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There was an excellent opinion in the November 2008 issue of Physics Today entitled “A broader view of the role of humans in the climate system” by Roger Pielke Sr., warning scientists and policy makers to pay heed to other anthropogenic sources of climate change besides carbon emissions.

There is no doubt among the scientific community that climate change is real, that its origin is anthropogenic, and that greenhouse gases play a large role.  However we should recognize that our planet obeys complex weather dynamics with impactful second order effects that should be considered: the water cycle, the nitrogen cycle and region specific drivers of weather.

But I had to link to this link from Eric Ries’ blog.  His topic of choice is a summary of books, presentations, and thoughts about why Silicon Valley developed into the tech behemoth of the late 20th and early 21st century, as opposed to Route 128 in Boston.

This is a personal favorite debate of mine, having seen the culture of entrepreneurship at MIT and at Stanford.  The difference is subtle but palpable.  While the students and faculty at both institutions (as well as the other universities at play locally: Harvard, Berkeley, Northeastern, Santa Clara) demonstrate immense intuition for entrepreneurship, the mechanisms for launching startups is different.  In an overgeneralizing, but demonstrative example, MIT entrepreneurship is represented by the 100k competition, a formal route towards bringing enterprising communities together and launching companies, whereas at Stanford students put stuff together in their dorms and meet with random mentors in the Menlo Park, Mountain View community to engender new companies.  The difference is culturally systemic and there is no doubt that both paths have led to extreme success.

I’m going to look forward to reading the referenced book (Regional Advantage: Culture and Competition in Silicon Valley and Route 128 by AnnaLee Saxenian.)

There has been obvious concern with recent financial bubbles: the internet, private equity, housing, food, energy, the list goes on and on.  Indeed bubbles represent the communal manifestation of human thought processes.  As humans, we take a few data points and extrapolate them into the future, and create predictions predicated on these assumptions taken to their often illogical end.  This cognitive process probably arises from the need to avoid a sabre-toothed cat or to prepare shelter for the coming winter months.

But nature works on much more diffusive or mean-reverting processes.  After all vacuums get filled, temperatures equilibrate, and there are substantive effects that drive processes that are often occluded from our immediate view.  For example that sabre-toothed cat might arrive at the top of that hill everyday at sunset, because it’s being chased by a group of hunters from the village downstream, not because it’s hungry for you or me.

We are working on some cool technologies and products to help our world wean itself off of petroleum based energy (a carbonified form of solar energy).  This is a great space to be in: there is significant investor, customer, and political interest, it carries the banner of the environment, and seeks to provide new opportunities to billions of people around the world  But we need to remind ourselves that energy from our sun isn’t the only big deal in town.  We should not build energy into yet another bubble at the expense of other opportunities.   We need to think of our other precious natural resources: our water, land, our wind.  The ancient view of our world as earth, wind, water, and fire should serve to remind us that all these ‘forces’ work in concert, and we should nurture them even handedly.

The August 2008 issue of National Geographic reminds us that our soil needs care and constant attention.  We’ve become so far removed from the basic source of our food that the bulk of the population neglects the need to reinvest in our earth.  We are driven by our idealism, but we are assured by result.  Don’t get us wrong, there is serious opportunity here to make our world better for future generations, and to create powerful businesses serving this undertapped need.

There is just too much good stuff flowing out of the New Yorker these days, say what you will about the ‘controversial’ cover.  I need to mention a particular article, “The Eureka Hunt“, in which Jonah Lehrer describes recent advances in neurological process of insights, which is extremely relevant to those working in the creative, scientific, and services industries.  The basic premise of the article is “How do we have those ‘Eureka!’ moments” when suddenly, seemingly out of nowhere, we solve a problem we have been struggling with.  I’m quite certain that every human being has had this moment, typically when we least expect it.  I recall solving many research problems in graduate school while sleeping or playing our indoor version of the basketball game HORSE.

The moral of the story, according to the conducted research, is that diligence, focus, and drive are required to get us through the necessary analysis and extrapolation of a problem, until we reach the point where a unique insight or leap needs to be made.  But at that point, those same qualities that we store in the the work ethic tool chest, need to be abandoned to allow insights to occur, to allow our brain to make connections between what our brain stores as disparate concepts.  The researchers suggest that only when we allow ourselves to relax, to allow our minds to wander can we invoke the required parts of our brain to make these connections.  What are the consequences of this research?  For companies that rely on major intellectual advances, it is important to foster an environment that can promote this relaxation.  A few examples: ping pong tables, yoga, guitar hero, a library of book, dart boards, surfboards.  The author even specifically mentions the success of Google, the corporate king of blending the work-relaxation environment.

What else can we do to stimulate insightful thinking?

We’re in the midst of putting some stuff together which you should hear about in the next coming months.  We’ll be back shortly.

I’m curious to see how much volume the gas bank mygallons receives and how much success they enjoy a few years down the road.

I distinctly recall standing in the lobby of building 66 in 2004 or 2005 with RDB discussing the, then unheard of, gas price of $2.75/gallon.  He had just read an article about a gas bank in the midwest which offered “gas forwards” to consumers and hedged their position on the CME.  The concept was really simple: you sell small forward contracts on oil to consumers, who do not have the capital or access to participate in oil forward contract markets, aggregate those positions and hedge them on the CME, and extract a small fee in the form of annual account fees and small premiums on gas prices.  The bank could hold its exposure to practically zero,  or could even speculate on the price of gas, while earning pure profit from the premium that the consumers pay.

I haven’t heard anything about that gas bank concept since, until today.  Gasoline has hit a price point which is causing a change in consumer behavior.  It would seem that the gas bank concept would have significant traction in today’s economy as consumers fear the upward ticking prices at the pump.  From books such as Predictably Irrational, we expect that the human brain tends to misprice the effect of recent trend.  Mygallons cleverly provides useful links to articles with titles like “$200 oil” or “$11 gas”, promoting that fear.  I would guess that there would be a lot more customers at mygallon’s website today than at the anonymous gas bank, RDB and I discussed, three years ago.

Final thought on this concept: There is no perfect gasoline hedge, only a correlated hedge through contracts on oil.  The airline industry had similar problems in hedging their costs of jet fuel.  Will this affect mygallons?

We’ve written previously about Predictably Irrational, and the larger phenomenon of behavioral finance.  Generally, I think the field has added a great deal to our understanding of human behavior and the limits of intuition.  However, on bad days I think the field can step over the line and into the realm of “Gotcha” research - stuff that deliberately confuses its respondents into irrational behavior that they are unable to display in more realistic situations.

A recent example of such “Gotcha” research comes from Rick Larrick and Jack Sole on The MPG Illusion.  I’ll let Rick and Jack explain the research:

Many people consider fuel efficiency when purchasing a car, hoping to reduce gas consumption and carbon emissions. However, an accurate understanding of fuel efficiency is critical to making an informed decision. We will show that there is a systematic misperception in judging fuel efficiency when it is expressed as miles per gallon (MPG), which is the measure used in the U.S.A. People falsely believe that the amount of gas consumed by an automobile decreases as a linear function of a car’s MPG. The actual relationship is curvilinear. Consequently, people underestimate the value of removing the most fuel-inefficient vehicles.

The paper was published in Science Mag, and dutifully reported on by none other than our favorite blogger, Dan Ariely of Predictably Irrational.  Ariely sums up the research so well, that I’ll let him tell it:

You need both types of cars and for now you can replace only one of them.  What should you replace?
Option 1: Replace the 5 MPG van with a 10 MPG van
Option 2 Replace the 20 MPG sedan with a 50 MPG sedan

What would you select?

As a new paper by Rick Larrick and Jack Soll shows many people select option 2, where in fact option 1 would be better for them (also see this story about the research).

Does this sound odd?  Lets look at it more carefully:  Lets assume that people drive 100 miles a month.  This means that the 5 MPG van uses 20 gallons a month while the 20 MPG sedan uses 5 gallons a month. Now what if we change them?  If we change the van we would change from using 20 gallons a month to using 10 gallons a month (saving 10 gallons a month). If we change the sedan we would change from using 5 gallons a month to using 2 gallons a month (saving 3 gallons a month).  Now it is clear that changing the van is a much better move.

The payoff is this: consumers, when presented with mpg information, make the incorrect decision about which car to replace.  But the obvious question is: is this how consumers actually think about their own cars?  I would argue not.  Most of us think about fuel efficiency when standing at the pump, watching those little numbers scroll forward.  We therefore are likely to mentally account for our fuel efficiency as a weekly fuel cost.  And weekly fuel cost is exactly the sort of metric that will lead us to make the correct decision - i.e. to replace the inefficient van, not the relatively more efficient sedan.

I would argue that this paper succeeds only in fooling its respondents because they pose the question in a framework that is unfamiliar to the vast majority of drivers.  Are consumers actually choosing to replace their sedans, while keeping their bulky SUVs?  If we are to believe the latest industry trends, SUV (and Hummer!) sales are way down, while sales of the more fuel-efficient crossover vehicles are way up (16% in 2007).  In other words, people are choosing rational option 1, not irrational option 2.

Irrational human behavior is so prevalent - is there really a need to invent it where none exists?

I should be thinking about hierarchically nanostructured materials, but instead I’m thinking about ways to make our world a little better.  The following post might be a little unstructured, but I wanted to put it out there for your thoughts.

Erik and I started the umbrella movement a few years back as an experiment in social good.  The concept was straightforward: we bought a ton of umbrellas, labeled them with a sticker that read “you’ve got the movement, pass it on”, and handed out these umbrellas in the pouring Boston rain.  Our working thesis was that everyone appreciates a little good will, especially when a sudden unexpected turn for the worse arrives, and that this good will could be passed on with a multiplicative effect.  Sort of like “Pay it forward” the movie, but not Haley Joel Osment.  In addition to encouraging good will we were curious to see the network effect and how far these umbrellas would be distributed.

It didn’t work very well.  The umbrellas tended to fall apart and extra ones were cumbersome to carry around.   Maybe our optimism was misplaced and people really thought “Hey sweet free umbrella.  Now I don’t have to spend $10 for a $1.95 umbrella that the guy on the corner is selling them for.”  I don’t think this is true.  I believe people are generally altruistic and desire to aid their fellows.

So what was the problem?  There were too many obstacles in the way; high friction slowing down the network of good will.  That and maybe the umbrella recipients weren’t primed to be altruistic.  Maybe they had to be home for dinner.

Thinking about twitter recently, I’m increasingly buying into the fact that as a platform, it has a serious potential to change the way we communicate.  It’s social, viral, and it addresses our decreasing attention spans.  I think buried within the network is an enormous opportunity to create social good and I’m trying to think of the best way to exploit this.

A simple concept is the idea of “doing a good twit daily” (borrowed from the Scout’s phrase “Do a good turn daily”).  Needy groups or people could send twits to a twit-bot requesting volunteer help, some extra food, etc. and indicating location and time.   Recipients of the twit could then reply indicating how they can help.  It’s simple, it primes people for altruism, and it leverages a huge network.  You could build a bunch of add-ons: AI to allow for twits which are local or within a certain type of volunteering or a database to help groups manage their volunteers.

I’ve been messing around with twitter for the past couple of months.  My network is relatively small, keeping small updates on my brother and twit-stalking a few of the VC guys that are big believers in this stuff.  So for me, I use it relatively infrequently.  For others though it’s huge, completely viral, and informative.

Fred Wilson, a VC at Union Square Ventures, has been a big proponent of twit-bots.   For example you can create a twit-bot on wine recommendation (@winetweets) .   This allows everyone interested in wine recommendations to post to the twit-bot and the bot published the recommendation to everyone who follows the twit-bot.  There is some real power of the masses at work here: if you get enough people, surely the wisdom of crowds should allow you to find the cream of the crop recommendations based on number of recommendations alone.  However there is oversaturation of information here as well: what happens when you get 1000, 10000, 1 million recommendations a month from the twitbot?  There is just no way of handling this information.

This leads me to the idea of ‘data-mining’ information from twitter (I’m sure someone is working on this already) . Because of the format, twits are limited to 140 characters, necessitating brevity.  In a comparison with yelp.com, there is no opportunity to supply context for the recommendation that a full review on yelp can provide.  Thus I think it will take some sweet statistical analysis along with some meta-data (some metric for how ‘good’ the recommender is) to really extract some value from this.

Venture hacks always supplies gems for the entrepreneur.  This post is excellent, reading and listening for anyone who wants to get a startup done.

Even more important, Mike Cassidy talks about conflict resolution within a company and how to achieve work-life balance.  Plus the dude plays ultimate which is a super plus in my book.

All this from a guy who sold hundred million dollar companies twice after only a couple years of launch.