Saturday, October 18, 2008

A Business Plan for achieving Energy Independence

As an entrepreneur I am always looking at the world through my experiences and how I would approach different problems. And sometimes I even attempt to look at some pretty big problems, and wonder "how would an entrepreneur solve this problem?"

So, I spent a few minutes to analyze where we are in ENERGY, and put together a basic Three (3) Point Plan on where I see a potential Business Plan for our country.

If we assume the three major forces behind achieving Energy Independence are:

1) Cost of Energy
2) National Security
3) Environment

- then we can start putting together a plan to achieve these goals.

So lets look at the Cost of Energy first - and see where there is potential for innovation.

Here are the breakdown of costs for Energy:

OIL = 4.0 cents to 6.0 cents per kilowatt hour for oil.
NUCLEAR = 1.1 cents and 3.3 cents per kilowatt hour for nuclear electricity.
COAL = 3.7 cents to 4.8 cents per kilowatt hour for energy produced by coal.
NATURAL GAS = 3.5 cents to 4.8 cents per kilowatt hour for natural gas
SOLAR = 20.2 cents to 30.8 cents per kilowatt hour for solar.
WIND = 5.5 cents and 7.7 cents per kilowatt hour for wind.

Before we get into the details, I want to make clear that energy is complex... for example, take these two graphs.

Here is a graph showing what People pay for energy around the country

This map shows where our existing Nuclear Power Plants are in the U.S.

(footnote.... ) Notice if you overlap these maps, you can see how "Cost of Energy" and "Residential Average Price" are not directly correlated. There is a high concentration of nuclear power (cheapest energy) in areas where our residential costs are the highest. Also, if you notice Alaska has one of the highest residential costs for energy, even though they supply a lot of oil to the U.S. So you can see that we also may have some other factors at play that we need to consider in the long run (regulation, taxes, etc) - but for now, I am going to stay focused on the simple economics of cost, and how we put forth a plan to shift our energy sources to meet our goals.

So now, we understand that there are other factors involved that we may need to address - lets focus on some basic principles we can set forth now - and shift momentum in the right direction.

1. First, we need to look at why Solar, Wind and others are expensive. (My research shows its mostly due to the equipment (panels, etc) and the inconsistency of the source). So I would invest in innovation focused on building more efficient and cost effective equipment to capture, store and transport these high-cost energy sources. This may take 20 years, but I think in the long term using solar and wind may be the ultimate energy source in 2050.

2. Second, we look at the low cost alternates like Nuclear, Natural Gas and Coal. Each one of these have pros and cons (environmental effects, safety, etc). In my research, there needs to be investment in making these sources clean, safe and ensure proper transport and protection. There are costs that need to be considered as well (It can cost $15 Billion to build a nuclear power plant and ten years to build). I think a logical approach to leveraging these technologies is to focus our efforts on Natural Gas and Coal for the short-term, and begin to build Nuclear Power Plants in areas where we need economic boost with the goal to double our Nuclear capacity from 20% of our energy use to 40%. This costs us about 100B in subsidies in the past, and I think we can easily justify the investment today.

3., Third, we need to look increasing our domestic production of oil immediately and reducing our exports of oil. This is not a long term solution for reducing our addiction to oil, but I believe it is the right direction for transitioning into a energy independent nation. I would offer subsidies to oil companies that commit to ramping up domestic production BUT also include in their expansion plans to also build the ability for new facilities to offer alternative energy. This way, we are encouraging a more diverse long term plan, and accelerating our independence at the same time.

The second goal is National Security. It is clear from the political side of the argument, we believe our leverage in the Middle East for keeping the peace is to reduce the amount of Oil we purchase from the region. If this assumption is true, then we need to have a plan to reduce our imports from these sources.

First, let me break down the Energy trend (political and economic) so there is a clear backdrop to my plan. Here are some basic facts you may or may not know - so its important we are on the same page. (Source: Department of Energy and Energy Information Administration)

Canada 18%
Saudi Arabia 13%
Venezuela 10%

Mexico 10%
Nigeria 6%
Iraq 5%
Angola 5%
Russia 4%
Algeria 3%

So, as of today we are importing about 30% of our oil from countries or regions that negatively effect our national security.

So how do we reduce our dependence on these suppliers?

1) Increase imports from other nations. Start to work closely with Canada and Mexico (our neighbors) on increasing production and increasing our supply from these friendly nations. I believe if we structure a new plan based on Energy in North America, we can increase our imports from Canada and Mexico by 10% over the next 10 years, and meanwhile reduce our imports from the Middle East by 10% (eliminating the need to import from Venezuela for example) .

2) Increase domestic production. Although it may take longer to increase domestic production and may not help in reducing our addiction to oil, it is a path of transition that will allow us to break free of the Middle East. We currently product 5M Barrels a day and import 10M Barrels a day. If we can ramp our domestic production to 10M Barrels a day in 10 years, we can completely eliminate our need to import oil from Saudi Arabia and Iraq (Assuming we also have an aggressive alternative energy plan beginning to produce).

The third aspect to a plan is the Environment. When looking at all the sources of energy, it is clear which ones are considered bad for the environment and which ones are clean. Clearly, we need some major advances in technology to help us clean coal and make nuclear safe. But the bottom line, is that technology takes time - and although the Environment is a major concern for all of us - we need to be realistic on the timeline. It will not be possible to have 100% clean energy in the next 30-50 years. However, I do believe if we follow a plan to transition toward clean energy, we will reduce carbon emissions, and we will have a net-positive effect on the environment.

One issue I think we need to understand as well, is that the US is NOT the only country on the planet earth, and we don't control the environmental laws in countries like Russia and China which surely will continue to use oil, coal (dirty) and other fuels and have a much larger footprint on the atmosphere than we will. So, truly the ONLY way to make major moves in protecting the environment is for the US to invest in new / clean technologies and offer competitive products to these countries so that the obvious choice is to adopt. Only the Market can drive environmental protections that we believe are responsible for the Earth. We can't enforce our laws, but we can change the market dynamics and strive to become the largest exporter of energy in the 21st Century.

Overall, the more I researched the market, and understood the problem, and the potential for technology - I have become increasingly more optimistic about our ability to become Energy independent and diversify our energy to make for a cleaner world.

It is not a perfect solution (there never is a perfect solution) - we all need to embrace the reality that we need to sacrifice and work hard - but like any startup you put in the long hours, the sweat equity and against all odds build something great - and one day - your hard work is rewarded 100 times over....

Friday, October 10, 2008

Save the Entrepreneur - Save the World

As we sit and watch stock market plunge - and financial experts are scrambling to find words to explain why overnight our country has lost 30% of its value - I remain calm.

No, I am not in denial. Actually, for me none of this is new. As a tech entrepreneur I has seen the bubble of the Internet age, and I could see the housing bubble coming from a mile away. However, my point is not that I am a "financial oracle" - but rather - as an entrepreneur this is nothing new. Nothing here is new. The state of panic you see businesses in today - is what an entrepreneur wakes up with every morning whether the market is good or bad. Entrepreneurs live in an environment where this is always a "credit freeze" or "no lenders". Even when the market was at 14,000 -no bank would loan me money for my new startup. No bank would give me credit to make payroll.

In some odd way - I am amused by this chaos. Not just because I have lived in a microcosm of this type of chaos my entire career - but more importantly how people react to the challenges. As an entrepreneur - there is a certain acceptance of risk when starting a new venture. In fact, losing your entire investment in a startup is a standard disclosure to our niche economy.

Of the twenty-something ventures I have been involved in one way or another - I personally have never heard the words "BAIL OUT". In my 15 years of growing businesses, meeting payrolls, using credit cards to buy inventory and spending days and nights servicing customers and building value - I have never blamed a banker, politician or president for my failure.

I believe in a free market system. And I believe businesses should be left alone to succeed or fail. I believe the heart and soul of our economy is the entrepreneurial spirit that drives innovation and invention. I don't blame our current economy on deregulation, greed or politicians - I blame our economy on the mental shift away from what makes America competitive - the entrepreneur.
We have created an economy of perception. We have built value in our economy on transactions and not on assets. We have ignored innovation and expected our policies and products of 30 years ago can carry us into the 21st century. We have lowered the pressure on businesses and markets to innovate and scale - and simply allowed them to rest on their laurels of the past, and take home profit. Like a horse leading a race, suddenly breaking its leg - the jockey continues to whip - but we have fallen fast into last place in Global innovation.

What we are witnessing right now - is not just banks foreclosing on homes - but a foreclosure on entrepreneurship. As a nation, we have not kept our promise and payment on supporting innovation in technology and launching new ventures to diversify our economy.

I don't claim to have all the answers - but I do have the answer on how we save our economy.


Instead of pumping 700 Billion into buying bad assets and over-valued mortgages... why don't we pump 700 Billion (or a fraction) into innovation and development of new companies?

Here is a simple plan that I believe makes as much sense (if not more) than a 700B bailout of wall street:

1. Energy Independence - Not only does energy off the most promise for new jobs in America, it also allows plays a big role in foreign policy. There are multiple paths to developing alternative energy, but we need entrepreneurs and heavy investment in science to make this a reality. Safe nuclear, clean coal, affordable solar, stable wind are all viable paths - but we need to invest in technology and entrepreneurs. Simply by investing 10-20 Billion a year into energy could create hundreds-of-thousands of jobs, create thousands of companies and re-instate our position in the global economy at the #1 supplier of energy.

2. Health Care - Want to find a way to offer more health care to more people, and at the same time not increase taxes and make policies cheaper? There is only one answer - technology. You can cut 20-30% off operations, and another 15% off the cost of processing if you build a digital backbone to the health care industry. Every other market has become digital - yet we still operate health care like we did in the 1980's. The problem is not that there isn't any technology or lack of interest - the problem is that the government has not put the pressure on the industry to raise the standards. In order to force a mass adoption of digital standards and to incur the cost of going digital - there needs to be a forceful entity to pressure hospitals, insurance carriers and even the patients and doctors.

I would estimate a government assistance program for this type of project would cost around $50 Billion to invest in innovation, infrastructure and tax breaks to corporations who meet the standards set forth by the project. I think we could achieve 80% transfer of data off paper in five years - if we were able to provide incentives and advance HIPAA to force all parties to make it happen.

3. Jobs - See #1 and #2. Not only are these major undertakings but they are catalysts for hundreds of thousands of high-paying jobs. All the workers looking for work after the auto-plant shut its doors, can easily be trained and hired to manufacture solar panels. All the workers who can't build buildings due to the real estate market crashing - can begin to build nuclear power plants, clean coal plants and wind/solar plants. All the jobs lost in middle-management and operations can be put to work helping health care companies make the shift from paper to electronic business. There are natural shifts in our workforce that have to happen in order to create new jobs. We can't "save jobs of the past". We need to look toward the future.

Also, I would suggest we invest heavily into startups to tackle major problems, and fund them similar to the SBA was formed to do - but managed by Venture Capitalists with a mission to transfer our economy. This itself would create jobs due to the investments made into these startups.

I would launch a Global Innovation Fund where we segment into 5 key areas 1) Energy 2) Health 3) Poverty 4) Security 5) Communications. This fund would allocate 10 Billion dollars per year (2 Billion in each category) that would invest in existing and new companies and technologies that focus on these areas, and specifically the goals set forth in each category.

For example, under ENERGY would be goals like 1) Reduce carbon emission of coal by 80% (Clean Coal). Much like we fund universities to innovate by providing grants - we would invest into these companies and facilitate solutions. The big difference between giving a professor a million dollars - is that he/she is not driven by a timeline or market demand. They use that million dollars to experiment and to discover - with no clear mission to deliver a product to the market. This major change in purpose would make the investment make more effective and deliver results to the market.

Not only would the Global fund invest in technology here in the U.S. but also in other countries. We could lure the best minds and inventors from other countries like China, Russia, Japan to move their operations and companies to the US, by leveraging this fund as a way to monopolize innovation for the next ten years. The requirement of the fund would be to only invest in U.S. company, but not limited to importing technologies from around the world and force them to move.

If we truly want to be a leader, we need to invest. Not in mortgages, not in banks, and not in securities - but in entrepreneurs.


Monday, October 06, 2008

A New Venture - ThisWeekIn.TV

Startup Florida launched a new venture - ThisWeekIn.TV.

The company focuses on bringing targeted advertising to tourists through the televisions located in hotel rooms.

Leveraging Internet-enabled Digital Sign technology, ThisWeekIn.TV is a dedicated channel for tourists to view upcoming events, travel information, information on the local community and of course advertising.

The power of the medium, is that for the first time is connects real-time content from the Internet (e.g. RSS feeds from local event websites, videos from online video sources like Youtube) and the traditional outlet of Television sets in hotel rooms across the community.

The dynamic of real-time content coming from an unlimited source (Internet) has great potential, and we expect to see a lot more innovation coming in this area.