Significance of Modal Income

This interesting article (with minor editing) was published in Business Line, Hindu Group of Papers (India), on Jun 11, 2002 by G. Ramachandran

MEAN income is a popular statistical measure used by experts and common folk to measure and to describe the prosperity of nations. Per capita incomes and mean household incomes are widely used by economists and policy-makers in government and by analysts and marketers to make important inferences and decisions. The widespread acceptance of mean is due to the simplicity with which it can be calculated. It is used widely as a result of the ease with which it can be visualised by those interested in measurement and comparison. Mean is the expected value of a random variable. But it has important limitations in its ability to convey critical and defining characteristics vis-à-vis the other statistical measure, MODE.

A neighbourhood where nine households earn $1,000 each and one household earns $6,000 has the same mean household income as another where nine households earn $500 each and one household earns $10,500. Their mean household income is $1,500. However, the modal, or most frequently observed, income of the first neighbourhood is $1,000 while it is only $500 in the second. The limitation of averages has a larger and deeper impact on economic and business policies that are derived from mean incomes. The neighbourhood with the lower modal income is unlikely to be a promising market for some goods that have a high sticker price. The neighbourhood with the higher modal income is unlikely to be interested in some goods that have a low sticker price. If both neighbourhoods are in the same economy and if households compete for jobs, it is very likely that wage competition would be intense in the neighbourhood with a modal income of $500.

It is easy to see why and how modal income influences wage aspirations and the willingness of households to invest in new skills. It is also easy to see how modal income influences the supply of human resources, and thereby aggregate demand and the size of markets. From such a perspective, the neighbourhood with the modal income of $500 might respond more vigorously to stimulus aimed at growth. When households break out of the lower modal income, they would push the mean household income beyond $1,500. It is easy to see why and how modal incomes and the principal factors that give rise to modal incomes are more important than mean incomes.

The Indian economy resembles the second neighbourhood. The per capita annual income is about $460, higher than that of 41 countries. But there are more poor households in India than in all of Africa, Asia and Central America. Why? The modal or most frequently observed income is less than $100, which makes most Indian households poorer than those in Angola, Burundi and Congo. Therefore, the analysis of modal incomes in the Indian economy could provide a new thrust to the generation of new income-producing opportunities in India and to aggregate growth.

Income Analysis:
Income analysis has an overwhelming influence over the inferences and recommendations of development institutions such as the World Bank. Their methodologies have influenced the formulation of poverty-alleviation policies by many governments. Comparative analyses of mean incomes are an important component of these methodologies. Time-series analysis involves comparisons of mean incomes of the same country or region but at different times. Cross-sectional analysis involves comparisons of mean incomes at a point in time of two or more countries or regions.

The purpose of cross-sectional analysis is to enable the formulation and implementation of policies that could lead to better incomes. But if the analysis is confined to mean incomes, there may be little to learn and emulate. Dr Branko Milanovic, a leading economist and researcher, has found that inequality in world income is very high more because of differences between mean country incomes than because of inequality within countries. Development economists may infer that domestic inequality in mean incomes is not as critical an issue as global inequality in mean incomes. They may argue for a better and more equitable world order, but this article would disappoint them by arguing for a better and more proactive domestic economy.

Neighbourhood Effect:
The rich seek privileges, while the poor are concerned about inequality. Privileges too are the outcomes of inequality. However, inequality is more poignant to the poor than to the rich. Hence, inequality is starker when 20 per cent of a population is poor and 80 per cent is rich than when 20 per cent is rich and 80 per cent is poor. Income inequality is a critical social issue in the OECD economies rather than in India. When many households in a locale have meagre incomes, only a few households feel poor. Remember Winston Churchill’s famous saying “beggars do not envy millionaires, though of course they will envy other beggars”. When neighbourhoods operate in isolation, there is relative satiation that modifies the effort expended by households towards earning higher incomes. This explains why households around the world tend to choose `comfortable neighbourhoods' in their domestic economies where they do not feel too unequal, but have better bargaining power than their neighbours.

However, in the long run, the neighbourhood modifies the effort expended by all households towards earning higher incomes. Dr Milanovic's research results are not surprising. Poor countries continue to remain poor for many reasons, but their low modal incomes and their neighbourhoods that operate in isolation are perhaps the most fundamental reasons. India should, therefore, focus on the modal incomes of households in every neighbourhood and on the mobility of human resources.

Income Expectations:
Households are exposed primarily to the incomes and purchasing power of other households in their immediate neighbourhood. Their exposure to the incomes and purchasing power of households in a distant neighbourhood is secondary. Hence, local incomes and purchasing power are the fundamental determinants of local prosperity. It is unlikely that a skin specialist would choose to practise in a locale where the modal income is low. Low modal income would adversely affect the specialist's income. The specialist's decision to ignore a neighbourhood would, in turn, adversely affect its mean income.

Every neighbourhood is a unique ecosystem with particular marginal costs and revenues, and particular opportunity costs and revenues. The costs and income expectations are driven by the neighbourhood's modal income. This is particularly important when services are produced by human effort but cannot be stored or transported. Such services constitute more than 30 per cent of India's economy. E-enabled services and remote servicing of customers could favourably alter the determinants of prosperity someday. But it could take long. In the meanwhile, smart governments could work on costs and income expectations by improving the terms of trade in their locales. The income of a skin specialist is determined by the number of customers and their individual capability to spend than by the mean income of customers. If households from several neighbourhoods could access the skin specialist, the specialist may choose to practise in a neighbourhood though its modal income is low. The mode of access -say, a system of roads - would make up for the low modal income. Roads and reliable transport overcome the inherent limitations of low modal incomes of neighbourhoods.

Empirical Evidence:
Many analysts assume that prosperity in the US is driven by urban, non-agrarian activities in the metropolises. Empirical evidence shows that 52 of the 250 richest counties are not metropolitan counties. The 52 counties derive their incomes from an interesting mix of income-producing activities, though they are agrarian at the core. They have generated new income-producing opportunities as a response to local modal incomes and local demand. Political will and administrative conscientiousness have made a difference to states such as Iowa. Linn and Polk counties in Iowa are in the midst of agrarian activities related to corn, soybean and hogs. Are they non-metropolitan? They are among the 198 richest metropolitan counties in the US. They have overcome the inherent limitations of low modal incomes imposed by agrarian activities.

By contrast, counties that have not overcome the inherent limitations of low modal incomes imposed by agrarian activities have lagged; 240 of the 250 poorest counties are not metropolitan counties. They are driven by agrarian activities. Kings County in California is among the 250 poorest counties, though California has a much higher mean income than Iowa. However, no county from Iowa is among the 250 poorest. Agriculture is not a hurdle to prosperity. Wichita and Haskell counties in Kansas continue to be agrarian and non-metropolitan but are among the 250 richest counties because they have found complementary sources of income. Empirical analysis of the 3,110 counties in the US shows that political will, administrative conscientiousness and the effectiveness of local governance make a vital difference to the domestic economy. These could be emulated in India.

States that are committed to improving the incomes of households could focus on the factors that affect modal incomes. An objective analysis of income-producing opportunities would show that most people earn their livelihoods in their neighbourhoods because of the purchasing power of their neighbours. That is the mode! The same analysis would show that most people who earn meagre incomes have failed to connect adequately with the purchasing power of their neighbours. Governments could, therefore, ask how they could make more people connect with more purchasing power in a bigger neighbourhood. Efforts in this direction would lead to the generation of new income-producing opportunities and to higher modal incomes and higher mean incomes.

The Sixth Extinction

The article The Sixth Extinction by the renowned Paleontologist Dr. Niles Eldredge is reproduced below with partial modifications.

There is little doubt left in the minds of professional biologists that Earth is currently faced with a mounting loss of species that threatens to rival the five great mass extinctions of the geological past. As long ago as 1993, Harvard biologist E.O. Wilson estimated that Earth is currently losing something of the order of 30,000 species per year -- which breaks down to the even more daunting statistics of some three species per hour. Some biologists have begun to feel that this biodiversity crisis --"Sixth Extinction" - is even more severe, and more imminent, than Wilson had supposed.

Extinction in the past
Our planet has been shaken by five major extinctions in the 3.5 billion year history of life. The past extinctions were all caused by abnormal physical events way outside the normal climatic and other physical disturbances which species, and entire ecosystems, normally experience and survive.

First major extinction (440 Ma): Climate change (relatively severe and sudden global cooling) seems to have been at work at the end-Ordovician mass extinction that caused such pronounced change in marine life (little or no life existed on land at that time). This occurred shortly after the evolution of the first land-based plants and 100 million years after the Cambrian Explosion of animal life beneath the seas. 25% of families lost (a family may consist of a few to thousands of species).

Second major extinction (370 Ma): The next such event, near the end of the Devonian, may or may not have been the result of global climate change. 19% of families lost.

Third major Extinction (245 Ma): Scenarios explaining what happened at the greatest mass extinction event of them all (so far, at least!) at the end of the Permian have been complex amalgams of climate change perhaps rooted in plate tectonics movements. Very recently, however, evidence suggests that an asteroid impact similar to the end-Cretaceous event may have been the cause. 54% of families lost.

Fourth major extinction (210 Ma): The event at the end of the Triassic, shortly after dinosaurs and mammals had first evolved, also remains difficult to pin down in terms of precise causes. 23% of families lost.

Fifth major extinction (65 Ma): Most famous, perhaps, was the most recent of these events at the end-Cretaceous. It wiped out the remaining terrestrial dinosaurs and marine ammonites and ended the reptilian dominance of the Earth leading to the current mammalian domination of the Earth. Consensus has emerged in the past decade that this event was caused by one (possibly multiple) collisions between Earth and extraterrestrial bodies. Some geologists, however, point to the great volcanic event that produced the Deccan Traps of India as part of the chain of physical events that disrupted ecosystems so severely that many species on land and sea rapidly succumbed to extinction. 17% of families lost.

How is the Sixth Extinction different from previous events?
Every year, between 17,000 and 100,000 species vanish from our planet says the famous Paleoanthropologist, Dr. Richard Leakey. At first glance, the physically caused extinction events of the past might seem to have little or nothing to tell us about the current Sixth Extinction, which is a patently human-caused event. For there is little doubt that humans are the direct cause of ecosystem stress and species destruction in the modern world through such activities as (1) transformation of the landscape, (2) overexploitation of species, (3) pollution, and (4) the introduction of alien species. And because Homo sapiens is clearly a species of animal (however behaviorally and ecologically peculiar an animal), the Sixth Extinction would seem to be the first recorded global extinction event that has a biotic, rather than a physical cause. Yet, upon further reflection, human impact on the planet is a direct analogue of the Cretaceous meteorite collision. Sixty-five million years ago that extraterrestrial impact -- through its sheer explosive power, followed immediately by its injections of so much debris into the upper reaches of the atmosphere that global temperatures plummeted and, most critically, photosynthesis was severely inhibited -- wreaked havoc on the living systems of Earth. That is precisely what human beings are doing to the planet right now: humans are causing vast physical changes on the planet.

What is the Sixth Extinction?
We can divide the Sixth Extinction into two discrete phases: Phase One began when the first modern humans began to disperse to different parts of the world about 100,000 years ago. Phase Two began about 10,000 years ago when humans turned to agriculture.

The first phase began shortly after Homo sapiens evolved in Africa and the anatomically modern humans began migrating out of Africa and spreading throughout the world. Humans reached the Middle East 90,000 years ago. They were in Europe starting around 40,000 years ago. Neanderthals, who had long lived in Europe, survived our arrival for less than 10,000 years, but then abruptly disappeared -- victims, according to many Paleoanthropologists, of our arrival through outright warfare. Everywhere, shortly after modern humans arrived, many (especially, though by no means exclusively, the larger) native species typically became extinct. Humans were like bulls in a China shop:

• They disrupted ecosystems by over-hunting species, which never experienced contact with humans before.
• And perhaps they spread microbial disease-causing organisms as well.

The fossil record attests to human destruction of ecosystems:

• Humans arrived in large numbers in North America roughly 12,500 years ago-and sites revealing the butchering of mammoths, mastodons and extinct buffalo are well documented throughout the continent. The demise of the bulk of the La Brea tar pit Pleistocene fauna coincided with our arrival.
• The Caribbean lost several of its larger species when humans arrived some 8000 years ago.
• Extinction struck elements of the Australian megafauna much earlier-when humans arrived some 40,000 years ago. Madagascar-something of an anomaly, as humans only arrived there two thousand years ago-also fits the pattern well: the larger species (elephant birds, a species of hippo, plus larger lemurs) rapidly disappeared soon after humans arrived.

Only in places where earlier hominid species had lived (Africa, of course, but also most of Europe and Asia) the fauna, already adapted to hominid presence, survived the first wave of the Sixth Extinction. The rest of the world's species, which had never before encountered hominids in their local ecosystems, were in direct competition for survival with the new arrivals.

Why does the Sixth Extinction continue?
Phase two of the Sixth Extinction began around 10,000 years ago with the invention of agriculture. Agriculture represents the single most profound ecological change in the entire 3.5 billion-year history of life. With its invention:

• humans did not have to interact with other species for survival, and so could manipulate other species for their own use
• humans did not have to adhere to the ecosystem's carrying capacity, and so could overpopulate

Homo sapiens became the first species to stop living inside local ecosystems. All other species, including our ancestral hominid ancestors, all pre-agricultural humans, and remnant hunter-gatherer societies still extant exist as semi-isolated populations playing specific roles in local ecosystems. This is not so with post-agricultural revolution humans, who in effect have stepped outside local ecosystems. Indeed, to develop agriculture is essentially to declare war on ecosystems - converting land to produce one or two food crops, with all other native plant species all now classified as unwanted "weeds" -- and all but a few domesticated species of animals now considered as pests.

• Estimates vary, but range between 1 and 10 million people on earth 10,000 years ago.
• There are now over 6 billion people.
• The numbers continue to increase logarithmically -- so that there will be 8 billion by 2020. There is presumably an upper limit to the carrying capacity of humans on earth -- of the numbers that agriculture can support -- and that number is usually estimated at between 13-15 billion, though some people think the ultimate numbers might be much higher.

This explosion of human population, especially in the post-Industrial Revolution years of the past two centuries, coupled with the unequal distribution and consumption of wealth on the planet, is the underlying cause of the Sixth Extinction. There is a vicious cycle. More lands are cleared and more efficient production techniques (most recently engendered largely through genetic engineering) to feed the growing number of humans -- and in response, the human population continues to expand. Higher fossil energy use is helping agriculture spread, further modifying the environment. Can conservation measures stop the Sixth Extinction? The world's ecosystems have been plunged into chaos, with some conservation biologists thinking that no system, not even the vast oceans, remains untouched by human presence. Conservation measures, sustainable development, and, ultimately, stabilization of human population numbers and consumption patterns seem to offer some hope that the Sixth Extinction will not develop to the extent of the third global extinction at 245 Ma, when 90% of the world's species were lost. Though it is true that life, so incredibly resilient, has always recovered (though after long lags) after major extinction spasms, it is only after whatever has caused the extinction event has dissipated. That cause, in the case of the Sixth Extinction, is ourselves -- Homo sapiens. This means we can continue on the path to our own extinction, or, preferably, we modify our behavior toward the global ecosystem of which we are still very much a part. The latter must happen before the Sixth Extinction can be declared over, and life can once again rebound.

Click http://www.actionbioscience.org/for the original article.

A letter from Abraham Lincoln to his son’s Head Master

Abraham Lincoln (1809-1865), the 16th president of the United States of America (1861-65) is one of the world’s great statesmen for all time. Lincoln rose from humble backwoods origins to become one of the great presidents of the United States. In his effort to preserve the Union during the Civil War, he assumed more power than any preceding president. If necessity made him almost a dictator, by fervent conviction he was always a democrat. A superb politician, he persuaded the people with thoughtful words and reasoned deeds to look to him for leadership. He had a lasting influence on American political institutions, most importantly in setting the precedent of vigorous executive action in time of national emergency.

Here is a letter written by Abraham Lincoln to the head master of the school in which his son was studying, a letter so typical of the man. It contains advice, which is still relevant today for executives, workers, teachers, parents and students.

"He will have to learn, I know, that all men are not just and are not true. But teach him if you can, the wonder of books.. but also give him quiet time to ponder the eternal mystery of birds in the sky, bees in the sun and flowers on a green hillside.

In school, teach him it is far more honorable to fall than to cheat.....

Teach to have faith in his own ideas, even if everyone tells him he is wrong.

Teach him to be gentle with gentlepeople and tough with the tough.

Try to give my son the strength not to follow the crowd when everyone getting on the bandwagon...

Teach him to listen to all men; but teach him also to filter all he hears on a screen of truth, and take only the good that comes through.

Teach him, if you can, how to laugh when he is sad... Teach him there is no shame in tears.

Teach him to scoff at cynics and to be beware of too much sweetness.. Teach him to sell his brawn and brain to highest bidders, but never to put a price on his heart and soul. Teach him to close his ears to a howling mob.. and stand and fight if thinks he is right.

Treat him gently, but do not cuddle him, because only the test of fire makes fine steel. Let him have the courage to be impatient.. Let him have the patience to be brave. Teach him always to have sublime faith in himself, because then he will have faith in humankind.

This is a big order, but see what you can do. . He is such a fine little fellow my son!

- Abraham Lincoln"

It’s Often Smart to Make the First Move in a Negotiation

When it comes to negotiation strategies, it is not always wise to wait for the other side to make the first offer, to suppress emotions during bargaining, or to reveal too much too early, says Stanford Graduate School of Business Professor Margaret Neale.

“Most of us think we should let the other side make the first offer”, but “You should make the first offer because of the power of anchoring” says Neale.

In making the first offer, you gain an advantage by defining the starting point to which the other side must respond. The only times when it makes sense to wait for the other side to make an offer, she added, is when you have information that gives you significant advantage in the bargaining or “when you honestly believe that the other side dramatically values the object of the exchange at a much higher rate than you do.”

How “extreme” should a first offer be? “Just this side of crazy,” Neale said, explaining how you must be as aggressive as possible without crossing a line that would prompt the other side to shut down negotiations and walk away.

And if you can’t risk an impasse or “the benefit you might receive is not worth the time it takes to negotiate,” a first offer should be on the low side, she added. This is also true if you want to start an auction with lower barriers to entry.

Negotiations are “a mixed-motive interaction” in which a party must manage both “the competitive and the cooperative components of interaction,” she said, adding negotiations should not be viewed as a zero-sum game.

Nor is transparency necessarily the best policy in negotiations, Neale said. You must never reveal your bottom line, for it increases the likelihood of an impasse, she added.

She also disputed the belief that a poker face is a key to success in negotiations, and that the rational negotiator is always the unemotional negotiator. “People don’t usually think we use emotions strategically,” she said, adding emotions can be powerful pieces of information. She cited a study that showed that, in some cases, negotiators who displayed anger during the process created more value than those who were unemotional.

Neale said negotiators must also always be aware of their greatest weapon: The ability to walk away. “If you are facing a bad deal,” she said, “you have a choice.”For the complete article, click the link below:
http://www.gsb.stanford.edu/news/headlines/2007nealefirstmove.html

Excerpts from Soul to Soul by Gary Zukav

The book Soul to Soul represents a giant step forward in the expression of Gary’s work, providing penetrating insights that illuminate our lives. The book is profoundly simple, wise, and poetic. It is a book to treasure and return to again and again for guidance and inspiration. The book can be ordered at http://www.seatofthesoul.com/.

BALANCE:
When I lived in the city, I never knew what an equinox was. It is an astronomical term for the time when the sun crosses the equator, making night and day of equal length in all parts of the world. In December, the sun is lowest in the sky and the nights are longest. This is the winter solstice. In June, the opposite happens—the sun is highest in the sky and the days are longest. This is the summer solstice. All of this has to do with the equinoxes, but I didn’t learn any of it by studying astronomy.Winter came, then spring, summer, and fall again. I lived a complete cycle with nature, for the first time. More important, I felt the seasons come and go inside me. That is how I learned about the equinoxes. They are midway between the times when the sun is highest (in the summer) and when it is lowest (in the winter). The days are not overly long or overly short. We call the equinoxes spring and fall.

Do you see the perfect balance? Day and night, spring and fall, hot and cold, planting and harvesting—everything is balanced at the equinoxes. This balance could not exist without the extremes. Midway between the heat of summer and the ice of winter, between sowing and reaping, between darkness and light, life goes on.

When you strive for balance, be gentle with yourself. How can you recognize balance without recognizing imbalance? When you rejoice at the good that you discover in yourself, or despair at the evil, do you move past the balance point between them without noticing it? If you strive only to avoid the darkness or to cling to the light, you cannot live in balance. Instead, try striving to be conscious of all that you are, and to choose responsibly at each moment. That is balance.

THE SUMMER SOLSTICE:
One special day in June, the sun is higher in the sky than it is at any other time of the year. That day is also the longest day of the year. It is the summer solstice. Maximal potential and maximal growth are happening together. The spring gives way to the full force of summer, but the harvest is still months away.

When I lived on my ranch I felt most at ease during the summer. I had no fires to build, no pipes to thaw, no snow to shovel, and I knew that I had months until the fall to lay away the firewood that would keep me warm in the winter. As the summer stretched before me, I lost track of the winter behind me and the winter ahead. I walked the stream in the hot afternoons and jogged old logging roads in the cool of the morning. I repaired the generator, cleaned the wooden water tank in the old barn, and wrote my book. Surrounded by thousands of acres of timberland, I soaked in the heat and the vitality of the summer and immersed myself in them undisturbed.

The fall approached almost imperceptibly. The heat of September days gave way to the coolness of September nights and I began to appreciate again the warm clothing I had put away and forgotten so long ago, at the beginning of the summer. Perhaps because I gave myself to the summer I was ready for the fall, and because I gave myself to the fall, I was ready for the winter when it arrived again, too. As the year completed itself and another began, the summer became more to me than the beautiful season of warmth and light that I love so much. It became part of a larger picture that I began to love even more than its many parts. I didn’t realize it at the time, but my awareness was expanding beyond my limited perception of the summer to a larger perspective of the cycle that contains and produces summers, and beyond my limited perception of my life to the larger perspective of the soul that generates and utilizes lifetimes.

Honor the insights that appear in you the same way. As the seasons of your life come and go, acknowledge the shifts that happen in you and allow them to mature in their own time. Don’t think of yourself as hypocritical because you aren’t living the fullness of your vision immediately. The limitations of your perception are already giving way to a larger perspective in which your struggles are a part of the goal you are striving for and inseparable from it. The fullness of your most noble and healthy aspirations will come, just like the fall harvest always comes. The harvest and the sprouts do not occur together. First come the sprouts, then growth and maturation, and then the harvest. Let wisdom and love sprout and grow in you the same way.

THE WINTER SOLSTICE:
The winter solstice is a very powerful time in the cycle of life and death, death and rebirth, disintegration and renewal that controls all Life on the Earth, including you. It is the time when motion ceases and at the same moment, Life begins to stir again. Animals in hibernation and seeds in sleep beneath the snow will not move until the spring, but deep within them a process has completed itself. The contraction of energy that the long nights and cold days reflect reaches its limit and a cycle reverses itself. From that moment forward, even though the winter remains to unfold as it must, the spring has been born, and the summer, and the harvests of the summer will follow with it.

This dark and trying season is repeated in your life again and again. Each tragedy, loss, failure, and humiliation reaches its inmost movement, spends its energy, and from that long journey another begins—a journey to warmth, light, and expansion. The season of celebration, of growth, of Life, and of movement is repeated again in the same way. One season follows the other. The arrival of one signals the coming of the other. They do not exist apart.

These seasons of the year, and seasons of your life, come and go, complete themselves, and give way to each other whether you are aware of the dynamic that controls them or not. If you are not, the seasons appear to have lives of their own and you forget they are each part of a cycle—a cycle that you have encountered many times before and will encounter many times again. Your life is built on this cycle of seasons—on the continual repetition of them. The arrival of winter, the coming of darkness and death, initiates the coming of light and life. This cycle controls the unfolding of your life and all within it.

When you are aware of this cycle, you can participate with it. You cannot stop the death that comes in the winter nor the life that comes with the summer, but you can determine in the winter what will be born in the summer. You can contribute your intelligence and will to the intelligence and movement of a dynamic larger than you. You can plant the seed that will sprout in the spring. You can lay the foundation for a different winter to come after the summer that has yet to arrive. You can only do this for yourself.

When you are in deep winter, the nights are long and the days are short. The Earth grows cold and life retreats. Now is the time for you to awaken to your place in this cycle, and to use it consciously. What is darkest in your life? What loss or disappointment, fear or terror moves through you? What powerlessness haunts you? These are given to you for your benefit. They are brought to your awareness so that you can change them. They are your avenues to the clarity and love that you are waiting for. You cannot become fearless at your command, but you can determine how you will respond to your fear. You cannot become kind with one intention, but you can determine how you will respond to your own brutality, righteousness, and fear.

This is the power of the deep winter. It challenges you, confronts you, and shows you what you must change in yourself. It is a holy and precious season. It illuminates your holy and precious life. It is your potential beckoning to you, disguised as an adversary, a tragedy, or a disaster. Will the adversary, tragedy, or disaster shape your experience, or will you shape your experience of it? Will your fears overwhelm you, or will they show you new and different ways to respond to them?

What new life is stirring in you this Deep Winter?

A New Era for Business by McKinsey & Co

More and more business leaders recognize that their company’s future is increasingly intertwined with the needs and demands of society. What many executives don’t understand is how best to manage that changing relationship. In this article, McKinsey & Company consultants provide a model for incorporating sociopolitical issues into the strategic decision-making process.

Businesses have never been insulated from expectations about their social responsibilities. What is different today is that the issues are far more numerous, complex, global, and fast-changing than ever before. Global warming, childhood obesity, unfair labor practices, air and water pollution – the list goes on and on. The impact that these issues can have on a company's future has also increased – to potentially devastating levels – because today’s social activists have more avenues and tools to influence and mobilize public opinion around hot-button issues.

Some business executives are resisting these trends, arguing that a company’s obligation to society is only to provide the best return possible for its shareholders. But more and more executives are taking a strategic approach to the problem, recognizing that the short- and long-term interests of their company and its shareholders are increasingly intertwined with the interests of society, and that the best response is to become more engaged with the issues and activists in the nonprofit and public sectors.

We believe that business does have a strategic interest in becoming more aware of and engaged in sociopolitical debate and issues. The reasons are twofold. First, social and political forces can fundamentally alter an industry’s strategic landscape and even torpedo the reputations of businesses that have been caught unawares or are seen as being culpable in creating the problem. Second, companies that are engaged can significantly benefit from these trends, by creating new products, services, and markets for unmet social needs, as well as for new consumer preferences.

The challenge that business leaders face is to find ways to incorporate an awareness of sociopolitical issues more explicitly and proactively into their strategic decision-making processes. Companies must see social and political dimensions not just as risks – areas for damage control – but also as business opportunities. They need to scan the horizon for emerging trends and integrate their responses across the organization, so that the resulting initiatives are coherent rather than piecemeal.

Having worked with many companies around the world, we have learned which areas companies need to master in order to understand and manage these complex sociopolitical issues. We call these the Five R’s: risk, renewal, regulation, relationships, and reputation. We have also learned that managing these issues is not a peripheral task to be relegated to public relations or corporate social responsibility departments. Instead, it requires leadership by the CEO and coordination throughout the organization. To succeed in today’s smaller, fasterchanging, more complex world, business leaders must systematically incorporate an awareness of sociopolitical issues into their strategic decision-making processes.

For full article, go to Stanford Social Innovation Review Source URL:

http://WWW.SSIREVIEW.ORG/ARTICLES/ENTRY/681/

'You've got to find what you love' by Steve Jobs, CEO - Apple Computer

This is the text of the Commencement address by Steve Jobs, CEO of Apple Computer delivered on June 12, 2005 and published in Stanford Report on 14th June, 2005

I am honored to be with you today at your commencement from one of the finest universities in the world. I never graduated from college. Truth be told, this is the closest I've ever gotten to a college graduation. Today I want to tell you three stories from my life. That's it. No big deal. Just three stories.

The first story is about connecting the dots.

I dropped out of Reed College after the first 6 months, but then stayed around as a drop-in for another 18 months or so before I really quit. So why did I drop out? It started before I was born. My biological mother was a young, unwed college graduate student, and she decided to put me up for adoption. She felt very strongly that I should be adopted by college graduates, so everything was all set for me to be adopted at birth by a lawyer and his wife. Except that when I popped out they decided at the last minute that they really wanted a girl. So my parents, who were on a waiting list, got a call in the middle of the night asking: "We have an unexpected baby boy; do you want him?" They said: "Of course." My biological mother later found out that my mother had never graduated from college and that my father had never graduated from high school. She refused to sign the final adoption papers. She only relented a few months later when my parents promised that I would someday go to college.

And 17 years later I did go to college. But I naively chose a college that was almost as expensive as Stanford, and all of my working-class parents' savings were being spent on my college tuition. After six months, I couldn't see the value in it. I had no idea what I wanted to do with my life and no idea how college was going to help me figure it out. And here I was spending all of the money my parents had saved their entire life. So I decided to drop out and trust that it would all work out OK. It was pretty scary at the time, but looking back it was one of the best decisions I ever made. The minute I dropped out I could stop taking the required classes that didn't interest me, and begin dropping in on the ones that looked interesting.

It wasn't all romantic. I didn't have a dorm room, so I slept on the floor in friends' rooms, I returned coke bottles for the 5¢ deposits to buy food with, and I would walk the 7 miles across town every Sunday night to get one good meal a week at the Hare Krishna temple. I loved it. And much of what I stumbled into by following my curiosity and intuition turned out to be priceless later on. Let me give you one example: Reed College at that time offered perhaps the best calligraphy instruction in the country. Throughout the campus every poster, every label on every drawer, was beautifully hand calligraphed. Because I had dropped out and didn't have to take the normal classes, I decided to take a calligraphy class to learn how to do this. I learned about serif and san serif typefaces, about varying the amount of space between different letter combinations, about what makes great typography great. It was beautiful, historical, artistically subtle in a way that science can't capture, and I found it fascinating.

None of this had even a hope of any practical application in my life. But ten years later, when we were designing the first Macintosh computer, it all came back to me. And we designed it all into the Mac. It was the first computer with beautiful typography. If I had never dropped in on that single course in college, the Mac would have never had multiple typefaces or proportionally spaced fonts. And since Windows just copied the Mac, its likely that no personal computer would have them. If I had never dropped out, I would have never dropped in on this calligraphy class, and personal computers might not have the wonderful typography that they do. Of course it was impossible to connect the dots looking forward when I was in college. But it was very, very clear looking backwards ten years later. Again, you can't connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something - your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.

My second story is about love and loss.

I was lucky – I found what I loved to do early in life. Woz and I started Apple in my parents garage when I was 20. We worked hard, and in 10 years Apple had grown from just the two of us in a garage into a $2 billion company with over 4000 employees. We had just released our finest creation - the Macintosh - a year earlier, and I had just turned 30. And then I got fired. How can you get fired from a company you started? Well, as Apple grew we hired someone who I thought was very talented to run the company with me, and for the first year or so things went well. But then our visions of the future began to diverge and eventually we had a falling out. When we did, our Board of Directors sided with him. So at 30 I was out. And very publicly out. What had been the focus of my entire adult life was gone, and it was devastating.

I really didn't know what to do for a few months. I felt that I had let the previous generation of entrepreneurs down - that I had dropped the baton as it was being passed to me. I met with David Packard and Bob Noyce and tried to apologize for screwing up so badly. I was a very public failure, and I even thought about running away from the valley. But something slowly began to dawn on me – I still loved what I did. The turn of events at Apple had not changed that one bit. I had been rejected, but I was still in love. And so I decided to start over.

I didn't see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life.

During the next five years, I started a company named NeXT, another company named Pixar, and fell in love with an amazing woman who would become my wife. Pixar went on to create the worlds first computer animated feature film, Toy Story, and is now the most successful animation studio in the world. In a remarkable turn of events, Apple bought NeXT, I retuned to Apple, and the technology we developed at NeXT is at the heart of Apple's current renaissance. And Laurene and I have a wonderful family together.

I'm pretty sure none of this would have happened if I hadn't been fired from Apple. It was awful tasting medicine, but I guess the patient needed it. Sometimes life hits you in the head with a brick. Don't lose faith. I'm convinced that the only thing that kept me going was that I loved what I did. You've got to find what you love. And that is as true for your work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven't found it yet, keep looking. Don't settle. As with all matters of the heart, you'll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don't settle.

My third story is about death.

When I was 17, I read a quote that went something like: "If you live each day as if it was your last, someday you'll most certainly be right." It made an impression on me, and since then, for the past 33 years, I have looked in the mirror every morning and asked myself: "If today were the last day of my life, would I want to do what I am about to do today?" And whenever the answer has been "No" for too many days in a row, I know I need to change something.

Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life. Because almost everything – all external expectations, all pride, all fear of embarrassment or failure - these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.

About a year ago I was diagnosed with cancer. I had a scan at 7:30 in the morning, and it clearly showed a tumor on my pancreas. I didn't even know what a pancreas was. The doctors told me this was almost certainly a type of cancer that is incurable, and that I should expect to live no longer than three to six months. My doctor advised me to go home and get my affairs in order, which is doctor's code for prepare to die. It means to try to tell your kids everything you thought you'd have the next 10 years to tell them in just a few months. It means to make sure everything is buttoned up so that it will be as easy as possible for your family. It means to say your goodbyes. I lived with that diagnosis all day. Later that evening I had a biopsy, where they stuck an endoscope down my throat, through my stomach and into my intestines, put a needle into my pancreas and got a few cells from the tumor. I was sedated, but my wife, who was there, told me that when they viewed the cells under a microscope the doctors started crying because it turned out to be a very rare form of pancreatic cancer that is curable with surgery. I had the surgery and I'm fine now.

This was the closest I've been to facing death, and I hope its the closest I get for a few more decades. Having lived through it, I can now say this to you with a bit more certainty than when death was a useful but purely intellectual concept: No one wants to die. Even people who want to go to heaven don't want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true.

Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma - which is living with the results of other people's thinking. Don't let the noise of other's opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.

When I was young, there was an amazing publication called The Whole Earth Catalog, which was one of the bibles of my generation. It was created by a fellow named Stewart Brand not far from here in Menlo Park, and he brought it to life with his poetic touch. This was in the late 1960's, before personal computers and desktop publishing, so it was all made with typewriters, scissors, and polaroid cameras. It was sort of like Google in paperback form, 35 years before Google came along: it was idealistic, and overflowing with neat tools and great notions.

Stewart and his team put out several issues of The Whole Earth Catalog, and then when it had run its course, they put out a final issue. It was the mid-1970s, and I was your age. On the back cover of their final issue was a photograph of an early morning country road, the kind you might find yourself hitchhiking on if you were so adventurous. Beneath it were the words: "Stay Hungry. Stay Foolish." It was their farewell message as they signed off. Stay Hungry. Stay Foolish. And I have always wished that for myself. And now, as you graduate to begin anew, I wish that for you.

Stay Hungry. Stay Foolish. Thank you all very much.

Extreme Jobs

The December 2006 issue of Harvard Business Review published an interesting article entitled “Extreme Jobs: The Dangerous Allure of the 70-Hour Work Week” written by by Sylvia Ann Hewlett and Carolyn Buck Luce from the Center for Work-Life Policy (http://www.worklifepolicy.org/). The study showed that 45% of managerial workers in large corporations have “extreme jobs” - they work an average 73 hours a week and deal with additional performance pressures that range from 24/7 client demands to grueling travel schedules. Workloads are not only heavy - they’re unrelenting. Vacation has become stigmatized - in many corporations contenders for the big bucks or the corner office don’t feel they can take time off. The survey data show that almost half of all extreme workers take fewer than ten days vacation a year. Nearly 60% don’t take what they are entitled to.

Despite these stresses and strains, jobs at the cutting edge of today’s knowledge economy are powerfully alluring. In the words of one BP executive: “I love my job. Riding this wave of expansion in Asia - being part of the reason a country takes off - is enormously exciting.” A Deutsche Bank executive is even more graphic “My work gives me this adrenalin rush. Like a drug, it’s irresistible and addictive”. The data show that fully 76% of extreme workers love their jobs. Very few feel exploited or put upon by a big boss. Rather, a majority (67%) see the pressures of their jobs as “self-inflicted.” Freely chosen or not, these pressures exert a heavy toll - wreaking havoc in lives and undermining health and well-being of both the organisation and the individual.

Close to 50% of extreme workers are so depleted and drained that when they get home at night they’re speechless - incapable of conversation. Besides relationship the impact on health is serious. The research details links between extreme jobs and chronic insomnia, weight gain, infertility, and heart problems. The connection between vacation (or lack thereof) and heart attacks is particularly eye-catching. Researchers at SUNY Oswego and the University of Pittsburgh have found that among male employees, taking an annual vacation cuts the risk of a fatal heart attack by 32%. Among female employees this figure rises to 50%. Taking time out isn’t just a piece of self-indulgence. It’s a life saver. Moreover, the workplace is becoming the centre of many people’s social life, at the expense of the home. With the rise of knowledge-based work, people increasingly like their jobs and their colleagues’ company.

What is the definition of “extreme jobs”? According to the study, a job is considered to be “extreme” when it takes 60 or more hours per week, is highly paid and entails at least five of the following characteristics:

1. Unpredictable flow of work
2. Fast-paced work under tight deadlines
3. Inordinate scope of responsibility that amounts to more than one job
4. Work-related events outside regular work hours
5. 24/7 availability to clients
6. Responsibility for profit and loss
7. Responsibility for mentoring and recruiting
8. Large amount of travel
9. Large number of direct reports
10. Physical presence at workplace at least ten hours a day.

The surge of extreme jobs is explained by three major factors. First, competition has become more intense. The immense wave of mergers, the flattening of hierarchies and the fear of losing jobs due to outsourcing greatly contributed to this phenomenon. The enormous amount of money earned by top professionals and managers these days is obviously a powerful incentive to work more than the rivals. This could rapidly turn into a vicious circle because numbers show that the higher the pay and position, the bigger the workload. Second, technological developments seem to have liberated and shackled professionals at the same time. 72% of the Americans who answered a survey declared technology helps them do their jobs well but 59% said it lengthens their working day, while 64% think it invades their family life. Finally, cultural shifts are also responsible for the spread of extreme jobs. Extreme efforts are well appreciated in our society. In extreme sports, the more demanding and daring athlete gets more public’s admiration. Intense jobs, like extreme sports, are seen as desirable and not exploitative at all.

But extreme jobs also imply cost increases. It may be that companies can take advantage of extreme workers in the short term. But in the long run, burn-outs, promotion refusals and health costs might prove expensive for firms. 69% of the study’s respondents believe they would be healthier if they worked less and 65% would refuse a promotion if it meant more workload. Bad relationships with spouse and children, an unsatisfied sex life and incapacity to properly maintain their homes are other problems encountered by extreme workers. Recruiting and retaining women talent seem to be most affected in “extreme jobs” condition.

Corporations, worried about “burnout” and high turnover rates, are getting into the business of taming extreme jobs. The new programs range from nap breaks (Nike), to creating half a day a week that’s “communication free” (Intel), to an internal consulting pool that offers valued employees a reduced hour schedule for a period of two years (Amex). The logic behind these new initiatives is two-fold. Providing respite from hellish hours reduces “flight risk” among key talent, while reducing information and work overload promotes creativity and innovation.

Cyborg

The term cyborg is a combination of the terms ‘CYBernetic’ and ‘ORGanism’. It was originally coined by Manfred Clynes and Nathan Kline in their 1960 article, “Cyborgs in Space.” According to the authors, a cyborg is a being that “deliberately incorporates exogenous components extending the self-regulatory control function of the organism to adapt it to new environments”. This definition arises from the authors’ desire to formulate a way for human beings to successfully adapt to the rigors of outer space. Likening space vehicles that were tiny, metal pockets of Earth’s atmosphere to “a fish taking a small bubble of water with him to live on land”, Clynes and Kline proposed the cyborg as a means of reshaping an organism’s body to the new and different environs of deep space, instead of transporting a pressurized pocket of earth into orbit and trapping the astronaut within its limiting confines.

Computers are getting smaller, faster and smarter. Some are invading our bodies, while others are taking on lives of their own. Humans are becoming more mechanized, while computers are acquiring personalities, emotions and even desires. As human and machine continue to merge, what does this mean for the future of the human body? Is this the end of evolution as we know it? Or is this the beginning of the next unfathomable stage? We are gradually but surely getting to the unbelievable frontiers of bioengineering, robotics and micro-computing, where the line between carbon and silicon is beginning to blur. From chips in the eye to robots in the bloodstream, the excitement and promise of this new age is being felt everywhere. In the near future, we will have more and more artificial body parts - arms, legs, hearts, eyes - and digital computing and communication supplements. The logical conclusion is that one might become a brain in a wholly artificial body and the step after that is to replace our meat brain by a computer brain.

Cyborgs are already here. The metaphysical and physical attachments humanity has with even the most basic technologies have already made them cyborgs. In a typical example, a human fitted with a heart pacemaker or an insulin pump might be considered a cyborg, since these mechanical parts enhance the body's "natural" mechanisms through synthetic feedback mechanisms. Some theorists cite such modifications as contact lenses, hearing aids, etc as examples of fitting humans with technology to enhance their biological capabilities. Stephen Hawking type of implants are more accurately cyborg enhancements. The merging of the evolved and the developed, the integration of the constructor and the constructed, the systems of dying flesh and undead circuits, and of living and artificial cells are all in realm of cyborgs or bionic systems.

In recent years the cyborgization of sports has come to the forefront of international conscious. The subject of steroids, blood doping, prosthesis, body modification, and maybe in the future, genetic modification are all topics that should be included within cyborgs in sports. As of now, prosthetic legs and feet are not advanced enough to give athlete the extra-edge, but may soon become better than their human counterparts. The "cyborg soldier" often refers to a soldier whose weapon and survival systems are integrated into the self, creating a human-machine interface. The range of these intimate human-machine relationships is mind-boggling.

Fifty years after the dawn of the space age, hundreds of people have flown into space. A dozen of those left their boot marks on the Moon's surface, and several nations now are planning to send astronauts back to the Moon and then beyond. So you would think the expansion of humanity ever deeper into the Cosmos is a sure bet. But the notion that human explorers are destined to become an interstellar species is far from a sure thing, says Roger Launius, an eminent space historian. More likely, humans, and the machines they use to explore space, are going to evolve together in ways that are hard to predict at this early stage in the opening of the space frontier.

Humans are destined to become a multi-planetary species, but that word may take on a whole new meaning as time evolves. Given that there will be the first child born on the Moon, as well as Mars, will that person be a Homo sapien, asks Launius. Could the differences of gravity, radiation exposure mean those children would be unable to return to Earth? "I think that's problematic," Launius said. In some respects this might be an evolutionary road comparable to that taken by amphibian creatures that departed their water world to become land creatures. "There is the possibility of the evolution of human species into something different". Launius says one possibility is the evolution of the human species into something different via self-induced transformations: Create an Earth-like environment for astronauts to live in or change the astronauts in ways that they will be more capable of surviving in new and different regions of space.

Projecting hundreds of years into the future, Launius said he believed that it is likely humans will evolve in ways that cannot be fathomed today, into a form of species perhaps tagged Homo sapiens Astro. "Will our movement to places like the Moon and Mars hasten this evolutionary process? I don't know the answer," he said. Launius predicts that in the years ahead we will have machines with intelligence and more power than that of humans. This will mean that robots, not humans, make all the important decisions. It will be a robot dominated world with dire consequences for humankind.

We have fairly good idea of the products and by-products of evolution of organisms so far. But we have absolutely no idea of the products and by-products of evolution of intelligence in the future!

Can Financial Incentives Create Bad Employee Behavior?

Offering financial incentives to motivate employees and executives has been a common management practice for decades. Car salesmen get higher commissions for selling more automobiles. Teachers get bonuses when their students score higher on standardized tests. Executives get generous stock options for boosting the company’s stock price.

Professor Jeffrey Pfeffer of the Stanford Graduate School of Business warns that using monetary incentives can backfire, especially if they are offered mainly to influence behavior. “Incentives should be used not to drive behavior but instead to provide recognition and to share the company’s success with its employees,” he writes. “There are, unfortunately, few shortcuts in leadership—and using financial incentives to fix companies isn’t one of them.” The article is based on a chapter in Pfeffer’s latest book, What Were They Thinking?: Unconventional Wisdom about Management, Harvard Business School Press, 2007.

Pfeffer, who is a professor of organizational behavior, writes that increasingly companies and organizations have been using individual incentive pay—including sales commissions—to inspire employees to be more productive or efficient. He cites a report by Hewitt Associates, the compensation and human resources consultancy, which said the percentage of companies participating in its salary survey that offered at least one plan that tied pay to performance jumped from 51 percent in 1991 to 77 percent in 2003.Pfeffer said organizations use incentive pay based on the belief “that if employees were just compensated appropriately, virtually every organizational and management problem could be solved.” However, that view can be misguided, he adds.

Pfeffer cites his own experience in buying a car on the San Francisco Peninsula. When he and his wife told a salesman that they were not planning to make a purchase that afternoon, the representative—who was paid by commission—began ignoring them. Pfeffer and his wife ended up buying a car from another dealership where more attentive salespeople “tried to build a customer-service culture and encourage dealer loyalty.”

Pfeffer also cited the experience of the city of Albuquerque where officials, hoping to slash overtime costs in garbage collection, began paying truck crews for eight hours of work no matter how long it took them to complete their routes. The city hoped the new policy would encourage the workers to finish the job quickly. Instead, some crews cut corners—missing pick-ups; speeding, which caused accidents; or driving to the dump with overloaded trucks, which led to fines.

The controversial practice of awarding stock option grants to top executives has also been problematic, Pfeffer writes. “There is evidence that the higher the option grants to senior executives, the more likely it is that their companies will have to subsequently restate their financial statements.”

Corporations and organizations should not assume that their employees and members are motivated primarily by money, he writes. Financial incentives can play a role, but the key is still to build a supportive culture in an organization. “You want rewards to be large enough to be noticed, and you want to use them to provide an occasion for celebration and recognition, to let the group come together and share successes and enjoy each other’s companionship,” Pfeffer writes. “But you certainly don’t want to make the incentives so large that they begin to drive, and thereby distort, behavior.” However, Pfeffer laments that many corporations and organizations have come to rely too heavily on financial rewards.

“One can change a pay system or a set of financial rewards fairly quickly and easily,” he writes. “It is much harder to change organizational culture, people’s mindsets and beliefs, their knowledge and skills, and how effectively they work and communicate with each other. Thus, financial incentives offer the mirage of a quick fix—and contemporary management seems to be enamored of that idea.”

Energy Return on Energy Invested (EROEI)

If exploring, producing, transporting, refining and again transporting the petroleum was quite difficult, such that it took 125,000 BTUs of energy to get it out of the ground, refined, and to the petrol station, then the energy returned by the gasoline (also 125,000 BTUs) is exactly equal to the energy invested, a ratio of 1:1. If on the other hand someone poked a stick in his front yard and petroleum started squirting out, so you built a little refinery on the spot and sold gasoline out of a drum in the driveway, you might (hypothetically) invest only 1000 BTUs in producing it. You would now have an energy return on the energy invested per gallon of 125:1. People in the energy world have formalized this measure of energy return on energy invested with an acronym, EROEI. So the EROEI of the gasoline made from the oil squirting out of the ground in the front yard is 125:1.

Thus, EROEI turns out to be one of the most important measurements in the history of humanity.

In physics, energy economics and ecological energetics, EROEI (Energy Returned on Energy Invested), ERoEI, or EROI (Energy Return On Investment), is the ratio of the amount of usable energy acquired from a particular energy resource to the amount of energy expended to obtain that energy resource. When the EROEI of a resource is equal to or lower than 1, that energy source becomes an "energy sink", and can no longer be used as a primary source of energy.

The natural or original sources of energy are not usually included in the calculation of energy invested, only the human-applied sources. For example in the case of biofuels, the solar insolation driving photosynthesis is not included. The energy returned includes any usable energy and not wasted heat for example.

This is a simple concept which is rather alien to current policymakers, economists, and even many scientists. Geology and thermodynamics are much more fundamental to the world than economics. Anything which consumes more energy to obtain than it provides is not a practical energy source. In terms of abundance of elements, hydrogen is by far the most common in the universe, but that doesn't mean that hydrogen in Jupiter's atmosphere is an energy resource for humanity. More down to earth, it doesn't matter to human society how much oil is underground, it matters how much can be raised to the surface with a EROEI above one. At the point it takes more than a barrel of oil to raise a barrel of oil to the surface and refine it, EROEI becomes less than one. If oil was the only energy source, then even if the price rises to a billion dollars per barrel, it would not be economical to continue. EROEI is slowly becoming recognized as the ratio which underlies the very possibility of maintaining a civilization or a life form.

High per-capita energy use is considered desirable as it is associated with a high standard of living based on energy-intensive machines. A society will generally exploit the highest available EROEI energy sources first, as these provide the most energy for the least effort and then progressively lower EROEI sources are used as the higher-quality ones are exhausted. For example, when oil was originally discovered, it took on average one barrel of oil to find, extract, and process about 100 barrels of oil. That ratio has declined steadily over the last century to about three barrels gained for one barrel used up in the U.S. (and about ten for one in Saudi Arabia).

Although many qualities of an energy source matter (for example oil is energy-dense and transportable while wind is variable), when the EROEI of the main sources of energy for an economy fall, energy becomes more difficult to obtain and its value rises relative to other resources and goods. Therefore, the EROEI gains importance when comparing energy alternatives. Since expenditure of energy to obtain energy requires productive effort, as the EROEI falls, an increasing proportion of the economy has to be devoted to obtaining the same amount of net energy.

Since the discovery of fire, humans have increasingly used exogenous sources of energy to multiply human muscle-power and improve living standards. Some historians have attributed our improved quality of life since then largely to more easily exploited (i.e. higher EROEI) energy sources, which is related to the concept of energy slaves. Thomas Homer-Dixon demonstrates that a falling EROI in the Later Roman Empire was one of the reasons for the collapse of the empire. In "The Upside of Down" he suggests that EROEI analysis provides a basis for the analysis of the rise and fall of civilisations. Falling EROEI due to depletion of non-renewable resources also poses a difficult challenge for industrial economies.

Measuring the EROEI of a single physical process is unambiguous, but there is no agreed standard on which activities should be included in measuring the EROEI of an economic process. In addition, the form of energy of the input can be completely different from the output. For example, energy in the form of coal could be used in the production of ethanol. This might have an EROEI of less than one, but could still be desirable due to the benefits of liquid fuels.

How deep should the probing in the supply chain of the tools being used to generate energy go? For example, if steel is being used to drill for oil or construct a nuclear power plant, should the energy input of the steel be taken into account, should the energy input into building the factory being used to construct the steel be taken into account and amortized? Should the energy input of the roads which are used to ferry the goods be taken into account? What about the energy used to cook the steel-worker's breakfasts? These are complex questions evading simple answers. A full accounting would require considerations of opportunity costs and comparing total energy expenditures in the presence and absence of this economic activity. EROEI is only one consideration and may not be the most important one in energy policy. Energy independence (reducing international competition for limited natural resources), freedom from pollution (including carbon dioxide and other green house gases), and affordability could be more important, particularly when considering secondary energy sources.

There are two ways to measure the value of any particular fuel. One is its monetary value, which changes almost daily. The second way is to base it on the actual physical energy content of the substance in question. Regular gasoline, for example, contains about 125,000 BTUs of energy per gallon (one BTU is the amount of energy needed to raise one pound of water one degree Fahrenheit). There is no connection between price and energy content. There is also a factor in calculating the energy content of any fuel that is hidden from the eyes, and that is the amount of energy that went into obtaining it. In the case of gasoline that would include prospecting for oil, drilling, pumping, transporting, and refining that oil, and then transporting and storing the resulting fuel.

The EROEI for oil from the 1950s, when it was very easy to find, pump and refine, was as high as 100:1. The tremendous energy return of early oil partly explains why it was possible to rebuild Europe and Japan so quickly after World War II. It also explains why the global population has leapt from about 1.5 billion people when the first oil well was drilled in the United States in 1859, to 6.5 billion today. The high EROEI of petroleum has made it possible to grow enormous amounts of food, transport raw materials and goods all over the world, and create dense urban communities across the globe.

For better and for worse, the EROEI for fuels in the future will not be as high as it has been in the past. The liquid petroleum that we been pumping from the ground now for 150 years (one trillion barrels has been pumped, one trillion barrels remains; we are half-way through the original supply) was a one-time inheritance of concentrated energy; when it is gone it is gone forever. In fact the EROEI for gasoline has already dropped precipitously, from the previously mentioned initial high of 100:1. It fell to 25:1 by 1970, and stands at about 10:1 today. This is because the size of the oil fields is shrinking, the depth at which oil is being found is growing deeper, and the quality of the oil that is being pumped is decreasing. Not only are we at the halfway point in the consumption of the earth’s liquid petroleum reserves, but in addition the second half of the petroleum produced will not return as much energy profit.

The measurement of EROEI is a valuable tool for assessing the potential of other types of fuel to replace our diminishing energy supplies. The table below shows the EROEI value for many of the energy sources and fuels currently used or being considered for the future:

Energy Source-------------EROEI
Bio-diesel---------------------3:1
Coal----------------------------1:1 to 10:1
Ethanol------------------------1.2:1
Natural Gas------------------1:1 to 10:1
Hydropower------------------10:1
Hydrogen----------------------0.5:1
Nuclear------------------------4:1
Oil-------------------------------1:1 to 100:1
Oil Sands----------------------2:1
Solar PV-----------------------1:1 to 10:1
Wind----------------------------3:1 to 20:1

The first thing that must be said about these energy-return ratios is that they are rough estimates. There are many variables involved in producing any energy product. In addition, even the scientific studies done on EROEI for specific energy sources vary widely in their results. But the imprecision notwithstanding, the general ratios are highly informative. For example, the energy return for hydrogen is negative, less than one. Hydrogen is not an energy source; it is an energy sink, a carrier, like a battery. It takes more energy to produce and store free hydrogen than one gets back when it is utilized as a fuel. Also consider bio-diesel and ethanol; their energy profit ratios are very low. In spite of this you will hear everyone touting them as the fuels of the future. It will not be possible to run society as we know it today, which is driven by the very high energy profit ratio of petroleum, on the low EROEI offered by bio-diesel and ethanol. Not that these fuels might not be useful, but they will be useful only to a society that has adapted to living on a lower energy budget.

The fact that the monetary value placed on energy resources bears little or no relationship to the net-energy content of a given resource shows how perverse modern economics has become. Energy writer Hazel Henderson has called modern economics as form of brain disease, because it is completely disconnected from the physical realities of the earth. Wind and solar power have the potential to offer respectable EROEI ratios and should be very helpful in our energy transition.

TQ – IQ – EQ – SQ

Universally the state of economy/society is bringing a high degree of pressure on individuals to handle difficult, adverse conditions and hardships. To the list of desirable qualities, a new measurement has been added: the tribulation quotient, which measures the ability of people to handle the hardships, the difficulties and the adversities of work and life.

A high TQ indicates the ability of a person to handle problems with speed and efficiency, minimizing damage and showing a high aptitude in disaster management. TQ shows how an individual looks at and handles challenging situations and his ability to think his way out of the stickiest corners. Typically, high TQ scores reveal the readiness by people to take charge and handle responsibility. People with such scores will rarely blame others for delays and glitches. Those with low scores will generally find themselves defeated, distressed and disoriented when faced with similar problems in similar circumstances. They give up and are content (though resentful) to let others do what they can not.

Solving logical or strategic problems involves the use of rational intelligence. Psychologists who devised tests to measure rational intelligence termed their measurement as “Intelligence Quotient (IQ)”, their hypothesis being that higher the IQ more is rational intelligence. Initially the IQ included only verbal and mathematical-logical capabilities. However, Gardner’s 1983 book “Frames of Mind” refuted the narrow IQ view and extended the concept to include spatial capacity, physical fluidity, musical capability, inter-personal intelligence, intra-personal intelligence etc. According to Gardner, intelligence has 8 dimensions: Factual, Arithmetic, Analytic, Linguistic, Athletic, Artistic, Intuitive & Emotional.
The operative word in his view of intelligence was multiple. While the utility of IQ in identifying potential performers is not disputed, according to psychologists IQ contributes only about 20% to the factors that determine life’s success, which leaves 80% to other forces. As Gardner observes “One’s ultimate niche in society is determined largely by non-IQ factors, ranging from social class to luck”.

In the mid-1990s, Daniel Goleman popularized the Emotional Quotient (EQ) – a degree of emotional intelligence, awareness of one’s own and other people’s feelings such as empathy, compassion, motivation and the ability to respond to pain or pleasure appropriately. His basic hypothesis was that for an effective use of IQ, EQ is a necessity. He writes: “In a sense we have two brains, two minds – and two different kind of intelligence, rational and emotional. How we do in life is determined by both, not just IQ. Emotional Intelligence is about recognizing what makes people more effective. It is about positive relationship. According to Hay Research, nearly 30% of a company’s bottom line is locked in discretionary efforts (EI stuff).

The millennium contribution in the area of intelligence was from Danah Zohar and Ian Marshall who coined the term “SQ” for “Spiritual Intelligence”. They argue that SQ is the basic foundation for an effective use of EQ and IQ. They also refer to it as the soul’s intelligence. While rational, logical thinking gives one’s IQ, and the associated habit-bound, pattern recognizing emotive thinking gives one the EQ, the creative, insightful, rule-making, rule-breaking thinking with which we reframe and transform our previous thinking gives one the SQ. Just as whole can be greater than the sum of its parts, SQ allows one to add a larger, deeper and richer context to the present. Zohar explains “It is our ultimate intelligence. IQ and EQ, cleverness and empathy, are not enough. Otherwise, why would so many clever, empathetic people feel there is emptiness at the centre of their lives?”

Although being spiritually intelligent is not the same as being religious. “Many actively and vociferously religious people have a very low SQ,” says Zohar. Neurologists have identified a “God Spot” in our brain that triggers our need to search for meaning in life. And, with the decline of conventional religion, Zohar says we are seeking this meaning in our working lives instead - no surprise really, when most of us spend more than 40 hours a week there.

Zohar believes that people with spiritual intelligence have the ability to assess whether one course of action or life path is more meaningful than another, and plan their future and solve problems in a way that adds value to their lives. But if one doesn’t have it already, how does he develop it? If you are suffering from American Beauty syndrome: Stuck in a job you hate, wondering why you drag yourself there for five days a week? It’s unlikely you will find the answer by having an affair with someone half your age or giving up your career to work in a fast food joint as Kevin Spacey did in the film.

Zohar says it all comes down to developing a set of principles that you believe in and that you can apply to all areas of your life. Different personality types will have different principles, she says. If you are artistic, a writer or interior decorator, then your deepest principle might be the joy in creation or achievement. If you are an “investigative” type person, such as an academic or doctor, then your principles will center on finding the solutions to the problems. If you are enterprising, such as a business executive, you will be motivated by loyalty and assuming leadership. And if you are Zohar describes as “conventional”, such as computer operator or accountant, your principles will center on building “kinship within the group”.

The challenge is how to identify, measure and improve our SQ, and thereby effectively use our EQ and IQ? The British work guru Nick Williams’s book The Work We Were Born to Do could be a self-help companion to Zohar’s Spiritual Intelligence: The Ultimate Intelligence. “As a society, we have valued the logic of the head over that of the heart for a couple of hundred years and people feel confused because they have everything that’s supposed to make them happy and they aren’t happy. He and Zohar agree there is a work we were all born to do. But it should have two qualities: we should enjoy it and it should help others.

It’s not about you

A couple of years ago, former General Electric CEO Jack Welch visited the Stanford Graduate School of Business to talk about leadership and his book, Winning. With about 800 people, he had a public conversation about managing. There he made a very simple comment which every leader should believe and practice every day. Leadership is not about you. It’s about the people who work for you.

“The day you become a leader, it becomes about them,” Welch said. “Your job is to walk around with a can of water in one hand and a can of fertilizer in the other hand. Think of your team as seeds and try to build a garden. It’s about building these people,” he insisted. “Only you will know the team.”

The minute you move from being a task-oriented professional to being a manager of people, it stops being about your individual talents, your successes, and starts being all about coaching, motivating, teaching, supporting, removing roadblocks, and finding resources for your employees. Leadership is about celebrating their victories and rewarding them; helping them analyze when things don’t go to plan. Their successes become your successes. Their failures are yours too. Too many people today think leading is exclusively about their own performance. Even some of those who become CEOs, usually highly intelligent people who worked hard to get where they are, turn into self-aggrandizing individuals once they hit the executive suite.

Too many people, perhaps encouraged by the media, have developed an obsession with leaders. In his book on hierarchies, Top Down, Hal Leavitt covers a broad range of issues. Leavitt, who is the Kilpatrick Professor of Organizational Behavior emeritus at the Business School, surmises that part of today’s infatuation with the leadership discussion springs from the fact that we perceive organizations have become flatter, when they are still hierarchies, though changed ones that are “participative” and “groupy.” They have become harder to navigate with chains of command that are less clear. As a result, leadership qualities are more necessary for managers at every level, not just for those at the top of an authority pyramid.

Although it is difficult to find common characteristics among acknowledged leaders (What would Winston Churchill have in common with Mother Teresa?), Leavitt identifies three recurring themes of leadership: Transformation, persuasion, and competence. Leaders are able to transform or change a situation. They can influence others and motivate them to follow. They exude confidence and competence about what they are doing that inspires others.

Of prime importance, is the notion that leadership is about change and a leader must leverage those who work for him or her, empower and support them with regular feedback, rewards, and exchange of ideas. Of course, sometimes leaders have to “weed the garden” in Welch’s pithy vocabulary. The tough job of firing and hiring is part of creating an effective team.

One person, no matter how talented, cannot accomplish much in a managed organization of today’s complexity and global reach. Transforming through others is the job of the leader at any level. Said Welch “The day you become a leader, your job is to take people who are already great and make them unbelievable."

An earlier version of this essay appeared in Stanford Business alumni magazine.

Origin of Petroleum Industry in India by S N Visvanath

The petroleum saga of India began in the rain forests at the head of the Brahmaputra Valley when the British military personnel guarding the frontiers of India in the early years of the 19th century came across oil and gas seepages and recorded their findings. So did the tea planters, the coal explorers and timber merchants who followed.

A scientific edge to these discoveries was given by the officers of Geological Survey of India who recommended the drilling of a few test wells in the Makum-Namdang area (today known as Margherita) of Assam. The results of drilling carried out in 1867-69 were positive, but the reserves quantities did not generate much excitement, but opened up possibilities.

To get these jungle clad resources of tea, coal, timber and oil to the centers of commerce and industry, a railroad was necessary to Dibrugarh on the banks of the Brahmaputra. Accordingly, the Assam Railways and Trading Co Ltd (AR&T) was incorporated in 1881 in London to build the railroad from Dibrugarh to Margherita. While laying the tracks in 1888-89, the workmen saw prolific oil seepages; they also suffered from the heavy odour of oil at Borhbil. The enterprising AR&T decided to include oil-drilling in its portfolio. Accordingly, Digboi Well No.1 was drilled in 1889 and completed as a producing well in 1890 at a depth of 662 ft. This event marked the dawn of the modern petroleum era in India.

The discoveries that followed were more from intuition than geological reasoning and hence carried the seeds of self-destruction. As oil was found, no questions were asked. A subsidiary, the Assam Oil Co (AOC) was formed to look after the oil interests of AR&T, but it was too late to reverse the tide. By 1912, the euphoria evaporated. Indifference to geological concepts, random drilling, lack of cost-consciousness, and dwindling production brought the company to the brink of liquidation.

In 1911-12, Burmah Oil Co Ltd (BOC) having made a successful debut in Burma (Myanmar) crossed over the Arakan-Yomas for oil prospecting in the Surma Valley. It established an oil field at Badapur in Assam where it drilled 63 wells and produced 321,000 tonnes of oil before abandoning it due to excessive water production. Elsewhere in the valley, 6 wells in Masimpur and 100 geological information borings gave dismal results, except for gas prospects in Tripura. In 1921, BOC moved in and took over the technical and financial management of AOC properties. Thus, 1921 witnessed the rebirth of the Digboi field.

After the takeover, BOC embarked on a systematic mapping and review of the field. Production from the 24 sands in the area increased from 350 barrels per day to 4500 bpd. Electrical well logging pioneered in France in 1938 was used in Digboi Well no.289 in 1933. In exploration surveys also such technology was swift. Alongside field development, BOC continued to use the worn-out refinery built by AR&T in 1899. This caught fire and a new refinery was commissioned in 1923. A wax extraction plant was erected in 1928 to handle the three types of crude oil produced: low wax (0-3%), medium wax (5%) and high wax (19% +). An Edeleaneau plant was built in 1933 for kerosene and bitumen plant in 1938 for roads. Through these various developments, Digboi refinery came to be regarded as a nursery for the growth of petroleum refining technology and skills to manage such growth.

During the 2nd World War years, and particularly after Japan entered the fray, Digboi became the easternmost operational refinery. The field production of 5,500 bpd of oil during this period, often peaking at 7,000 bpd, was much above the peace-time level defined by experience and scientific studies. Irreversible and swift production decline was the natural consequence of this profligacy. In 1946, the refinery could achieve only 5% of the target in kerosene and 11% in petrol. Around the time of independence there were about 760 wells in the field and two wells were under drilling in the Makum lease. Six to seven rigs were in operation. Production was of the order of 5,000 bpd.

Here, it’s important to mention that two significant events would have altered the petroleum scenario had they not been interrupted by the war. The first was the 1937 session of the Indian National Congress (INC) which broadly stated the economic philosophy to be followed in free India. This was firmed up at the 60th session of the INC in 1948 whereby the commanding heights of economy, including oil, would under the public sector. The second was the discovery of the giant Nahorkatiya field on the banks of the Dihing River, southwest of Digboi. Coming as it after 216 unproductive wells were drilled by AOC/BOC (excluding those drilled in the Digboi and Badapur Mining Lease areas), this was an outstanding example of tenacity.

The discovery prompted a paradigm shift in our perceptions of oil occurrence and opened up a vista of regional possibilities. Shortly after the Nahorkatiya discovery, K. D. Malaviya, the then Union Minister for Natural Resources and Scientific Research, visited Nahorkatiya. What he saw convinced him that Indians and India could manage the oil business. To this conviction we owe the beginnings of the national oil industry.

Choosing Russia as the role model for oil exploration and development and in discussion with Russian experts, the seeds were shown in 1954-55 for what ultimately blossomed into one of the world’s largest and fully integrated oil company, the Oil and Natural Gas Commission Ltd (ONGC). As they say, the rest is history.