Electricity 4: C02 Emissions: the Endgame

Continued from Electricity 3: CO2 Emissions: a floor report

Fun fact: this man-made disaster is just for all the living beings. Earth will live on! And cockroaches probably!

1. Tackling CO2:

There are six ways of how we can tackle CO2 release into the atmosphere.

  1. Switching to Nuclear power! But it has other grave issues. Not sure if chances are being explored to make it safe.

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Source: http://www.pictureisunrelated.com

  1. Shut down Coal and Natural gas plants which have the highest emissions. This will have really high repercussions on world economy. Phasing them out overnight will lead to heavy loss of jobs and will send a deadly shock through the system if an alternative is not planned.

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CO2 Emissions per source[i]

  1. Make all energies renewable which will lead to 0g emissions. To do this it is estimated that a 100 Trillion$ should be invested over the next 20 years[ii]. The world income is 80 Trillion $ and concentrated on just few hands. If you divide the cost per consumer, it will be too costly for an individual consumer to pay. You might just have to give 55 billion dollars from your monthly income of 2000$! Unless world powers are trying to co-operate and make at least investments bit by bit towards this goal, an individual consumer can’t do anything about it. This is where the importance of Trump’s exit from Paris environmental agreement lies in. He influences about 23 Trillion $ in the world (USA’s GDP)

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  1. Invent a technology which will imitate a tree. Suck out all the CO2 and convert it to something human friendly: best case: Oxygen. There was interesting article on this topic. They call it “Negative emissions”[iii] and show there is hardly any research on this topic. They also warn if some policy maker should cite this as a solution, probably he/she is trying to deceive, as hardly any investment flows into this field. Quoted from the article: “Keith concurs.”As of today there is extraordinarily little research on it,” he says. “The number of scientists funded to do work on carbon removal globally is seriously small.”
  1. Plant trees! One mature tree can absorb 22 Kilos per year or about 1 tonne CO2 in its lifetime[iv]. For the same 1 trillion goal, if we want to tackle them by planting trees, we just have to plant about 4.5 trillion trees more. Currently, there are about 3 trillion trees[v] in the world and they absorb about 40% of the 30 Billion tonnes emitted every year. It’s fine even if we don’t plant new trees, but cutting down existing trees is disastrous. It is estimated that yearly 15 billion trees are cut out of deforestation or urbanization[vi]. Only about 5 billion are replanted, but it will take some years for it to become mature to absorb CO2 effectively.

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Life cycle of tree cultivation[vii]

  1. Reduce household electricity consumption and support to bring down the CO2 emissions to acceptable level. This will be the focus of this article as this is something where you and I as common man can take actions independently without having to rely on governments or global leaders. Planting trees as in point 5 counts too

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2. Switching to Eco Electricity! But does it make us Eco-friendly?[viii]

Yes!

My energy supplier is EnbW Company. They are located about 40km away in a town called Heilbronn. On 6th August 2011, in response to the Fukushima catastrophe, one of their nuclear power generation units had been shutdown[ix] along with 7 others all over Germany[x]. Now they are carrying on further with the remaining nuclear unit and a coal firing unit. Additionally EnbW also has a hydro unit nearby. I have a 100% Eco-Electricity plan, which theoretically would mean that EnbW sends me the power only from the hydro unit. In reality it is not. It will be too costly for EnbW to make a separate electricity grid just for my home. Any energy generation unit therefore normally feeds their supply into to the public grid. Electricity mix is the appropriate term to be used. The electricity power grid in our region thereby would get a mix of electricity from these three sources, as once the electricity from any type of power generation unit gets fed into the grid, you cannot differentiate the electricity. What EnbW promises me is that for the money I pay, an equivalent clean power is fed into the grid somewhere else in the world grid. It’s a good thing that you can do by switching to Eco Electricity. As of 2019, Germany’s renewables mix has become 40% and has overtaken coal production which is at 38%[xi].

3. Yearly 20% reduction in your electricity bill can help reverse the climate change!

To see the relevance of the above claim that I can save 20% in my electricity bill and at the same time improve the environment, we need to see the role of my home in the context of the surroundings. It’s very similar to the argument over electric cars. Although the cars are electric, the recharging stations which supply energy to the cars are fed by coal and other non-renewables. By this setup, are we really going environment friendly by buying an electric car? Likewise by conscious electricity consumption, I can impact 20% of my electricity bill, but do I really impact the environment?

How does my 20% electricity bill saving fit in the whole picture?

As discussed above, the electricity mix that my house receives is a mixture of nuclear, coal and hydro. What I had learnt in my electricity lecture was that the energy generation units are controlled by smart systems. The units can only produce so much power as is needed in the homes. The public grid cannot be over burdened or under burdened. The smart system makes sure that this balance is always present, else the whole system will shutdown. What it means to us is that the electricity that we save at home by not running a device is really an energy not generated at the plant too. Lesser energy generation is lesser CO2 emitted in the air. This is the link to the environment and the air we breathe. In the table above in Section 1 point 2, you can see how much CO2 is emitted per source.

In Germany, an average house consumes about 6600 kWh[xii] per year. If I can reduce it by 20%, I will have reduced 750 Kilos of CO2 emitted just by my action! Meanwhile an Indian home uses only about 1100 kWh[xiii]. Let’s say that a person in the first world or having more electrical appliances at home will have a higher individual impact. A person in the city will have much higher impact, as urban sector consumes about 70% of the whole world electricity produced[xiv]. If you are living in a city and are on the higher end of the kWh scale, you are a high impact person. On the other hand, the total population of such high impact people are less, the bigger slice of the cake are those humongous number of small homes. That’s why I say regardless of whatever individual impact kWh you are making, a discussion or a goal setting in “Percent” is more reliable than an absolute number. A person in Germany should aim towards reducing 1200 kWh and meanwhile the person in India should try for reducing 220 kWh.

What does one person’s effort into reducing 750 Kilos of CO2 per year make?

To understand this statement, we need to switch to the global scale of electricity production. In reality, homes are not the only consumers of electricity. There are three other types of consumers and residential is just one of them. More or less, all the three of them almost have an equal distribution: Residential, Industrial and Transport

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World energy use[xv]

Total electricity use in the world is about 100,000 tWh (Tera Watt Hours is kWh multiplied by 1,000,000) Given that the topic of discussion is Residential, we are talking about impacting 36% of the electricity as per the above table. Imagine if all the homes could save 20% year by year, the 750 kilo equivalents per home gets translated to an impact of 1.06 billion tons of CO2 released into the atmosphere year by year. Totally 30 billion tonnes of CO2 and upwards are released into the atmosphere year by year.

The contribution of each home could reduce total CO2 emissions by about 4%!

You can be sure that every effort of yours really counts. We have to proactively set a goal and run towards it. You can use my blog post Electricity 2 to cut down your energy consumption. If my wife and I would do our work well, by the end of first year, we should have consumed 1900 kWh less and 1280 kWh less in the second year and so on. Whether we will really achieve it or not is a different question and is up to the individual’s commitment. More important is to have the consciousness active!

Change begins from self!

 

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How wild can my dream be to ask for my Coimbatore back?

To be continued: Electricity 5: Electric Cars and solar panels – Are they really viable?

If you like my posts, please acknowledge your motivation by Following/ Liking/ commenting on this blog. Thanks for reading.

Recommended Reads:

  1. https://www.dw.com/en/green-energy-solutions-youve-probably-never-heard-of/a-47731808
  2. Wetland mud is ‘secret weapon’ against climate change
  3. https://www.bloomberg.com/news/articles/2019-03-07/trump-said-to-again-seek-deep-cuts-in-renewable-energy-funding
  4. https://www.dw.com/en/co2-emissions-to-hit-historic-highs-in-2018/a-46606292
  5. https://www.sciencealert.com/scientists-spot-530-000-potential-pumped-hydro-sites-to-meet-all-our-renewable-energy-needs/amp
  6. https://business.inquirer.net/267764/how-europe-is-faring-on-renewable-energy-targets/amp

References:

[i]https://en.wikipedia.org/wiki/Life-cycle_greenhouse-gas_emissions_of_energy_sources

[ii]http://knowledge.wharton.upenn.edu/article/a-renewable-world-what-will-it-cost/

[iii]https://www.wired.com/story/the-potential-pitfalls-of-sucking-carbon-from-the-atmosphere/amp

[iv]https://www.quora.com/How-many-trees-would-it-take-to-reverse-climate-change

[v]https://www.bbc.com/news/science-environment-34134366

[vi]https://www.independent.co.uk/environment/how-many-trees-are-there-on-earth-10483553.html

[vii]https://www.coillte.ie/about-us/our-story/forest-lifecycle/

[viii]https://www.shine.eco/2016/10/24/wann-ist-oekostrom-100-erneuerbar/

[ix]https://en.wikipedia.org/wiki/Electric_power_industry

[x]https://en.wikipedia.org/wiki/Nuclear_power_phase-out

[xi]https://qz.com/1515608/electricity-from-renewables-topped-coal-in-germany-for-first-time-in-2018/

[xii]https://en.wikipedia.org/wiki/List_of_countries_by_electricity_consumption

[xiii]https://en.wikipedia.org/wiki/List_of_countries_by_electricity_consumption

[xiv]https://www.c40.org/why_cities

[xv]https://en.wikipedia.org/wiki/World_energy_consumption

Electricity 3: CO2 Emissions: a floor report

Continued from Electricity 2: Understanding my home: How to reduce my electricity bills?

Coimbatore: a floor report

I hail from Coimbatore and since 2009 I live in Germany. Coimbatore used to be a heaven with moderate temperatures of 20°C and cool breeze all throughout the day. It used to be a pleasant place to live and was convenient to walk around. In fact, my friend and I used to walk 5km on a daily basis for about 10 years. Switch to 2019 now, average temperatures have gone above 35°C with dry and skin piercing winds. The infrastructure of the city is not equipped to survive the heat. Population explosion and drastic increase in number of vehicles aren’t helping the situation either. Given the cluster and chaos, building a green infrastructure is going to be very difficult. Vehicles have spoiled the air and the number of moving objects on the land has increased the dust. I could feel my lungs being filled with exhaust gas and I was choking. My eyes were having an irritating sensation too. There is hardly any government intervention. This was my experience visiting Coimbatore the last time in 2018. The whole time was so overwhelming that I felt like sitting on a stack of card castle and someone was just about to remove the bottom most foundation card. Whenever I think of bringing up kids in the city that I grew, it feels like running against a wall. The city is simply going out of hands. I don’t need numbers or scientific studies to prove that environment is being harmed. India in the recent years has started seeing deaths from heat waves. A person in Germany might not understand this yet, as the air is still fresh, but the situation is changing there too.

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Source: Our World in Data[i]

In Germany, the last four years seem to make a statement. Winters aren’t that cold anymore and couple of summer months are unbearable with temperatures going above 40°C. Moreover the houses are not built for summer which makes it difficult to sustain the summer heat. The trend is alarming in a way that every New Year is unpredictable than the year before: Temperature swings are terrible. Soon world over, this trend might reach a tipping point and the next “Black plague” might result.

Why is CO2 harmful?

The strange thing in our world, which applies to many things, is that a healthy reality or a solution is in most cases in the middle. There is a saying “Too much of anything is good for nothing” – the contrary is also true “Too less is also too bad”. Reality is about striking that equilibrium. This setup basically summarizes the issue for CO2 too. Currently we are having too much of it. Too much of CO2 increases Earth’s average temperature and too less of it will freeze us[ii]. (Read Greenhouse Effect[iii])

How much of CO2 is released in the atmosphere today?

As of 2010, yearly over 30 billion tonnes of CO2 and upwards are released year by year into the atmosphere, with the energy sector contributing to about 50% of it.

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Source: Our World in Data[iv]

What level of CO2 is permissible in the atmosphere?

All those 30 billion tonnes of CO2 emitted, increases the number of particles of CO2 in the air. It’s called parts per Million. Before 2014, the acceptable limit was defined at 400 ppm[v] which is already crossed now. Now a maximum tolerable level is pegged at 600ppm[vi]. As of  Jan 2019, the world ppm was at 411ppm[vii]. The cities will be the first one to die. A latest report says that Seoul, South Korea; Guangzhou, China; and New York City have the three highest carbon footprints of cities worldwide[viii]. Only Seoul emits about 30000 tons per year and a specific study says that in Seoul Metropolitan Subway (SMS), the indoor CO2 levels could reach up to 4000ppm[ix].

PrtScr capture

Source: http://www.CO2.earth

To avoid climate change scientists say that the ideal limit is 350 ppm[x].

The year 2050 is a global phenomenon for Global-warming. To avoid atmospheric temperature increase by 2°C we need to cumulatively emit less than 1 trillion or 1000 Billion tonnes by 2050[xi]. Since 1750 till 2009, the world had already added 0.5 Trillion tonnes C02 into the atmosphere, of which about half of it 234 tonnes was added just between 2000 and 2006.

Today in 2019 the total CO2 emission in the atmosphere is about 800 billion tonnes!!

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Source: Statista.com[xii]

We are just 200 billion tonnes away to cause a disaster!

This is the reason why many scientific communities are showing Red flag! With our speed, we will cause the problem in just about 5 years! To reverse the trend, we have to reduce our usage by so much that we need to make this 200 billion tonnes CO2 emission span out for the next 31 years! Sounds like fantasy right? That exactly is our problem!

To be continued: Electricity 4: C02 Emissions – the Endgame

If you like my posts, please acknowledge your motivation by Following/ Liking/ commenting on this blog. Thanks for reading.

Recommended Reads:

  1. https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions
  2. https://www.scientificamerican.com/article/limits-on-greenhouse-gas-emissions/
  3. https://www.dw.com/en/where-air-pollution-hits-hardest/a-47907072

References:

[i]https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions

[ii]https://www.giss.nasa.gov/research/briefs/ma_01/

[iii]https://www.mnn.com/earth-matters/climate-weather/stories/co2-101-why-is-carbon-dioxide-bad

[iv]https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions

[v]http://400.350.org/

[vi]https://www.quora.com/How-much-CO2-in-air-is-harmful

[vii]https://www.co2.earth/

[viii]https://www.smartcitiesdive.com/news/report-worlds-highest-carbon-footprints-in-seoul-guangzhou-nyc/524989/

[ix]https://www.researchgate.net/publication/288779211_PM10_and_carbon_dioxide_concentrations_of_the_Seoul_metropolitan_subway_cabin

[x]https://www.mnn.com/earth-matters/climate-weather/stories/co2-101-why-is-carbon-dioxide-bad

[xi]https://www.scientificamerican.com/article/limits-on-greenhouse-gas-emissions/

[xii]https://de.statista.com/statistik/daten/studie/37187/umfrage/der-weltweite-co2-ausstoss-seit-1751/

GDP Conclusions: history of world GDP and its side effects

Continued from GDP 7: the third threat – Environmental Choke

CONCLUSIONS:

  • GDP increase does not necessarily mean that the income is equally distributed. A Pareto principle of 80:20 distribution of income is true for most societies.
  • With turning point in the 1950s, the dramatic GDP increase of the countries can be attributed to consumerism.
  • In a consumerist supply chain, you are the consumer and at the same time the worker too!
  • Right wing surge is obvious, but they have to choose the economic model wisely
  • Automation is not the answer; employment with guarantee for a minimum salary is!
  • Economic models should focus more on reducing the need for money than insisting to make more money i.e. to promote savings in a household, the costs can be cut rather than traditionally having the salary increased year by year. A sharing economy will automatically facilitate this than an economy focusing on increased ownership of products
  • A sudden stop of materials supply is a plausible scenario. Individuals can prepare by getting rid of their credits ASAP and increasing their savings. Governments can support only so many people and their reaction can be delayed.
  • Governments should practice and promote the sense of Co-existence with Nature and other species, rather than showing an outright “Domination”
  • Veganism may not be the answer, but meat consumption has to be regulated down to minimum.
  • Quality of life will be determining factor for the health of future generations: population increase, density and air emissions have to addressed with an attitude of applying an “Emergency brake”

 

FINAL THOUGHT:

Change begins from self!

 

———————–Fin – Thanks for Reading——————-

If you like my posts, please acknowledge your motivation by Following/ Liking/ commenting on this blog. Thanks for reading.

GDP 7: the third threat – Environmental Choke

Continued from GDP 6: the second threat – Economical Choke

Environmental choke: animal and nature extinction

Sadly the most to suffer in all these fast changes are the plant, animal species and their homes i.e. forests. The diverse man made acts have caused tumult to the environment that its sudden changes has been unfavourable to many of the species, including us humans. It’s as if humans have declared themselves as the only “worthwhile” species and simply ruled out the aspect of “Co-existing”. To gauge this impact, I have split the topic into two sub-sections

1. Nature Vandalism

The total available land on earth in 2016 can be split as in the following representation.

1

Figure 26[i]

2

Figure 27

As of 2014, the world population was living in the 1% of land. To feed the then 6 billion people mostly living in this 1% area, 50% of the land was needed for agriculture. With today’s population of 7.4 billion and further increase, more land would be needed to feed more mouths and more space would be needed for living. This land has to be taken from somewhere. Unless a global scale policy is made on reduction in land for livestock which is seen to taking 77% of the agricultural land, the most likely option is to get the forests converted. Every inch of the forests would be converted for agricultural use or industrial use or for urban living. Although the graph above represents 37% for forests and 11% for shrubs, many other sources seem to disagree and they go with an even lower figure of 31%. It was found that the reduction in forests from pre-industrial era to today is one third i.e. from 45%, we are down at 31% and the most change has happened after 1950! Looking into the future, it’s calculated that we are losing 8.3 million hectares [ii]year by year, which means that with this trend we will lose all the forests within 100 years!

It would be interesting to have a comparison on how the land division would have been in the pre-industrial area, but the data was hard to find. Alternatively, the graph below might give you an idea of the extreme vandalism after 0 AD and the second big rise after the industrial revolutions.

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Figure 28

Why are forests important?

Quoted from “Green tumble[iii]”: “Forests cover 31 percent of earth’s land surface and house a majority of the plants and animals found on earth. It is estimated that these diverse ecosystems house 80 percent of the world’s terrestrial biodiversity. Rain forests have especially high species density, covering 2 percent of earth’s surface, but housing nearly 50 percent of all plant and animal species. These plants and animals are integral to forest ecosystems and provide countless ecosystem services to humans. If forests ceased to exist humans would be unable to survive. As important as forests are both environmentally and economically, many of our global forests are severely affected by deforestation. Deforestation is one of the leading causes of climate change and species extinction.”

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Figure 29[iv]

2. Intolerance towards other species

Quoted from “Green tumble”: #4 Starvation: When trees are destroyed, an integral piece of the forest ecosystem disappears suddenly. All animals, in one way or another, get energy from plants. Plants make energy from the sun and herbivores eat plants. Carnivores eat herbivores, which gained their energy from plants. If no plants are present, there is no food in the ecosystem and animals starve.”

On one side the “Obese” guy is not buying climate change and on the other hand no one really seemed to have cared about animals so far. Starving animals would be the least of priority to the world governments, especially the obese guy, who seems to have the focus on not letting the Person 11 overtake his GDP.

The world’s major ignorance towards the rest of the species is evident in the following graphs and it is outrageous.

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Figure 30[v]

6

Figure 31[vi]

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Figure 32

The above graphs simply say that the animals are slaughtered in alarming masses. The topic of the article which gave the data source to the extinction graph titled it as the “sixth mass extinction” and this one is man-made. If you divide the world animals into two categories as meat animals and non-meat animals, the non-meat animals are heading towards extinction simply by us ravaging their houses – the forests. And the meat animals are purely “control bred” for eating. In 2013 109 million tonnes of poultry meat, 112 million tonnes of pig meat and 68 million tonnes of beef were produced world over. An average poultry bird yields 1.71 kilos, a cattle type yields 209.6 kilos and a pig yields 78 kilos. Dividing this to the production, we can say that approximately 63 billion birds, 1.43 billion pigs, 0.3 billion cows and diverse other livestock are killed per year to feed the 7.5 billion and growing humans. The terrible part is that these animals are control bred in this mass year by year and slaughtered. Going Vegan is an appreciable side effect as a protest to this practice. Veganism may not be the answer, but when 77% of the lands are needed to control grow and carry out these mass killings and they could certainly be reduced by having it allocated for cultivating more crops. The crops consume way less space and can cover the consumption need of the growing population. At the same time, relieving the land from the livestock is a win-win situation, which gives us an option to be able to convert them to forests. This study does not cover water species as the historical numbers were showing an obvious increase in consumption, like any other graphs above, but was difficult to be converted to something tangible to address the seriousness under the water!

To be continued: GDP Conclusions: history of world GDP and its side effects

If you like my posts, please acknowledge your motivation by Following/ Liking/ commenting on this blog. Thanks for reading.

References:

[i]https://ourworldindata.org/yields-and-land-use-in-agriculture

[ii]http://www.earth-policy.org/indicators/C56/forests_2012

[iii]https://greentumble.com/how-does-deforestation-affect-animals/

[iv]https://www.dw.com/en/how-to-stop-an-insect-apocalypse/a-47723711

[v]https://www.macleans.ca/society/science/infographic-charting-the-worlds-sixth-mass-exinction/

[vi]https://ourworldindata.org/meat-and-seafood-production-consumption

GDP 6: the second threat – Economical Choke

Continued from GDP 5: the first threat – Survival Choke

The sudden stop: Economical choke

We analyzed the increase in wealth and increase in population so far. There is one another biggest threat which might choke the economy sooner or later. In our previous analysis, we saw that just the world Aluminium industry employs over 1 million [i]people and supports other 5 million jobs. The graph below shows that the industrial sector occupies about 22% of the working population. Of all the minerals in the background of these industries, only aluminium makes about 1.3% jobs directly and about 10% indirectly.

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Figure 21[ii]

Imagine the scenario if the supply of Aluminium should suddenly stop! 10 million people would need new jobs overnight. In the analysis where you were both the consumer and worker, you were increasing your salary by switching jobs within the industry. Now the whole industry does not have work. Employees can’t switch jobs within the same sector too. People who were trained for nuances in Aluminium would find it very difficult to transfer to another sector. When too many people should suddenly come under the government payroll, the government treasury has to bridge their expenses till they find a new job. They might have to increase taxes to the other employees who might not be happy with the move and take it to a protest on the streets. A capable government would borrow money from other economies. In either of the cases, the timing of governments on how quick they can react is very crucial.  Many countries have laborious bureaucratic processes. For a first world country like Germany, when the surge of refugees happened, the government took years to respond.  As in our scenario, when a whole industry should face a shutdown overnight, it will be really challenging on how the governments will tackle. If they make delays, the person who lost the job and is depending on government, may be pushed to extreme consequences over credit burden. But how likely is this scenario to happen?

It was shocking to learn that Material pricing is not done based on scarcity, rather just on free market pricing. What this statement means is that, every year material price increases by certain extent. This price inflation usually has a supply and demand reason behind, where when a certain material has a demand, the manufacturers from the up the supply chain can ask for an increase in price every year, which the companies down the chain will be willing to pay for. So increase in price does not necessarily mean the material availability is decreasing. In fact, there is a possibility of sudden stop to happen i.e. after a century long constant pricing or mild increase, there might be sudden peak in price, when the resource base is found to be emptying soon.

Quoted from the paper[iii]“The problem is that the true size of the resource base is never known. Society does not know if technology is actually overcoming scarcity or not until demand for a resource outstrips supplies. It is even possible for a price shock of incredible magnitude to surprise an economy within one or two years after a hundred years of declining prices and increasing production.”

If we see the global increase in use of minerals, almost all the minerals are mined with the assumption of infinite availability. If Earth is completely mined of its last ore, the hope is that by then the technology would have advanced enough to take us to the moon or mars or has achieved 100% recyclability. I will leave it to the readers to decide which sounds more like fantasy – going to mars or running out of resources? I found a presentation titled “The future of mineral resources[iv]” by Price and Hitzman which hideously concludes that we are unlikely to run out of mineral resources. It looked like a presentation that someone would make to Trump. It makes me wonder, what the difference between gypsies and us is. Gypsies grazed a land till its last piece of vegetation, moved to the next land and grazed further. It makes the consumerist economies simply look as educated gypsies. Aluminium’s extraction exploded from about 1 million tonnes in 1950 to over 50 million tonnes currently.

2

Figure 22

3

Figure 23

The similar explosion in use of resources and increase in usage of electricity can be seen in the graphs below.

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Figure 24

With increase in population, the exponential increase in material extraction is just showing more tendencies to increase rather than slowing down or being constant. Every political party and its term ruling the government has traits of managing a company after all. It needs to show an increase in GDP to the previous year. A slowdown might even topple the government and bring a new obliging party to power who will simply continue with making a graph always showing an upwards trend. The likelihood of a material stoppage is hard to predict until it occurs. But when it occurs, the likelihood that it could happen overnight could not be eliminated.  We should be mentally prepared to face such a situation. Governments should focus on these threats, parallel to making their upward trend graphs.

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Figure 25

To be continued .. GDP 7: the third threat – Environmental Choke

If you like my posts, please acknowledge your motivation by Following/ Liking/ commenting on this blog. Thanks for reading.

References:

[i]http://www.phinix.net/services/Aluminum_Products_Processes/Worldwide_Aluminum_Economy.pdf

[ii]https://www.ilo.org/wesodata/?chart=Z2VuZGVyPVsiVG90YWwiXSZ1bml0PSJSYXRlIiZzZWN0b3I9WyJJbmR1c3RyeSIsIlNlcnZpY2VzIiwiQWdyaWN1bHR1cmUiXSZ5ZWFyRnJvbT0xOTkxJmluY29tZT1bXSZpbmRpY2F0b3I9WyJlbXBsb3ltZW50RGlzdHJpYnV0aW9uIl0mc3RhdHVzPVsiVG90YWwiXSZyZWdpb249WyJXb3JsZCJdJmNvdW50cnk9W10meWVhclRvPTIwMTkmdmlld0Zvcm1hdD0iQ2hhcnQiJmFnZT1bIkFnZTE1cGx1cyJdJmxhbmd1YWdlPSJlbiI%3D

[iii]http://www.oilcrisis.com/reynolds/MineralEconomy.htm

[iv]http://dels.nas.edu/resources/static-assets/besr/miscellaneous/PriceHitzman.pdf

GDP 5: the first threat – Survival Choke

Continued from GDP 4: The chocolate river: on how the first world is having withdrawal symptoms!

1. Population increase and poverty

1

Figure 13[i]

In all this fighting for world resources and on making money, a critical aspect which went out of control is population explosion. The graph above shows the frequency of procreation after 1950s. A developing economy to sustain the wealth of what it is earning should try to distribute it by employing its population i.e. creating new jobs. As long as there are jobs in the market and people are employed, there would be stability in the society. Simultaneously a control on population growth with focus on education will make it a healthier growth. But in reality, the economies with less income are going on the loose with multiplying. It is just about time, when the population flood should overflow to the developed countries too. It will shake the income distribution on a world scale. Population increase will make the income distribution so hard, that the people who will lose out the competition might even commit suicide and in volumes!

2

Figure 14[ii]

3

Figure 15

As you see in the above graphs, the population growth in the high and middle income economies have reduced and the lower income has remained constant or rather increased a bit. This multiplication year by year has led to the situation that high income economies with 1.3 billion people i.e. 18% of population are holding to about 53% of the world GDP of $ 80 billion. Meanwhile 82% of the rest population has the share of 47% of the income. Despite this harsh share, something positive has happened over the years. The data from UN shows that the situation with extreme poverty has bettered. This is certainly a big success in terms of distribution of wealth. With increase in world income, the extra money at disposal has been put at good use with extreme poverty reducing from 1.8 billion people to 0.7 billion [iii]in 2015.

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Figure 16

5

Figure 17

World Bank defines $ 1.9 as the limit for extreme poverty: it will be interesting to see by how much this extreme poverty situation has bettered. I’m going by the logic that if people were taken out of extreme poverty, they would land in low income or middle income categories. The graph below gives the information on how wealth is distributed in the rest of the sectors. Of the 6 billion people in the non-rich countries, 4.5 billion are in the middle and low income sector. With increasing population, this is going to be a really big challenge on how this distribution can become better. Even if income can set limits for extreme poverty, it is still not an indicator of a sustainable lifestyle. This will be one of the biggest challenges the world governments will face: to ensure income distribution and develop a sustainable lifestyle.

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Figure 18

2. Threat of automation and qualification of labor:

To avoid decrease in productivity[iv] due to labor force, the first world countries are increasingly investing in automation, which will make the countries increasingly independent from human labor. To give you an idea of how much automation can impact the employments in the market, we can compare India, Germany and the United States in the agriculture sector. To work on a 10 hectare land (or 40 acres) all throughout a year, India can employ 211 people[v]. Germany, for the same size of land, utilizes more machines to plough, collect the reap etc. and employs thereby just 11 people[vi]. And our obese guy Mr. America employs just 1[vii] person for the same size of the land! The interesting fact is that the one American guy earns a salary of 34 farmers [viii]in India. The same guy in Germany earns the equivalent of 42[ix] farmers in India! With increasing corporate farming in India, the independent farmers are being displaced. Lack of support structure from the government in times of drought and other natural calamities, the lack of alternative opportunities or training for the farmer to develop alternative skills to have some mean of income, has been killing them. Every year about 15000[x] farmers commit suicide in India, most of it due to credit burden.

The message is very simple and is imminent to spread to the other sectors too. If you are not on the money bandwagon, you are likely to be pushed to commit suicide. Agriculture sector sadly is taking the first hit due to the focus on increase in productivity per person. To survive in a world heading towards automation or productivity increase, basic schooling wouldn’t be enough. Labor force is expected to be highly skilled. They will move away from physical work and will have to engage more in programming work i.e. machines will produce and maintain themselves. The new worker will be needed to just program the machines and having it set up. It is estimated that Automation will dispose up to 800 million[xi] traditional jobs by 2030. Currently the world has a total labor force of about 3.4 billion[xii] i.e. Automation is expected to affect about one in four jobs by 2030. Automation will form new jobs needing new skills, but it is hard to estimate how many of such jobs will be created.  It will certainly not be 800 million else the reduction in labor will be pointless.

Asimov’s three laws on robotics is world known. Probably it’s time to define a set of laws to restrict its usage. I would propose the following.

The three laws for using Robotics in employment sector

  1. Human assist automation or semi automation must be given precedence to full automation, as long as the EHS (Environment, Safety and Health) standards set by the government authorized body are not achievable by the former
  2. Automation may not replace a person as long as the precision needed for an unavoidable product or work function cannot be achieved manually or through semi automation
  3. Regulatory bodies and authorities must focus on increasing employments as long it does not conflict with the first and the second law

3. Quality of living: Population density and air pollution

In Asia, especially the quality of living has started to see the first impact. The India I was living in 10 years before is not the same India today. First thing I noticed when I got out to the city or especially when I rode a motorbike was how heavy and alien the air felt to the lungs: being in an Indian traffic felt as if the exhaust from the vehicle was directly flowing into my mouth. The strain and the irritation on the eye is another sign. Nothing can be more symbolic than seeing people walking on the street with their eyes and mouth covered. That is the quality of living this chapter aims at describing. In Delhi, the smog is apparently felt inside the apartments. The measurement of this is the PM2.5 air pollution. It says that regardless of the pollutant, how many harmful particles of a tiny size of 2.5 μm can be found in a space of one meter cube. The feeling what I had described above is absolutely “Red” and the graph below depicts the alarming levels world over

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Figure 19[xiii]

Secondly what goes hand in hand with air pollution and the deaths connected to it is the population density. Although the west emits as much emissions into the air, the number of deaths was contrarily seen in the east. The major driver behind this cause is not just the increase in population, but also the population density resulting out of it. Especially for cities where the people are most densely accommodated, it will be a big challenge for the governments. As seen in the graph below, the current average density has increased to a bit over 58000 people per sq.km. The higher the density, the higher the impact pollution would have. It’s literally gassing the population. The overall world industrial drive is not showing signs of turning green. The west would eventually have its “red” sooner or later. By that time, their GDP would be skyrocketing as they will be trapping their air in cans and selling to China and India for $10 a bottle!

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Figure 20[xiv]

To be continued: GDP 6: the second threat – Economical Choke

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References:

[i] https://ourworldindata.org/world-population-growth

[ii] https://en.wikipedia.org/wiki/List_of_continents_by_GDP_(nominal)

[iii] https://ourworldindata.org/extreme-poverty

[iv] https://ourworldindata.org/employment-in-agriculture 

[v] https://data.worldbank.org/indicator/SL.AGR.EMPL.ZS

[vi] https://tradingeconomics.com/germany/agricultural-land-percent-of-land-area-wb-data.html

[vii] https://en.wikipedia.org/wiki/Agriculture_in_the_United_States

[viii] https://tradingeconomics.com/united-states/gdp-from-agriculture

[ix] https://en.wikipedia.org/wiki/Economy_of_Germany

[x] https://en.wikipedia.org/wiki/Agriculture_in_India

[xi] http://fortune.com/2017/11/29/robots-automation-replace-jobs-mckinsey-report-800-million/

[xii] https://data.worldbank.org/indicator/SL.TLF.TOTL.IN/

[xiii] https://ourworldindata.org/air-pollution

[xiv] https://data.worldbank.org/indicator/EN.POP.DNST

GDP 4: The chocolate river: on how the first world is having withdrawal symptoms!

Continued from: GDP 3: Rise of consumerism

Imagine 210 houses on a long road along a river of chocolate and one house on the opposite side of the river. There was one person living in each. A truck has to supply chocolate to all the houses. The first person who gets hold of the hose was the guy in the lonely house on the other side of the river. He does not let it go and begins to fill every nook and corner of the house and drinks as much as he could before he would pass it to the houses on the other side of the river. But the truck was never passed and the guy made a clever deal that instead of passing the truck, he offered chocolate as commission to whomever who will work to maintain his house. Having the truck under his control and living far away, the first person could easily ignore any protests from other people. Seeing the truck is not coming to them, one by people tried to build their own truck to get access to the river. People who knew how to build a hose got it by themselves in the sizes they could make, but their sizes were nothing comparable to the first truck. Despite their small hose sizes, if one would throw a hose to the river, the other would protest and complain that the former is taking too much chocolate. Some said that they will not live in their own home and move to the home of the guy with a bigger hose. Some established partnerships and did teamwork to extract as much chocolate. Years went by. The person at the first house where the truck did not move becomes so obese and laggard. He could neither move to lift the hose nor carry the items to maintain the truck.

Due to his incapability, he starts to demand more work from the other people, but for the same amount of commission. With growing obesity, he even needed assistance every time if he wanted to just eat a chocolate. For extra support, he hires a person from house 11*. The guy was willing to help, but he too wanted a chocolate commission if he should help the obese guy. The obese guy accepted and lets the guy do the work. Seeing that the person 11 is working for cheap, he gives more work to this guy so that he could save more chocolate. The guy from house 11 becomes skilled overtime that on top of serving the house 1, he builds his own truck which is modern and easy to maintain. At some point Person 11 announces to the obese guy that he does not want to work anymore for him. Person 11 quitting contract made him devastated as he found it difficult to get the job done by himself. He had lost his skills, as he did not keep in touch with the work. All the time he was just watching TV, eating lots of chocolate and letting the others do the work. Now he couldn’t even move and get to his truck. Moreover his truck needed a repair as it has become old. Person 11 at a point of time decided to invite the other house mates to his house for work and for a better commission. Person 11’s modern truck got so much attention, that the other people couldn’t stop speculating on how he could have built this. Although they were happy that were promised better pay, some were questioning if the truck was just painted modern on the outside and that he is just offering to pay more to cut the work at house 1. In any case, the better pay starts to talk and one by one the housemates start to call quit with the house 1 and started to move to Person 11. Person 11 becomes rich soon. Now the obese guy is screaming from the other side of the river that person 11 is useless and that he was a better owner and he had a better truck. People turned and laughed at him, but their legs were moving towards person 11’s house*.

The United States of America is the representation of the first house and Trump is a perfect and literal representative of the obese child in the story! I don’t blame and make fun of Trump for what he is! He is simply an obvious output of such an obese economy! This does not make Obama or any other American president any good. They with a conservative mask were simply fuelling the consumerist attitude over time. Once the signs of losing the truck started to arise, it is just natural that an aggressive person, who would fight to get back the truck, would be chosen by the people. Real problem is the economic source: when it goes away, the problem reflects in terms of nationalist identity as to who really belongs to the house and who not. Dwindling resources simply ensure a fight for the remaining share. World over, this story of obesity is what the first world countries are going through now and the surge of right wings are just an indication of their withdrawal symptoms of letting the truck moving to a different house! With Trump leading the rise, the right wing party AfD is gaining so much popularity in Germany, Brazil has chosen its recent right wing president, Austria has its youngest right wing chancellor and this list is just showing signs of increasing in the west. Right winged parties does not necessarily mean that it’s doomsday. If the new party in power should insist on consumerism i.e. work for the same obese share of chocolate that they were demanding till today, they are set to fall on their face. At the time when they are obese and costly, creating jobs in the country without reducing the lifestyle will most probably backfire. As an alternative, if they should opt for a sharing or minimal economic model, than a consumerist model, they can survive. Also whether it’s a right wing or a left wing, any party taking the mantle will have the following three biggest threats to tackle.

To be continued.. GDP 5: Three biggest threats

* China was at position 11 in world GDP list in 1990’s. Now it’s at number 2. China found its chocolate source. Given the fact that it was pumping it to the limit, only time can say how long this growth can last. Resources are finite after all.

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GDP 3: Rise of consumerism

Continued from … GDP 2: Supply chain of a television, a case study

1950’s marked this beginning of Consumerism with America probably being the torch bearer! After 1 AD world GDP reached $1 trillion or $1000 billion in 1890’s i.e. it took 1890 years to reach that mark. By 1950 it had reached about $4 trillion at a growth rate of 2.65%. From then on production of goods and thereby the growth rate doubled year by year to a current world GDP of ~$80 trillion or ~$80000 billion!

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Figure 11

How much money do you have?

If a country has resources in their access, if it’s government could raise the educational level and facilitate the infrastructure to produce, any country can enter themselves on the world power list very soon. The treasury of such a developing country would multiply and the per-person salary would also increase. This aspect is called GDP per capita i.e. if the GDP for a nation is divided equally to its population. The GDP per capita for the whole world is $17,300 i.e. when the world income would be equally distributed to the whole world population, this will be our earning per year. In reality, every country has its own GDP and thereby the income per person differs with the world average $17,300 too. It follows a pattern called “Pareto principle” where 20% of the nations hold on to 80% of the wealth in the world. So the GDP per capita between each country can have drastic differences. As of 2017 a Qatarian has the highest income in the world of $ 125,000 [i]per year and Central African Republic earns the least in a year with $ 681.

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Figure 12

Also within each country the distribution will differ based on government structures and policies. For example: In Qatar, not everyone would equally earn $ 125,000 per year, it will follow the same Pareto principle within the country where 20% of the population would hold on to 80% wealth in the country. Apparently the richest person in Qatar is the Sheikh of Qatar [ii]himself with a worth of $ 2 billion. In a country with a GDP $167 Billion, just that one person holds on to 1.1% of the wealth. Qatar has enormous resources of oil which it is able to capitalize.

A country is lucky if it should be abundant in resources that could be capitalized. For countries who don’t have that luxury, they usually would focus on improving their education skills and offer services to the resource rich countries i.e. the income from service sector can drive such economies. Once the money source has been organized, the role of a government then is purely to facilitate the money flow within the country and ensure a sustainable distribution to each of its population i.e. not letting people suffer in poverty. Just this one factor of “sustainable distribution” is the goal which all the different kinds of economic ideologies like Capitalism, communism, fascism etc. compete for and try to achieve. Diverse governments and political parties frame their policies based on these ideologies, to make sure that the GDP per capita saves its final citizen from poverty.

Capitalism correlates mostly to the consumerist society and it goes with the assumption that there are ample jobs constantly created in the market. Whoever earns tends to survive and the role of the government would be mostly to make sure that enough jobs are available. Communism promises a better distribution among the population and the state itself might hold a significant part of the income and distribute only what is needed; Fascism is dependent mostly on the ideology and beliefs of the country’s leader, which makes it unpredictable. Although China makes a communist propaganda on the outside, the happenings in the last couple of decades seem to incline more towards capitalism.

As soon as a country would have the opportunity to tap into a resource, it would be like opening a treasure. Anyone who would touch it will start to mint money. All world politics lies on who taps the resources first. Dominant countries can play the game in a way that they gain access to resources of other nations. Poor countries would be put in a helpless situation, where they would be forced to sell their nature areas, to generate a credit. Two world events in the last decades stand proof to this fact: the American century long politics for Middle East resources and China’s hasty and strong investments and acquisitions in Africa. They have been offering so much “Flash news” over the decades that a media company can see profit just by reporting just these two happenings and the issues surrounding it. China is one such country who started facilitating its infrastructure from 1990’s and since then they were just on the roll. But why is the west afraid? Let me narrate a second story which attempts to simplify the fight for resources

To be continued…GDP 4: The chocolate river: on how the first world is having withdrawal symptoms!

References:

[i] https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

[ii] https://www.qatarday.com/blog/information/richest-people-in-qatar/12384?pg=5

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GDP 2: Supply chain of a Television, a case study

Continued from 1. GDP 1: A look into World’s GDP until now

Making a television!

Let’s take an example: a television. A television is made from many minerals[i]. Usually plastics or aluminium make the most weight in a television amongst the hundreds of minerals used in it. To simplify the imagination, let’s assume that the whole television is made out of just one mineral – Aluminium. Aluminium is the second-most abundant metallic element in Earth’s crust [ii]after silicon. It makes to about 8 percent of the Earth’s crust by weight. It is found in Bauxite, a sedimentary rock with relatively high aluminium content. It is the world’s main source of aluminium and contains only 30–60% aluminium oxide.

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Figure 6: [iii]Bauxite with US Penny for Comparison

The aluminium oxide must be purified before it can be refined to aluminium metal. To process aluminium existing in it’s natural form into an usable form, it takes in reality many companies. This sequence of companies with each company processing one or more steps and handing over to the next company is called supply chain. A simplified supply chain for Aluminium processing can looks like in the following paragraph.

Supply chain of Aluminium[iv]

Company 1 establishes in the market as an Aluminium extractor. It employs labour and uses machines to mine bauxite. The bauxite is refined to white powder called Alumina and sold to an Aluminium smelter, the Company 2.

2

Figure 7 & Figure 8

Company 2 uses energy to heat up the ore to extract its metal. Some two tonnes of alumina are needed to produce one tonne of aluminium through an electrolytic process. A smelter gives out Aluminium as slabs.

3

Figure 9

Slabs are transported to a Casting company 3 which cuts it to billets that are convenient for storage and shipping.

4

Figure 10

Company 4 then buys these billets, extrudes and stretches it to flat plates and sells it to Company 5 which cuts it into size and polishes the surface. The manufacturer of products which we use in daily life is the company 6 – a television manufacturer in our case, who usually places orders to Company 5. They explain the shape and size of their need in the product, and company 5 prepares them accordingly. The television manufacturer assembles it into their final product and hands it over to a distributor or showroom company 7 which takes the product to the end user who is you and me.

Sample Scenario

Each company on the supply chain, if they would increase the volume of production, they will earn more money as long as there are takers. Increase in money with all the companies in the chain means that the government can also make lots of money by taxing them. For an interested government to multiply their wealth, the only problem in the puzzle is that in the end of the supply chain, there will be too many televisions coming out. If no one buys it, the company 7 will not earn money and it will not make orders to company 6, company 6 will not order from 5 and so on till the company 1. Either the factories will be shutdown and workers will lose all their jobs or if they should continue to produce, there will be humongous unsold inventory of aluminium somewhere along the chain. In such a case, the Government cannot risk to lose too many jobs, else it will have to support the people from its own pocket. The solution to avoid this loss would be to have more and more televisions get sold in the market. The government, to motivate the people to buy television, can give tax benefit to company 6 to make sure that the televisions could be produced and sold in the market for a cheaper price. The government would also support company 6 to come up with more innovative products provided they have better acceptance in the market than televisions. With support for funding or subsidies, Company 6 then will invest a lot in Research and development and simultaneously they could also hire the topmost celebrity to endorse their products.

You as the consumer

Given their investments to drive innovation, the company 6 will manage to release a new product successively every few months or years. Their product catalogue will add a tablet, a play station and a smart TV. You, your wife and kid would see people around starting to buy them, having benefits and fun with the devices and now you might also want to have them. Your doctor will want to have those devices too and will start to increase the bill to the patients. Likewise your kid’s teachers and other service providers will slowly increase their bills too. Because of the higher bills that you will have to pay for your services, your budget will increasingly start to hurt and at the same time you want the devices too. Every year your salary will have increased due to your performance and you would even get an additional bonus from the company. Still this wouldn’t be enough. When more people will get into this trouble, things will escalate and will necessitate the government to interfere in the process. The government already had reduced the taxes for the company before and now it will have to support the consumers and get them these benefits. It will then set a minimum wage to increase the wallets of people so that they can also add these products to their lifestyle. You will start to receive a higher salary. The people who did not get a raise, will quit their job and take a second job by negotiating a higher salary at the first place. With successive increase in salaries, you would have bought a tablet for your wife. Two years later, you would have saved up more money and got a play station for your kid. Soon enough with successive increments in your salary, you would buy a smart TV and you would even get a second television to yourself too as your old one had started to perform slow. The common point in all those products is that all of it has aluminium. With increase in sale of televisions and the new innovations, more and more Aluminium got to be produced.  Although the products could last for 10 years, every new product got increasingly attractive, that the consumers will choose to dispose the old ones and replace it with new ones every couple of years. The new products will have aluminium too and in this way we as active consumers will be driving the whole supply chain upstream till the company 1!

You as the worker!

Now the twist in the story! In reality you are not just the consumer, you are likely to be a worker in one such industry too!. Every time you or the labour union has been asking for more wages, the industry gave it. In our example, as the Aluminium industry was thriving, the government was able to set a minimum wage and ask the companies to increase the wage of their employees. The companies were able to afford, as consumers were increasing willing to buy televisions and other products which had Aluminium.  The sample scenario above considered, for the sake of discussion, just one mineral in the product, while in reality we have multiple minerals in any product. In 2018, just the world aluminium industry directly employed about a million people and indirectly supported 5 million jobs. This is just for one mineral. Take all the minerals in the world; it could cover over 22% of the total employments in the world. Taking this supply chain as a reference and drawing parallel to what happened in the 1950s, world governments decided with every consecutive year to drive mineral extraction as much as possible. It earned money through Income tax from the company, Income tax from you as a worker and Sales tax from you as a consumer too. Because televisions and other innovative products were produced in humongous quantities, the government decided to export them and earned even a lot from selling to the foreign markets! The market thrived and there was more and more money getting generated. Households got increasingly filled with diverse products. This never-ending cycle is the phenomenon called consumerism: a market where there is no regulation or limits on how much a consumer can buy!

To be continued … 3. Rise of consumerism

References:

[i] http://www.answers.com/Q/What_metals_are_used_in_a_television_set

[ii] https://www.livescience.com/28865-aluminum.html

[iii] https://en.wikipedia.org/wiki/Bauxite

[iv] https://www.aluminiumleader.com/economics/how_aluminium_market_works/

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Book Review: The Lean Start-up by Eric Ries

This is the first of the kind of book reviews that I decided to blog. My main motivation to write this post is to have the content as a reminder to myself i.e. after we read the books we tend to forget the main learnings from the book over the time. I just want to capture the highlights which meant something to me so that I can refer to these notes rather than reading the whole book, if I want to recall at a later point of time. At the same time I would offer a generalized recommendation to the readers too.

About me: I’m a continuous improvement specialist. I chose Lean management as my study focus in my Masters. I have two years of experience in applying lean concepts in the automotive supplier industry and close to 5 years in oil industry.

The Lean Start-up by Eric Ries:

PrtScr capture

What’s it about? Eric Ries applies Lean concepts and thinking in the context of Start-ups, where the discussions seek for the best way to approach and kick start a Start-up.

Target Audience of this book: People in the business world and anyone from wannabe to professional entrepreneurs

Verdict: I liked it. Every person who either wants to begin a business or is already a part of any business setup, should certainly read to understand and evaluate how their current way of working is and how could it be optimized. It’s a fast read. Numerous case studies backs up the concepts really well. I liked how the author insisted on not wasting anyone’s time, which was the key takeaway of the book. The fact that he managed to simplify the world around us and applied lean concepts to start-up in a credible way showed that author has ample competence and experience. Thank you Mr. Ries.

Feedback: Although he wrote for 300 pages, the content could be compressed to about 200 pages. It can be ignored, as it was a fast read. The author seems to have missed out on impactful chapter titles. They don’t stand out or don’t seem to stick to the head easily and how the concepts discussed in each chapter correlates to the title was not clear. The general structure of the book and how the concepts flow could have been better. Lots of case studies were offered and learnings from each case study could have been highlighted.

Rating: 8/10

Category: Classic/ Must-read/ Killing time/ Forget it

Useful Links: Amazon Link; The Lean Startup blog by Eric Ries

Personal Notes:

  1. Intro

Over Planning vs. just doing it: Lean is mostly common sense: The discussion on how either excessive planning or simply “just doing it” can be detrimental to a start up has been discussed well

  1. Vision
  • Start

That product is just an outcome of the vision and strategy; It’s often we hear on how companies base their model on just one product. If this product wouldn’t work, the company sinks. On the other hand, it’s totally valid to focus on a vision and strategy and having product as a variable

  • Define

Definition of a start-up: A Start-up is a human institution designed to create a new product or service under conditions of extreme uncertainty

  • Learn

Talk to the customer; involve them in every step of product development. The insistence on this aspect which anchors on customer makes this book very much Lean.

  • Experiment

How to know if a business is doing well?

Value hypothesis – is the customer willing to invest his time in the product or service &

Growth hypothesis – how are new customers coming about? Measure the behaviour on how the word is being spread.

Does it make sense to involve too much into one product or experiment our way with product with minimum needed features (MVP – Minimum Viable Product); Experiment fast with MVPs is a significant takeaway of this book

The four key questions in developing a product:

  1. Do the customers recognize that they are having a problem that you are trying to solve?
  2. If there was a solution, would they buy it?
  3. Would they buy it from us?
  4. Can we build a solution for that problem?
  1. Steer

Build-measure-Learn feedback loop; How fast can you go about this loop determines success.

  • Leap

Genchi Gembutsu with your customer: Visit your customer in the environment your product is supposed to be used for the best feedback on your product

  • Test

MVP – types of MVP; A video demo as a MVP; concierge MVP; How going about “a not perfect product” can be the best for product development

Can competitors imitate your product? Are you accelerating through the loop fast, not to worry. The imitators also have to go through this loop to imitate your product

  • Measure

Cohort Analysis – Shunning away from Vanity metrics. A metric is only as good as the quality of the decision making it can lead to. Divide detailed KPIs: E.g. not total number of customers; rather types of customers;

Split testing – Releasing two different MVPs and trying to understand customer’s behaviour

Having three A’S in metrics – actionable, accessible & auditable

  • Pivot (or persevere)

Pivot fast and move on: Another key takeaway of this book

Catalog of pivots;

Moore’s major business architectures: High volume and low margin (B2C) – volume operations model; Low volume and high margin (B2B) – complex systems model

Pivoting is a continuous process

  1. Accelerate
  • Batch

One piece flow in product development; using Toyota’s Andon card system in start-ups; addressing the root cause

Reducing WIP: on where “Lean” derives its name from.

  • Grow

New customers come from the actions of the past customer;

Four ways of how customers bring growth: Word of mouth, as a side effect of product usage, through funded advertising, through repeat purchase or use

Engines of growth – sticky – rate of customer attrition vs rate of winning new customers, viral – viral coefficient & paid – cost spent for a new customer

On having the right Market fit; If a product has it’s right Market fit, it’s exhilarating

  • Adapt

Using Five why’s in product development: for proportional investment decisions; involving customers in development; cross functional teams; five why’s master,

  • Innovate

Shusa & experimenting; data driven decision making; one team leading an experiment to the end; Let the innovator innovate – identifying the right resource for the right phase

Phases: early adopter; main customer segment; op-ex; legacy products

  1. Epilogue

In the past, man has been the first, in the future system must be the first

————fin————-

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