Category Archives: Stacking the Deck

Google Says: More Clean Energy Now or Fewer Jobs & Profits Later

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Does pushing for cleaner energy kill jobs & growth? No, says Google (via Grist’s Stephen Lacey). In fact, waiting will cost us dearly:

Google, a leader of innovation in the digital economy, says that without a private and public focus on innovation in renewables, storage, and electric vehicles, the cost of delaying the clean energy economy could be in the trillions of dollars to the U.S. economy.

Using McKinsey’s macroeconomic tool for modeling energy costs, they found that

by 2030, innovation in the modeled technologies alone could have a transformative impact on the US, adding over $155 billion per year in GDP and 1.1 million net jobs, while reducing household energy costs by $942 per year, oil consumption by 1.1 billion barrels per year, and GHG emissions by 13% relative to BAU. By 2050, annual gains in GDP increase to $600 billion, net additional jobs to 3.9 million, and emissions reductions to 55%.

And if we don’t? Lacey summarizes Google’s findings:

delaying this “innovation arms race” by as little as five years with inconsistent policy that slows private investment (a delay not unlikely in the U.S.) could result in $2.3-$3.2 trillion in unrealized GDP gains — costing the U.S. over a million new jobs and preventing the reduction of up to 28 gigatons of CO2.

One more example of how Stacking the Odds in Favor of the Good Guys pays off.

Playing with the Order

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After spending the week playing with the pieces of Stack the Odds, I’ve figured something out. Each of the pieces of Stack the Odds feels true. What’s missing is why you should care — what do they give you that other models don’t?

This is particularly critical for the first principle. If the first principle doesn’t have real punch, nobody’s going to get to the second one.

So for the next week, I’m going to try mixing it up a bit. For example, what if I put the principles in reverse order:

  • We Aren’t As Smart As We Think We Are
  • Use Checks and Balances
  • Stack the Odds In Favor of the Good Guys

It seems a little bizarre, but maybe trying something that’s a little odd ball for a week or two will help shake things loose. Stay tuned…

The Pieces of Stacking the Odds

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Now that I’ve simplified my framework down to 3 main principles — Stack the Odds, We Aren’t As Smart As We Think We Are, and Use Checks and Balances — it’s time to flesh out each of the principles. To get that started, here’s a quick brain dump of the pieces rattling around in Stack the Odds.

Level the Playing Field: Sometimes banning certain types of behavior isn’t just about saying no, it’s also about giving the good guys a leg up. Someone running a janitorial service may want to pay their employees a wage they can live on and give them decent benefits, but if they do they’ll go out of business because the competition will undercut them on price. But if we create a floor – either through laws or through union organizing – then Good Guys will have a fighting chance because they’ll be able to compete on quality of service instead of just price.

Create/Nurture Markets: Sometimes the best way to help the Good Guys is to help nurture or create new markets. Want to help companies who want to switch to producing electric cars? Give rebates and increase fuel economy standards, and it’ll generate enough demand to create economies of scale to push costs down to the point where they’re affordable. Or, as we saw in the case of Starbucks’ difficulties in recycling coffee cups, according to BusinessWeek,

The solution for the paper coffee cup may lie not with building coalitions and markets — or with corporate social responsibility at all. “Landfills in Europe charge an average of $250 a ton. In America, it’s $40,” says Eco-Cycle’s Lombardi. “Ireland created a compost industry overnight by doubling landfill fees and creating a zero-interest loan for any composting business.” Economical technology exists today for 80% to 90% resource recovery through recycling and composting (including harvesting of methane for energy). There’s a lot of money to be made from an essentially zero-waste economy, but only if the right incentives are in place.

People and Organizations Aren’t Calculators, or the Practitioners’ Perspective: As we saw in Auden Schendler’s Getting Green Done, simpleminded models are going to fall flat. If we really want to understand how to give the Good Guys a leg up, we need to dig in and understand the nitty-gritty of how folks in their world make decisions:

Return on [green] investment matters in the real world, but it’s only one piece of the puzzle. If you’re trying to go Green or make any fundamental change in an organization, you need to figure out the hidden rules and the complex relationships that govern how that organization actually make its decisions…. Opportunity costs, a.k.a. the availability of capital. If a mid-level manager only has so much money available, they may decide that spending it on another project is a better deal — especially if their mental model says they make money by selling, not saving.

Some techniques that follow from this approach:

Make It Easy: Sometimes the best way to give a leg up isn’t a tax break, it’s making it easier to figure out what to do — unlike calculators, people have limited bandwidth, Or giving a break like creating a fast approval track for developers who’re creating a Smart Growth development, because for developers, time is money.

Make it Visible: so it’s easier for others to hold accountable folks who aren’t playing by our values.

Stack the Odds and Checks & Balances: Such as how Greenpeace acts as a check on corporations by helping companies interested in protecting the environment and smacking upside the head companies that aren’t, and as unions act as a check on corporations that force the Good Guys to compete based on who’ll pay the lowest wages. Checks and Balances is also a way of ensuring that the Good Guys get heard. If we want to Stacks the Odds in favor of banks that care about their communities – and we want to ensure the stacking isn’t undone — we need to make sure community-oriented banks have a powerful seat at the table. Aka the virtuous circle.

Stack the Odds and We Aren’t As Smart As We Think We Are: As the first piece on Stacking said:

If small businesses in an ecological niche can’t afford the current cost of health care benefits, we can’t just insist they pay for it. Either we need to reshape the healthcare ecosystem so small businesses can comfortably afford it, or we need to reshape the ecosystem so everyone gets high quality, affordable healthcare and they don’t get it through their job. And Stacking the Deck isn’t a panacea. We can’t magically create a world where the Good Guys always win. But here and there, we can do what we can to give them a leg up.

The Tensions: How do you know who speaks for the Good Guys (the Chamber of Commerce problem)? And how do you tell whether the Good Guys know what they really want? For example, the importance & power of real-world examples such as Norway in expanding our understanding of what’s possible. Or using pilot projects as a way of figuring out what folks really want.
 
That’s a decent list of pieces. In the next week or so, I’ll see if I can start pulling them together.

Combining Principles & Strategies into Stack the Odds

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One of the things I figured out while consolidating my core principles down to just three is that a number of the free-floating principles and strategies I wasn’t sure how to categorize will fit into Stack the Odds in Favor of the Good Guys:

I’m a little stretched for time this week, so next week I’ll explain how these five strategies are part of a new way of thinking about Stack the Odds.

Starbucks' Idealism vs. Stacking the Odds in Favor of the Good Guys

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Fast Company has an interesting article about Starbucks’ efforts to figure out a way of making their cups sustainable. Most of the article focuses on Starbucks’ trials and tribulations – it turns out it’s a lot more complicated than it might at first seen. But near the end of the article, Fast Company gets down to brass tacks:

The complexity dissipates, apparently, when you have the law on your side. Only 5% of Starbucks stores currently recycle cups, and that’s mainly in places like Seattle, San Francisco, and Ontario, where it’s required by law. Tim Hortons recycles paper packaging in 600 stores in Ontario due to legislation passed in 2002. It was the law, not corporate initiatives, that enabled Cedar Grove’s state-of-the-art, profitable (and expanding) composting facilities, the largest in the nation…

Could the solution to Starbucks’s long-standing cup conundrum actually be legislative change? Look at the recycling rates of soft-drink cans and bottles. “Our national recycling rate for bottles and cans is only 34%,” says As You Sow’s MacKerron. “It was over 50% just 20 years ago.” Part of the reason for the decline, he says, is that Coke and Pepsi have lobbied aggressively against mandatory take-back laws. In the 11 states that do have these deposit laws, more than 80% of cans and bottles get recycled.

The solution for the paper coffee cup may lie not with building coalitions and markets — or with corporate social responsibility at all. “Landfills in Europe charge an average of $250 a ton. In America, it’s $40,” says Eco-Cycle’s Lombardi. “Ireland created a compost industry overnight by doubling landfill fees and creating a zero-interest loan for any composting business.” Economical technology exists today for 80% to 90% resource recovery through recycling and composting (including harvesting of methane for energy). There’s a lot of money to be made from an essentially zero-waste economy, but only if the right incentives are in place. “I think Starbucks supports this,” Lombardi adds. “Its vision and words are exactly what we want to see top global companies doing. But it can’t do it alone.”

If that’s the case, why doesn’t Starbucks also fight for laws that stack the odds in favor of the good guys?

I ask Hanna why the Shared Planet goal doesn’t simply read “We will advocate and lobby for mandatory recycling laws wherever Starbucks stores are located.” He pauses and chuckles, uncharacteristically at a loss for words. “That’s a tough question,” he says, before specifying that Starbucks supports recycling laws “where cities work with the business community, so there’s a level playing field. Laws are written differently from community to community. That’s why I can’t say that Starbucks supports laws in every community.”

‘Nuff said.

Play on the Corporate Board, Stack the Deck for Green Biz Guys & Gals

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One of the many benefits of playing big on the Corporate Accountability Board is that it gives an assist to other players. Take Newsweek’s interview with 5 of the 800 CEOs who’ve signed the Copenhagen Communiqué on Climate Change. Newsweek asked:

Isn’t there an inherent contradiction between the interests of business and the environment?

Reinoldo Poernbacher, CEO of Klabin S.A., “Brazil’s biggest paper producer, exporter, and recycler,” says no:

It would be a contradiction if there aren’t common rules for everybody. If we all play by the same rules, I don’t see any contradiction. On the contrary, the way we see all this is as the biggest opportunity in the world, whether for scientists or for creating new jobs—for everything. The key point is that everyone should play by the same rules, and then we will have a big opportunity for business worldwide.

In short, by Stacking the Deck In Favor of the Good Guys, we make it easier for the Poernbacher’s, the Auden Schendler‘s, and many other folks pushing for environmental change inside their corporations.

How to Avoid Getting Fried by iPhones and Derivatives

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Can we create rules to stop Wall Street from ripping us off? No, says Wall Street. You aren’t smart enough to understand what we do. Your rules and regulators will just get stomped by traders. All your pathetic attempt to keep up with us will do is stifle innovation. So shut up and let the grownups do their thing.

Imagine if Apple said, you can’t write rules to protect you from your iPhone exploding or frying your brain. You aren’t smart enough. All you’ll do is stifle innovation. Would anyone take them seriously? Fuggedaboutit.

Is it because you understand how your iPhone’s physical innards work? For that matter, how the brakes on the last elevator you rode on works? Or the engines of the last jet you flew on? I’m guessing not.

Most of us are ignorant techno-peasants, swimming in a river of quasi-magical objects we don’t really understand. But that doesn’t mean we give manufacturers a free pass.

How do we do it? As a society, we’ve put together rules of the game that foster an ecosystem of players that create checks and balances and stack the deck in favor of us not getting killed and foster innovation. It’s not perfect, but it works.

Why should Wall Street’s “products” be treated any differently?

UPDATE: based on some feedback I got, some folks really don’t get how insanely complicated the iPhone is — they think derivatives are much, much harder to understand. So here’s a reality check. Continue reading →

Former Credit Card Company CEO: We Rob the Poor to Give to the Rich

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Speaking of thieves, it’s not everyday that a former CEO lays out how stacked the deck has become against working families. Atlantic blogger Mike Konczal on a recent Frontline special on the credit card industry:

[It] traces a narrative of the changing nature of credit and debit cards, where services and goods became free because they explicitly took on hidden fees and charges, hoping to net enough from a large body of consumers to make profits. Shailesh Mehta [former CEO of Providian, a major credit card company] is quite explicit about this, as are other insiders.

There’s been a lot of fascinating research in behavioral applied microeconomics along these lines recently; it seems that the credit card industry already figured it out a long time ago. Mehta points out that the most affluent consumers pay the least, while the poorest pay the most.

Mehta’s exact words are pretty stunning:

Mehta: Now, if somebody pays their monthly bill in full, and zero interest income, and if you don’t charge annual fee, zero fee income. So you have to make up everything from the merchant side, which you cannot. So what banks ended up doing is therefore they were subsidizing this whole group, because still two-thirds of the people were not making full payment. And that interest income covered the losses of the people who were paying in full.

So overall, the business looked profitable. But … in a strange way, banks were charging borrowers higher interest rates in order to give the wealthy people a break — in a strange way, if you look at it, because the people who have money were paying in full, and they were getting the break at the expense of the people who couldn’t pay in full. [Emphasis added]

PBS: So it was sort of an unintended transfer of wealth.

Mehta: It’s unintended, exactly. I don’t think anybody thought through that. But correct.

Stacking the Deck In Favor of… Child Labor???

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From inside US Trade, courtesy of David Sirota:

Business groups are worried by the potential effects of provisions banning the import of all goods made with convict labor, forced labor, or forced or indentured child labor that were included in a customs bill sponsored by Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Charles Grassley (R-IA)…
These groups are examining the ramifications of the bill’s provisions, especially in light of the bill’s requirements that a newly created office in the Department of Homeland Security (DHS) annually report to Congress on the volume and value of goods made with child labor, forced labor or convict labor that have been stopped at the border.

Business sources say this reporting requirement could cause DHS to more actively seek out imported products made with child labor, forced labor or convict labor…

One source did expect a push from lobbyists closer to the Finance Committee markup of the bill, and speculated that U.S. industry groups and foreign governments could form ad hoc coalitions to help send a united message.

Ewww , Eww, Ewww!

Aside from being truly morally disgusting, there’s a basic economic problem with this vile approach:

Whereas comparative advantage used to be about natural advantages (ie. one country has optimal soil for grapes, another country has optimal soil for corn), “free trade” encourages countries to create comparative advantage through man-made laws. Some countries, for instance, creates a comparative advantage by letting factories pollute as much as they want, thus encouraging companies to move their factories there from other countries where pollution controls are more serious. Other countries create a comparative advantage by permitting children to be enslaved, thus encouraging companies operating in countries with more expensive non-slave labor to shift operations to a place where they can make products with all but free labor.

The way to stop this is for the world’s largest economies to establish basic rules which everyone else will inevitably follow as a price of admission to those economies’ markets. If the United States says companies cannot sell products in our market made with child slave labor, most companies will cease making products with child slave labor fearing the loss of access to our market which would destroy their business.

Of course, that’s why business has opposed every effort to put basic labor, environmental and human rights standards into our international trade agreements…

"Stack the Deck" Doesn't Quite Work

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While playing around with the new rules metaphor, I realized it’s also time to replace one of my favorites: Stack the Deck in Favor of the Good Guys. I really like juxtaposing stacking the deck with good guys. But there’s a problem with that metaphor — control.

According to Wikipedia:

The term originated from the magician’s gimmick of “stacking the deck”, which involves presenting a deck of cards that appears to have been randomly shuffled but which is, in fact, arranged in a preconceived order. The magician knows the order and so is able to control the outcome of the trick; the audience is unaware of the gimmick. In poker a deck can be ‘stacked’ so certain hands are dealt to certain players.

The problem is, you can’t control the economy. Sure, there are small pieces of the economy where you can at least temporarily control the outcome. But as a metaphor to build a model around, it implies way too much control.

Oh well. Time to look for a new metaphor.