Australian Election Surprise

Some of you may be disappointed with the Australian federal election result last Saturday. Especially if you think like I do, that we need to take stronger action to reduce greenhouse emissions and also to prepare people for much warmer weather to come.

Actually, there’s not much politicians can really do. Think about it. Pretty much everything we need to do to reduce greenhouse emissions relies on engineering and that in turn relies on private finance.

Coal fired power stations are not uneconomic because of the cost of coal and generation equipment. They’re only uneconomic because financiers suspect that no one will be able to operate these power stations after about 10-15 years. So instead of recouping the money over 30 years, the project proponent has to show how they can recoup the finance and interest (hiked for risk) over 10 years. That makes the whole project less commercially attractive than renewables like solar and wind.

It’s unrealistic to expect governments in a coal producing country to rule out coal-fired power stations. But there’s no need to. Risk-averse banks and pension funds do it for us. As they will in India, China and other countries as well.

We now have engineering solutions for reducing and eliminating most greenhouse emissions.

Take Close Comfort for example. Small localised air-conditioners greatly extend the temperature range in which people can be comfortable in hot conditions. Up to 45° or so. Close Comfort can help eliminate greenhouse emissions caused by air-conditioners. That’s expected to reduce warming about 0.5° compared with business as normal by the end of the century. What’s more, people will be paying much less on their electricity bills. And governments will be collecting less taxes as a result.

In other words, no government action is necessary. Sometimes, governments can get in the way with outdated regulations. In theory, governments could help. But that relies on politicians and committees making smart decisions: sometimes they do but not always.

Of course, as engineers we need to remind ourselves that it’s our job to enable people to do more with less: less effort, less energy, less material resources, less health risks, less uncertainty for investors, and less environmental disturbance.

And we also have to learn to collaborate better: something that is not acknowledged in engineering schools, let alone taught. That way we will be more likely to deliver on our promises and improve our present appalling project delivery performances. Fixing that would make it easier to get investors on-side.

So let’s not worry too much about politicians and get on and do the things that we need to do: things they cannot do anything about. If we as engineers provide solutions which make life easier for people, and save money, we don’t need government assistance. And I know we can do that when it comes to energy efficiency and greenhouse emissions. Some issues, like plastics pollution, probably do need government action. But we need to recognise where politics can help and where it just gets in the way.

Trump needs engineers who understand value

Americans have voted, and most of us were surprised.

I just watched a CNN interview with a former factory worker who voted for Trump. “We need lots of small factories with 200-300 people making things, employing Americans.”

Trump can’t deliver that.

Only engineers can make that happen, engineers who know how to create sufficient value to attract investors.

Bill Williams and I have recently discovered that many engineers know little if anything about creating value for investors.  Supported by students, we interviewed practicing engineers and found that, for example, most associate the word “value” with a number in a spreadsheet.

We also discovered little in the business and engineering research literature that can help.

A small number of “expert engineers” have worked it out for themselves, without necessarily being able to explain it in simple terms.  They are well rewarded by their clients and employers because they create so much value for their enterprises.

We have recently written a detailed explanation which, we think, explains how these experts create value, and we hope this makes sense for many more engineers who could just make enough difference, everywhere.  Not only to help frustrated Americans.  Engineers who know how to create value effectively could transform our world and eliminate poverty.

Since the industrial revolution, we have all come a long way, but most of us know we cannot sustain our civilization into the future without making some big changes.  We engineers have to lead these changes, but we need huge resources from everyone else to make it happen.  And that requires insights into value creation that elude the vast majority of engineers right now.

In coming posts I will do my best to explain the fundamental ideas that have emerged from our research and what we mean by value creation.

Why Are Investors Not Listening to Engineers?

Mineral processing refinery - summary of Ravensthorpe Nickel Refinery: Conceived 2004 for AUD 1.4 billion, Cost till 2008 Au $2.6 billion, Sold to First Quantum for AUD $250 million, AUD 2.4 billion in value destroyed

Photo: Mineral processing plant  (This is not a photograph of the Ravensthorpe Plant – image by Shutterstock)

In the first post in this series I explained just how significant engineering is in today’s sluggish world economy, both in the developed world and developing world.  In this post I will explain why investors are so reluctant to back engineering ventures.

Engineering performances are slipping, engineers are frustrated, business owners are even more frustrated and billions of people languish in misery because of engineering performance failures.  These are not spectacular failures like Fukushima or Deepwater Horizon.  Instead they are silent failures that have remained mostly out of sight, in many cases deliberately hidden by their owners.

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