Sleeping your way to the middle

I wrote yesterday on the race to the bottom — how corporations play states, and even cities, off one another in pursuit of the most lucrative benefits. At the same time, they complain about the burdensome taxes and regulations of California. But, as my colleague Martin Kenney so nicely notes in a recent column,[1] California seems to be holding its own in spite of playing hard to get. 

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Racing to the bottom

The New York Times has written several great pieces on incentives state and local governments use to attract companies. Their goal: to bring new jobs. The outcome: as game theory would predict, a classic race to the bottom where everyone who plays loses. Except, of course, the corporations. The reason: you don’t want the kind of corporate love money can buy.

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Old-style innovation

I had a nice read this weekend of the California and National Energy Efficiency action plans (links here). An interesting question lurks beneath the surface of these two documents.

The approach to increasing energy efficiency these two documents reveal seems directed towards either (1) state and national regulations (building codes, appliance standards, etc…) or (2) utility-driven efficiency programs.

I agree with the power of the former–codes and regulations are responsible for much of California’s leadership in per-capita energy consumption, having held relatively constant since 1974 while the rest of the country has practically doubled.

But energy efficiency programs face a difficult challenge. The diffusion of energy efficiency practices aimed at changing behaviors (ie adopting new technologies or practices) are primarily marketing strategies born in the 1940s and 50s. These are the same approaches that brought hybrid corn seeds to farmers in the 1940s, tetracycline to doctors in the 1950s, axes to Amazonian indians in the 1960s, tractors in Thailand, etc.–textbook “diffusion of innovation” recommendations. Essentially, a larger, wiser organization decides what’s best and pursues the diffusion of these policies to rural populations. And we’re living with the consequences today.

What’s changed in the meantime is a much better understanding that not all emerging technologies are best understood, let alone supported, through this centrally-driven diffusion model–no matter how smart the change agents are (and these folks are smart…I’ve met many of them). There are a great deal more grass-roots and entrepreneurial opportunities to promote innovation than fit within the traditional diffusion model.

In pursuing the broader penetration of energy efficient technologies into the market, some of these findings from the innovation literature come to mind:

1.Technologies evolve in use. This means early adopters get the first solutions, not the best ones…and sometimes this kills the potential for growth. Think how pushing early solar water heating, with it leaking plastic pipes, set the technology back decades. Pushing a technology before its time can do more harm than good.

2. The best technologies are not readily identifiable by single actors–even when those actors have lots of experience. If venture capitalists fail 9 times out of 10, what makes a utility or government bureaucrat (who allocates millions towards emerging technologies) any better at picking winners? Letting the market find and reward the right products and services may seem slower and less efficient, but don’t forget the tortoise and the hare.

3. Technologies live or die by their integration within (local) economic and political systems. This means supporting technological initiatives without supporting their local integration is like throwing seeds on a parking lot and expecting them to grow.

4. Successful ventures depend more on the team than the technology. For those technologies that need to be self-sustaining as business ventures (and most do), the team has more to do with the success than the original technical vision or market plans.

Simply put, any system that focuses too much on “technology” in the abstract and not on the particular details of any one implementation (from the technical details to the market to the team behind it) will most likely fail.