Podcast # 13, Our Preliminary Specification Executive Summary

 Another podcast to summarize and inform. Still a few bugs to work out but nothing major standing in our way. 

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Number 13

Our Index of Podcasts 

Blinded by Science: The Business Cost of Oil & Gas Orthodoxy

McKinsey & Company’s recent article, “Shale’s Bold New Era: What it Means and How to Succeed,” marks a return to their traditional playbook—analyzing companies, profitability, and industry fundamentals. Their foray back into oil and gas business analysis, stepping away for a moment from climate, clean energy, and DEI discourses, is a notable shift, but their grasp appears unsteady. While McKinsey may find its footing again over time, this piece doesn’t demonstrate the acuity or originality the sector needs. At People, Ideas & Objects, we’ve never wavered in our commitment to profitability and its systemic absence in oil and gas, nor lost focus on the solutions required to restore it.

What emerges from McKinsey’s approach, however, isn’t a rigorous business critique—it’s the perspective of oil and gas engineers and geologists, who serve as the industry’s key decision-makers. Their worldview, dominated by technical and scientific priorities, discounts—or outright dismisses—the business disciplines of accounting, administration, and organizational design as secondary, even parasitic. In their minds, only technical expertise creates value, and the industry has been steered by their pursuit of technical (rather than commercial) objectives for decades.

This mindset has endowed the industry with a strange duality: a mystical faith in science as the ultimate value-driver, paired with a stubborn detachment from business realities. The sector functions less as a business than as a perpetual science fair, ever seeking the next technological breakthrough, even as commercial sustainability and profitability deteriorate. For decades, “advancing the science” has resulted in shrinking resources and missed opportunities—especially as actual profits have dried up, and the industry’s ability to conduct meaningful experimentation has dwindled. The notion that science alone will deliver returns has left the entire sector diminished and ill-equipped for today’s competitive landscape.

McKinsey’s article unintentionally captures this internal culture of exclusion and defensiveness. Their language is revealing: “there will be no silver bullet for organizational redesign in the new era,” and success will come only to operators “who understand the value centers of their portfolio and build organizations to deliver efficiency at scale.” These value centers, they say, range from field development to commercial operations, each requiring specific capabilities—a vision that, ironically, ignores how effective software, disintermediation, and modern business models are reshaping industries everywhere else.

In adopting this scientific worldview, McKinsey aligns itself with those inside the sector who are hostile to change—especially anything challenging the traditional roles and hierarchies. Disintermediation and new models based on efficiency and accountability don’t fit their script. A prime example: the mishandling of LNG contracts, where most export deals were set at domestic Henry Hub prices ($2.50), while buyers resold the gas at up to $50 in foreign markets. This colossal misstep, worth hundreds of billions, exposes the absence of business acumen at the executive level, yet the response is to seek greater “control over market paths” and blame midstream operators—whose role is merely to deliver product, not negotiate prices. Decades of unexplored value (with LNG contracts lasting years into the future) cannot be blamed on midstream; the problem traces directly to strategic failures at the top.

The real cost? Roughly $4.7 trillion in lost natural gas revenues in North America from 2009 to 2024, the result of a leadership class determined to treat business disciplines as expendable and accounting as irrelevant. Budgets for administration and effective ERP systems could have sustained investment, innovation, and dividends—yet starved, these “non-technical” functions were regarded as unnecessary. Reserve reports—rather than real-time business data—became the governing metric.

In truth, sustaining the business would have preserved value and prevented the collapse of natural gas pricing ratios from a 6:1 to 50:1 oil-gas equivalence. On a true comparative basis, North American gas volumes should have generated nearly $6.9 trillion leaving $2.3 trillion of actual natural gas revenues realized. Which is proof in a way that all the value is generated by engineers and geologists. 

People, Ideas & Objects exist to correct these structural failures—to place business, not just science, at the heart of the industry’s value creation. Until that happens, these businesses losses, not opportunity cost—in profit, innovation, and long-term sustainability—will remain staggering.

Partnership Accounting, Podcast # 12

Our Partnership Accounting module is an essential complement to the Accounting Voucher module, specifically addressing the complexities introduced when People, Ideas & Objects uses the Joint Operating Committee as the key organizational construct. Nothing in the producer firm is unchanged when we make this change.

I’m finding these podcasts valuable for the initial introduction to our content. Opening a window as to what, how and why the Preliminary Specification is different. And a comprehensive summary for those who already have a good grasp of our product. 

I’ve once again included the url for the Accounting Voucher module and Podcast Index. 

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Partnership Accounting 

Accounting Voucher

Podcast Index

Podcast # 11, Value Proposition

 

I’m quite enjoying these podcasts we’re producing these days. They will become a regular feature of the content that we produce. They seem to capture many of the subtleties that may be hidden in plain sight to most readers. Having them confirmed at least is worthwhile. Today’s topic is our value proposition which is well covered here. There are still some minor details that need to be figured out how to correct, and this episode introduces what I would consider is an AI hallucination. One of the presenters stating they remember when something occurred back in the late 1970s. 

With each post now I’ll be posting the podcast and an index of the podcasts to date for users to access. 

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Index. 

Podcast # 10 - Rebuilding Oil & Gas White Paper

Summer is in full swing, and People, Ideas & Objects are thrilled with the enthusiastic response to our podcast series, which introduces the Preliminary Specification and its underlying concepts. We’ll be pausing regular blog posts in July and August to focus on releasing white papers.

Over the next three weeks, we’re launching more podcasts, each highlighting one of the six white papers People, Ideas & Objects published in 2025. The first podcast, covering our April 7, 2025 paper, “Oil & Gas Arbitrage: The Market Finds Away” explores how investors can drive transformative change using the Preliminary Specification and participate effectively in rebuilding the industry. 

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Professor Paul Romer’s Theories, Podcast # 9

One of People, Ideas & Objects seven Organizational Constructs is the implementation of Professor Paul Romer’s theories captured in his 1990 paper “Endogenous Technical Change.” A principle we’ve adopted throughout the North American oil & gas industry and producer population. Where, for example, we share the cost of our Cloud Administration & Accounting for Oil & Gas software and services as opposed to each producer building the infrastructure individually within their company. 

It’s not just administration and accounting that’s covered by these principles. Operations, geological and engineering also have benefits from Romer’s thinking in the Preliminary Specification. 

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Connecting the Dots

Two crucial points, highlighted in separate papers this year, have gained significant traction and warrant explicit connection in light of recent major investments aimed at rebuilding the oil and gas industry. The Carlyle Group's $2 billion investment in Diversified Energy's non-operated properties, following Citadel's $1 billion earlier this year, signals a pivotal moment and underscores the importance of the following actions.

• First, investors who are non-operator members of Joint Operating Committees are encouraged to propose the implementation of the Preliminary Specification to their working interest partners. The value of these properties for all owners, including Carlyle and Citadel, will be substantially increased with the system fully operational across all partnership assets. Should this proposal be considered, People, Ideas & Objects is prepared to manage the subsequent marketing with discretion and confidentiality, pending receipt of the necessary contact information.

• Furthermore, our January 20, 2025 paper, titled “Reconstructing Oil & Gas: Enabling Engineers and Geologists to be This Century’s Pioneers and Lead the Industry’s Future," presents a vital challenge to the industry's technical professionals. For the sector to fully capitalize on the economic opportunities that lie ahead, it is essential that engineers and geologists actively engage and participate as producer firms, leading the charge in innovation and growth.

Investors 

The current climate in the oil and gas industry presents an unprecedented investment opportunity. A combination of factors has created a market of highly motivated sellers and affordably priced assets. Producers are motivated to divest properties for several reasons: the immediate need for cash after a prolonged period of scientifically-driven rather than financially-focused operations, the desire to mitigate personal liability risks associated with past fiduciary duties by distributing proceeds as dividends, and a clean break for new investors who wish to avoid entanglement with the previous leadership.

Simultaneously, new investors, such as hedge funds, are attracted to the sector's potential for significant returns. However, their continued participation is contingent on two key factors that have historically been absent in the oil and gas industry: profit reliability and liquidity. These investors are not fundamentally committed to the industry itself, but to the financial gains it can produce. Therefore, the ability to easily enter and exit positions is a critical requirement.

To attract this new wave of capital, emerging producer firms must design their business models to directly address these needs. We propose the consideration of innovative financial structures, such as creating asset-backed securities or securitizing working interests in properties. Furthermore, technologies like blockchain could be leveraged to enhance transparency and facilitate liquidity. Incorporating these elements is essential for new producers to succeed in this evolving landscape.

Engineers and Geologists: Seize the Opportunity to Lead

With renewed, multi-billion dollar investments from entities like Citadel and The Carlyle Group, the oil and gas industry is at a pivotal turning point. This new capital is not backing the old guard; it is seeking dynamic, innovative, accountable and profitable new leaders. This is a direct call to the engineers and geologists who possess the essential talent to develop, exploit, and manage these properties.

Investors like Citadel and Carlyle are focused on financial strategy, not day-to-day operations. Their participation in Joint Operating Committees is a temporary measure to secure assets at advantageous prices. They are looking for entrepreneurial leadership to step up and drive the future. They require new producer firms built on reserves preservation, performance, and profitability—firms that can provide a return on investment and potentially offer liquidity through mechanisms like securitization.

To facilitate this, People, Ideas & Objects is developing the Preliminary Specification, an ERP system designed to handle the accounting and administrative needs of an oil & gas producer firm. This tool will enable new companies to build on a foundation of transparency and efficiency.

The capital has already been committed. Now, the talent must rise to the occasion. The industry needs new producer firms, led by technical experts, to form immediately and build value for themselves and these new investors. If the entrepreneurial dynamic does not emerge to meet this opportunity, this wave of investment will recede. The mandate is clear: create agile, profitable business models and lead the industry forward. Let's not disappoint the investors again.

In Conclusion 

New producers in today's oil and gas industry face a critical choice. They can spend valuable time and resources slowly building investor confidence by demonstrating a newfound commitment to profit and accountability. Alternatively, they can immediately establish that credibility by adopting the "Preliminary Specification" and the inherent business models developed by People, Ideas & Objects, thereby signalling their commitment from day one.

People, Ideas & Objects has established itself as the authority on the profit-focused principles the industry must now embrace. We provide the standard, objective, and factual financial information that was sorely lacking when investors exited in 2015. The legacy of that era still burdens every new venture, and overcoming it is paramount.

While the current arbitrage strategy employed by investors provides a temporary window of opportunity, it will not last forever. This strategy gives the industry a few precious years to rebuild and establish profitable operations as a universal standard. The ultimate goal for any producer is independence, which can only be achieved through the sustainable funding generated by consistent profitability.

The road to becoming competitive in the broader capital markets is long. The industry as it stands is ill-equipped for that journey. The opportunity to change this dynamic is now, but the challenge is immense. For those ready to build on a new foundation, this is the best of times.

Professor Giovanni Dosi Theories, Podcast, # 8

 Just as Tuesdays podcast covered Professor Langlois’ theories and our application of those to oil and gas. Today is Professor Giovanni Dosi’s ideas under the microscope. And if I hadn’t mentioned it before this AI tool is good at compiling vast quantities of information and making it easy to digest. 189 documents produced 141 blog posts and summarized in the Preliminary Specification on our wiki. 

Professor Dosi has specialized in innovation and the foundational document we used to prepare a large percentage of our features of the Preliminary Specification was “Sources, Procedures and Microeconomic Effects of Innovation.”

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Professor Richard N. Langlois Theories, Podcast # 7.

 The value of this podcast is quite satisfactory. I don’t believe there are any errors in the content and the work the AI completed is directly in line with what I’m thinking when discussing the Preliminary Specification. This podcast is the compilation of the 221 text files I created to publish the 195 blog posts on our blog and wiki of Professor Richard N. Langlois’ work. 

In a 20 minute summary they’ve captured the substance of his research and our application of that to oil & gas. 

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Stagnant Industry Landscape

Before diving into today’s topic, I must highlight a persistent issue. Since at least 2015, People, Ideas & Objects has consistently urged producers to achieve financial sustainability through profitable production methods. Unfortunately, the industry’s entrenched culture shows an inability to embrace fundamental change and a lack of understanding of these principles. Operations consistently revert to increasing drilling activity while cutting costs—an approach already optimized to its limit, incapable of delivering true commercial viability. Concepts like competition and profitability remain absent, misunderstood, or actively resisted.

This mindset creates confusion among producers’ officers and directors when discussing competitive returns in North American markets or generating genuine profits. Given that investors have issued calls for action and the Preliminary Specification outlines the necessary steps, a critical question arises: How would additional investment in the industry today meaningfully alter its trajectory? Would it merely revive the early 2000s, with CEOs touting “well built balance sheets?” This outcome seems almost certain. But what further guarantees exist? After decades of questionable conduct by officers and directors, can we reasonably expect a transformation in their approach?

To claim that initiative and innovation would decline is an overstatement, as these qualities are already scarce. If investors resume funding producers, the prospect of future innovation would likely diminish further. When officers and directors dismiss or undermine efforts to introduce dynamic, accountable, and profitable operations, what hope is there for meaningful reform in any discipline? The market’s response to attempts to improve the industry remains uncertain, but challenging the status quo carries significant professional risk. Insulated by investor capital, producers would then be shielded from the consequences of their admitted missteps—such as “putting cash in the ground,” “building balance sheets,” or simply “muddling through.”

Software Development Approach

Our development methodology has often diverged from mainstream trends, drawing scrutiny over the years. As end-user and mission-critical tools gain traction, some overlook the critical elements missing from these alternatives. Today, I’ll explain why People, Ideas & Objects prioritizes an unimpeachable data set, precise applications, and significant cost and time savings in software development. 

We are relational database developers—a choice some may view as outdated, but its significance is profound. Databases do more than store data; they ensure its integrity. Oracle’s database, for instance, enforces strict design and architecture rules, rejecting any data that doesn’t comply and requiring all expected data to maintain integrity. This rigorous process, defined by our user community’s data model and process selections, is costly and complex but essential. If data isn’t 100% secure, reliable, and unimpeachable, it’s worthless. This discipline forces developers and users to think critically about system design, implementation, and use.

Many tools bypass this rigor, offering quicker but less reliable solutions. For example, Palantir aggregates structured, unstructured, and semi-structured data from sources like relational databases and spreadsheets, using an object-relational model. This approach, once heralded in the 1990s with Java’s rise, proved flawed when it introduced “Null” errors in key database attributes, compromising integrity. While Palantir mitigates these issues with proprietary logic and sophisticated ontologies for user analysis, it’s not designed for ERP, accounting, or audit purposes, nor for industry-wide process management like our Preliminary Specification. Though an unfair comparison, Palantir underscores our focus on data integrity.

Palantir excels in analysis, not ERP or industry-wide process management. Its AI-driven insights may not address the industry’s core issues or opportunities, leaving end-users to interpret its outputs.

Application Precision

In an industry-wide ERP system like the Preliminary Specification, “garbage in, garbage out” takes on exponential significance. Data integrity is a cornerstone. Missing this once-in-a-century opportunity to build a robust IT foundation for the next 25 years would be a grave mistake. As industry data grows increasingly valuable, cutting corners is not an option. Our user community and developers must leverage their expertise to capture these requirements and accommodate growing data volumes and types. Rebuilding the industry on a foundation of reserves preservation, performance, and profitability is a transformative opportunity we must seize.

Our user community sets us apart, leveraging the proven quality of user-led ERP development. We’ve empowered them with exclusive Intellectual Property licenses to create derivative works, ensuring our developers take direction solely from them. Independent and budget-autonomous, the user community sells their IP to People, Ideas & Objects, making it accessible for all members of our user community. Ensuring they are not “blind, sleepwalking agents of whomever will feed them.”

Lowest Time and Cost

While our approach increases development costs due to its quality focus and broad scope—covering producers from startups to Exxon—it’s less than what each producer would spend on individual systems or manual processes. By applying Professor Paul Romer’s non-rival cost theory, we incur costs once for the entire North American producer population, distributing them via our Profitable Production Rights. These fund the Preliminary Specification development and long-term support for our Cloud Administration & Accounting for Oil & Gas software and services, making our per-producer costs the industry’s lowest.

Time is critical. The Preliminary Specification should already be operational, delayed only by the resistance of officers and directors. The industry faces two urgent issues: monthly losses of at least $20 billion and a potential decline in North America’s oil and gas deliverability. These time pressures seem to conflict with our quality goals, but any failure will stem from insufficient industry engagement with our user community, not our approach.

Industry must prioritize meaningful interaction with our user community. Relying on outdated tactics like issuing SLAs to hold vendors accountable is counterproductive and wastes time and resources the industry can ill afford. Collaboration is essential—we’re all in this together.

Artificial Intelligence in Oil & Gas Development

We believe that Artificial Intelligence (AI) will significantly enhance the quality of our products in software development. Our paper, "AI, IP and Hyper Specialization, highlighted how AI mastered games like Go and Chess, not only defeating human champions but also innovating within those fixed environments. We see similar potential in software development, given its increasingly well defined and fixed domain.

However, it's crucial to recognize AI's current limitations. While powerful for code development, its application to dynamic business models like the Preliminary Specification, which is highly influenced by creative changes, remains years away. Therefore, while we will leverage AI to assist user community members and developers, this will be done with a clear understanding of its weaknesses, the demanding needs of the oil and gas industry, and our stringent quality requirements.

Deployment of our user communities distinct competitive advantages remain irreplaceable. These advantages include the application of artificial intelligence, automation, adaptability, conflict and contradiction as analytical tools, creativity, collaboration, decision-making, deployment, and integration of task, knowledge and explicit knowledge, design, financing, ideas, innovation, integration, issue, identification and resolution, judgment, leadership, negotiating, and compromising, planning, performance, quality, reasoning, research, resiliency, spontaneity, thinking, vision and wisdom.

Intellectual Property and AI in Oil & Gas

In a future where individuals can easily build their own Preliminary Specifications, Intellectual Property (IP) will play a critical role in organizing and preventing redundant and duplicative work. Our paper, "AI, IP and Hyperspecialization," emphasizes IP's ability to streamline innovation through licensing and agreements. This ensures that efforts are directed towards developing new solutions for the oil and gas industry's complex challenges, rather than repeating existing work.

It's important to clarify that AI does not capture intellectual property; it flows to its user who has the right to create derivative works. Oil and gas producers must therefore ensure their chosen vendors are the rightful owners of the underlying software IP to guarantee legal use of the software.

We've also argued for increased organizational performance through hyper-specialization and the division of labor, a principle that has driven economic value since 1776. Today, the software an organization uses either enables or constrains this process. We believe that with the right approach to AI and IP, hyper-specialization can be managed with precision, allowing tasks to be distributed and processed efficiently—addressing the chaotic nature of speed and complexity that often impedes modern organizations. And will no doubt accelerate with the velocity of tomorrow's business pace. 

A Call for Change in Oil & Gas

The oil and gas industry stands at a pivotal moment, with a unique opportunity to transform its culture. The focus must shift to reserves preservation, performance, and profitability, leaving behind the inefficiencies and decline of past decades. We're potentially witnessing the beginning of a precipitous decline in oil and gas production deliverability, a trend exacerbated by the inherent steep decline curves of shale that are, quite frankly, a rolling log gathering terrifying momentum. 

The weight of this crisis is compounded by the stark realization that our reliance on what amounts to 25,000 man-hours equivalent labor per barrel of oil was, in large part, a self-inflicted wound. This profound misjudgment now rests heavily on the officers and directors of producer firms. Indeed, this era could very well be remembered as one of the most reckless and destructive acts in civilized history. For those of us who have done the calculation. At 25,000 man hours / barrel of oil equivalent. The total 8 hour equivalent labor each and every one of the 8 billion people on the planet benefits from oil & gas is 66 times their labor output. Since producer officers and directors were willing to sacrifice North America's output so willingly. And we should anticipate in the future the need to allocate supply. I suggest we begin by cutting oil & gas consumption in all its forms to those who had the fiduciary responsibility, the authority and the resources to avoid this, knew the risks, were advised in the most aggressive manner (their investors actions,) had solutions offered yet did nothing. The producers, officers and directors who ensured they have Directors and Officers Liability Insurance secured. 

Before any effective changes can be made, the industry must organize itself for the significant challenges ahead. We cannot afford to cling to outdated methods or leadership. Even more critically, the industry needs to regain the trust and belief of investors, who abandoned it a decade ago after years of deception. That exodus should have been a four-alarm fire, yet the past decade has seen no action, leading to evaporated faith, trust and hope. Our first and most crucial step must be to immediately clean house.

Creating the Preliminary Specification will be a multi-year effort, but it’s critical for aligning and organizing our approach. Fortunately, the foundational work for the Preliminary Specification is complete, enabling us to focus on implementation without being hindered by intellectual property issues related to People, Ideas & Objects.

North American companies are at the forefront of the fourth Industrial Revolution, with investments in emerging industries and firms disintermediating those that previously disintermediated the market. However, the oil and gas sector, as a primary industry, remains focused on protecting its revenues to maintain the status quo resisting any and all challenges. This defensive stance has led to trillions of dollars in lost value, with shale’s wealth squandered and our advanced economy jeopardized due to declining energy availability.

Given the intense competition in other industries and the inability of North American producers to keep pace, it’s no surprise that producer officers and directors have conceded on their production deliverability. It’s time for change. 

Post Script

The All In Podcast, released every Friday, is a must-listen for its cutting-edge discussions driven by the four self-made hosts. In the June 20, 2025 episode, they touch on software companies like People, Ideas & Objects and their relevance to the “S&P 493”—the S&P 500 excluding the MAG 7 stocks.

They argue that a complete “rip and replace” approach to rebuilding software is the only viable path forward, emphasizing a comprehensive, “soup to nuts” scope. Companies in the S&P 493 that undertake this full software rebuild are expected to outperform those that don’t.

This segment is discussed between 01:03:00 and 01:16:00 in the episode.

 Listen here: