A decade or more ago as the notion of global warming was getting traction in the scientific community, I was among the skeptics who pointed out that the Earth’s history was peppered with instances of global warming, as well as even more frequent instances of ice ages.  In fact, in one instance the Earth was frozen from pole to pole.

In the intervening years a lot of data has been gathered that circumstantially supports the global warming hypothesis.  For instance, it is irrefutable that man-made CO₂ emissions, chiefly from burning hydrocarbons, are accumulating at an alarming rate in the atmosphere.  when compared to data collected as recently as the turn of the Twentieth Century.  A slight rise in the average global temperature has also been demonstrated convincingly.  No one disagrees that CO₂, per se, acts to hold in infrared radiation from the Sun and trap it in the atmosphere – creating what everyone refers to as the “Greenhouse Effect”.  This is where opinions diverge.  Some believe that CO₂ emissions will accumulate to the point where the Earth’s average temperature could rise as much five degrees Celsius, or even more, thereby causing the melting the north polar ice cap and Greenland  and maybe even Antarctica, drastically altering weather patterns and causing the extinction of many animal species, to name a few consequences. 

Not so, say others.  We are in the midst of one of Earth’s periodic warming periods that result from Earth’s elliptical orbit around the Sun and the tilting of the Earth’s axis, resulting in major climate shifts at 100,000 and 400,000 year intervals.  In fact, some say we may be overdue for the onset of the next ice age.  Confoundingly, parts of North America and Europe, indeed, are experiencing a spell of especially severe winters.

This is where matters stood until 2007 when a team of climate researchers from the US, UK, Norway and Netherlands stumbled upon kilometers of drilling cores kept for years in a warehouse in boxes in Longyearbyen  in far northern Norway– apparently saved by the oil company that took these samples in hopes they might be useful someday.  The team was delighted to discover that the cores yielded continuous samples of ocean sediment prior to, during and following the last great global warming event known as the Paleocene-Eocene Thermal Maximum (PETM) which began 56 million years ago and persisted for millennia.  Analyses of these layers yielded good estimates of ocean bottom temperatures as well as atmospheric CO₂ and methane concentrations (methane is a significantly more potent greenhouse gas).  These data were then inserted into a computer model of the Earth’s climate using different sets of assumptions for unmeasureable variables.  Each iteration of the model took a month of computer time.

Here’s what they found.  PETM occurred at the time the great Earth landmass called Pangaea was splitting apart to form most of the continents as we know them today.  The splitting apart was marked by extensive volcanism that caused the release of vast amounts of CO₂ and methane to the atmosphere via the cooking of limestone, coal and oil.  However, the model indicated that volcanism alone could not explain PETM.  Several positive feedback loops were set in motion that could account for the warming.  First, the ocean began to warm and eventually melt the huge amount of frozen methane hydrate known to exist on sea floors around the planet even today.  This resulted in a steady release of more methane to the atmosphere.  Second, as areas of permafrost in arctic areas thawed, the frozen organic matter trapped the permafrost rotted and yielded still more CO₂ and methane to the atmosphere.  All of this played out over a period of about 20 thousand years and resulted in about a 5 degree C rise in global temperature.

The good news is that 20 thousand years was sufficient time from the majority of Earth’s species to migrate and adapt.  In fact, many new types of animals appeared, notably primates (that’s you and I).

The same computer model tells an ominously different story when current data is plugged in.  The same positive feedback loops will operate just like during PETM but over a very short time, geologically speaking.  The results leave little doubt that the present global warming trend is indeed caused by man and the consequences will be more dire that those of PETM.  In fact, the data suggest global warming of between 2 and 10 degrees C occurring in decades or a few hundred years.  All of the calamitous consequences of rising sea level, warming of the poles and so on, will create a vast, dry and uninhabitable belt around the equator, submergence of costal areas and many islands and acidification of the oceans over a period of time so short that many species will be simply exterminated.  In the northern hemisphere, Canada and Siberia will be choice real estate, leaving the northern tier of the US in the zone of wildly oscillating weather.  Not nearly enough room for more than ten billion people will be habitable.

The computer models don’t establish our future.  They only predict a possible future – one in which humanity has failed to stop the runaway release of greenhouse gases.  For more reading, see Scientific American, July, 2011.

For those of you who have read this far, the title is linked to my previous blog because of the relationship of the topics.  “Quo imus? – iterum”  “Where are we going? — again”

Sometimes it’s useful to take a step backward to gain a fresh perspective.  In my case, I’ve thought a lot about alternative energy.   This is partly because the topic automatically involves of a lot of interesting technologies.  Regrettably, the topic also has a way of becoming politicized because the favored alternative energy policy tends to depend upon which political party controls congress and/or the White House.  However, were it not so, would such policy making would be based solely upon science and economics?  Not likely.  Scientists and economists also have political agendas.  The point of this blog is that the consequences of our collective lack of will to confront invetables shortages of affordable energy worldwide can have dire, and possibly permanent, consequences for our species.

History teaches that despite our best intentions, a subject of such profound impact on all of us as alternative energy policy won’t be effectively addressed until the impending crisis is upon us and the literal survival of civilization as we know it becomes the overriding priority.  By then, of course, the momentum of the catastrophe is so great that vast effort must be expended and much suffering must be endured before the momentum is reversed and the crisis is abated — assuming that option is still available.

How does history teach this lesson even though we are confronted with a genuine twenty first century dilemma of that magnitude?  It’s because the Second Law of Thermodynamics rules the universe, including ourselves.  The Second Law states that entropy always wins.  It always has and always will, unless something intervenes.

Time to explain.  Entropy is a measure of disorder of a system.  Nature prefers more disorder (higher entropy) in a system since it takes less energy to maintain that state than to keep the system stable (lower entropy, more organized).  For example, nature prefers to make mountains become a pile of gravel rather than make mountains from gravel.  Same goes for breaking billiard balls.  After one cues the cue ball to break the nice, orderly, triangular array of balls on the table to create a mob scene of balls all over the table, entropy has increased.  Physics will tell you that the process can be exactly reversed, with the balls spontaneously moving back to their orderly array, but not without adding energy from somewhere and waiting longer than the lifetime of our solar system for it to happen.

Take a deep breath here because I am going to take a totally unreasonable jump in logic:

The same rule can be applied to civilizations.  It takes enormous and continuous effort (energy) to establish and maintain a civilization.  Take the Roman Empire.  Most of us are familiar with Rome’s historical arc of dominance of Western Europe and most of the Mediterranean and its subsequent precipitous decline and fall in 476 AD.  The virtual total disintegration of Western European civilization followed in remarkably short order.  Without Roman law, military presence, trade, physical infrastructure, etc., Western Civilization was replaced by the original age-old system of chaos and human misery.  In short, entropy triumphed again.  This history lesson can be wrapped up succinctly: Civilization is organized resistance to entropy. Without the Romans, civilization simply obeyed the Second Law by vastly increasing its entropy (it disintegrated).  Nearly a millennium passed before sufficient and sustained effort across Europe had reduced the entropy and thereby reestablished a semblance of order (reduced entropy).

Yet the historical Western Civilization model is a flawed model in the twenty first century.  Don’t forget that all the time Europe endured the Dark Ages and the Middle Ages, civilizations in China, India and several Arab countries continued to flourish.  It’s a good thing, too.  The Arabs, in particular, managed to hang onto some of the more critical historical, scientific and literary aspects of Western Civilization while waiting for someone in Europe to ask for it back.  I’m glad they were patient.

Fast forward to today and we discover that even our concept of civilization has to embrace the world, not just a continent.  The bricks and mortar of this new concept of “civilization” is based on the interconnectivity of economies, sources of raw materials and energy, communications, travel and transport, technology and so on.  We are now in an era where a lot of effort must be expended world-wide to keep the edifice from falling down.  Remember, all of this order is an unnatural state.

Finally an answer to the rhetorical question in the third paragraph.  History teaches that once the edifice of twenty first century Civilization begins to crumble, it will go quickly.  The tensions that will then develop between the haves and have-nots will make the world a dangerous place to be – certainly as bad as the Dark Ages, but this time it will be world wide.

The most likely candidate for triggering this catastrophe won’t be food, economics or military misadventure.  It will likely be energy shortages.  If our pool of energy sources is outstripped by population or economic growth, competition for this finite resource will be the trigger point.  Even countries who have essentially achieved energy independence by having transitioned to alternate, renewable energy sources will not be immune to the consequences.  They are just too dependent upon the rest of us for most everything else.  It will be up to all the people of Spaceship Earth to pull together and find a comprehensive energy solution for all of us before a collapse becomes inevitable.  We won’t be saved just by being efficient and frugal.

Sorry about the title.  It’s a lame attempt at humor.  Had history worked out differently, most of us in Europe and the Americas would be speaking Latin.  The title means “Where are we going?”

Lately I’ve been writing about the economics of electric vehicles (EVs) and the battery technologies (mostly lithium-ion) being used to drive them.  Or, rather, I’ve been writing about the impossible gap between the cost of such “solutions” when compared to the cost of the conventional means of getting around, mainly with the internal combustion (IC) engine.  Only consumers with discretionary incomes that allow them the luxury of buying EVs can earn bragging rights for their stance on fossil fuels and greenhouse gases.  Well, from where I sit, I say:  “Bravo!  Glad you are doing your part because I don’t see an EV in my future.  I hope you will excuse me because I’m late for work.  I need this job because I am upside-down on my mortgage and I think our seven year old car needs a new transmission.”

What the heck is wrong with this country and its scientists?  We’re the country that succeeded, for better or worse, with the Manhattan Project and with the Apollo Program.  Both of these examples have returned to society and consumers their investments many times over.   Surely we are capable of creating solutions that break the stranglehold of imported fuel and avert the looming disaster of global warming.

A thoughtful and well-read man by the name of Dr. Peter Grossman, a Professor of Economics at Butler University, has written on the subject of why most government funding and sponsorship of many different types of alternative energy technology development has not yielded results that can be seen as successful or even confidently viewed as capable of leading to energy independence.  He makes his points succinctly and much better than I, in a white paper he gave in 2008.  See the link to his paper at: 

http://www.altenergystocks.com/archives/2011/02/alternative_energy_technologies_and_the_origin_of_specious.html

The gist of his paper is the observation that successive US administrations from Nixon to Obama have championed numerous alternative energy schemes by providing grants, loans and rebates in the hope that these stimuli can make the difference between high cost demonstration projects and widespread adoption of new technologies by consumers and industry.  Currently the Obama Administration is actively promoting vehicle electrification by using the Presidency as the “Bully Pulpit” and by helping pick the winners with generous grants and low cost, Government-guaranteed loans.

Dr. Grossman points out three fallacies in the Federal Government’s approach to encouraging technological innovation over the last sixty years:

• An inability to distinguish between the technologically possible and the economically desirable;
• A belief that intervention can force innovation and overcome technical challenges on time and within budget; and
• A failure to recognize that generous subsidies invariably lead to increased demand for more generous subsidies.

The fallacies of the first two bullets are partly based on the results of the Manhattan and Apollo Programs where neither program had any constraints imposed by economics.  In addition, the current desire for energy independence in no way matches the urgency of live-or-die imperative to succeed with the Manhattan Project or the emotionally stirring call by JFK to demonstrate the supremacy of the United States by landing men on the moon by the end of the decade.  Both programs met with success but were funded and executed at the Federal level where national policy trumps economics. Not so with the multitude of projects funded by the Government to promote energy independence and clean, renewable energy at the consumer level.

Back to battery technology, current Federal programs are inadvertently aimed at promoting solutions in search of a problem.  The solutions offered?  High cost, bulky, heavy, mobile power sources with finite lifetimes.  The problem being solved?  Beats me.  Certainly not energy storage for EVs.  I’ll entertain alternate suggestions.

Lest I get too cocky about my opinions, I’m reminded of an old saying:  “It takes a craftsman to build a barn.  Any old jackass can kick it down”.   Meaning, it’s easy to point out the flaws in the US energy policy.  It’s quite another thing to propose a better solution.  In my opinion, a temporary alternative may lie with the relatively recent discovery of the Marcellus gas shale underlying most of Pennsylvania and part of New York, combined with the still nascent technology of hydraulic fracturing.  This convergence of an unusable resource with a new recovery technology promises to eventually yield vast amounts of previously economically unrecoverable natural gas in the US.  What’s better, similar deposits can be found in Britain, Eastern Europe, China, India and Australia. This sudden, world-wide windfall of natural resources certainly suggests investing more in an interim energy policy focused on compressed natural gas (CNG).  This energy source may form the bridge between petroleum and whatever clean, economic and renewable energy source that may arise in the future.

I am all for altruism – as long as I can afford it and I am not overly inconvenienced.  I guess that places me in a category with most middle class Americans.   What the heck am I talking about?  In the present case I am talking about the rationale for supporting the US Administration’s push to encourage adoption of electric vehicles (EVs) as our primary mode of personal transportation.  In the abstract, the notion is that EVs will contribute to the reduction of our country’s dependence upon oil imports and, at the same time, reduce greenhouse emissions for the entire planet.  For the record, I strongly support both objectives.  However, the current cost of EV batteries is so high that it makes no economic sense for most consumers to consider buying an EV compared to conventional vehicles.  Thus, if one does buy an EV, it is pure altruism.

It is no longer news, or even a revelation, that all known EV battery technologies offer limited driving ranges (100 miles or less) even in severely down-sized cars and are prohibitively expensive for the majority of the car-buying population, even with government subsidies.   Never mind, some say.  Most people drive their cars less than 100 miles a day, primarily for driving to and from work, and with rising gasoline prices, the extra vehicle costs are eventually offset by lower operating costs – especially after a sizeable subsidy from the taxpayers.  (Ahem!  That’s you.)  Furthermore, our electric generating plants that recharge the batteries use mostly domestically-produced coal or natural gas and technologies exists to scrub their emissions and sequester their greenhouse gas emissions.  Finally, if we convert to mostly nuclear electric plants like the French, most of these inherent pollution problems go away entirely.

Actually, most of the preceding paragraph is substantially true.  (We’ll leave nuclear waste disposal for another blog.) What’s the problem? 

To begin with, a large portion of the American public lives from paycheck to paycheck.  This means that we live and die by our monthly cash flow.  I don’t give a fig about recovering my investment in an EV in four or five years based on energy cost savings.  All I care about is:  what’s my monthly payment?  Also, I have a hard time supporting two cars, unless one of them is an old beater.  I can’t afford an expensive car for just commuting and still have a decent second car for my entire family for use for those not-so-infrequent round trips of longer than 100 miles.  Finally, explain to me again how I am helping the planet’s greenhouse gases while half the world’s population in China and India are still putting around in their petrol-powered econo-boxes.  And will be doing so for as long as anyone can see because their batteries cost too much too.

It seems to me that the US market for EVs will saturate at just a minor fraction of total vehicles sold.  Mostly those of greater means who can afford altruism will be the customers.  Recent census figures show that that sector as remaining relatively fixed in size in the US  but richer than ten years ago.

The outlook in the EU is not too much different.  Granted, as an economic group, they are more accustomed to small but still expensive cars and high fuel prices.  Furthermore, they have vastly better access to alternative mass transit compared to those of us in the US.  So much for the good.  But don’t rely upon higher standards of living  to make up the difference in adoption of EVs in the EU.  Recent case in point:  The violent reaction to increasing the minimum retirement age in France from 60 to 62.  A generation ago, France adopted a 35 hour work week and an early retirement age of 60 to encourage higher employment.  Didn’t happen.  French employers absorbed the loss in productivity and failed to add to their workforce.  The bottom line is that citizens in the EU are no more keen to sacrifice their personal economic well being than we Americans. 

The only plausible solution to the conundrum of the incompatibility of good public policy with the bad economics of EVs is to get creative with how consumers can acquire their batteries at a fraction of their present cost (US$15 – $20 thousand per vehicle).  A little known oddity of lithium-ion batteries is that their useful life in a vehicle is short.  Such a battery pack will still have about 80% of its useful life remaining when it is no longer considered useable in a car.  This means that the battery pack will have a high residual value if it can be repurposed to be used in standby power applications (called “peakers”) for electric utilities or as a storage unit for excess energy created by wind or solar generating installations.  If a consumer is able to lease the battery pack (which is after all, just amortizing the depreciation of frst 20% of the life of the battery pack) the lease payments could be rolled into the monthly finance payment the consumer makes for the purchase of the car — commonly a 48 to 60 month loan in the US.  With continued incremental improved costs of batteries, such a financing plan may be affordable for a much larger segment of the population.  However, for this to happen, a secondary market for battery packs needs to be established.  There’s is a lot of money for someone to make, but the business will start slowly.

The point of this blog is that without creative financing, EVs will remain remain only marginally more feasible for US taxpayers than they were over a century ago – when they were quickly trumped for passenger vehicle use by the combination of the high energy density and affordability of gasoline with the internal combustion engine.  Plus ça change, plus c’est la même chose.

In my February 1, 2011 blog I made a case for not bothering to spend your money and time on ad hoc patenting and to ensure what patenting you do is was part of a well-conceived  and well-articulated strategy in support of your company’s business objectives. 

Ad Hoc Patenting

What’s the difference between ad hoc and strategic patenting?  Where to begin?  Ad hoc patenting means assessing each patent on its individual merits, usually in the context of a periodic company or product line patent review board where patent proposals are reviewed.  Commonly, there can be five possible outcomes of these reviews:  (1) outright rejection, (2) come back later with better information, (3) classify the idea as a trade secret, (4) write a defensive publication or (5) approve the idea and release funds to have the patent application written up by a patent attorney or patent agent.

Regardless of the outcome of the review, the critical issue is the means by which such decisions are made.  Since the patent review board will likely be heavy with technical members, decisions tend to be heavily weighted in favor of the “nifty factor” – meaning, “how nifty is the idea”?  Other considerations include educated guesses on the patentability of the idea and subliminally, whether the review board is wanting to reward good creative thinking by a valued employee. 

As I’ll attempt to show later, this bottom-up decision process results in inefficient use of scarce budget dollars, may be conducted according to varying criteria if there are multiple patent review boards and, worst of all, fails to link the decision to the support of the business objectives of the company.

Strategic Patenting 

Strategic patenting is a top-down process that begins with the senior managers of the company making explicit decisions about which products or technologies in which the company should spend its finite resources.  In most cases, the number of areas of emphasis should be no more than three to five.  I leave it to others to debate whether this is just defining core competencies using different words. 

The next part of the process may cause some angst in the company at large because management must inform the organization at large and key middle managers in greater detail, that the era of ad hoc patenting has come to an end.  This is a sharp ninety degree turn and organizational inertia will resist the sudden change in direction. Unanimity of purpose, patience and providing clear decision guidelines will be required by senior management to ultimately succeed in making the necessary course corrections without having too many people fall overboard.

The consequences of strategic patenting is that all patent review boards will first use the litmus test of whether or not the idea can be shown to directly support the company’s stated business objectives.  If it can’t be shown to do so,  then the options include: (1) abandon the idea, (2) write a defensive publication or (3) classify it as a trade secret.  Yes, this means that some nifty ideas will never see the light of day – a tragedy of epic proportions, especially to the inventor.  One caveat.  Let’s not throw our brains away. We should make sure that the revised patent review process still allows for significant innovations that don’t make the first cut to get a hearing.

The other bugaboo of ad hoc patenting is that the patent applications that are written up are typically narrow in scope.  The claims are basically confined to the steps/processes/ components/materials  the inventor found to work.  Instead, attempts should be made to include as many of the rejected alternative approaches in the claims so that the patent can’t be easily flanked by competitors using alternate means. The patent application is necessarily more extensive (and expensive) but this approach may erect significant barriers to entry.  A provisional “jumbo” patent application based on this concept will buy time (one year) while multiple patent applications which claim priority to the single provisional application can be filed.  This approach erects the classical patent “picket fence” consisting of a cluster of related patents.  As long as the company’s institutional memory (which is sometimes lamentably short) remembers the reason for setting up the picket fence in the first place, the company will choose to continue to invest in the maintenance of those patents and will be vigilant that other companies have not breached its perimeter.*

The bottom line is that by adopting strategic patenting a company does not have to spend more money on making patent applications and maintaining its portfolio in order to get a superior sustainable competitive advantage.

* A tip of the hat to Scott McBain for helping me clarify the jumbo patent application/picket fence concept.

In my first blog on the subject of patents over a year ago, I stated that the concept of a patent was so fundamental that it is specifically mentioned in the U.S. Constitution (Article I, section 8).  Naturally, when the Constitution was adopted in 1789, the world was vastly different.  The new United States had little indigenous industry, especially heavy industry, because its erstwhile colonial master, England, had forbidden industrial development in the colonies in favor of supporting British industrial exports to them.

From the perspective of the framers of the Constitution, encouragement of industrial development in the US was of utmost importance, since the economic independence of the US was a pillar of the political and military survival strategy of the new country.  Therefore, allowing inventors to have a temporary monopoly on exploitation of their inventions by granting them a patent was a logical and desirable policy. 

However, from the outset, a patent’s protection was a matter of geography and politics.  The patent served the inventor’s rights within the US, but there was nothing to prevent England, the US’s primary trading partner at the time, from ignoring these patents and commercializing these inventions – even to the point of exporting infringing goods to their former colony.  Because the patent granted the holder a monopoly to sell products based on its patent, but only within the US, US Customs had authority to impound infringing goods at the port of entry.  Unfortunately,  the US’s ports of entry were rather porous and US consumers had strong demand for imported goods since similar domestic goods were scarce to non-existent until well into the nineteenth century.  Strike One against the patent.

The “world” in the view of the US in the late eighteenth century, was the US, England and Western Europe.  Japan and China were closed off societies and essentially didn’t exist from an economic perspective.   Little of the industrial revolution and the vast technological leap forward it spawned seemed of little relevance to rest of the world from the insular perspective of the US.  And so it remained until the mid-Twentieth Century.  After a sustained post-war period of economic and scientific growth, Japan joined the exclusive club of economic superpowers.  Recently, and seemingly out of nowhere, China has achieved the rank of the world’s second largest economy after the US, having left Germany and Japan in their dust without even a fare-thee-well.  This is not our forefather’s world.

Let’s pause to catch our breath.  The upshot of all this change is that having patented something in the US no longer has the cachet it once had.  There is now a nearly limitless number of competitors outside the US who don’t give a fig about your patent.  I suppose one could go to the trouble and expense of filing patents in China, Japan and the European Union – as if that gave some reassurance.  The truth is, that filing for a patent in Japan is a decade-long process.  China?  Don’t bother.  The truth is that protecting our borders from infringing and/or counterfeit goods is like trying to bail the ocean.  One industry that comes to mind who consistently tries to enforce the patent rules is the pharmaceutical industry.  In their case, “enforcement” means mega-million dollar lawsuits that play out over years in the courts, not stepped up customs inspections.  For the most part, defense of a patent is prohibitively costly to individuals and many companies.  What monopoly?  Strike two against patents.

Well, fans, the count is 0 and 2 against patents.  Why spend the money on filing for a patent then?  As I stated earlier, under today’s circumstances, only select companies even spend a sou to protect their patents.  My former employers certainly did not.  Worse yet, why send good money after bad and spend money to maintain each patent over its lifetime (twenty years after the filing date)?  The answers are a bit surprising and nothing like the framers of the Constitution imagined.  Much current patenting is motivated by one of the following:

 1.      Technology companies, especially start-ups, try to gloss up their bona fides for the benefit of investors by filing patent applications.  Only occasionally do such companies draw a distinction among “applied for”, “published”, “allowed” and “issued”.  They are all typically touted as “patents”.  Dare I say “lipstick on a pig”?

2.       Large companies in various industries compete to acquire the largest number of patents or the most patents applications filed in a year for purpose of bragging rights.  An extreme example is China.  As a country, in 2011 they will  overtake the US (currently number one) in patent applications.   Who cares?   This is merely a manifestation of a national policy, not evidence of the blossoming of genuine innovation.   Overall, this policy results in substantial recurring costs for the patenter to maintain its large patent portfolio, which unfortunately, will include many worthless patents.

3.   Companies in many industries maintain a thicket of patents as trading stock to defend against infringement suits.  Instead of directly defending against infringement claims, such companies shake their sabers and assert that the other party is nearly certain to be infringing one of their patents.  The end result is commonly a cross-licensing agreement in which both companies promise to look the other way when it comes to infringement issues.

4.   Companies who are disinclined to reward their innovators with cash, knowingly subvert the patenting concept and agree to file patent applications on behalf of these inventors, regardless whether the patents have value to the company.   In short, patent awards become something like merit badges.  They are part of the company’s recognition and rewards program.

Do the examples above count as strike three?  No, not really.  Patents, if part of a well conceived intellectual property strategy, can become powerful tools to maintain a competitive advantage.  Foreknowledge of powerful patent portfolios often have a salutary effect on competitors  — either causing them to change plans or to request a license before proceeding.  The whole point of this blog is not to argue against patenting;  rather to urge companies to patent selectively and for reasons that directly support the business’s objectives, rather than fall into the trap of one of the four examples above. 

Sadly, a well-designed and well-implemented patent strategy is a rarity.  Partly this is the result of a lack of understanding of the concept.  More on this topic in subsequent blogs.

Well, readers, we’ve done it!  We’ve completed the alliance agreement and it’s signed off by both parties.  Time to celebrate! 

Well, yes and no.  Completion of an alliance agreement, especially with an all-new alliance partner, is worthy of celebration.  I am forever charmed by the style with which Japanese companies exhibit themselves at such celebrations.  Of course, sakeʹ is involved, but that’s not my point.  Instead I’m talking about Daruma dolls.

Commonly, at what we Americans would call a “kick-off meeting”, your prospective Japanese business partner will host a dinner at a nice restaurant, during which the sakeʹ and beer (Kirin, Asahi or Sapporo, depending upon your host’s keiretsu affiliation) will flow and toasts will be given.  At some point in the dinner the senior host will produce a Daruma doll – a hollow, red, paper mâché, spherical figure said to represent an ancient Zen Buddhist monk named Bodhidharma. Representing good luck, the Daruma is presented “with both eyes closed”, namely the eyes are blank, white orbs.  The Daruma may be as large as a basketball.  Household Darumas are more sized like a grapefruit.  My own Daruma is about the same size. 

In order to commemorate and to bring good luck to the anticipated alliance, the host will take a pen and fill in a small part of the Daruma’s right eye and pass the doll to the senior member of the other party, who will do the same.  After that, everyone at the table will complete filling in the eye (actually the pupil).  The “one-eye-open” Daruma is to be a daily reminder to everyone of the task at hand.  Upon successful completion of the alliance agreement, another celebratory dinner is held in which the second eye is similarly filled in.  “Both eyes open” in Japanese means “realization of a goal”.  Now, is that classy, or what?

Back to “yes and no”.  One may consider too much celebration to be premature because a finalized agreement is merely a means to an end.  No actual progress toward the objectives of the alliance has been made.  How do we get started?

It is a given that the alliance agreement sets forth the objectives, but these objectives may be slightly nebulous.  Consequently, most agreements establish a Management Committee and a Working Committee, which reports to the Management Committee. 

The agreement typically specifies quarterly meetings for the Management Committee (at alternating sites) and the working committee at least monthly.  As a practical matter, the Working Committee sweats the details and brings specific proposals for proceeding to the Management Committee for approval.  Later on, the Working Committee implements the plans and the Managing committee oversees progress and issues directions.

Sounds pretty organized doesn’t it?  At the outset it is.  The Management Committee will hold their quarterly meetings through at least the first two cycles, having met at each other’s facilities once.  Similarly, the Working Committee will have met regularly, sometimes in person, sometimes by phone.  Quite a bit of preliminary planning and some work will have been accomplished.  However, when the third Management Committee meeting is scheduled, difficulties will arise at settling on a date because of schedule conflicts of the senior members.  This will be a particular problem if the meeting is to be held outside the US — at least for the US members.  The problem will only worsen as time passes because the glow of anticipation will have long cooled for the senior management and the priority of the quarterly meetings will take the back seat to the problem or program du jour.  To be honest, the foregoing speaks more for senior executives of US companies than it does for Japanese companies.  I’d say that Europeans are more like Americans than Japanese when setting their priorities for these crucial relationship-maintaining meetings.  The consequences are that maintenance of the alliance falls on the shoulders of the Working Committee, who are already doing all the work anyway.

The best way to deal with these problems is to start the alliance to work on an objective where early and nearly certain success is assured.  With a success under its belt, the alliance will have begun to form the basis for mutual trust and respect.  Once that storehouse of goodwill begins to fill, alliances can work well with only occasional direct involvement by senior management.  When that point is reached, that is the time to really celebrate.

If you’ve heard of Vinod Khosla you are better read than I – at least you were until recently.  Among his lesser accomplishments has been to become wealthy as a partner at the venture capital fund of Kleiner Perkins Caulfield & Byers.  Of more consequence is his co-founding of Sun Microsystems and becoming even more wealthy.  However, his most important accomplishment is to have seen enough, done enough and be intelligent enough to think of really BIG Truths and to invest his money to make these ideas a reality.  Big Truths give the flywheel of civilization a kick every once in a while so that we maintain the societal momentum acquired over the last ten thousand or so years.  Of course, “society” must encompass all the peoples of the world since we are all passengers on Spaceship Earth.  A current Big Truth is the imminent train wreck of civilization due to climate change and dependence on fossil fuels.

Khosla has a saying that meshes neatly with the theme of my December 1, 2010 blog:  “If it doesn’t scale, it doesn’t matter”.  His point is not as cryptic as it sounds because it states a truth that most educated people understand at once.  Just bear with me a bit. 

He is not talking about the scientific discoveries that help explain why the Universe (that includes you and I) is the way it is.  We need this knowledge and it doesn’t matter that acquiring that some of this knowledge consumes insane amounts of wealth and human talent.  For example, the newly launched Large Hadron Collider (LHC) on the Swiss-French border cost billions of Euros and employs thousands.  No one has a clue to what the LHC’s discoveries will lead.  However, there is a deep, abiding faith that these discoveries will ultimately be of profound importance.  Sir Isaac Newton once said: “If I have seen further it is by standing on the shoulders of giants.”

Back to Khosla.  His point is that for a technology or discovery to be of significance from the perspective of a global citizen, it must be able to leave the laboratory and be capable of being made in such quantities that it is available, affordable and fulfills a useful societal function – without the need for government subsidies.   For the sake of argument, let’s use China and India as proxies for global citizens.  So, if a technology is scalable enough to be personally important to an average citizen of China or India, by definition it truly matters.

OK, what are some examples?  How about the cell phone?  Whole swaths of the planet are now connected wirelessly,  having entirely skipped in a single generation the stage where telephones were connected by wires.  Access to the Internet is not far behind.  How about GPS?  The system began as a secret US military navigation tool enabled by a tremendously expensive constellation of low earth orbit satellites.  Now the GPS function is so ubiquitous that adding that capability to a cell phone or myriad other portable devices is almost incidental.  Most of us have forgotten that the US victory in first Gulf War was substantially the result of the US having the ability to fire and maneuver in featureless terrain, while the Iraqis could not.  This means that GPS has scaled up in only twenty years.  This is light speed compared to incandescent light bulbs, electric grids and paved roads.

The tie-in to the theme of my blog on automotive EV/HEV batteries is that current battery technology is not scalable – at least not in the way I defined it earlier.  A lithium ion battery pack for the Nissan all-electric Leaf is about US$20,000.  And this is for a US$26,000 car (after incentives) with less than a one hundred mile range.  While you’re at it, Google “range anxiety”.    Substitute “fuel cell” in the preceeding and the argument still applies.  So let’s expand the circle.  Wind turbine farms and solar farms are at least within sight of economic plausibility if these farms are in the right places geographically and the wind/sun is present.  However,  these green energy sources have the unfortunate tendency to be out of sync with the pattern of consumer’s consumption of electricity.  The roadblock?  Lack of economical storage capacity of excess energy for use when the wind isn’t blowing or it’s night.  This problem surely won’t be solved by today’s generation of batteries.  Nope, they’re not scalable.  Yet.

I have personal knowledge of a Li-ion battery start up company. They have good technology and judging by their booked orders, they are doing well.  However, on the eve of their having to make the transition from making a limited number of cells using great care in a lab or prototype facility, they are beginning to realize that high volume production means virtually flawless high speed functioning of every process step, with no time to test for quality, much less rework defective cells.  Every cell, every electrical connection and every bus weld in a multi-cell battery pack must be flawless.  Otherwise the battery pack fails.  Although it is unfair to discount how engineers can often rise to the occasion, the future of this company (and most of their me-too competition) looks dire because their design will not scale. It does not lend itself to high volume manufacturing resulting in single-digit parts-per-million quality rates.  Would their technology scale if their product had been subjected to the rigors of design for manufacturing (DFM), failure mode effects and analysis (FMEA) and error-proofing of the production line?  Chances are that no one will get a chance to find out.

Just a side note.  Current thinking is that EV Li-ion battery packs will still have 80% of their usable lifetimes remaining after they have passed the point they are considered to be safe for automotive use.  There is a possibility that in the future, used EV battery packs will be reincarnated as energy storage devices for wind or solar farms.  If so, consumers should be able to lease new EV battery packs for EVs/HEVs for a nominal sum because the “used” battery packs will have a high residual value when removed from the vehicles and re-tasked for mass energy storage. Unfortunately, this rosy scenario still doesn’t sound like consumers in China and India will benefit much.

I am certain that most of you who bother to read my blog are the types who stayed awake in history and the various science classes we all attended in school.  Because you stayed awake, you are likely to recall that a self-powered vehicle is a rather old concept with most of its roots in Europe.

For instance, the first self-powered conveyance may have been a locomotive owned by the Middleton Railroad, chartered in Leeds, England in 1758.  The first self-powered vehicle to not run on rails was built by Nicholas Cugnot in France in 1769.  It was steam-powered and beastly heavy.  Then came Robert Anderson’s battery powered vehicle in Scotland in 1832.  And at long last, an internal combustion powered horseless carriage (literally) was patented in Germany in 1879 by Karl Benz.

In view of the chronology of the various types of self powered vehicles, it shouldn’t be much of a surprise that the very earliest commercial automobiles were either steam or electric powered.  This fact is often overlooked since their period of dominance was short-lived and a very long time ago.  The shortcomings of steam and primitive lead-acid batteries are well known.  Internal combustion engines got a fast start due to the mechanical simplicity of the old low compression engines and, most of all, the energy density and portability of gasoline.  This is despite the fact that there was no gasoline distribution infrastructure, no useful roadmaps or even named roads and finally, nearly no roads suitable for wheeled vehicles.  Mud as far as the eye could see.  Oh, and don’t forget pneumatic tires that couldn’t survive but a few miles on such wretched roads.

Well, here we are at the turn of the first decade of the twenty first century and for more than a century, gasoline powered vehicles have reigned supreme on the world’s roads and highways.  How does this state of affairs manage to persist for over a century and likely for decades longer?  Ironically, most of the trains now used in highly developed countries are either purely electric or diesel-electric.  The latter, diesel electrics, claimed the title of the first hybrid conveyances over sixty years ago.

Short answer?  A century plus of brilliant engineering of the internal combustion (IC) engine making it vastly more fuel efficient (more power per cc of engine displacement per liter of gasoline) and the inherently high energy density and portability of gasoline versus the same amount of time (but significantly less effort) of brilliant engineering making very significant improvements to battery chemistry (example:  lead-acid to lithium ion).  And the costs, which are more-or-less related to KWH/KG for comparison’s sake, are not budging.  Not that there was a contest per se, but the outcomes of the parallel development of these alternative energy sources have been starkly different.  And frankly, there doesn’t appear to be much on the horizon to change this state of affairs.

Don’t misunderstand me. A huge effort is underway around the world to make a quantum change to the current state of battery technology.  Unfortunately, battery cell improvements tend to be incremental and the costs remain stubbornly high – at least when compared to an alternative IC engine.  A worrisome side note to the state of the art battery technology is that virtually all of these technologies depend upon exotic and rare elements concentrated in just a few locations in the world.  Afganistan, for example.  We’ve already seen China economically punish Japan by limiting Japan’s access to China’s reserves of rare earth elements.

Many of these  incremental improvements to batteries result from tweaking various cell chemistries and/or exploiting the novel characteristics of new materials such as nanoparticles.  However, just like previous focused efforts to improve video recording that became the battle of standards (Beta vs. VHS and HD DVD vs. Blu-Ray), the market is unintentionally being used to sort through the multitude of candidate battery cells to establish a standard battery.  On second thought, this analogy is not particularly apt, since each of the aforementioned recording technologies were, in fact, the joint output of multi-company consortia.  These consortia presented the market with an “A” vs. “B” choice.  In contrast, battery technologies are being pursued by literally dozens of companies world wide and the market is being presented the choice of “A” vs. “B” through “Z”.  Not exactly the right environment for a quick shake-out.  Neverthess, until some degree of standardization occurs, it will be difficult for manufacturers to acquire sufficient volumes of cells to drive the cost of the technology down a learning curve.  Thus, the costs will remain high.

Aside from cost, if you are a manufacturer of hybrid electric vehicles (HEVs) or electric vehicles (EVs) when you commit to use a particular type of cell, there is a whole cascade of consequences that result from that decision that will make you disinclined to change to a different battery using a different chemistry – especially if only to capture another marginal improvement in the technology.  This is because each particular cell chemistry results in a different cell voltage, energy density, form factor and charge/discharge characteristic.  Consequently, your assembly of battery cells (the battery pack) will be a particular size, weight and physical configuration and the charging and charge state monitor electronics will all be peculiar to that exact cell chemistry.  Change the cell chemistry and all of those variables will change.  That means different costs to manufacture and different applicability to various HEV and EV models.

So, until HEV and EV batteries finally become standardized like the familiar AA, AAA, C, D and 9V battery configurations with essentially similar charge/discharge characteristics and battery state monitoring requirements, every choice of cell technology for these vehicles will result in a sub-optimum solution of some sort.   The world awaits the big shakeout.  But don’t hold your breath, because there’s no end in sight for the quest of the holy grail of batteries.  In the meantime, EVs for short range daily commutes and HEVs for longer trips will be the best solutions you can buy.  If you can afford them.

Just in case you’re thinking about fuel cells, you are on the right track.  Unfortunately this highly promising technology has been stalled in a time vortex for decades and a practical commercial fuel cell perpetually remains ten years away.

By the way, have you ever wondered why there’s no A and B cells?  It’s simply that their primary use was to power vacuum tubes, especially in radios in automobiles.  They are just not needed any more.

Sad to say, I am an anachronism.  Last of a kind.  A dinosaur. 

Why?  I spent my entire career with one company.  However, unless you are within five years of my age, you won’t have to bear such ignoble titles when you retire.  That’s because you will have worked for several companies during your working life.  Perhaps many companies.  There has been a tectonic shift in the employer/employee relationship in which companies no longer foster employee loyalty and longevity.  Without incentives to hang around (like a pension), employees have become migratory and by necessity, mostly concerned about their own welfare.  The work ethic still exists, but company loyalty and willingness to sacrifice for the good of the company does not.

In short, you likely won’t work long enough for any given company that you will acquire a full understanding of the nuances of any one company’s culture.  Aside from startup companies, all companies that have been around for a few years, say ten years or more, will develop a distinctive culture.  “Culture” is expressed in many different ways:  obvious and in your face or so ineffable that it’s, je ne sais quoi, like the air you breathe.  Actually, more likely a mixture of both.  This culture drives important things like how your company makes decisions or its risk tolerance and equally importantly, but more subtly, how superiors treat subordinates and how tolerant the company is of people who chafe at the “system”.

Generally, most people don’t really spend much time pondering a company’s culture.  However, they do, consciously or unconsciously, adjust their behavior to optimize their personal welfare.  Much of this “adjustment” is instinctive and not much different from what we all learn in order to fit into our family, our circle of friends and into our society.  However, when one changes jobs, re-learning is usually required.  

However, there seems to be one constant in corporate cultures that exists, regardless whether the company is high tech or low tech, manufacturing or service, public or private, you get the point.  That constant is the fact that people will do whatever they are rewarded for doing.   Well, duh!  What insight! 

Au contraire mon ami!   This fact seems to lost upon most people in management.  If this were not so, one wouldn’t see subordinates being pressured to spend time, money and human resources on pet projects (on the one hand) or strategic alliances (on the other hand) by their superiors without providing them with the budget to do so.  Or, at a minimum, giving them a free pass when it comes time to review their budget performance.  Most often, these hapless subordinates are expected to support management’s ad hoc projects and still meet their budgets.  Every manager working within a budget has had this experience. 

The solution?  Give lip service to the new project and continue doing the activities for which you are budgeted.  The consequences of not meeting budgeted commitments are much more severe and certain than the consequences of not meeting the new project’s objectives.  Besides, with a little bit of luck, perhaps the project can be stretched out to the point where everyone gives up in discouragement or the manager-sponsor of the project is reassigned.   In certain psychological circles, this response by our hapless manager is called “least pain behavior”.  Said another way, our manager, who is quite rational but faced with two mutually exclusive options, will choose the option that results in the least pain to him/her in the end. 

I have personally spent considerable time and creativity over the years helping companies make commitments in agreements that I am certain are not going to succeed in the long run.  Why are these plans doomed before the ink is dried?  Because the low- and mid-level managers of one (or both) company(ies)  who will be expected to do the actual implementation of the plan haven’t been consulted, nor have they been given any incentive to support the plan.  Paradoxically, they are only going to be rewarded if they starve the plan and meet their budgets.  Thus, the answer to my rhetorical question is:  Managers behave the way they do (that is, acting contrary to the best interests of their employer) because their company’s incentive system encourages them to do so.  Go figure.