Geothermal energy, a clean opportunity for development

Geothermal energy

The first signals of how humans used geothermal energy, dates of thousands of years ago. Evidence shows that some cultures took advantage of this power for cooking and heating. All over the world it is possible to observe geysers and bath in thermal waters, which are in fact a representation of this natural force.

Geothermal energy is simply the heath of the Earth, power that comes from the inner part of our planet contained in the rock and fluids beneath the crust. It is a clean and sustainable source of energy, which can generate electricity and heat or cool buildings directly.

Moreover, geothermal energy is effective, reliable and environmentally friendly but limited to tectonic plate boundaries. In this regard, recent technological advances considerably expanded the useful territory, and the range and size of the resources. In theory, the Earth’s geothermal resources might be more than adequate to supply humanity’s energy needs but only a very small fraction may be profitably exploited.

The first geothermal plant that generated energy was established in Larderello, Italy, in 1904. Nowadays more than 20 countries generate geothermal energy, being the USA the world largest producer. However, international cooperation bodies are supporting the development of this industry in strategic regions with high Earth power potential.

How does it work?

Geothermal energy works with underground reservoirs of steam and very hot water, which drives turbines linked to electricity generators. There are different methods to extract this power from the subsoil, (1) dry steam takes steam out of fractures in the ground and uses it to directly drive a turbine; (2) flash plants pull deep, high-pressure hot water into cooler, low-pressure water and the steam generated is used to drive the turbine; (3) in binary plants, the hot water is passed by a secondary fluid with a much lower boiling point than water, this causes the secondary fluid to turn to vapour, which then drives a turbine; (4) EGS or enhanced geothermal system does not need of water to generate energy but uses the hydraulic simulation to create power resources from hot dry rock, then cool water is injected back into the ground to heat up in a closed loop. This technique, adapted from previous experiences from oil and gas extraction, does not use toxic chemical, so the possibility of environmental damage is low.

Environmental effects and renewability

The geothermal energy is considered a renewable energy; the heat extraction rate from the Earth’s heat content is minimal but extraction must be carefully monitored to avoid local depletion. Even in localities, where the resources were over exploited, the soil has the potential to replenish and recover its full potential, if production is reduced.

Although geothermal energy can be produced without the use of any fossil fuel such as oil, gas or coal, it might bring some environmental issues that have to be considered. Especially hydrogen sulphide (H₂S), carbon dioxide (CO₂) and methane (CH₄) represent an environmental concern when released as well as the disposal of some polluted fluids. In this regard, EGS technique uses these fluids and injected them back to the Earth to both stimulate production and reduce environmental risk. In general terms, geothermal systems require a tiny quantity of freshwater and land if compared with traditional and other renewable energy systems.

Geothermal energy supply for the long term

The global energy supply system is threatened by an excessive demand of electricity for the next 20 years. Old and contaminant coal plants and public resistance to expand nuclear power are, among many others, limitations that incentives to invest in the development of more efficient energy resources as well as in infrastructure changes needed to include renewables at large.

As aforementioned, international bodies are turning to invest in the research and development of geothermal energy; cooperation programs now take place in different regions in the world. Expansion of geothermal energy for electricity generation can lead to a fundamental shift in regional production systems, which need to be accompanied by regional development strategies to minimize economic, social and environmental risks; it also requires the development of complementary technologies as well as human capital.

There are four key elements of assessment:

1. Resource – quantitative and qualitative evaluation of the current state of knowledge regarding geothermal resources
2. Technology – analyses of subsoil and surface system components and field testing experiences
3. Environmental constraints – establish an update policy overview for sustainable development, climate protection and energy security.
4. Social–economic attributes – set strategies to promote the empowerment of stakeholders including capacity building, facilitation of knowledge transference and local ownership.

All previous key elements have to be aligned to explore feasibility of a new or improved technology. For this purpose, cooperation programs may include basic and applied research aiming to foster a resource-efficient and market-affordable energy technology.

So far, geothermal energy has prove to be:

• Large, local, indigenous, accessible base load power resource
• Fits portfolio of sustainable renewable energies options
• Scalable and environmentally friendly due to small foot prints and low emissions
• Technically feasible, the technology to capture and extract EGS are being tested
• Positive economic projections
• Reasonable research cots in comparison with other alternative energy programs

A study supported by the MIT states that geothermal can provide a large amount of sustainable, indigenous, clean, base load and affordable energy.

For this to happen, local ownership has to be addressed in order to assure a successful execution of the programs by supporting local development efforts, and creating social acceptance around the development of the geothermal industry.

Flat World and Fragmented World

Ten years ago, in 2005 a book called “The World is Flat” was published. I came across this book because my lecturer in the introduction to electronics class told us the story about how the world became more and more flat through several waves. The first one was colonization, second was industrialization, third was corporation and the last one is internet. The flat world has two children.

The first child is the integrated-standardized world. Outsourcing is one of the example. Two of the BRIC are famous for their outsourcing power, India absorbed so many IT (software) jobs and China absorbed so many manufacturing (hardware) jobs. These two economies were blamed for many job losses in developed countries. Standard and certification played a very important role in this progression. Without them, communication between the job owner and the outsourcing companies will be costly. Internet made it even smoother for sending information from one part of the world to the other.

It cannot be denied that people dress more similarly and have almost the same smartphones here in Germany and in Indonesia. My friends in Indonesia talked about the famous Game of Throne series and people here are waiting for the new season as well. When i woke up last Saturday morning, my families warned me to stay alert, to avoid night events and not to travel to Paris. Only after googling it 5 minutes later, i knew the sad event in Paris on that night. The world shares the same information.

Interestingly the flat world also pushed the world into another direction. The giants are too big to fail and the internet has liberated information to almost everything on how to create things. Imagination and creativity spark, people become the producer of their own things: blogs, videos, pictures, articles, knowledge, etc. This creative world is fragmented. People explore many possibilities, that are left by the big corporations, carving fine details for their own niche. Sometimes they really do fine market research and sometimes just produce what they like doing and people love it. This is the second child of flat world, fragmented world.

It is nearly impossible to know everything that are going on in smartphone apps for example. Apart from language barrier, your interest and usage behavior play a major role in navigating through apps world. Let us take an example of chat apps. I used only Black Berry Messenger and WhatsApp for the last two years because i can chat all my friends and colleagues through these two. I did not want to add another one until recently I add Line because I want to reach my fellow Indonesian students. And I did not know the existence of a famous “chat” app that only send a “YO” to my friends simply until I googled: “the most strange apps” and surf a little bit.

As you already know, this fragmented world does not only producing blogs, pictures or videos, but also hardwares. Developments of 3D printing and also programmable credit-card sized computer such as Arduino and Raspberry Pi enabled people to develop smart hardwares easily. People start to create their own projects, play and experiment with these affordable technologies to create their own hardwares. It is not surprising that people start to create their own companies these days. It does not mean building a company is getting easier, but people are becoming more and more enabled to do so. With so many people experimenting with so many ideas means that it is impossible to predict the trend in the fragmented world.

To close this reflection, both the integrated-standardized world and fragmented world exist together because of the flat world. Both worlds have their own characteristics, understanding them is important to survive within those worlds.

 

Startup Before Business Creation Expenses Tracking

Startup Before Business Creation Expenses Tracking.

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Irresistible force versus immovable object

“What happens when an irresistible force meets an immovable object?”  This was the challenging question the young fellows of the Allan Gray Foundation were tasked to answer during their meeting in South Africa.  This question might sound like an abstract economic statement, however it represents the reality facing our planet. In layman’s terms it simply means, what happens when the irresistible force of growth meets the immoveable object of finite resources?

The fellows were presented with the following facts and figures to help them see the size and complexity of the challenge for which they would seek answers.

Growth has been unprecedented at all levels:

• Population growth – population around 2.5bn in 1950, currently 7.3bn and growing by nearly 2 million people per week!
• Urbanization – 2/3 of world population will live in cities by 2050, amounting to 6.3bn people

Since the second half of the 20th Century significant growth has been observed in almost in all key aspects: GDP, motor vehicles, water use, temperature, fisheries exploited and species extinction.

This level of growth has been made possible through a number of factors, including increased primary energy use, declining resource prices and worryingly increased debt (world debt has grown 2.5 times in 10 years).

For a number of reasons, growth is exceptionally important:

• It alleviates poverty – the 1.75bn people currently living in multi-dimensional poverty
• It addresses energy poverty – 587 million without access to electricity in Sub Saharan Africa.

• It solves unemployment – global unemployment is now sitting at 19%
• It deals with an ageing population – Proportion of the population over 65 will grow from 7% in 2000 to 15% in 2050.

Growth has been noticeable and has been important for the reasons stated above, however, fellows where also informed that, that growth faces the immoveable object of finite resources.

This was said to be evident in a number of different ways:

• Hitting limits of resources – end of easy oil, resource reserves now more expensive, food prices increasing.
• Overexploiting natural capital – 80% of our world fish stocks are either fully exploited, over exploited or depleted; Water stress: for example, by 2005 South Africa had allocated 98% of its available water resources. Thus, it is likely that South Africa will be hit by serious water shortages in the coming five years.

To make the finite nature of the world resources vivid for the fellows, it was explained in terms of our global ecological footprint. Our current footprint uses 1.5 planets and on current trends researchers expects that we will exceed two planets around 2040.

Armed with these insights, the Fellows then pondered on the issues and identified the following ingredients to address the challenge:

• The importance of courageous leadership.
• Secondly there was the acknowledgement that there needed to be shifts in two key aspects: time horizon and mindset. There simply had to be longer term thinking to solve these problems and, at a societal level, mindset had to shift in order to answer the question why knowledge of destruction was not currently sufficient to change behaviour.
• Finally, there was the suggestion of interesting tactical approaches such as increased adoption of Biomimicry. According to the Havard University’s Wyss Institute for Biologically Inspired Engineering Biomimicry is the imitation of the models, systems, and elements of nature for the purpose of solving complex human problems. Biomimicry has given rise to new technologies inspired by biological solutions at macro and nanoscales. Humans have looked at nature for answers to problems throughout our existence. A popular example of Biomimicry is the imitation bird wings that let to the development of airplanes with wings. 

Sustainable Intensification (SI)

Meanwhile, being cognizant of the United Nations’ estimates that the world population might double in 2050 and need to  find smarter ways to produce double the amount food we are producing now, the researchers particularly those in the area of agriculture looked at the above mentioned question from the perspective of growing  world population vis-à-vis insufficient food production and coined what they termed “sustainable intensification”.

Source: http://independentreport.blogspot.com/2013/01/infinite-growth-in-world-of-finite.html

Sustainable Intensification (SI) stems from the premise that current approaches and methods of food production and distribution, particularly in developing countries needs to change. Baulcombe et al (2009) defined SI as the method of production wherein yields are increased without adverse environmental impact and without the cultivation of more land. SI simply means maximizing food production on the same size of area without causing harm to the environment. This is illustrated in the SI model in figure 1.

Figure 1: Sustainable Intensification Model

Source: http://www.slideshare.net/ILRI/9th-africandairyconf-manyawu

According to Garnett & Godfray (2012), the concept of SI is new and evolving and there are many other terms that are currently in use to capture the central objective of sustainable intensification – using land, water and other inputs in better ways to provide the food we need as well as to achieve other goals – including e.g. agro-ecology, climate smart agriculture and so on. However, it is heartwarming to note the concept of SI has been embraced and implemented by large players such as GIZ and FAO in the pursuit of present and future food security attainment.

In the final analysis, the attempts aim at addressing the challenge of infinite growth and finite resources require an interdisciplinary collaboration between environmentalists, scientist, economists, innovators, entrepreneurs and government actors to come up with bargained practical solutions that will ensures that their compromised objectives are met sustainably and lay firm foundations on which the future generations can build.

Sources

Baulcombe, D., Crute, I., Davies, B., Dunwell, J., Gale , M., Jones, J., Pretty, J., Sutherland, W. and Toulmin, C., (2009) Reaping the benefits: science and the sustainable intensification of global agriculture. Report. The Royal Society

Garnett T and Godfray C (2012). Sustainable intensification in agriculture. Navigating a course through competing food system priorities, Food Climate Research Network and the Oxford Martin Programme on the Future of Food, University of Oxford, UK

http://www.allangrayorbis.org/irresistible-force-meets-immovable-objectchallengesustainability/

http://wyss.harvard.edu/viewpage/aboutus/aboutus;jsessionid=402A622376EA3D7995C3E73CA14AF258.wyss1

International MBA Program recognizes the importance of sustainability in SME development

Leipzig, Germany – Afternoon of June 26, 2015, forty six (46) international students from 28 different countries dressed up in business suits and graduation dresses gathered at the Alter Senatssaal in Leipzig for the 17th Graduation Ceremony of the Master in Business Administration (MBA) on Small and Medium-sized Enterprise (SME) Development or MBA-SEPT. In his speech, Prof. Dr. Utz Dornberger, Director of the MBA Program, recounted some of the impacts that the Intake brought to the program. Among others he acknowledged the emerging importance of sustainability to the future of SMEs which may as well bring change in the SEPT curriculum.

It can be noted that three of the graduates have conducted their research study anchored on the sustainable development topic.

Martin Kempf from Chile conducted a comparative study on the B Corporation and conventional companies in Chile. In his exploratory study, Kempf aims to uncover the advantages that the existing SMEs get as they shift their business focus from a purely profit-driven perspective into a socially driven enterprise. Benefit Corporations or familiarly known as B Corps separates itself from other conventional businesses by creating value for the society and environment. B Corps are companies that voluntarily meet rigorous standards of social and environmental performance, transparency and accountability leading to the creation of benefit not only for the shareholders but also for all stakeholders. According to Kempf, the way these B Corps do business is about to set the new trend of capitalism. More information can be found here.

Patricia Matzdorf from Germany, on the other hand, researches on the Corporate Social Responsibility (CSR) in SMEs from the gastronomy sector in Swiss-Romande. The study aims to shed light on the state of CSR activities that the restaurants in the French-speaking region are undertaking and the challenges confronting the sector in heading towards a sustainable enterprise. Matzdorf particularly tackled in her study the issues on food waste resulting from inefficiency in production and how the companies reach out to the community they operate.

Lastly, Ireneo Piong, Jr. from the Philippines studied the impact of the green business practices to the competitiveness of the SMEs in the tourism sector in Palawan, Philippines. The study aims to find out whether the green practices such as rainwater harvesting, using indigenous materials, replacing inefficient technologies, and using solar energy results to better financial and operational performance of the hotels, pension houses, restaurants, and resorts in the province — enough to convince the other tourism SMEs in the country to follow suit. Tourism is one of the rapidly growing industry in the country but due to the poor infrastructure for the supply of electricity, inefficient and wasteful use of appliances, the tourism SMEs are burdened with two problems: (1) large amount of CO2 emissions and (2) high energy costs. With this, the author intends to determine whether green practices are worth replicating for the SMEs.

Greening SEPT

Recognizing the contribution of these research studies, Prof. Dornberger emphasized that SEPT Program will highly consider offering sustainable development topics to the curriculum. According to him, the way of doing business across the global economies is changing, with sustainability coming into play in the fate of every businesses. With this, Prof. Dornberger sees the need to adjust the program to catch up with this change and to prepare the incoming generation of students to remain upbeat to this trend.

Sustainable development advocates Kempf and Piong on their part are pleased of this development. The author in particular felt it is high time that such a unique MBA Program focused on SME development consider upgrading the curriculum to include a topic confronting the future of business: sustainability. Big corporations with their available resources can easily change their ways but the SMEs with limited resources but predominant in the market are at the disadvantage when sustainability becomes a criteria for competitiveness. Therefore, with the MBA Program producing would-be consultants and entrepreneurs equipped with knowledge on sustainable development, embedding sustainability in the curriculum will be an innovation in business education. The SEPT Program will not only revolutionize the MBA Programs but also produce future alumni who will change the course of business from a profit-oriented approach to economically viable, environmentally sound, and socially responsible direction.

Sounds like a dream but as Liberian President Ellen Johnson Sirleaf said in her speech before the graduates of the Harvard University in 2011, “If your dreams don’t scare you, they are not big enough”.

Forceful Formalization – Is it Panacea?

Ketevan Morgoshia, 2013

Modern economic picture shows highly complex and interconnected trends, which creates challenges to identify the root of the problems that developing countries usually stand in front of. Among those ambiguous economic challenges, the most eye-catching one – informal sector, attracts attention among the economists’ circles, especially in the standpoint of development economics. The current discussion over the topic divides those circles for and against informal sector which is still growing in the Third World. The proponents share the idea that informal sector fills the gaps of formal sector “among the poorest of the poor” and helps to maintain the baseline in the “survival economics” (ILO, Geneva). They argue that not all developing countries are prepared to root the informal sector out completely, as

long as various social and institutional processes are involved aside economic ones. Hence, Structural Adjustment Programs (SAP), initiated in 1980-1990 by the World Bank (WB) and International Monetary Fund (IMF), along with the Washington Consensus policies of 1989 do not necessarily result in expected economic growth, but the other way around (Stiglitz, 2000). Thus the topic is complex due to the fact, that it involves not only the economic concepts and discourses explaining development economics, but sociological and anthropological aspects as well (Rand, Torm, 2011). The proponents of informal sector usually refer to the “rigidities of labour market” and “voluntary choice of informality” as a result of costly labour market regulations, often leading the labour force voluntarily join the informal sector. Such critical standpoints have to be taken into consideration while dealing with the transition economies, which mostly suffered from the “shock therapies” during 1990s resulting in high inflation rate and growing number of “underground economy” that was later labeled as “informal economy”.

On the other hand, SAP proponents suggest the formalization to sustain economic growth and high performance in a state’s economy. Elimination of informal economy will reduce the level of crime, exploitation, industry inefficiencies and unemployment as long as public records of registered businesses would let governments tackle directly with the shortcomings. Formalization increases the level of social protection, access to financial support, government services, growth rate and Foreign Direct Investments (FDI) (ILO, 2013).

The concept of informal sector stems from early 1970s, when economic anthropologist Keith Hart conducted his research in Ghana having found out it not only existed but expanded. Later it was accepted by ILO, (International Labour Organization) perceiving the range in which marginal workforce turned into the profitable enterprises. It was followed up with the International Labour conference in 2002 broadening its concept to an economy wide phenomenon involving the jobs and workers inside (ILO, 2013). There are also various definitions incorporated by the various economist and sociologists, but ILO Resolution of 2002 delivered the one commonly applied in many states: «The informal economy comprises half to three-quarters of all non-agricultural employment in developing countries. Although it is hard to generalize concerning the quality of informal employment, it most often means poor employment conditions and is associated with increasing poverty. Some of the characteristic features of informal employment are lack of protection in the event of non-payment of wages, compulsory overtime or extra shifts, lay-offs without notice or compensation, unsafe working conditions and the absence of social benefits such as pensions, sick pay and health insurance. Women, migrants and other vulnerable groups of workers who are excluded from other opportunities have little choice but to take informal low-quality jobs (ILO, 2002)”.

Various socio-anthropologists and economists define informal sector in their own particular way. Meagher (2004) introduces following categories: survival informal group, dependent workers and entrepreneurs. House (1984) investigates the motivation triggering entrepreneurs start a business which accordingly lines up in three categories: dynamic IS (Informal Sector) with subcontracting arrangements with the formal sector; poor, marginalised workers trying to survive; transitional subsector stretching between the previous ones (Ishengoma, 2006). ILO has recently stratified the manifestations of informal economy, which differs from country to country and from region to region. It discusses the peculiarities of each and every single type of manifestations giving the detailed explanation of the cause and effect ending in the informal economy.

The list of actors in the informal economy ranges from street vendors up to Micro, Small and Medium Enterprises (MSME), which usually do not involve contractual relationships and thus do not participate in creation of decent work. The underlying causes of informal economy, listed by ILO, may be poverty, poor absorption capacity of industrial sector, the drive of flexibility, changing production structures, economic restructuring, the labour regulation and economic crisis (ILO, 2013). All these challenges that are present in the developing countries closely relate to the Structural Adjustment

Programs and Washington Consensus, giving recipes of liberal economic organization to let the free market function.

The debt crisis in Latin America of 1980s let IMF (International Monetary Fund) and WB (World Bank) to think about solutions for the indebted governments to maintain economic stabilization and issue even more loans to repay existing debts and avoid international banking crisis. The policy set the preconditions for the borrower governments to earn credit from WB and IMF, named afteWashington Consensus. It required governments to liberalize trades and open markets, change state owned industries to private-owned ones, and let FDI freely flow in the countries ending in the total deregulation of their economic systems (Woods, 2003). Structural Adjustment Loans were repeatedly given to the same countries to make “adjustment” viable, though sometimes ending the zero level of “adjustment with growth”, for instance, in Argentina, Ghana, Senegal and Malawi. They suffered from the same black market premium and inflation rate, the same real overvaluation and real interest rates among the 1980s to 1990s. The primary demand to ensure intensive lending from WB, was tax reform, enhancing property rights and increasing formalization policies to enforce law over the private sector. The overall negative outcome could be observed on the post USSR countries, named as “transition countries”. Only Poland and Hungary had success along with Georgia, but the latter showed the worst case of output due to the civil wars in 1990s.

The paper will analyze the relation between informal sector, formalization outcomes and macroeconomic structural changes. The analysis is based on the three country examples: Brazil,Vietnam and Georgia. Those countries were selected due to their experience to cope with the informal sector, i.e. Brazil was chosen for its successful public and financial policy ending in the rise of formal sector; Vietnam for its partly successful formalization, but more for its successful informal institutions and lastly Georgia, conducting all necessary structural adjustments, but ending in decrease of formalization incentives.

Entrepreneurs and the concept of anti-fragility

Have you ever wondered what is the exact reverse concept of fragility? One might think of peripheral ideas about what is not fragile and consider robust, solid or resilient as possible answers.

First, it is necessary to define what makes a package fragile. Usually, you can see that something is fragile, when you find the “handle with care” stamp on the box. According to the Oxford dictionary, fragile is an adjective that refers to an object easily broken, damaged or threatened, or a delicate and vulnerable person.

Second, lets characterise a fragile object, person (dispositions, behaviours, personalities) or systems. A clear example is a wine glass, which is better preserved, well kept and protected; it is an object which would be at its best unharmed. Another good example could be the current financial system; the more stable and the less risk the better.

Third, all the concepts aforementioned (robust, solid, resistant, etc.) could be representative qualities of anti-fragile products or systems, however they do not cover the substantial attribute of the phenomenon.

Nassim Nicholas Taleb, a Libanesse-American scholar and statistician, has created the neologism of Antifragility. He, an uncertainty and risk expert in the fields of Philosophy and Finance, points that some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty. That is what he called Antifragility.

So, antifragile has the exceptional property to become better; it evolves from errors, it manages to deal with the un-know, and it does things without completely understanding them; to say, stressors and volatility.

One can guess, that the analysis around the concept of antifragility is to become aware of what is fragile and its better understanding. Taleb himself explains that you can measure how fragile a system can be, but risk is not measurable and one cannot predict the occurrence of a stressful event that could harm it. In the long run, the antifragile wins from prediction errors.

So, how is this conception translated into personal domains? There is a name for them: Fragilistas. These individuals usually take the role of the victims of the system, a bad boss, a bad mood. Further, they are characterized by their attitude towards errors and variability; after making a mistake, they feel defensive and embarrassed rather than moving on, introspect and learn. They are nonaction types.

On the other hand, the Entrepreneur is that one, who gains from innovation and conviction, and –not always- speculation. But, how to innovate? Get in trouble -recommends the author- real and serious trouble but not terminal. Innovation is usually a consequence of necessity more than the outcome of bureaucratic academy.

Contrary to fragility, entrepreneurship may be considered a risky and heroic activity, necessary for growth or even mere survival for the Economy, says Taleb. Still after a failure, the Entrepreneur is still alive, though morally and financially broken, and it is the high rate of failure –a necessary high failure rate- what makes the economy to be antifragile.

However, the Entrepreneur may not regret its activity of constantly and rationally modifying its targets as he/she acquires information; this is an opportunist predilection, which has significant consequences in business. The Fragilista believes in the illusion of thinking that others, too, know where they are going, and that they will tell you what they want if you just asked them. The Entrepreneur denies this assumption.

The strength of the computer entrepreneur Steve Jobs was precisely in distrusting market research and focus groups –those based on asking people what they want- and following his own imagination. Taleb interprets the famous “stay hungry, stay foolish” as “be crazy but retain the rationality of choosing the upper bound when you see it”.

This simplistic orientation towards trial and error (seen as the expression of an option so long as you could identify a favourable result and exploiting it), with no comparative shame in failing, starting again, and repeating failure triggers whole economies. Indeed, U.S.’s largest generators of wealth are based on real estate (financial optionality) and technology (based on disruptive innovations). In contrast, Japan or Germany hide risk by making small contributions, adding small benefits.

According to Taleb, technology is the result of antifragility, exploited by risk-takers in the form of tinkering and trial and error, with nerd-driven design confined to the backstage, to say emphasising in the implementation more than in the innovation.

Also, the Entrepreneur shows the distinctive quality to control fragility in four ways:

1. Detecting fragility (more than prediction) by understanding the dynamics of causal-effects and forecasting errors. How to benefit when you make a mistake?
2. Focusing on make things -your company- more robust to defects and exploit these errors (both internal and external). Do not try to change the world for now.
3. Considering time as the mother of all stressors. Antifragility is necessarily how things move forward under time.
4. Understanding innovation as a concept of options and optionality. How can you take the upside if you like, but without the downside?

The model of Antifragility covers well-known dilemmas about risk and chaos from a very peculiar perspective. The idea is not try to solve or shield something against disorder agents or volatility but rather understand and learn from stressors.

Entrepreneurs may consider his advice to face a world full of uncertainty, where randomness seems to be the only constant. Be able to gain from disorder.

Governance in the value chain: the case of Namibian beef value chain

Summary

Globalization and global interdependence has provided opportunities to businesses in developing to access and profit from lucrative markets beyond their border. However, they are expected to meet high standards and demands from governments and consumers. Thus, effective governance of the value chain is required for a developing country’s value chain to be able to maintain access to pricey markets. The Technical Centre for Agricultural and Rural Cooperation (CTA) which is a jointly established international institution of African, Caribbean and Pacific (ACP) Group of Countries and the European Union (EU) revealed that from the 79 ACP countries which are granted duty free access to EU markets, only Namibia exports beef constantly to the EU. This fortunate situation for Namibia has been attributed to the fact that it can meet the governance requirements set by the EU (CTA, 2013).

Namibia was granted preferential access to supply 13 000 tons of beef to EU, however the country has been unable to supply that amount due to numerous challenges facing the beef sector. One main factor is governance, because 51% of the cattle are resident in the communal areas north of the VCF, thus EU cannot accept any meat products from those areas, due to potential risk of the foot and mouth disease, hence Namibia is unable to take full advantage of the 13 000 tons duty free access granted to its beef exports under the Economic Partnership Agreement.

Namibian beef value chain

 

Source: Deloitte & Touch, 2013
Moreover, due to the access to EU market, Namibia is subjected subject to rigorous inspections and audits from the EU and other entities. EU required the implementation of a time-consuming computerised traceability system from the Namibian meat industry, and in response the industry has implemented the Namibia Livestock Identification and Traceability System (NamLITS). The requirements from institutions in developed countries are changing from time to time. However, Namibia has proved that with effective governance even the most stringent requirements can be met by developing countries, though at a high price.

Disease zoning with the veterinary cordon fence and strict control of animal movement by DVS has helped parts of the country to be to be free from food and mouth disease. However, 51% of Namibia’s cattle population are resident in the communal areas north of the VCF and can therefore not be exported to overseas markets. Thus, the country is faced with a challenge to have the areas declared disease free by the international authorities, such a declaration will shift the VCF northward to lesser risky areas and enlarge the FMD free zone and thus integrate some cattle farmers into the mainstream economy. This integration will unlock the economic potential of the communal areas north of the VCF as it will not only boast Namibia’s cattle production for export but it will also enable these producers to benefit from the high returns from export to the EU and other lucrative markets.

Veterinary zones in Namibia

Source: Adopted Gawande, et al, 2007

However, the realization of this dream requires very close cooperation from between all the stakeholders to anticipate potential risk and thereby avoid coordination failures, because coordination failure might result in the suspension the country’s beef exports.

The Meat Board plays a coordinating role in the beef value chain, all key stakeholders are represented on the Meat Board, its platform is used to raise and discuss important governance issues and workout national strategies to implement requirement of Supranational institutions. The Meat Board was instrumental as it ensured that Namibia meet the EU’s 90/40 residency and the traceability requirements. Meat Boards’ FAN Meat scheme ensures that Namibia’s claim that its beef is naturally produced from healthy free ranging cattle is maintained internationally. Farmers that subscribe to the FAN Meat scheme are closely monitored as they are expected to maintain high standards in terms of farm management, environment, animal welfare, animal health, feed and traceability.

Namibian cattle producers have established Meatco and developed the corporation over the years into a multinational company. As a result, the producers have indirectly upgraded in the value chain collectively. Therefore, they are benefiting directly from the returns from the lucrative markets. Meatco has been able to meet and maintain multiple standards, thus it has earned trust in foreign markets. Due to the capacity which Meatco has developed the corporation is able to strengthen and empower cattle producers to improve the quality and quantity of cattle which they supple to it.

Finally, Meatco has been able to tighten co-ordination, and thereafter it upgraded in the value chain from a beef processor/trader to a beef marketer. By developing a strong brand and appealing packaging Meatco has yielded positive returns for the producers (Members). Moreover, Meatco also owns subsidiary companies in Europe and South Africa. Therefore, this can also serve as a model for primary product exporting companies in developing countries. Beef producers in other ACP countries should organised themselves under one entity and engage other stakeholders in order to strengthen value chain governance. Once the value chain governance mechanisms are firmly in place then successes in terms of upgrading, exports and higher returns will follow .

References

Animal and Plant Health Inspection Service (APHIS). (2005). “APHIS Evaluation of the Footand-Mouth Disease Status of Namibia (Site Visit Report and Risk Analysis).” Veterinary Services, National Center for Import and Export. Retrieved from https://web01.aphis.usda.gov/db/mtaddr.nsf/2f5c87c0140172cb852564bf0046d1e2/aaff1b4d96d760de85257129006cc523/$FILE/

Chiriboga, L., Kilmer, C., Fan, R. and Gawande, K. (2008). Does Namibia have a comparative advantage in beef production? Texas A&M University Retrieved from http://kishoregawande.net/wp-content/uploads/2008/12/finalreporti.pdf

CTA. (2013). Executive Brief Update 2013: Beef sector. Retrieved from
http://agritrade.cta.int/Agriculture/Commodities/Beef/Executive-Brief-Update-2013-Beef-sector

CTA. (2012). Executive Brief Update 2012: Beef sector. Retrieved from http://agritrade.cta.int/Agriculture/Commodities/Beef/Executive-Brief-Update-2012-Beef-sector

Deloitte and Touche. (2013). Draft Joint Vision of the Livestock & Meat Industry of Namibia. Retrieved from http://www.nammic.com.na/index.php?option=com_jdownloads&Itemid=146&view=viewdownload&catid=8&cid=180

Gawande, K., Cabrera, R., Cochran, K., Dangelmayr, L., D’aguilar, G., Lee, J., Speir,I., & Weigand, C. (2007). African Capacity Building For Meat Exports: Lessons From The Namibian And Botswanan Beef Industries. Trade Law Journal, Vol. 19, No. 55, 2010. Retrieved from http://ssrn.com/abstract=1979233

Gereffi, G. (2009). Value chain governance. Briefing Paper. USAID. Retrieved from http://www.microlinks.org/sites/microlinks/files/resource/files/vc_governance_briefing_paper.pdf

Kaplinsky, R. and Morris M. (2001). A Handbook for value chain research, A report
prepared for the IDRC. Retrieved from http://www.ids.ac.uk/ids/global/pdfs/vchnov01.pdf.

Meat Boad of Namibia. (2011). Namibian livestock sector strategy Retrieved from

Click to access NamibiaLivestockProducerSectorStrategy.pdf

Meatco. (2012). 2011/2012 Meatco annual report. Retieved from

Click to access Meatco%20Annual%20Report%202011%202012.pdf

Industrialization as the stages of development – Textile Industry in Egypt

One of the theories that identify frequent social change and the idea of development is Walter Rostow’s concept of economic growth in his book “The Stages of Economic Growth” 1960. He identifies five growth stages: the traditional society, the preconditions of take-off, the take-off, the drive to maturity and the age of high mass consumption. “These steps are linear and towards evolutional higher development” (Mallick, 2005, p.5).

• The first stage, the traditional society, is characterized by limited production functions; therefore the main focus is on agriculture. The political rule is centralized in the traditional society.
• The preconditions of take-off, a process of transition from traditional society to take off. It is characterized by more dynamic society which is reflected in more production functions. The society is more open to trade and it is the beginning of expansion and internationalization.
• The take-off stage begins with overcoming the old blocks and the resistances to steady growth. At this phase growth becomes the normal condition. The rate of investment is increasing and the technological development is expanding. Also there is an expansion in urban areas and building new industrial areas. Moreover, new techniques in agriculture and industry are used and the farmers begin to accept the changes.
• The drive to maturity is characterized by extension of technology over the whole front of economic activity. The economy finds its place in the international economy: goods formerly imported are produced at home; new import requirements develop, and new export commodities to match them. The society develops new values and revises the current institutions to support the growth process.
• The age of high consumption the society looks for welfare. The leading sectors shift towards durable consumers’ goods and services. In addition to that, the structure of the working force is changing; more people are working in offices or in skilled factory jobs.

According to Rostow’s theory of economic development, industrialization happens through several development stages to make the shift from traditional economy.  In early stages, there should be a surplus which is generated from a key sector to provide funds for investment in the manufacturing industries which means that the output exceeds the need of the local need which leads to exporting the surplus. The revenue from the exported surplus would be spent in several directions. Infrastructure is one of the primary ways to invest the revenue like railways, roads and roads which serve the exporting activity and at the same time their availability will foster industrial activities. Moreover the revenues may be used in manufacturing industries. This prepares the economy for the first step of industrial development (Meier, 2000, p.180-185).

Industrial development has two main stages. The first one is import substitution while the second one may be market inward orientation or outward orientation.

1     “Easy” Import Substitution

“The first step of industrial development is “the first stage of import substitution”. This stage requires some tariff or quota protection to accelerate the process of industrial development,” (Hawash, 2007, p.1).

The developing countries start to substitute imported goods which doesn’t need skilled labors, is not effected by low production in sense of cost and don’t need sophisticated technology. These goods are usually clothing, shoes, household goods which are made of leather, wood and textile fabric (Meier, 2000, p.180-185).

Therefore, this stage is called the “easy” stage of import substitution. In addition to that, external economies are generated through production of these commodities. It increases the human capital and the spread of technology. Therefore, the increase of production will be more than the increase in consumption of the economy (ibid).

2     Inward or Outward Orientation

There are two ways for an economy to continue increasing its industrial growth rates. The first way is the second stage of import substitution which is inward looking industrial development strategy or the outward-oriented strategy, the exportation of manufactured goods (ibid).

The first strategy, inward industrial development, in based on substituting imported products by domestic production. The problem with this strategy is that developing countries have low physical and human capital and unskilled labor, “highly physical-capital-intensive intermediate goods and skill-intensive producer and consumer durables” is challenging (ibid).

The other strategy is the outward-oriented strategy. This strategy focuses on international trade and exporting the goods and services that the country can be competitive at. Examples of these economies are Hong Kong and Taiwan.

Countries applying outward-oriented development strategies performed better in terms of exports, economic growth, and employment than countries with continued inward orientation (ibid).

Industrialization in Egypt

In the end, according to Rostow’s economic growth concept, Egyptian industrialization in general and textile industry in specific, has passed by the ‘take off’ and now in the ‘drive to maturity stage.’ In other words, the textile industry has passed the import substitution phase and the inward market orientation and now struggling in the outward orientation phase.

The textile industry in Egypt first started mechanization in the 1899 by the European commission who lived in Alexandria and then was adopted by the government which led the way afterwards in 1952 to the import substitution stage. When Gamal Abd El Nasser ruled, he applied the ‘Inward Industrial Development’ strategy. All the production of the cotton was purchased by the government and subsidized the textile products for the domestic market. Afterwards in the early 70s, when El Sadat has come to power, open door policy was adopted which shifted the strategy from inward orientation to ‘Outward Industrial Development.’

The challenges in this phase are huge. On one side the industry is not efficient; the backward and forward linkages are weak, the technology used is old and the labour need intensive training. On the other side the policies and the institutions need reform; the corruption is high, the public companies customizing the rules and laws to their benefits and the private companies are not well presented and involved in the decisions and policies that is taken by the government. These challenges make it difficult for the textile industry to compete internationally.

By making reforms in the policy level, improvements in the domestic capabilities and adjustments in the market strategies, the Textile industry in Egypt will be able to fully adopt the ‘drive to maturity’ level and be able to compete internationally which will have a huge impact on the Egyptian economy because of the Textile industry role in the economy.

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References

Hawash, R., 2007. Industrialization in Egypt: Historical Development and Implications for Economic Policy. [pdf] Cairo, Egypt: Faculty of Management Technology, German University. Available at: <http://mgt.guc.edu.eg/wpapers/001hawash2007.pdf>

5. O. B., 2005. Development Theory: Rostow’s Five-Stages Model of Development and ist Relevance in Globalization. [pdf] School of Social Science, Faculty of Education and Arts, The University of Newcastle. Available at: <http://202.202.111.134/jpk/data/gjzrzygl/web%20prepare20110608/paper/Rostow%20Development%20Model%201960.pdf>

Meier, G. M. & Rauch J. E., 2000. Leading Issues in Economic Development, 7th ed. [pdf] New York: Oxford University Press. Available at: <http://econweb.ucsd.edu/~jrauch/leadingissues/leading.pdf>

B Corporations: Evolution of Capitalism?

The “B Movement” (referring to Benefit Corporations and Certified B Corporations) is a global concept that was born in U.S.A. in 2007 with one clear objective: redefine the “success” in business. What will happen if companies start to compete not to be the best company of the world, but to be the best company for the world?

B Corps are companies that, voluntarily, meet rigorous standards of social and environmental performance, transparency and accountability; aspects that will lead them to create benefit not only for shareholders, but also for all stakeholders (community, workers and environment). The main purpose is that business should aspire to do no harm and benefit all (including the decrease of poverty, rebuild of communities, preservation of environment and create proper places to work).

Some people say, B Corps might “turn out to be like civil rights for blacks or voting rights for women – eccentric, unpopular ideas that took hold and changed the world”, (Richardson, J, 2010). Why? The traditional way of doing business today is known by everyone. Basically, a company is created to make profit for their shareholders, and a lot of them don’t care much about the whole chain of stakeholders that have participation in the every day’s process of that company. To show this with a practical example, there will be no questioning by a directive board of a certain company if the manager decides to move a factory from U.S.A. to China because the costs are lower and the company can make a higher profit by doing that. In fact, this is a very common strategy.

But what about the thousands workers from U.S.A. who will be “kicked out”? As Richardson points in his article, “corporations are legally prevented from being decent and humane”, because in the same example of moving a factory from U.S.A. to China, if the corporate leader “decides to make profits secondary to the well-being of his workers and neighbors, his stockholders can sue him (…). Corporate laws are written so that a company’s fiduciary responsibility is to the stockholders. Nothing else matters. If the choice was between the survival of the corporation and the survival of America itself, the law would compel him to pick the corporation”, (Richardson, J., 2010).

So, we are living in a capitalist world where these types of practices are normal. However, B Movement is advancing relatively fast with a different conception of capitalism; some people say, this is the evolution of capitalism, which uses the power of business as a force of good to solve social and environmental problems.

What is a B Corporation?

This idea of B Corporations sounds very idealistic and maybe utopian, isn’t it? Can this really work in a world where the prevailing capitalism rules the way of making business? Are shareholders truly willing to adopt new policies inside their companies which could harm their wealth and decrease their profit, “only” for the good of the environment, society and the community?

Well, it seems that there are companies, shareholders and also investors who are willing to redefine the way of doing business in favor not only for shareholders, but also for stakeholders. In fact, the number of these types of companies (Benefit Corporations and Certified B Corps) ascends to over 900 in 32 countries and in 60 different industries with only 4 years after the beginning of the B Movement. And Chile is the third country with more B corporations, accounting 4.2% (after USA with 673 and 74.3% and Canada with 98 and 11%).

But how can Benefit Corporations differentiate from Traditional Companies and Non-profits? A Benefit Corporation is a new legal status form of corporation created in the United States that voluntarily meets higher standards of corporate purpose, accountability and transparency; a triple bottom line that considers workers benefits, community and environment -along with profits- in every decision process, with the objective of create general public benefit.

To understand the main differences between these two business forms, it is relevant to mention that until recently (before the benefit corporation legal structure was passed in several states of U.S.A.) “corporate law has not recognized the legitimacy of any corporate purpose other than maximizing profits. That old conception of the role of business in society is at best limiting, and at worst destructive” (Gilbert, J. C., Houlahan, B., Kassoy, A., 2013. These authors are the founders of the B Movement).

Basically, the idea is that corporate law requires only profit maximization, leaving aside any attempt of social responsibility or social impact, which means that entrepreneurs or company owners with a mission-driven business may be “reluctant to accept outside capital from investors who may not share their long term vision (…). The ability to register as a benefit corporation empowers these entrepreneurs, not only to take their company to scale while maintaining mission, but to clearly identify themselves as purpose-driven companies”, (Gilbert, J. C., Houlahan, B., Kassoy, A., 2013).

Conclusion

Is this the evolution of capitalism? Is this really a movement that can change the traditional way of making business, leaving aside the obsession of profit-making and focusing in a social mission?

Personally, I think the answer to those questions is yes; it could be. I believe some business people (from now, still a minority group) are having these change of paradigm inside their heads, willingly to make a difference in the way of making business. And the reason why I think this is possible is because the ideology of B Corporations still haves a capitalist base; still cares about profit; and still operates as a business (I mean, they need to be competitive in the market, they need to improve constantly because they still can fail or go bankruptcy if they perform badly), but in a logical way.

Why in logical way? Because at least for me, sounds logical that a company may have other purposes than only maximizing profits for shareholders. Business, as one of the most powerful man-made force on the planet, can contribute to create value for society and for the environment.

It also sounds logic that a company should worry about the community where she is inserted; to put the workers as a priority; and to take care about the environment. But with legal and real commitment; not just with a handful of CSR activities at the end of the year.

“Capitalism is becoming less obsessed with revenue and more focused on creating social value (…). If 20th century was obsessed with maximizing financial returns, then the 21st century will be all about creating social value”, (Balch, O., 2012, citing Andrew Kassoy).

Of course there are opinions saying that the impact of B corps will not be big for the worlds or America’s economy, but I think every big idea requires some time to mature.

Forbes Magazine published an article on 12th April of 2010, written by Susan Adams, called “Capitalist Monkey Wrench”, where one of the topics discussed was that the Rockefeller Foundation gave US$ 1 million to develop a new rating system for social and environmental effect.

“Wealth advisors and private banks are hungry for such a standard, says Antony Bugg-Levine, a managing director at Rockefeller: ‘Credible ratings unlock a whole new source of capital’. But can it unlock wealth? So far all the B corps are privately held, and none has revenues exceeding $200 million. David Vogel, a business ethics professor at the Haas School at UC, Berkeley, who has written extensively about corporate responsibility, doubts the potential is that great. “It’s a moderately nice thing,” he says, “but it won’t be transforming American business”, (Adams, 2010).

But is really “unlocking wealth” the main purpose of the B Movement? I don’t think so, and the article “Today marks a Today Marks A Tipping Point In The Evolution Of Capitalism” provides an overview about why. “(…) And for investors, it mitigates risk, reduces transaction costs, creates additional rights to hold management accountable, and accelerates the growth of a big market opportunity to meet the needs of people who want to invest to both make money and make a difference.”

Make money and make a difference… that’s the key. They are not talking only about profit maximization; here one must understand that the proposal of B Corporations includes a change of paradigm in the way of making business. The main objective (unlike the traditional capitalist way) is to contribute with social benefit, and a Benefit Corporation or a Certified B Corp must have that purpose clear in their statutes.

“To truly live in a more egalitarian society, with less poverty and with a healthier environment, we don’t need only companies that put people in the center of it; we need investors to start investing in a different way. We need public policies that are friendlier; we need universities teaching this issue so that new entrepreneurs come out with this ‘chip’ in their heads. We need every single actor of the economy in this, and that’s why we have ally with more organizations”, (M.P. Salas, 2013).

References

• Adams, S., 2010. Capitalist Monkey Wrench. Forbes [online], 12 April. Available at: http://web.archive.org/web/20100328155935/http://www.forbes.com/forbes/2010/0412/rebuilding-b-lab-corporate-citizenship-green-incorporation-mixed-motives.html [Accessed February 2014].
• Salas, M., 2013. Las empresas B utilizan el Mercado para resolver problemas sociales. Y no solo están en alza, sino que cada día son más valoradas. cl [online] 29 November. Available at: http://www.eldefinido.cl/movil/actualidad/lideres/1461/Sistema_B_empresas_que_no_buscan_ser_las_mejores_del_mundo_sino_para_el_mundo [Accessed February 2014].
• Gilbert, J. C., Houlahan, B., Kassoy, A., 2013. Today marks a Today Marks A Tipping Point In The Evolution Of Capitalism. Forbes [online], 17 July. Available at: http://www.forbes.com/sites/skollworldforum/2013/07/17/today-marks-a-tipping-point-in-the-evolution-of-capitalism [Accessed February 2014].
• Balch, O., 2012. Are B Corps redefining business for the 21st century? The Guardian [online], 3 October. Available at: http://www.theguardian.com/sustainable-business/b-corp-redefining-business [Accessed February 2014].
• Richardson, J., 2010. Saving Capitalism from Itself: Inside the B Corp Revolution. Esquire Online [online], 23 August. Available at: http://www.esquire.com/blogs/politics/b-corp-082310 [Accessed January 2014].