EV Not-So-Quick Recharging

EV proponents underestimate the seriousness of the battery recharging time element and the obstacle it will become to establishing large fleets of EVs on American roads. The EV industry has established a reality distortion field in order to avoid the unpleasantness of a fact that impairs their marketplace agenda and the media has more than contributed to the downplaying of range anxiety and recharging time, which makes this piece from Popular Mechanics refreshing.

Listen to Mitsubishi and Eaton, and they imagine a future where quick chargers could be positioned at Starbucks, McDonald’s or, yes, Sonic drive-ins. Drivers could pull in, hook their i-Mievs up to the system and sit back and enjoy a latte, Big Mac or whatever it is Sonic sells. After that relaxing respite, they’d stroll back to their driving appliances and continue their journey. It’s their alternative to the extended range offered by the upcoming Chevrolet Volt’s on-board internal combustion engine.

Their dream may be a good one. But it’s also problematic. There were, after all, five i-Mievs on this drive that needed charging, and with only one charger it didn’t take 20 minutes to fuel them. It took about an hour and a half.

[From 2011 Mitsubishi i-Miev EV Test Drive - From San Francisco To Sacramento - Popularmechanics.com]

The idea that “quick chargers” will proliferate in retail establishments is fantasy, for the same reason that free wifi has not become a fixture in American retail… it’s not core to the business, discourages normal customer turnover, and can result in unnecessary customer backlash when something doesn’t work right. Oh yeah, it a straight expense for business… which to paraphrase Yogi Bera “is almost the same as money”.

Let’s deal with the cost issue first, quick rechargers are expensive to acquire and install for good reason, they are complex pieces of precision equipment that push a large amount of electrical energy at a controlled rate and control heat buildup and potentially catastrophic personal injury in the event of failure. The cost to install is also not insignificant as it represents a physical infrastructure project that requires planning and permitting, often in locations where retail tenants are just that, tenants and not owners.

What about the case where retail outlets are located in strip malls or other multi-use facilities? Would the cost of installing and maintaining the chargers fall to the owner with the cost then spread to all tenants whether or not they want the quick chargers? If so commercial landlords would certainly consider the potential which the increased rent expenses would put them at a competitive disadvantage. Proponents would say that the recharging stations would increase the appeal, but in reality this would not be the case with a handful of pumps operating in a fashion that excludes the overwhelming majority of visitors from taking advantage of them.

The last two issues related to cost are insurance and actual electricity… the former would certainly increase by the mere fact that the recharging stations exist and represent property and liability risk. The electricity is nothing the shrug off with the “well they will just have solar” comment because solar only works when the sunshine is available and business operates whatever the weather forecast for the day and also at night, which means that businesses will absolutely incur a spike on their power bills, all while making expensive efforts to comply with government mandates at all levels and a dealing with already rising power costs that eat away at their economics.

While all of these issues are formidable, perhaps no more than the time issue. Even a 20 minute quick recharge, as Popular Mechanics points out, is a huge barrier when you are the 5th car in line… now it’s not 20 minutes but more like an hour and a half when you factor in “setup time”. Even 20 minutes is significant at places like Starbucks and McDonald’s where a significant number of customers don’t consume their purchases on location. Is Starbucks really prepared to deal with a stream of customers who from the moment they walk in the door are unhappy because the recharge line is going to make them late for work?

Commercial fuel stations face an even more insidious problem, which is that the pump customer turnover makes it impossible to earn a living. A commercial fuel station with 2 islands of pumps can fill well over 100 cars an hour but with the same number of EV recharging stations that number would drop to under 25, all the while selling a product that generates far less revenue and even taking into account the improvement in profitability would be no relief for a business that fails to cover their fixed expenses.

EV and utility companies predict a future where motorists will pull into their garages at night and recharge their frugal EV for the next days use but that scenario fails to take into account many uncomfortable realities that real people deal with. We don’t always have garages, certainly not the 350,000 people who park on the streets of San Francisco, no doubt a target market high on the list of every EV company. We also don’t have predictable driving habits with unplanned trips and errands consuming large amounts of behind the wheel time, and we don’t have purpose specific vehicles because of taxes, license, and insurance reasons so having an EV “grocery store car” is nice on paper but not a realistic use case.

I’m all for having an expanding fleet of EVs, not only is an environmental master served but also a security issue that derives on global dependence on oil produced in an unstable part of the world, but I’m pragmatic enough to realize that large fleets of EVs are unrealistic to expect because humans are too messy to fit nicely in the narrowly constructed use cases EV manufacturers put forward. For better or worse the internal combustion engine is a remarkable engineering feat that combines efficiency, utility, and range by which EVs will be measured against and this is the single biggest problem that EVs face, they are simply don’t have the utility that their gas counterparts offer.

More on this topic (What's this?) Read more on Sonic at Wikinvest

Keynesian Porn

Read this and thought “right on brother”.

it ain’t exactly the whole truth and nothing but the truth. Every American who pays taxes is invested in your EV at this point.

Self-righteousness gets you nowhere when the playing field ain’t level. Just sayin…

[From Quote Of The Day: Don’t Make Me Pull This Oversubsidized Niche Over Edition | The Truth About Cars]

I keep hearing about EV and cleantech energy companies expanding in spite of the state that the U.S. economy is in, as was the case when President Obama visited Solyndra here in the Bay Area yesterday. Without exception these companies are benefiting from enormous subsidies from the Federal, state and local governments in the form of tax credits for consumers, and grants and loan guarantees.

There is an argument to be made that the government is simply stepping in where the private debt marketplace is failing, which is providing expansion capital but even here the government bears responsibility for contributing to the condition that are causing the debt market to contract, which is revealed in today’s report about the M3 money supply which now matches the decline seen between 1929-1933.

“It’s frightening,” said Professor Tim Congdon from International Monetary Research. “The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly,” he said. (Telegraph) [my emphasis].

We can debate the merits of various fiscal and monetary policies but the one thing that should be agreed upon is that a marketplace that depends on the government for financing expansion while at the same time depending on the government to incentivize consumers to buy their products is not a healthy one. It’s Keynesian porn plain and simple, we are paying companies to expand while paying consumers to buy their products which would not be economically competitive without both subsidies.

When it comes to GM I find their chutzpah to have few equals, from running ads proclaiming that they paid back taxpayer funded loans while not mentioning the other $43 billion in taxpayer money that converted to equity and will likely never be paid back (GM would have to achieve a market valuation greater than what they had 10 years ago when they had more market share and a high growth financing operation called GMAC), to now attempting to take credit for “investing” $700 million in EV production without also mentioning that it’s funded by $14.4 billion in taxpayer loans to the company in addition to all the other funds provided to keep GM floating. BTW, taxpayers will also fund $7,500 for every buyer of a GM Volt. Shameful.

Maybe GM should spend some time talking about how they are (see slide #8) unable to contain market share loss without paying buyers with well above average incentives for new cars and trucks? Just sayin…

Lean vs Fat Startups: The Disrupt Debate

This is the “tastes great, less filling” debate that recurs on a regular basis in the venture capital and entrepreneur communities.

Back in March, Ben Horowitz of Andreessen Horowitz wrote a post called The Case For The Fat Startup, where he outlined some of the reasons why a fledging company might want to consider taking a large amount of funding — a strategy that contrasts with the ‘lean startup’ model that has become common in Silicon Valley. Fred Wilson, another well known VC, countered with a post of his own explaining why Being Fat Is Not Healthy. Today, both men took the stage at TechCrunch Disrupt for a semi-formal debate, where they critiqued each others stances in person. The full video of the debate is below.

[From Lean vs Fat Startups: The Disrupt Debate ]

The short answer is that both Horowitz and Wilson are right because the correct answer hinges on a key variable summed up as “it depends”.

The case for being lean:

Founder dilution is the key concern because early stage companies are ill equipped to argue for outsized valuations on the basis of idea alone and many, if not the overwhelming number of examples, support the case the early stage companies that benefit from high valuations rarely end up earning their way into that valuation upon exit.

Venture math is really simple, if you raise $10 million for a company that is valued at $10 million “pre-money” then you have sold 50% of the equity to the new investors. If you raise $10m for a company that is valued at $3.5m pre-money then you have sold 75%. See, the math is easy.

This is why early stage companies that raise a lot of capital are valued richly, it’s a compromise between the company and investors summed up as “I know you will only sell 40% of the equity but you need a pretty big chunk of capital so we’ll give you $10m and value you at $15m pre money instead of $5m”. At this point it’s all paper valuation because the stock isn’t liquid so achieving an outcome is a function of executing on the business to achieve a next round of funding or selling it.

As you move into growth stage capital rounds the valuation topic accelerates because now the company does have a basis for arguing valuation and the amount of capital increases which ends up moving the needle dramatically. This is the most precarious place for investors because early stage investors can often eek out a small win while minimizing losses, the investors that are putting $15-25 million for a companies valued at $80m and up (pre-money) are much more exposed. I’d be willing to bet that more investors lose a great amount of aggregate capital here than at any other stage.

The case for being lean is also rooted in the belief that it causes the company to have more focus on the variables that position them for a next round of funding. I suppose there is truth to this but there is another side to that coin that ends up impairing early stage companies raising follow on capital, which is that dedicated focus on near term accomplishments opens them up to the accusation that they aren’t “thinking big enough”.

Another point worth mentioning is that not having a lot of capital does not immunize you from making bad decisions… companies with tight capital positions make bad decisions all the time and when they do they don’t have a safety net from which they can recover.

Raising capital is also an incredibly time consuming and involved process, and as investors you have to ask yourself how much time you want the founders and executive team devoting to raising money instead of executing on the business. From where I sit this is the biggest argument again being too lean, it forces you to engage in activities for the purpose of continued survival versus that that lead to prosperity.

The case for being fat:

I feel a Jerry Maguire moment upon me… “the things we think and do not say”. The technology business is like every other business undertaken since the beginning of mankind, the best product doesn’t always win. Tech startups are no different today than they were 10 years ago, they require a commitment of resources to achieve a set of activities which present the conditions upon which revenue is accomplished. Those activities cover the full spectrum and are people powered, and people cost money.

As markets develop they go through a natural expansion stage followed by consolidation. At this point it is a race to acquire customers and revenue, but also market mindshare that positions you as the consolidator of the space or best able to establish the highest valuation multiplier.

The law of accelerating returns kicks in when companies and markets go through these stages, simply put, the more you have the more you get. Product differentiation becomes a tactical exercise and it is rare when a disruptive innovation upsets the market balance because the best capitalized companies can buy their way up the innovation ladder or use good marketing to minimize the disruptive nature of competitive offerings. Capital becomes a strategic weapon for companies to deploy when markets are crowded and on the precipice of consolidation.

Too much money does present problems for companies, most typically when many activities are funded that don’t contribute to execution success for the company or expanding well ahead of where the business is capable of growing. These are better described as examples of bad management than too much capital but at some level they are one in the same. Good management and strong investor oversight should work together to avoid this situation, whereas underfunding a business to create scarcity of capital seems rather short sighted.

Dear Microsoft, Why Do You Make It So Difficult?

Like a lot of people I paid attention when Microsoft updated Hotmail and declared war on Gmail. That’s a bold move and to pull it off they must be confident that the features they are delivering really are transformative… but having done it with Bing (love it, don’t use Google much at all anymore) I figured maybe they were on a roll.

Many commentators agree, saying Microsoft has delivered the goods with “quick views”, better attachment handling, a Gmail-like conversation view (which itself is nothing new, many wonder why it took them so long to do this), and more. I thought I would revisit my old friend, having not used anything other than Gmail (for public email) since 2004.

SafariScreenSnapz008.jpgFor whatever reason my old hotmail email address is no longer available (which kind of pissed me off because I had jnolan@), having been subsumed by my Live.com account which, ironically, is my jnolan at gmail dot com email. When signing into my Live.com account and clicking on the “mail” tab I am told I don’t have a mailbox and must create one. There doesn’t appear to be any way to get to Hotmail other than going through the Live.com frontend.

SafariScreenSnapz006.jpgI understand that it is pretty difficult for a Live.com account identified by my gmail address to have a corresponding email account via Hotmail, but I have to wonder why the hell nobody thought about this back when they were building the Live.com identity system? It’s not like Live.com predates Hotmail. While mildly annoyed that I must create a new inbox I figure it’s no big deal so I click on the sign me up button.

SafariScreenSnapz007.jpg Upon clicking the “sign me up” button I am presented with yet another roadblock, this time telling me it could not sign me out of Live.com to move on to the Hotmail new account creation workflow. Furthermore, it’s telling me I have to enable cookies but I know for fact that I have cookies enabled so now I am at a roadblock which after investing the time to get this far I am not willing to go farther. No new Hotmail account for me, moving on and not going to bother trying again. #FAIL.

I am not writing about this to beat up on Microsoft although I think they deserve it for creating that maddening Live.com identity system with inherent and intractable conflicts with how Hotmail handles identity, but rather to point out that consumer online services have a very fragile relationship with new users where every single interaction adds or detracts from the experience and when it breaks you have lost that user forever. When you get me and build up a track record I am willing to put up some hassle because I have invested time in the relationship, as is the case with Gmail and performance at the moment, but when we are just starting the relationship is more like speed dating, you get 5 minutes to impress me or I move on. Microsoft, you wasted your 5 minutes with me.

Artists We Like – Christian Burchard

It’s been a while since I wrote about an artist that I enjoy so I thought it was time to feature Christian Burchard. People in art circles talk all the time about “organic forms” and for the most part it’s just a fancy way of saying art that flows with curves and radiuses to mimic how nature itself sculpts much of the landscape. I don’t have much patience for people making up reasons why art is important, I just know what I like about it.

As I have written many times, I love wood sculptures and wood turnings because they reflect a high accomplishment in the technical arts and exist in 3 dimensions. I guess you could say that wood is the ultimate “organic form” not just because it is itself organic but also because every piece of wood is different and to be successful with it you, as an artist, have to be able to read it and work with it not to create what you want but to uncover what the piece has in it.

Burchard is interesting to me because he is successful with so many, and very different, forms. Most wood turners and sculptors focus on single forms, like bowls, but Burchard covers the map with large sculptures, bowls, and wall hangings. I like his wall hangings, if for not other reason than we have young children so things art that hangs on a wall is kind of essential (we’ve had to put all of our glass works in storage because of this fact).

HumbleDynasty_1.jpgBurchard’s book series is well worth a look, not only because he creates spectacularly detailed raw forms but then employs a technically challenging finishing process to transform the wood into something altogether different. Much of art is illusion, taking one thing and transforming it to reflect something altogether different in such a manner that we don’t question the transformation but there is something more primal about Burchard’s book series, perhaps because it’s really not a transformation because paper is of course a product of wood.

If you are interested in Burchard’s work, or any number of other top artists in this field, check out Del Mano Gallery in Los Angeles.

Algorithm That Measures Sarcasm

giveafuckometer.gif “The pursuit of machine intelligence means we have to come up with ways to communicate with our computers in a way both entities can understand. But while computers process verbal commands in a straightforward fashion, humans tend to use more sophisticated speech forms, employing slang or symbols to convey an idea. So an Israeli research team has developed a machine algorithm that can recognize sarcasm.”

[From Computer Algorithm Can Recognize Sarcasm (Which Is Just Soooo Cool) | Popular Science]

Automotive MalWare, There’s An App for That

The University of Washington released an interesting, as well as lengthy and detailed, report about the security of automotive electronics, more precisely the lack of security. I would encourage you to read the report in full, it’s pretty eye opening.

The key finding is that hackers will not be far behind auto makers attempts to open up their tech platforms to third party applications. This made me think back to the networked car panel at Gigaom’s GreenNet event a few weeks ago… the singular point that auto makers focused on in that panel was the threat of distracted driving and not once was security and integrity of the on board computers discussed. In the case of Ford they seemed to defer the technical dimensions of their on board Sync platform to key partner Microsoft, like that makes me feel better.

Aside from the inconvenience of having a vehicle disabled by rogue code, it doesn’t take much imagination to consider the consequences for Toyota in their recent “unintended acceleration” fiasco if it were determined that the life threatening vehicle behaviors were the result of hackers.

Chavez Uses Twitter to Intimidate Venezuelans

I read this and realized that the social media industry has indeed become mainstream when thuggish potentates in banana republics are using Twitter to suppress and intimidate the citizenry.

CARACAS, Venezuela — President Hugo Chavez urged supporters to use Twitter to blow the whistle on currency speculators on Sunday and announced that police raids on illegal traders would continue as Venezuela’s government tries to defend the embattled bolivar.

[From The Associated Press: Chavez asks Venezuelans to tweet on speculators]

Twitter should terminate Hugo Chavez’s account.

More on this topic (What's this?)
Intervention and The Misery of Fiat Currency
Daily ETF Trend Report – Currency
Read more on Investing in Venezuela, Bolivar, Currency at Wikinvest

Wealth Gap

My friend Meryl sent me this and asked for comment… rather than send her 40 tweets I thought a blog post was in order. The basic thesis of the Business Insider piece is that the gap between rich and poor has widened. By the way, the world isn’t flat either…

Here’s my problem with this kind of reporting:

1) It is stating the obvioius… dumbass.

2) The issue isn’t whether or not the gap exists it is what do we do about it and more importantly is it ultimately destructive to our economy.

3) The entire notion of wealth is incredibly arcane and subject to a lot of interpretation.

4) We have shifted from a manufacturing economy to one of services, predominately of the low skill variety.

5) The attempt to link tax rates with wealth creation is hugely complicated because we are now talking about investment returns versus economic productivity.

Let’s tackle an easy one, CEO compensation. Yes it is out of whack, shareholder rights advocates have been saying that for years but it will never (ever) be the place for government to regulate compensation, it doesn’t matter whether it’s the janitor or the CEO. Shareholders own those companies and whether individuals or investment funds they are the proper regulatory authority for CEO compensation.

Let’s look at a couple of interesting facts not revealed in the Business Insider piece, namely that the 5 states ranked worst in terms of business climate also suffer from the widest gaps in wealth. Basically these are the states with the most progressive tax system and most onerous business regulatory environment, so it should not be eye opening to any rational person that these states also have high unemployment and low economic productivity.

The problem with highly progressive tax systems is that they dis-incentivize productive people from being productive. I don’t have a W-2, instead I earn income that is taxed as capital gains, which means that I take home more of my income than if I were working, but because I am not working I don’t create an economic multiplier that lifts other people with me… as in creates jobs. My accountant told me straight out that the worst thing I could do is get a job. How upside down crazy is that?

As an economy we have driven out high value manufacturing industries and with them the jobs that pay good decent wages and provide strong benefits for workers. Blame regulation or unions or high cost of housing or anything you want, but the fact remains that these jobs are gone baby gone. In California we have lost fully 25% of the manufacturing jobs the state once boasted as recently as the 1980s.

Let’s talk about wealth, specifically what is it. I look at it pretty simple, it’s my net worth and for the most part that is what most people calculate. The problem for most people is that the single largest line up on their balance sheet is their house and their mortgage and both have benefited disproportionately by a supply side driven mortgage environment and housing values that rose artificially as a result of that supply driven lending environment. We’ve seen, let’s say, a 30% correction in housing values that should persist for the next 10+ years, but the problem is that debt levels didn’t correct by that same amount so the result has been a massive erosion of wealth since 2007.

The housing issue would on it’s own be manageable were it not for one other incredibly sticky problem… unemployment. First off, when it comes to unemployment you have to ignore the number that gets quoted in the media whenever a new report comes out. That’s U-3, basically the people who have filed unemployment claims… while U-4, U-5, and U-6 captures short plus long term unemployed and people discouraged by lack of opportunity who have simply left the workforce altogether. This number is frightening and when you correlate that to average number of hours worked you get a picture featuring a lot of people who have been unemployed 27 weeks or longer and those who are working are working, and earning, less.

So basically we have allowed a system to develop that features persistently high unemployment, personal wealth erosion, inflation risk, and a low savings rate. Is that dangerous… just ask the Greeks.

The EU lesson being applied right now illustrates this point to a high degree of precision. The future of any economy begins and ends with people having jobs and when they don’t have jobs the tax system becomes imbalanced which leads to an accelerating death spiral because wealth is mobile and the people at the top simply leave their tax domicile, and this creates fiscal instability that erodes the value of money itself which then eats away at whatever savings people have, resulting is a bigger wealth gap.

I don’t have a degree in economics but this stuff is really logical and when you see the dependencies in the various parts you can start to put it together. I am also not saying anything surprising when I say the solution is not one simple thing, economies are complex machines and in order to right this ship we need to create the conditions upon which economic growth can occur which leads to jobs which leads to wealth stability. When we have a diversified landscape of economic opportunity and few barriers to movement across or up those ladders then real wealth for lower socio-economic tiers increases. More taxes and more regulation simply won’t work. In a nutshell, this Congress and this Administration don’t seem to be doing anything that will result in more jobs… well private sector jobs, the government is certainly bucking the job trend by adding them hand over fist.

More on this topic (What's this?)
Debunking Robert Reich’s “Inequality For All”
Is Your Wealth in Jeopardy?
Read more on Wealth at Wikinvest