We received this enigmatic letter in the post today, “Orchids and Steam Shovels: Part one, outlines how a company’s strategic effectiveness can change over time due to the shifting balance between energy (a company’s driving force) and entropy (ability to implement change.)”
We only mention it because we think the letter didn’t quite get the meaning of entropy right. But it reminded us of General Motors, and that’s our point here. Yesterday General Motors (NYSE: GM) announced its plan to introduce a plug-in electric car, turn its business around, and save the world. It is largely a response to increasing energy costs globally, which are causing a lot of entropy for firms like GM, who were built and modeled to operate in a cheap oil world.
GM is fighting a lot of entropy, the forces of commerce, physics, and inertia that tend to grind large, bulky, ageing institutions into dust. GM’s strategy is to focus on a hybrid technology that switches between a conventional petrol-powered engine to an electric engine, similar to what Toyota already does with hybrids. Many of these future hybrids will also run on biofuels or biodiesel, increasing efficiency and giving the marketers a lot work with.
But electricity does not hang out in the walls, magically appearing when you flick the switch to light up your life. Electricity has to be generated, and usually that means coal, natural gas, or, heaven forbid… nuclear. Similarly, biofuels come from crops, and it takes energy to grow crops too. Behind every “clean, green” solution is usually coal, or some not so clean and green primary fuel source. You can have a world full of electric cars that run more efficiently. But that also means you need a world full of electricity.
“Bottom line,” says Floyd Kvamme, the co-chair of Council of Advisors on Science and Technology in the U.S., “is we will need 50 percent more electricity by 2030. We are recommending a return to the nuclear world-it’s the greenest of the green.”
There you have it. We’ll have more to say on the nuclear future next week. For now, we want to point out one of the big wheels in California’s alternative and nuclear movement is John Doerr, of pirate equity firm Kleiner Perkins Caufield and Byers. “Biofuels are part of the solution, and we need to accelerate adoption of those alternatives, replacing coal, which is the biggest culprit,” Doerr said yesterday.
Doerr-who was an early stage investor in Google, Amazon, and Sun Microsystems-proposes an “E-ARPA,” an energy advanced research projects agency, modeled on DARPA, the Defense Advanced Research Projects Agency that brought us the Internet. Based on our own research, we think Doerr already has an energy and technology alternative in mind, one that he’s backed with his own money. See full article at ZDnet.com ‘Nuclear World is a Green World’.
We’re going to visit a competitor next week right here in Melbourne. But if Doerr is right, and this company is right, this new application of an old technology will play a critical role in the immediate energy future, make GM look like a lumbering oaf, and be great news for early stage investors.
We’ll report our findings next week.