Category: Energy

Three quarters of the world’s natural gas is used in industrial applications and for power generation.

It burns more cleanly than oil or coal, which means that emissions from natural gas are lower.

As a result, governments around the world have policies that make using natural gas more attractive than the alternatives.

The IEA estimates that global gas consumption will grow from around 120 trillion cubic feet (TCF) in 2012 to 203 TCF by 2040.

So where does this gas come from?

The graphic above shows the top exporters of LNG by market share in 2016 according to the IGU World LNG Report 2017.

Australia now has the largest market share of LNG, going from 12% in 2015 to 44.3% in 2016, a huge increase.

Qatar remains an important source of gas, although the problems it is currently experiencing with its neighbours may have an impact on gas production this year.

Russia, despite its enormous gas reserves, is a relatively small player in the LNG export market.

The one to watch is the United States.

In 2016, the U.S. had a market share of 1.1%, making it the 16th on the list.

Over the next few years, however, it is expected to ramp up exports significantly.

In the next decade, Australia and the United States are expected to be the dominant exporters of LNG to the global market.

Two roads diverged in a yellow wood, wrote Robert Frost, and taking the one less travelled by made all the difference.

When is it wise to follow the crowd and when is it not a good idea?

Crowds are good at particular kinds of thinking. In his book The Wisdom of Crowds, New Yorker staff writer James Surowiecki talks about three kinds of problems that crowds are particularly good at solving:

1. Problems of cognition: These are problems which will have a solution at some point. How many cars will sell next quarter? How likely is it that a new drug will get approved?
2. Problems of coordination: How should a group of people behave? for example, how do buyers and sellers trade fairly? How should people drive safely in cities?
3. Problems of cooperation: How is it possible to get people who are focused on their own interests to work together? How can we tackle problems like pollution, climate change or tax policy?

Crowds can also be extremely unwise. This usually happens when the rules they should follow break down, communication fails to moderate behaviour and you get things like a riot or stock market bubble.

Interestingly, a crowd seems to fail when its members start to think the same way. This is the essential cause of stock market bubbles and has been seen over time, from tulips to houses.

When everyone starts to believe that the price of something will always go up, you get irrational exuberance, and a bubble that eventually bursts.

The paradox is that wise crowds integrate individual judgements to produce a group judgement – but in order to reach a good judgement, each member of the group needs to think and act independently.

Organisations that want people to reach better decisions should encourage diverse and independent thought and action.

Individuals who want to make better choices should not be afraid to disagree and contest ideas and options. We think better when we think independently.

An organisation’s success depends on the nature of its relationship with its customers.

How customers view your company is key to how they choose to interact with you.

Thinking of an organisation only in terms of its staff, its products or its processes can hide important strategic aspects from you.

The model in the picture is adapted from this TED talk by Guy Kawasaki and this paper by Lepak and Snell and shows how customers treat organisations based on how they perceive them.

What does it mean to think out of the box – to be able to come up with new ideas and be more creative?

In this TED talk Professor Giovanni Corazza, a faculty member of the University of Bologna and founder of the Marconi Institute of Creativity, talks about how you can become more creative.

The key to thinking out of the box is to understand what the box is – in your mind – and what it means to think out of it.

All thinking is in your mind – you can’t think out of your mind.

Instead, what this means is that creative thinking is being able to go from what you know to what you haven’t thought of yet.

Being able to cross from one type of state of mind to the other is the essence of being creative.

How do you go about doing that?

The first thing is to realise that most thinking is convergent – we think about what we know and use existing knowledge and tools to approach situations and problems.

Our brains are designed to jump to conclusions quickly – a good evolutionary survival mechanism. You don’t want to be considering all the facts about whether that is a tiger in those bushes.

We also look for evidence that confirms our initial conclusions. There is a flash of orange, the bushes are moving, it must be a tiger.

We then act based on that evidence – climb a tree, run indoors, get away from that tiger.

The thing with creativity is that you have to remind yourself to go through a process of divergent thinking.

Divergent thinking is a way to be creative by exploring many possible solutions.

It asks you to take a more spontaneous, less rigid approach to the tasks, to play with ideas, to be willing to tolerate the absurd, the illogical, the risky approaches.

Above all, it asks you to be open. It’s only when you are open that you have the freedom of mind to think creatively.

How do you know what kind of innovations will succeed and which ones will fail?

This is a question addressed in Stuffocation: Living more with less by James Wallman.

Wallman is a cultural forecaster, and uses five questions to ask whether an innovation is likely to catch on.

Strategy in business is about focusing on the actions and responses of competitors.

That is what Professor Bruce Greenwald says in his book Competition Demystified. Bruce Greenwald teaches at Columbia Business School and is perhaps the leading academic authority on value investing, the method followed by Warren Buffett and outlined by Benjamin Graham.

The core concept of competitive strategy is based on Michael Porter’s theory that Five Forces tell you how attractive a sector is for business. These are Suppliers, Buyers, Competitors, Substitutes and Potential entrants.

The Five Forces framework makes it easy for business people to spend a lot of time looking at their markets and making plans.

The book says that executives make the mistake of thinking that any plan to get new customers, cut costs or do something that takes time and money is a strategy.

Instead, a strategy should be thought of as only those plans that focus specifically on the actions and responses of competitors.

Why is this important?

It’s because the price at which you sell something tends to head towards cost in a commodity market. If what you do can be done by anyone else, the market price of that thing you do will quickly fall to the cost of doing it, making your margin zero.

The more exposed you are to competition, the easier it is for someone else to start what you do, the fewer the buyers for your service – the more quickly your margin will drop.

The way to maintain a high margin is to focus on how you can create and protect an advantage for your business. As Warren Buffet would say, what is your moat? What is the thing that surrounds and protects your business from competitors who want to take your market share.

Strategy is all about making the playing field less level by doing something your competitors cannot. As a result, strategy is all about your competition – where are they playing, what are they doing, and where should you put your efforts so that you can make it harder for them to replicate what you have and do?

If you can’t protect yourself, then the only thing to do is to be as efficient as possible. Forget the competition and focus on reducing your costs.

If you can, then focus on creating a moat.

The same strategic process applies to individuals. If anyone can do what you can do, your wages will stay low as you can be replaced easily.

If what you do is unique and hard to replicate, you will be more valuable and be paid more.