Full transcript of the the panel “Building Up Resilience: Can the Upcoming Food-Water-Energy Crises Be Avoided?” at the 2013 Strategic Foresight Forum. Entitled Harnessing Disruption, the Forum highlighed ways the technology revolution is shaping government, business, and civil society. Many panelists focused on the effects of technology on individual empowerment and globalization, and the need by both public and private sectors to better adapt to coming change.
|Welcome and Moderator:
Vice President and Technology Analyst,
Location: Atlantic Council, Washington, D.C.
MICHAEL KANELLOS: Well, thank you very much. My name is Michael Kanellos. I’m a consultant at Eastwick, which is a consulting and communications firm, and I’ve been a journalist also in Silicon Valley for about 25 years now. And we’re here to talk about the food, energy and water. You know, what can we do to prevent the next crisis?
And, you know, in a quick nutshell, it’s not a pretty picture. Right? We have chronic droughts; we’ve seen food shortages, and we’ve even – some levels of social disruption. You know, there’s, you know, the riots in China about coal dust and pollution and things like that. I mean, some people look at that and say, well, that’s a good sign. People want to clean up their environment. But it’s only a good sign if you don’t live there. If you’re living through it, it’s a very difficult period. And to compound all these matters, fossil fuels just aren’t cooperating. You know, peak oil has not happened, right? Natural gas, fracking came along, and now we’re going to have things like hydrates where they’re discovering methane and, you know, frozen water. It just – we find more and more and more of it, which makes it difficult to bring solar and wind and things like that online.
I had a discussion over this in about 2004; I had a discussion with Richard Smalley (sp), Nobel Prize-winning chemist on this. And all the reporters asked him, we said, can we avoid this crisis? And he said, I think we’re going to have to have a thalidomide moment. There’s going to be a sudden catastrophe. We’re in the rearview mirror; humanity looks back and says, we made a mistake; we have to dig ourself out. Now, to make that story cheerier, he died about three weeks later, but – (laughter) – it was – it was very – (inaudible) – because it’s – you do see people actually sort of whistling past a graveyard on a lot of climate issues.
But – not to be too depressed – here’s the good news, right? The industry’s finally moving along, the clean tech industry. It’s taken about 10 years, but now we’re seeing solar growing leaps and bounds. In fact, this year so far, solar accounts for 21 percent of the installed utility capacity in the United States. It’s second only to natural gas, but the growth rate’s off the charts. In fact, in October, solar accounted for 72 percent of the new capacity in the U.S. just on utility, not even counting homes. And also in the lighting industry, everyone in lighting tells me that the year of LED finally occurred in 2012 where all the shipments went from fluorescent to 90 percent of the shipments fluorescent and halogen to a huge shift over to LED. And LEDs with networking, you can save about 90 percent of your lighting power. And lighting is 19 percent of the world’s electricity. It’s not a – it’s not a small matter. I mean, it’s basically – if we’re getting 40 percent of our electricity from coal, we can cut that in half just by switching over to LEDs. And we’re seeing better products, too.
One of the more interesting acquisitions this year was when Monsanto bought Climate Corporation. They did Climate Corporation, the big data corporation, they take agricultural data, they – you know, analyze it and they give it to farmers so they can actually hedge their bets about the certain crop values. They bought it for $930 million and they (could ?) start offering it as a service to agriculturals. But it’s a very targeted form of big data. It’s not the sort of abstract notion where it’s just a research tool. And in the utilities base, you’re seeing companies like Bridgely (sp) and AutoGrid (sp) and Veridity (sp) making tools, using big data that can replace large hardware systems and making the grid more efficient.
So we have that. And another aspect of this that I think I’ve – it gives me hope too is that we’ve talked a lot about technology and we see technology improving, but there’s also the unacknowledged improvement we’re seeing in business models. I mean, the way these products are getting to market is just as revolutionary as the product themselves. You’ll hear from Jigar later . His company, SunEdison, invented the PPA, the power purchase agreement. And that probably did as much for solar as any invention in the last 10 years. You talk to any solar installer and they will say that accelerated their deals more than anything else.
Or another technology, demand response. Demand response will probably account for 20 percent of our peak power in about 10 years. But it wasn’t a technological invention at first. Peak – demand response for curbing peak power was invented by two guys out of Dartmouth, and the only underlying technology at the time was the telephone. It was strictly an arbitrage and a contract thing. It was not a technological thing, but it’s really changing the grid.
So I think in some ways – and the U.S. also has a lead in this. So I think in some ways, if I put my America First hat on, you know, our students may not be leading the world in science in technology, we may not be winning all the math derbies, but we know how to sell things to people and that’s something I think we can also, you know, really show what we’ve done at the university, show what we spend on start-ups, and I think that’s actually knowledge we can spread globally.
So enough from me. Now move on to our panelists, and our first one – I’m changing the page so I get her title right – Frances Seymour. She’s a senior fellow at the Center for Global Development. Frances is in the middle here. And she’s an expert in forestry, and one of the areas they’re looking at is pay for performance, to actually get cooperation so there’s incentives to save, you know, virgin forestland.
Frances? Want to take it away?
FRANCES SEYMOUR: Thank you. Thanking me – thank you for allowing me to step in for Nancy Birdsall, who is sitting here in the second row and I hope will feel free to weigh in in the discussion. What I’m going to focus my remarks on are land use change and its relationship to food security, water security, energy security, and, I would add, the climate security where it all comes together for resilience.
And what I want to do is talk a little bit about forests and how we’re doing a pretty poor job of managing forest contributions to all of those objectives. And I’ll suggest that technology is part of the answer but probably not in the way that you might think.
Now, some of you saw the article in yesterday’s Washington Post on the front page about how the U.S. over a recent four-year period had lost 360,000 acres of wetlands and all kinds of analysis about how this is going to increase vulnerability to floods and storm events and sea level rise. But in Science magazine just a few weeks ago, it was revealed that over the last 12 years, the world lost 2.3 million square kilometers of forests. And in Indonesia alone, we are losing almost 20,000 square kilometers every year.
This is having a huge impact on resilience across levels. At the global level, emissions from deforestation are estimated to be at least 10 percent of global climate emissions.
So let me deconstruct three myths, or at least convenient half-truths, that relate to deforestation.
The first is that, unfortunately, deforestation is necessary to make way for expanded agriculture to feed the world. It’s absolutely true that we need to increase agricultural production. But you know, the most fertile lands were brought into production a real long time ago. So in recent decades, most increases in agricultural production have come from intensification, not extensification. And in order to even understand the significance of that increment of – from marginal lands, you have to subtract out all the contributions to food security that standing forests make.
Well, what are those? First of all, standing forests provide a lot of food. In Congo Basin, rural areas, it’s estimated that up to 80 percent of proteins and fats in local diets come from bushmeat, and so hunting the wild beasts of the forest.
Forests also provide income to buy food. Some research that’ll be published soon in World Development estimates that in a typical village near or in a forest, between a quarter and a fifth of income comes from the forest. A lot of that is wood for fuel and energy, but that amount is about commensurate with the amount households get from agricultural crops. So, food from the forest, nontrivial.
And finally, forests make contributions to mainstream industrial agriculture by regulating hydrology, pollination. And emerging research shows the impacts on rainfall patterns at continental scales.
So I hope I’ve convinced you that converting forests to agriculture risks undermining food security, water security, energy security for people at the local level, and climate security for all of us.
Half-truth number two: Encouraging biofuel production is a good way to increase both energy security and climate resilience. Well, again, we need to look at some trade-offs here. The impact of bioenergy on food security would take another conference to get to the bottom of. I think it stands to reason that if you create a competing demand for cropland and food, you’re going to increase prices or at least their volatility with a bad impact on food security for poor people. But what I want to stress is the failure of biofuels to largely meet their intended consequence, which is to reduce emissions from fossil fuels. Because it turns out that if you take into account full life-cycle analysis and particularly the land-use change from producing biofuel crops, the climate-friendliness of biofuels mostly goes away and it sometimes turns badly negative. The most extreme example is if you take a peatland (sp) forest in Indonesia and convert it to an oil palm plantation, use all of the fruit to make biodiesel, you would have to keep substituting that biodiesel for fossil fuel for 840 years to meet the carbon debt incurred by the land use change.
So biofuels for energy security can come at the expense of food and climate security.
Half-truth number three: The best way to solve these problems is the application of technology to intensify production on land that is already under cultivation in order to take the pressure off the forests. Well, yes, we need to intensify production. But in the case of biofuels, I’d argue that the first job of technology is to get us to the second generation fuels so that we get out of this food-versus-fuel competition altogether. And if our business is feeding people rather than cars, yes, we need to increase production to meet rising demand, but we’ve got lots of research showing that raising yields doesn’t automatically take pressure off forests. And in fact, it can have the perverse effect of increasing the rate of deforestation because it’s more profitable to grow those crops with higher yields.
So what we have to do is actually create land scarcity through improved law enforcement and land-use regulation to induce the demand for investment in intensification.
I would argue that the most important impact of technology on solving all of these problems have been incredible advances in remote sensing technology to be able to observe, essentially in real time, where deforestation is taking place. That makes deforestation visible in the same way that the satellite imagery analysis of where the fires were burning back in June that threatened to close the Singapore airport because of the density of the haze – that’s what creates political will, it creates citizen activism, it puts pressure on corporate supply chains that are responsible for a lot of this land clearing, and it helps law enforcement officials actually target law enforcement because a lot of this land clearing is illegal.
Now, let me close by talking a little bit about a cause for optimism, and that is what has happened in Brazil. You may remember, you know, Brazil was the poster child of deforestation. You know, the Amazon was in flames. But over the last 10 years, Brazil has more than halved its rate of deforestation and has done so in ways that provide lessons for how we can get out of this mess. First of all, Brazil has been able to decouple deforestation from food production. Deforestation’s been going like this; food production’s continued to go up. Brazil is a leader in biofuels, but this biofuel is ethanol based on sugarcane that isn’t planted at the expense of forests.
And while it’s true that Embrapa (sp) is a leader in agricultural research and technology for agriculture intensification, the key reason for Brazil’s success in reducing deforestation is that they had access to the satellite imagery technology 25 years before anybody else. And being able to feed that information into civil society and the political discourse, use it to pressure corporate supply chains and use it to empower law enforcement officials to get out there and stop illegal deforestation has been a big part of the story.
So let me conclude. If you’re concerned about resilience, you need to look at land use change. And yes, technology is needed, but it’s to get us to second generation biofuels and it’s needed to help close the land – (inaudible) – frontier in order to create a demand for agricultural intensification.
And I hope – since I’m out of time – that you’ll ask me what rich countries can do to solve this problem, and part of the answer is indeed pay for performance.
MR. KANELLOS: Excellent; great. I will, in fact, if nobody asks, I’ll ask you that later.
Next we have Sonita Lontoh. Disclosure: We’ve been friends for a number of years, and now you’re head of the Indonesian Diaspora Foundation and you’ve been also an executive in SmartGood (sp) for a number of years. That pioneering energy – save energy; wonder if you’d share some of that.
SONITA LONTOH: Hi, good morning, everyone. So after we’ve listened to Nancy (sic) explain about food security and climate change, I want to transition right now to talk about one of the emerging technologies that have game-changing potential to solve some of the key global challenges in the 21st century; namely, the smart grid, which is my area of expertise.
But before we go into the smart grid, I want to take a step back and share with you a little bit of context as to the challenges that we’re facing as we enter the 21st century. So first of all, let’s talk about the current state of our electric grid. According to the National Academy of Engineering, our electric grid is the number one most important engineering achievement of the 20th century. And I think it was Neil Armstrong who once said that if anything shines as an example of how engineering has changed our world, it is definitely the power that we use in our homes and buildings.
And yet this greatest achievement of the 20th century has not been modernized for almost a hundred years to basically manage, you know, tackle the challenges of the 21st century. So as we enter the 21st century, societies and energy providers around the world are faced with daunting energy challenges which include limited supply; increasing demand; aging infrastructure – and in some countries, actually nonexistent or inadequate infrastructures – aging – retiring skilled energy workforce, especially here in North America and United States; the need to deal with greenhouse gas emissions and climate change, the need to integrate more renewable, intermittent renewable like solar and wind and also the need to deal with the proliferation of distributed energy resources like solar on rooftops, electric vehicles, smart energy storage, smart appliances in our homes and buildings, et cetera.
Compared to other industries, the energy industry has been relatively slow to adopt change. And, you know, a lot of people say that, you know, Alexander Bell would probably not recognize the telecommunications network that we have today. However, Thomas Edison would feel quite at home to, like, operate our current electric grid given that it has not been modernized, right? And actually the transformations that need to happen in the industry are nothing new, because they have happened in other industries before.
For example, in the ’70s and ’80s we saw the transformations of the computer industry where we went from a kind of centralized mainframe system to more distributed desktop PCs to even more distributed laptops to even – you know, today, of course, you know, the proliferation of smart tablet like the iPads. Similarly in the telecom industry we saw the same thing, where we moved away from a centralized kind of like mainframe switchboard system to, like, a more distributed fax phone system to even more distributed cell phones and mobile phones and, of course, through the proliferation of smart iPhones – you know, iPhones, Blackberrys and Samsung Galaxies and so on and so forth So in a similar way, our energy infrastructure will also evolve and move from this, like, centralized generating plant system to more distributed energy like solar and electric vehicles, and demand will become closer – sorry, the generation will become closer to where the demand is. And that is really where the smart grid comes in, to help modernize our energy infrastructure to better help us to tackle the 21st century challenges.
So a lot of people ask me, what is the smart grid exactly? In the simplest term, it is really the layering of intelligence and two-way communications across our whole energy value chain, from generation to transmission to distribution to the meter where the demand is in our homes and buildings to beyond the meter, which is inside our homes and buildings and all the way to distributed energy resources like solar on rooftops, electric vehicles in our garage, smart energy storage, smart appliances, and so on and so forth. Traditionally, our energy system has been one-way, where energy is generated at the centralized plant and then pushed one way without much visibility or communications to where the demand is, which results in a lot of inefficiencies and waste. But with the advent of the smart grid, there will be this two-way communications, intelligent, between the supply and demand, which result in much better efficiencies and also a much more balanced system between the supply and the demand.
There are many studies out there that have, you know, kind of shown the benefits of the smart grid. One study I’d like to mention is the – by Epri (sp). It is estimated that the smart grid has the potential to deliver about 2 trillion in economic benefits to the United States alone by 2030. And a lot of these benefits come from, of course, better efficiencies, but also better reliability, right? I always kind of think, like, one of the reasons people don’t think about energy, because I think we take it for granted. We don’t think about it until we have an outage or, like, a blackouts, right? And Epri (sp) estimated that blackouts and outages in the U.S. alone cost the economy about $120 (billion) to $180 billion per year. So with the smart grid, we can reduce these outages, you know, both the number, frequency and duration and contribute positively to the economy and to society.
And the good news is, smart grid is just the beginning. So from smart grid, we will then move to smart cities where we will put, again, intelligent communications and information technology to city infrastructure to enable better efficiencies and productivity and reduce waste and environmental degradation. And from smart cities, the big vision is this – what some people call smart planet, or the Internet of things, where we put information communications technologies to billions of devices around the world and connect them and enable, like, true machine-to-machine communications with no human intervention necessary, which will result in a smarter, more efficient and cleaner way of living.
And personally, I actually like to think about the Internet of things just like the Internet itself. So before the Internet, you know, kind of like relatively few computing devices were connected, right? And after the Internet, there are like billions of computing devices connected round the world and enabling all new forms of applications and business models. You know, things like e-commerce, Amazon and eBay, you know; our email system, social media like Twitter and Facebook; search engines like Google and Yahoo and so on and so forth. So in a similar way, the Internet of things will connect these billions of devices around the world, and enable all kinds of new forms of applications and business models that we cannot even think of today.
Of course, this is still a pretty futuristic vision, but some cities and counties and countries around the world have already started working towards this direction. And what I want to leave, I guess, this audience with is, in order to get there, we really need a true public-private partnership and also the right intersection of technology, business, policy and education to make it happen.
MR. KANELLOS: It’s interesting you bring up Internet of things. I deal with a lot of Internet things companies and they thought a lot of it would be home and things like that, energy efficiency, and it is, but the first real big application they’re seeing is agriculture, actually. You’re seeing, actually – because you have three people in 30,000 acres, right? You need remote sensing and things like that. But those are actually the two biggest markets for those – for that technology.
And last but not least, we have Jigar Shah. If you look in your gift bag, you will see Jigar’s smiling face on the back of “Creating Climate Wealth.” He’s the author of that. And also he’s played an instrumental role in the – in the renewable energy world. He founded SunEdison, which invented the power purchase agreement, which has, like I said earlier, accelerated solar. He’s also investing in projects for a company called Stem, which is actually bringing storage to the mainstream, and a number of other projects. So Jigar, maybe you’d tell us about all the things you’re working on. And you’re also the founder of the Carbon War Room, a think tank that you and Richard Branson founded together.
JIGAR SHAH: Thanks. Well, thanks for having me and thanks for being resilient yourselves and coming out here today on a snowy morning. I know that D.C. likes to think that it is so unempowered that it can’t handle rain or – (laughs) – or snow, but you guys showed them wrong.
And you know, for those of you who live in this area, I think you know what Sonita was saying firsthand. I lived in Chevy Chase for 15 years and averaged about two and a half days of power outages per year, so I think Pepco, you know, resembles your comments there.
I think when it comes to my work, I think that there is this interesting nexus where we’re at now where there’s – when the Arab oil crisis occurred, we decided to spend billions and billions of dollars to make sure that this never happened to us again, right, that we had choices, that we had technologies, that we had a pathway by which to avoid the impacts of hundred-dollar oil on our economy. Today, we’re at a place where we have hundred-dollar oil again, and we seem powerless to do anything about it, right? So even though we’ve got efficient cars, I know that the president has increased CAFE standards to 54.5 miles per gallon by 2025, but Japan and Europe are already at 54.5 miles per gallon by 2025 today. So we have this – MIT described it – this historic inability to do big things now in the United States. And I think it’s important for those of us who are in the ideas business to understand why that is. Because we keep pumping out great white papers without an understanding, I think, of how the political class sort of, you know, decides to read them and implement them.
A couple of points there. One is that I think that when you think about what happened in the 1960s and ’70s is that the time in which this era of oil crisis occurred, we at the government level decided to get out of the infrastructure business. Right? So we decided to push all of that decision-making down to monopolies, whether it’s the water utility, the electric utility, whatever it is. So when you go to President Obama today and you say, you – we want you to do this, he doesn’t actually know what to do, right? I mean, you know, like, I guess he could hire the right person at Federal Energy Regulatory Commission and say, we want to do some good policy, and Chairman Wellinghoff has done great work, but he doesn’t really control the decarbonization of the grid.
The same thing’s true with Department of Energy. The Department of Energy really doesn’t do anything on the implementation side. They have no way of really forcing electric utility companies to implement smart grid or anything else. They do have the ability to say, we’re going to pay for 50 percent of the cost of a smart grid implementation based on the stimulus bill, but as many of you know, none of that smart grid infrastructure really was required to, as Frances said, you know, this pay-for-performance thing, it was never actually required to hit its metrics. And I think, for those of you who have tried to log in on your Pepco website and, you know, use the green button that, you know, that folks talk about, it’s not as easy to use.
And so you’ve got this historic inability of politicians to understand what role they really play in infrastructure, which you don’t necessarily have, let’s say in China and Brazil, but you do have in the United States.
I think the other challenge is that – is what happened when we actually pushed that authority down, right? So when we pushed that authority down, we made sure that those people not only had the authority to implement infrastructure but that, by definition, meant that they were the entities by which you raised money to implement that infrastructure, right? So they had bonding authority, they had the ability to, you know, be publicly traded on Wall Street with certain S&P, you know, ratings, and so they had the ability to raise money from stock – the stock market to implement whatever it is.
And when you think about where that is today, you can imagine with Southern Company, for instance, right, which is building the nuclear power plant in Georgia – they came to the federal government to get a 50 percent subsidy for that. They then came to the federal government to get a loan guarantee for that program. They then went to the public service commission of Georgia to get it rate-based, which was rejected. They went to the state senate of Georgia to say, we actually want you to overrule the public service commission, which they did, and we want to start raising rates before the nuclear power plant’s actually even completed because we don’t want to take the risk to our shareholders just in case a nuclear power plant doesn’t get completed. Right? So this is the mindset now of the monopoly that we’ve outsourced this – whatever it is that we want to do – to. Right, whether it’s energy efficiency or whether it’s electric vehicle infrastructure or whether it’s decarbonization of our grid, this is exactly who we’ve outsourced it to.
So then, leaving that thread to the side, why do we actually have the political impetus to do this work? I think climate change is important and resiliency is important, and for the – and I’ve recently moved to New York and so with Hurricane Sandy just a year ago, a lot of folks actually know what that looks like in the U.S., and with the typhoon in the Philippines and other places, people see that on a regular basis.
But the real impetus for this is not the crisis part of it. The real impetus for this is the inflation part of this, right? So if you think about the last year that you probably think was prosperous for the United States of America, let’s call it 1999, right? We all sort of loved 1999. And so I think Prince sang about it, and we all had fun and thought it was the actual coming of the millennium but it was actually the next year, and it was good, right? But if you think about where we are today, oil prices globally, we pay about $2.5 trillion more globally for oil today than we did in 1999. On electricity, we pay about a trillion dollars more globally than we did in 1999. When you think about copper and steel and all of the commodities that we – that we all think about, you know, those are very high, and as you know, Jeremy Grantham has wrote a lot about that.
And then at the same time, the median wages and, you know, particularly for the poor and the middle class in the United States have not gone up since 1999, even though it costs them three and a half times more to fill up their car than it did in 1999.
So this is the reason why it’s important for us to do this and the reason why companies like the ones I support and the one that I started have such a huge marketplace, right? Because we’re saving people boatloads of cash, right? I mean, I’m the person who flew to Bentonville 14 times to get them to put solar on their roof and now they’ve done 90 megawatts of solar on their rooftops. And so this is not because they necessarily, you know, want to be green – and in fact I can tell you that they don’t want to be green. The reason they’re doing this is because they’re tired of 5 percent rate increases on their electricity bill every year and this is the only way that they know how to hedge their electricity prices going forward.
So the company I started basically figured out this pay-for-performance model for solar, and what’s interesting is we’re now using it for battery as a service model with Stem; we’re using it for solar hot water heating as a service in D.C. for a company called Skyline Innovations, so we own the hot water heating systems on GW and American University’s dorms that are saving them natural gas. We did hydroponic greenhouse as a service outside of Trenton where it’s a seven-to-10-year contract with the top five grocery store chains to guarantee volume, and then we built the hydroponic greenhouse based on that volume
MR. KANELLOS: And (leading ?) growhouses in the area – (inaudible) – the area.
MR. SHAH: Right. And so what you find is that whether it’s water, agriculture, industrial, electricity, transportation – which we haven’t really talked about but we should – all of this stuff can be done as infrastructure as a service, not because it needs to be – I mean, clearly if we want to go back to the days of Eisenhower we could actually do this from a government-led approach. But I think the reason why the infrastructure as a service model, which I describe in my book, is so critical is because the government has lost the ability to do infrastructure in many parts of the world and so we’re sort of stuck with the new paradigm, which is, you know, where the private sector has this leadership role.
MR. KANELLOS: One thing on the transportation thing you brought up there. I mean, out of all the sectors in clean tech, water and transportation have been the most difficult to actually reform. Water because it has a lot of subsidies in it and there’s agriculture – (inaudible) – but transportation – I mean, biofuels have been a flop. EVs have succeeded but it’s a very small percentage of the market. Is – what do you envision for this? Would it be the demand-response with EVs?
MR. SHAH: I think transportation’s actually been quite successful, we just haven’t noticed it yet. And so I think that when you think about transportation, I mean, one of the things that I find is shocking is this notion of, you know, how overrated, at least to me, hybrid cars are and how everyone sort of feels like we’ve done our part because we have hybrid vehicles. That’s sort of like saying that we’ve done our part because we’ve made the coal plants ever more efficient. You know, at some point you actually have to replace the coal plant with something else. We have this hegemony of oil that we have had for 40 years that we actually need to end. And there’s a couple ways of doing that, right? So, one is alternative fuels. Biofuels – it’s sort of interesting and we can definitely have an entire conference on it. I definitely think ethanol has its problems, but the one thing that, you know, we have to acknowledge is, from an economics point of view, is that oil is traded on the margin and that if ethanol didn’t exist, the world would have spent trillions dollars more for oil than it actually did, because ethanol did bend the curve at which oil traded because it existed. That’s not to say it was good for the environment, but it was good for economics.
I think – we can go to second-generation biofuels and all that stuff, but the low-hanging fruit right now is to end the hegemony of oil using, natural gas and electricity. And it’s shocking to me that we haven’t been able to implement the T. Boone Pickens plan even though, you know, everyone was supposedly for it.
But the other piece on transportation, which I think is even more extraordinary, is this notion of the fact that the car is by far the worst investment a person actually can make, right? I mean, you drive it 3 percent of the year and 97 percent of the year you have it parked. It’ s one of the worst asset utilization rates in the world. And we spent 200 billion-plus (dollars), you know, a year for that asset. So what’s happening with Zipcar, Car to Go, you know, car-sharing programs in general, Uber, Lift, Sidecar, all these other guys, is that I think David Orr’s research at Oberlin College shows that, I think, people between the ages of 21 and 27 have bought 30 percent less cars today than their counterparts 10 years earlier. And people who are empty nesters are now moving back into cities and actually going without vehicles and living in places where they don’t need a vehicle. And you’re seeing that happen over and over and over again, and so I think what you will find is this – you will find over time that this car-sharing thing will be far more disruptive than alternative fuels will be.
MR. KANELLOS: Yeah, it’s a behavioral change but it is having a huge impact where it’s also more people are actually joining Lift – and different types; it’s not just like – you know, I’m a slacker and I just (happen to have ?) a car and I’ll do this. It’s actually people who don’t need the money but actually want to do it. So.
But I forgot to ask. Any time, raise your hand, please, with questions and things like that and we’ll keep chatting away.
Sir. The man from Raytheon, I believe. Yes.
Oh, waiting for the –
Q: Yes, Randall Ford (sp) with Raytheon. So at a(n) Atlantic Council conference, I believe it was in late May, a couple of guys from – in this very room – from Singularity University were talking about exponential change and progressions in technology, and in cyber they said – I’m sorry, on solar, rather – they said the efficiency of solar cells is doubling every 22 months. So at some point –
MR. SHAH: Which is not true.
MR. KANELLOS: It’s not true at all, yeah.
Q: It’s not true. All right. Well, but they’re improving. So at some point, doesn’t solar, you know, become the change, become a more significant impact on our energy usage?
And then on the subject of food, when 3D printing becomes prevalent enough and we’re laying – we’re basically replicating food through organic materials, haven’t we solved the food problem around the world and doesn’t that solve your land use problem if everybody’s got a 3D printer and you just go in and – I want a pizza tonight, boom, you got a pizza. So – (laughter) – for example. But it seems like – the point is that technology, as we go through these exponential curves, technology has the solution for many of the things that we’re discussing here.
MR. KANELLOS: Frances, you can address the food.
MS. SEYMOUR: I guess I’m just curious where the calories come from, you know? You would have to feed some feedstock into the machine to get your pizza out at the other end, and I think – is that – are you assuming fossil fuels would provide that, or – ?
MR. SHAH (?): (I’m assuming ?) you’re right. Calories would have to come from somewhere.
But I think that, you know – I mean, I have huge fights with the guys at Singularity University on a regular basis. Not because they’re not smart people; I mean, they’re actually some of the most brilliant people I’ve met, but more because – so there’s this incipient sort of thought process which I’ve done a lot of hard work to eradicate that sort of came from John Lautenberg (sp) around the notion that the deployment of the technologies we have today is not worth doing because the technologies of the future will be far superior than the ones we have today. And that – and then the sort of corollary to that is that if the technologies were so great, they’d self-replicate on their own.
I think that when you think about the scale at which we’re deploying technologies – I mean, we’ll deploy about a trillion dollars of solar using the financial and business model that we created by 2020, so, you know, this year along we’ll do probably about $100 billion of solar. That the – that the mindset of MIT, which has been historically bad at incubating companies in this area, and then Silicon Valley, which has been historically bad at investing in companies in this area, is that technology matters. And what you find is that in infrastructure, technology actually is the thing that matters the least. And the reason for that is you can imagine that the people who are providing this trillion dollars are MetLife, Mass Mutual, Wells Fargo, et cetera. And these guys actually want to see a minimum of a hundred thousand hours of field testing before they actually get involved in something on a billion-dollar scale, right? So they don’t want to see something that just came off the line that just got Popular Science’s what’s-new award or whatever it is. They want to see something that’s actually been in the ground for 12 years.
So by definition, what we’re doing is actually figuring out how it is that we actually take the value streams that are – that come off of the technologies that we create, whether it’s demand response or energy savings or, you know, whatever they are. And how do you actually monetize those, whether it’s Walmart paying for them or the independent system operator or the electric utility company or whoever, or carbon, for that matter, and put them in the financial flowstream such that Wells Fargo and others feel confident enough to finance these technologies, right? And so that is the problem that we have to face. It’s not – it’s not what Singularity sort of thinks it is.
MR. KANELLOS: Actually, too, to add to that, too – in fact, you could tell the Singularity guys – solar is improving. It’s not – the efficiencies are not improving the way they’re talking about it, but right now when you look at a solar system, 64 percent of the costs are balance of system, which is not the panel. That’s permitting, getting the electrician, estimating customer acquisition, financing. And some of those areas can be solved by technology, but most are behavioral, right? Organizing the business structure so those can be thinned out. So it’s really – it’s that problem. I mean, the energy could be free and solar’s still going to cost money.
MR. SHAH: But the one – one thing just to add is just that – but we are – we are having exponential growth, so the curve, the Ray Kurzweil sort of theory of exponential growth is real. And so the notion of people who say that, oh, you know, solar’s only 1 percent of the grid so, you know – they’re really thinking linearly. When you think about Germany, for instance, it took about six and a half years for them to get to 23 percent of their grid being solar. And the same thing’s true – is going to happen in the next three years in Japan. And that’s happening. And the same thing is going to happen in the U.S. It’s extraordinary to me that people don’t see it, but by 2017 we’ll do over a hundred billion dollars a year just in the U.S. of solar.
MR. KANELLOS: Nancy Birdsall.
Q: Thank you.
One of the things I take from this panel, which is very good, actually, is that it’s not only about technology and not even maybe primarily about technology as the leading edge of change, but about the business model and about the policy environment and about the transactions cost you just referred to. So I wanted to go back and ask Frances to explain pay for performance on forests, which after all is about not getting consumers and producers and bankers and service industries to perform, but getting a – governments to perform.
And then maybe you could go back, Jigar, and elaborate on the difference, or how you – you know, is it – is it a different animal, these different forms of pay for performance?
MS. SEYMOUR: OK. The world has been concerned about tropical deforestation for a good generation. I mean, at the time of the first Rio conference back in 1992 we were all concerned about the burning Amazon. And so a lot of donor aid, billions of dollars, has gone to try to stop deforestation. And frankly, it didn’t work.
In the last few years, a new paradigm for international cooperation on forests has emerged under the banner of reducing emissions from deforestation and forest degradation in the context of the climate agreement. And the idea is that industrialized countries should just pay forest countries for their performance in reducing deforestation. And in fact the government of Norway has stepped up to this and put several billion dollars on the table in bilateral agreements, starting with Brazil and Indonesia, to say, here’s the money; if you reduce deforestation, it’s in your bank account. And while it’s early days and there are still some issues to be worked out, there is good reason to believe that this new model of financing decreases in deforestation will be the most effective yet. It doesn’t mean that all of the other things that development aid used to invest in aren’t necessary. Yes, we need to build capacity and yes, there’s new institutions needed – yes, yes, yes, yes. But in order to generate the political will to actually do those things, you have to have what an Indonesian colleague called the pot of gold at the end of the rainbow.
And so these billion-dollar agreements that the Norwegians have put forward – a billion dollars, nice round number, gets your – but in fact pretty trivial in the context of the Brazilian or the Indonesian economy. And I think there’s a good case to be made that it was the symbolism of the – a rich country finally putting a significant check on the table and not just, you know, talking about what developing countries should do, and really framing it as a partnership, a business transaction, rather than a conditionality kind of relationship, has really made all the difference.
And in the case of Brazil, the decreases in deforestation were already underway, so it was really more of a consolidation, you know, of a process. In Indonesia, more of a catalyst. And even though it’s early days, and as I mentioned, the deforestation rate is incredibly hard, this agreement has catalyzed governance changes for the first time ever. The maps of deforestation are on the Internet, you know, and so the public is able to engage in this process.
So this payment for performance idea, I think its time has come. Right now it’s being – the negotiations about forests in Warsaw done and dusted the rulebook for the mechanism for reducing emissions from deforestation, forest degradation. It’s being held hostage to a broader agreement to liberate large-scale finance. So what rich countries can do is step up in the meantime with development assistance and other funds and just, you know, make some of these business, you know, transactions with the governments, with the public sector at national or subnational levels to say, you decrease deforestation, here’s what we’ll pay.
MR. KANELLOS: It’s (easy ?) because even though it’s pay for performance, really what’s underlying is the money, even from the donor, is really not the relevant part. It’s the goodwill and the – almost the diplomatic feeling about it.
Sonita, wonder if you could add on this too because smart grid really works on the same levels. I mean, utilities are putting it in basically so they can reduce peak power and manage energy better and things like that, and they’re going to do that basically by giving consumers rewards.
MS. LONTOH: Yes, exactly. But actually, before I go there I want to kind of like flip it a little bit. So pay for performance is good, but also penalty for nonperformance works. And you know, I actually used to work for utility in California, and California is one of the most progressive states in terms of adopting kind of forward-thinking energy policies like energy efficiencies, renewable portfolio, standards mandates. And we have a mandate of the utilities in the state having to get 33 percent of their generation from renewable – from eligible renewable resources because in California, large hydro doesn’t qualify and certain – you know, noncarbon sources do not qualify. So actually, I have seen firsthand how this works, you know? At the utility – well, first of all, utilities are very risk-averse for good reasons, because they’re not in the business of innovation but they’re in the business of managing very big risk, like black swan events. And so policies and incentives to get them to move, you know, to a certain state is actually very, very important. So one is, of course, penalty for nonperformance. In California there are mechanisms for energy efficiencies, demand response, and actually the California consumption of energy per capita has been flat since the’70s. So it works.
So, just want to share with you that of course pay for performance is great, but also penalty for nonperformance also works.
MR. KANELLOS: And now there’s new penalties. If they don’t put in storage by 2020, there’s actually – it’s going to help energize that market.
MR. SHAH: Yep.
MS. LANTOH: Yes. And actually, on that sense – I’m just thinking out loud here – maybe if we have, like, a federal level of, like, mandates of, like – or, like, goals that we need to achieve, and there is incentives, like both rewards and penalties associated with it, maybe we can have better alignments between federal and state and local governments, because one of the issues, you know, in getting all of these new technologies forward is really not about the technology but is about putting in place the right policies and incentives to change behavior and to make certain industry, like entrenched industry participants and consumers, to change their behavior.
MR. SHAH: I definitely don’t think that’s going to happen at the federal level in electricity. But I certainly think it’ll happen at the federal level on transportation. The federal government takes a big role in transportation in the U.S.
I mean, I think on the pay-for-performance piece on forestry, I – it’s an important thing to note that – I think Frances talks about this as well – is that there was an entire puzzle already in place that was, you know, incomplete. And this pay-for-performance piece was added to the puzzle, right? So I think in Brazil, you know, I mean, there are hundreds of, you know, campaigners making sure that Brazil is kept honest in the promises that they make. And, you know, two or three of them lose their life every year, you know, trying to make sure that this happens. And so it’s really not maps, I think, that really gets it done, although it’s hugely important to be able to do that.
And the same thing is true in Indonesia. I mean, the assault that Greenpeace had on Asia Pulp & Paper brought them to their knees, and I think Asia Pulp & Paper now actually is lobbying on behalf of Greenpeace with the Indonesian government to, you know, get these things done because they don’t want to be the only corporation that doesn’t get to deforest. And so they are now convincing all the rest of their, you know, cohorts to not deforest because, you know, Greenpeace got every one of their contracts in the U.S. canceled, from Kroger to Walmart to Target, et cetera.
So I do think that, you know, it takes all these people together. But I agree with you on the pay-for-performance piece, in the end, I think, is that missing puzzle piece. And part of that – like, you know, I wrote an op-ed on the Warsaw talks around – we need to change the dialogue of – you know, the words that we use around – from who pays to who invests, right? I mean, because these technologies exist. So I agree that the rich countries have to invest a hundred billion dollars into developing countries to actually deploy the solutions that they need to be able to reduce their use of diesel, you know, for electricity; to reduce all these other ills that they have in their economies as well as on the emissions side. And that investment is intellectual property; investment includes dollars or euros or whatever; it also includes know-how and, you know, all these other, like, sort of like just, you know, O&M and, you know, that kind of stuff too. So I think that if we – and I think this pay-for-performance thing is sort of a way in which we go away from who pays to who invests, I think, which I think is a far easier thing for rich countries to agree to than this sort of like, you know, you guys have polluted for the last hundred years; now you must pay.
MR. KANELLOS: It sounds better, at least, too. It makes it more palatable, which is often a big part of the battle.
MR. SHAH: Yeah. I mean, a huge part of the battle, absolutely.
MR. KANELLLOS: Yes, with the yellow tie, right there in the –
Q: Hi, my name’s Chad Briggs (sp) with Global Int (sp). I wanted to ask a question about water, particularly as it relates to renewables and energy, because traditionally our perspective in the defense community has been that it’s a real bottleneck for whether you’re talking about the Tigris-Euphrates in Iraq or the Yellow River in China or gas fields in West Texas, that you can’t do most production process and transport, so forth, without massive amounts of water, with the exception of wind and photovoltaics. But – and Jigar, you were mentioning that the input prices are going up for so many of these energy issues except for water, which we’ve traditionally treated as a free good. And I was wondering if you could just comment on that as a potential problem or a solution opportunity in the future.
MR. SHAH: Yeah. I mean, look, I mean, the University of Texas and others have had huge academic programs on the energy-water nexus, and you know, I think that that’s pretty well covered. I – you know, I think – I was in Arizona last week and, you know, I think – for those of you who haven’t been following it closely, it’s gotten very personal and I’m on one side and the, sort of, you know, other folks are on the other side on – in the Arizona Corporation Commission. And you know, the reason I’m winning is because, you know, Scripps (sp) has made it quite clear to Las Vegas that they will run out of water in Lake Mead within nine years. And the only way to save Las Vegas is to shut down all the coal plants that are feeding from the Colorado River.
You know, over 50 percent – or close to 50 percent; sorry – of all of the water – freshwater withdrawals in the U.S. come from – come for cooling coal and nuclear plants. I mean, it’s just, you know – only 11 percent of the water withdrawals in the United States actually go for brushing your teeth or showering or any of the other things that, you know, you care about. So – I mean, I – god, I mean, I wish we had a price on water. I think that would be far easier to do, actually, than a price on carbon – but I don’t think either is going to happen. I just can’t imagine – you would literally shut down almost every industrial process as well as fracking, as well as everything else, if you even put a de minimis price on water. So I just don’t see it happening politically. But I do think that – I do think that from an argument standpoint, I mean, that’s why most of the work I’m doing is so successful. I mean, that’s why I’m winning votes at the local level is because people are so concerned about water. In India they just, you know, cut 90 percent of all of the coal plants in India in terms of, like, the new ones that they were trying to build, and it was basically all because Coal India didn’t actually have the coal supply to give them and freshwater withdrawals were just – you know, it was – there was – too high. They couldn’t actually build in water-stressed areas.
And so I do see water playing this important role. I just have a hard time seeing politically us putting a price on water in the U.S.
MR. KANELLOS: Are you seeing anyone doing bifurcation where actually consumer water and things like that would still be subsidized, as it is now, and then water use for commercial use would be on a, you know, a much steeper tariff to actually encourage conservation, or is that –
MR. SHAH: Well, consumer water is not subsidized. I mean, let’s be clear. I mean, consumer water – I mean, we pay for whatever the costs are. Those were – those are the parts that have actually have been sort of done somewhat systematically, right? There’s a water authority in D.C; it’s called D.C. WASA. They have certain costs associated with what they do and then they actually, if they have to upgrade their plant for new arsenic standards for EPA, they raise everybody’s water bills 50 percent to be able to pay for that bonding authority. It’s the power plant sector and the industrial sector who – the fracking guys who just go in and basically just take this water. I mean, today in Colorado, they’re outbidding by 3-to-1 the agricultural sector for water rights in Colorado. And it’s an extraordinary thing that you see, and I think that it’s the source, I think, for why this broad-based coalition has come together to actually win these battles, right? The reason we’re getting so many ranchers and so many like Ducts Unlimited and lots of these other folks who are –
MR. KANELLOS: Yeah, they have to cooperate or die, right.
MR. SHAH: – generally getting in – we’re winning because they care so much about water on the politics side. But I just – it’s so hard to see how we put a price on water in this country.
MR. KANELLOS: We have a question here from Twitter from Evan Faber (sp): Does technology solve problems in energy, food and water and ecology and the environment, or does it cause these problems to mutate, almost a version of the Jevons paradox, similar to what we use efficiency to actually end up using more. So, technology, does it solve problems or does it create them?
MS. SEYMOUR: Certainly both. I mean, one of my points is that intensifying agriculture, you know, will increase production but it won’t necessarily slow deforestation because it can create incentives to clear more forests.
MR. KANELLOS: I think – (inaudible). I mean, this comes up a lot with computing and things like that. You say, well, you know, because electricity – you know, computers, more efficient, people buy more computers. That’s not why they buy them. You know, you don’t buy a second fridge because your power bill is less. You want to do it because you have more food. You don’t build big data centers because the power is less; it’s because there’s an opportunity to actually use those numbers. So.
Q: What about fracking? That’s improved – reduced emissions, but increased water use.
MR. KANELLOS: That is true.
MR. SHAH: Well, I mean, I think it’s – I mean, it’s an overly simple – I don’t think it’s a good question. I mean, it’s an overly simplistic thing.
First of all, I mean, the paradox only works in, like, sort of – some sort of normal commercial sort of, you know, basis, right? We’re not there anymore. We’re completely off the charts on everything, right? And when you think about price of gold, price of platinum, price of copper, price of steel, price of everything, has gone up to the point where we’re not on that paradox curve anymore. So like, I think this notion that, oh, if we stop using all this stuff, coal prices are going to, like, go down by half, I doubt it, I mean, you know. It just costs $65 a barrel to get oil out of the Bakken Shale now. This notion that the Bakken Shale is new – I mean, when I was – when I worked at BP, we had all this technology but oil prices were $19 a barrel. Why the hell would we actually do something that cost $55 – at the time it was maybe $35 a barrel because there’s been so much inflation in the oil supply chain. But you know, today, I mean, Arctic oil – $85 a barrel. I think it’s criminal what Shell is doing in terms of Arctic oil drilling, knowing full well that they’re not going to make anything close to a 20 percent rate of return in equity. They just want to show that their dick is longer than everybody else’s by actually polluting the Arctic. They know that they’re not going to make money on the Arctic.
MR. KANELLOS: And those costs are always buried. They always try to make it out like this is the new Saudi Arabia, where – you know, oil comes out at $8 for every barrel.
MR. SHAH: All of their profits have come from oil that they found between 2000 and 2008. All of the oil – all of the money that they’ve invested in the last four years – I mean, the Shell Oil CEO who’s retiring, you know, in the Financial Times article last month said that his biggest regret was all their shale work because they’ve lost their shirt on shale, right?
And so – I mean, we can talk about shale if we want to, we can talk about all these things, but this notion – that question was just poorly framed and it’s not – there is no trade-off here. This is a very complex thing and I think that that’s not what we’re dealing with.
Q: As the asker of that question, I’d like to defend that (really quickly ?). (Laughter.)
MR. KANELLOS: Sorry for using your name, actually.
Q: Live-tweeting a rhetorical question, and I didn’t realize that it was going to come right in here, so that’s pretty great.
The question was not so much an either-or. I think that – you know, folks really want to implement technology solutions. You create – you know, solar is going to be the answer, or fracking is going to be the answer because it will lower oil costs. But I think my point is more that these kinds of problems don’t get solved by technology. Maybe an aspect of a problem gets solved by technology. But technology always has – is always a double-edged sword and it always has consequences that you can’t necessarily envision. And I think that the role of strategic foresight is to think about alternative possibilities when you implement a technology and to think about alternative outcomes and alternative strategies. So I wouldn’t believe anybody who says, you know, this technology is going to solve any problem. I would want to think, you know, about all kinds of possible implications and to think about, how can we arrange strategies and investment opportunities that will prevent risks and enhance opportunities?
MR. KANELLLOS: That’s a very good point. In fact, I’d add to that, too, by also looking at alternatives – also look at the – I would call the lowest common alternative. In food, for instance, there’s a lot of people investing now in synthetic foods and things like that, but if you look at the food supply chain, where people are really gaining the most bang for the buck is just replacing old drives and refrigerators with variable-speed drives. And the company Sysco – not Cisco the router company, but S-Y-S-C-O the food distributor – they’ve cut power intensity in their warehouses by close to 40 percent just by swapping out parts that we’ve had on the market for like 25 years, right? So if you actually – you know, it’s almost like you call it stupid green because it’s such a stupid easy thing to do, everyone should be doing it.
MR. SHAH: Well, but I think that – I mean, the more – so the more thoughtful way, I think, to think about this is – you know, I’m an engineer by training and when you think about the MIT sort of Rube Goldberg, you know, competition, right, where you have, like, the whole marble that goes in and then, you know, things go up and then at the end you, like, sort of toast your, you know, piece of toast and pour yourself a glass of orange juice – you know, like, that is our energy system today, right? I mean, this notion that we have a coal plant, right, and it’s a single use of water, and so now we’ve decided to sort of recycle that water and added energy to do that. Then we decide to put a scrubber system on that coal plant to be able to, like, reduce emissions. And then we decided now that we’re going to CO2 sequestration and we’re going to have another 10 percent of the energy gets siphoned off to do that. And all of this stuff is just nonsensical, right?
So look, I don’t think that solar is the best technology or anything else, from variable speed drives to et cetera, is the best technology. But I do think that we need to simplify the supply chains of what it is that we’re doing, right? So I don’t think we should be bringing in food from California and Arizona to feed people on the East Coast. I think that’s just dumb. Like the fact that my tomatoes taste awful because I have to get them from California and Arizona because they’re basically optimizing them for their ability to not spoil in a truck as opposed to the way they taste is ridiculous. I think the same thing’s true with energy, right? I mean, I think we should actually get our energy from primary sources. And whether that’s water or air or solar or whatever, and I think every 5-year-old knows that that’s exactly where we should get our energy sources, not from, you know, very complicated technologies to go two miles below the Gulf of Mexico to figure out how we actually bring something out of the water.
I mean, all this stuff is crazy.
So look, I think if there’s a certain set of technologies that get us to a more biomimicry way of doing things, I think that’s a better approach than, you know, trying to figure out how we actually fight nature and how, you know, we try to, like, you know, control nature in a way that we think that we’re, you know, sort of the superior being.
MS. LANTOH: I want to make a quick comment, actually, about technology and potential implications. So one example, for instance, the smart grid. So after smart grid’s put into place, there is this huge amount of data that is, you know, like coming from all kinds of sources creating potential, you know, problems if not managed correctly for privacy issues and data security and things like that. But it also creates opportunities for companies, innovative companies and individuals who actually have the ability to analyze and transport this data security to be able to optimize the data in a – in a right way. So, you know, all technology may create some issues – let’s say automation can cause, you know, like, the need for less workers – but it can also create opportunities for others, you know? Maybe we can kind of upgrade that human capital so that they can, you know, thrive in the new knowledge-based economy.
So I just want to make comment that, yes, it’s true that technology itself will not solve problems, and a lot of policies and implications need to be thought of. But it can also create new opportunities that, you know, if managed correctly can move us in the right direction.
MR. KANELLOS: Instead of robots replacing humans, robots actually doing things that are just beneath us, like trying to – you know, working all day to save 11 cents a kilowatt hour, right? It’s true, it’s basically the jobs humans don’t want to do rather than a human wants to do it and then getting replaced by a machine.
MR. SHAH: Well, but that – I mean – I mean, just to be clear, though, like, that specific line of thinking – I mean, I agree almost completely with what Sonita said. But, like, that specific line of thinking is why we’re in the mess that we’re in. Right? I mean, this notion that everyone, just through a better education system, is going to become a software coder is ridiculous. Right? There is some percentage of people who either want to work with their hands or want to work with the land or want to do whatever it is they do. They may not even want a high school education. Whatever it is that they don’t want to do, us – we as a society have to figure out how to give those people meaningful jobs and meaningful work. I mean, one of the good things about technology and where it’s going now is this whole concept of small is beautiful is now possible because the smart grid and other things. I have the ability to invest in things at a $50,000 level now because I can get data for, you know, 17 cents, you know, on the sensor to be able to manage my stuff. And that now leads to community-based solutions.
And so there’s a tremendous amount of community-based solution work that’s happening. You can actually more cost-effectively now power a village in India than to actually bring the grid to them and actually use a central station power plant. So I have – I mean, I understand where – what you meant; I didn’t mean to argue with what you said, exactly. But I do think that there’s this pernicious problem, particularly in the United States but also around the world, where this notion of productivity has driven us on the fed, and I think productivity is no longer a good measure of the way we’re going. This upgraded human capital piece is no longer a good measure for us now. We actually do have to figure out proper employment for everybody, and that has to be a proactive policy that we’ve failed to do since 1990. And we actually have to go back to figuring out how we actually train these people. Like, for instance, vocational education, you know? Maybe some people need to go directly into vocational education. We had a vocational education place where I grew up in rural Illinois where, when a lot of folks turned 16, they immediately went into vocational education and learned a skill or a craft or something. But I do think that this focus on infrastructure that we have will create a huge amount of jobs for blue-collar workers, but only if we actually have somebody who’s thinking for, like, five seconds about how to help these people.
MS. LANTOH: It’s basically a new – I think it’s a new definition of productivity. So instead of efficiency, it’s actually being a contributing member of society.
MR. KANELLOS: But yeah, it’s a good point too, because actually renewables, one way to look at it is you’re replacing fossil fuels with construction jobs.
MR. SHAH: But labor – that’s right, absolutely right.
MR. KANELLOS: Sir.
Q: Ed Berger (sp). Let me focus on the area of transportation. Your discussion – transportation almost entirely was consumed with the issue of the sources of energy, fuel, and particularly for private cars. But you had no discussion at all of mass transportation. They – the railroad that was recently built from the north end to the south end of Taiwan was followed by an article on the subject that pointed out that if the same number of people had had to drive from one end of the island to the other, it would have cost 13 times more energy than it did to transport them by mass transportation.
Other parts of the world, as everybody knows, have had other – have had other solutions to this matter, and I might point out as well that the state was involved, I think, in every one of those successes.
What should we think about that?
MS. SEYMOUR: Well, I can start by saying that the econometric research is clear that the highest correlation between anything that you do and increasing the deforestation rate is to build a road through a forest. So if you can build a rail line instead, that’s a good thing.
MR. KANELLOS: Distributed car networks almost seem like a quasi-mass-transportation –
MR. SHAH: Well, I mean, look – I can answer your question in a number of ways, you know, and we can certainly have the academic conversation. I’ve chosen in the last six years to win as opposed to being right, and so I’ve worked really hard on figuring out how to win.
Look, I think in the United States, mass transit doesn’t make a lot of sense outside the Northeast Corridor. When you think about the density of people in Europe or in Taiwan or in other places, those densities don’t exist in the U.S. outside of the Northeast Corridor. So there’s a reason why everyone uses Amtrak and that basically subsidizes the rest of the country, and Amtrak doesn’t really work, necessarily, across the country, although my dad and I did have a fantastic trip from Chicago to San Francisco.
But I think that there are lots of ways to do that in a virtual way, which is, I think, what Michael was talking about. These car-sharing platforms, you know – like I use this thing called Bandwagon now every time I go to the airport, and so it picks up – so – (inaudible) – in a black car, it picks up two more people to go to the same airport, because everyone’s basically using Uber anyway, so, you know, why not pick up two people on the way? It takes you five extra minutes and it saves me 40 bucks. So there’s a lot of things like that that could happen, and I do think that you’re going to see that happen. And so whether it’s bus, rapid transit, or whether it’s other things like that, you’re going to see just literally, you know, hundreds of thousands of Econoline vans that are on, you know, our highways that are actually helping people to pick people up and become virtual mass transit.
But I think this notion that in this country that outside of maybe California, that we’re going to build – for instance, I mean, Houston to Dallas should have a mass transit solution. But Southwest Airlines is now the largest domestic airline in the United States, much bigger than any of the other airlines, and they make so much money from Houston to Dallas that you will never see a mass transit solution between Houston and Dallas. And it’s just what it is. So I just choose to live in the world that we live in and win, as opposed to, you know, trying to, like, do these 30-year story arcs. Mass transit in the United States for most of the United States will be very, very difficult to do.
But I would love to see the San Francisco-San Jose high-speed train because I hate that drive.
MR. KANELLOS: I think that’s going to happen, don’t you think?
MR. SHAH: There’s – you know, everyone in Menlo Park’s objecting, you know, to the noise, even though it’s not exactly, you know, pristine wilderness there, but –
Q: (Got ?) Elon Musk’s loop. (Laughs.)
MR. KANELLOS: That would be – there’s actually a couple ideas like that. We’ll see if that happens or not.
Sir, and I think we’re probably –
MR. : We’re over time.
MR. KANELLOS: OK. Sorry, we’re over time. Sorry about that. Thank you all very much. If you could give our panelists a great big round of applause, they were fantastic. (Applause.) Thank you.