Ruminating Out Loud

A new study on the installed costs of solar photovoltaic (PV) power systems in the U.S. shows that the average cost of these systems declined significantly from 1998 to 2007. Below is an extract from a news release from Lawrence Berkeley National Laboratory (Berkeley Lab):

Researchers at the Department of Energy’s Lawrence Berkeley National Laboratory (Berkeley Lab) who conducted the study say that the overall decline in the installed cost of solar PV systems is mostly the result of decreases in nonmodule costs, such as the cost of labor, marketing, overhead, inverters, and the balance of systems.

“This suggests that state and local PV deployment programs — which likely have a greater impact on nonmodule costs than on module prices — have been at least somewhat successful in spurring cost reductions,” states the report, which was written by Ryan Wiser, Galen Barbose, and Carla Peterman of Berkeley Lab’s Environmental Energy Technologies Division.

Installations of solar PV systems have grown at a rapid rate in the U.S., and governments have offered various incentives to expand the solar market.

“A goal of government incentive programs is to help drive the cost of PV systems lower. One purpose of this study is to provide reliable information about the costs of installed systems over time,” says Wiser.

The study examined 37,000 grid-connected PV systems installed between 1998 and 2007 in 12 states. It found that average installed costs, in terms of real 2007 dollars per installed watt, declined from $10.50 per watt in 1998 to $7.60 per watt in 2007, equivalent to an average annual reduction of 30 cents per watt or 3.5 percent per year in real dollars.

The researchers found that the reduction in nonmodule costs was responsible for most of the overall decline in costs. According to the report, this trend, along with a reduction in the number of higher-cost “outlier” installations, suggests that state and local PV-deployment policies have achieved some success in fostering competition within the industry and in spurring improvements in the cost structure and efficiency of the delivery infrastructure for solar power.”

Paul Graham has an interesting post on the evolution of judging people, specifically as it relates to prediction of future performance. He argues that the change from state where family influence and bribery were of determining factor to one in which academic credential were used as a measuring stick to evaluate the knowledge one has was brought about by the Chinese. He informs about the benefits that this change brought about the and pitfalls of using credentials as a predictor of performance and output. Such pitfalls of the system, are being overcome by another transformation he sees taking place in the way businesses are organized and how the large scale ones are perceived. A passage from his essay is presented below:

…The use of credentials was an attempt to seal off the direct transmission of power between generations, and cram schools represent that power finding holes in the seal. Cram schools turn wealth in one generation into credentials in the next.

It’s hard to beat this phenomenon, because the schools adjust to suit whatever the tests measure. When the tests are narrow and predictable, you get cram schools on the classic model, like those that prepared candidates for Sandhurst (the British West Point) or the classes American students take now to improve their SAT scores. But as the tests get broader, the schools do too. Preparing a candidate for the Chinese imperial civil service exams took years, as prep school does today. But the raison d’etre of all these institutions has been the same: to beat the system…

The obvious way to solve the problem is to make credentials better. If the tests a society uses are currently hackable, we can study the way people beat them and try to plug the holes. You can use the cram schools to show you where most of the holes are. They also tell you when you’re succeeding in fixing them: when cram schools become less popular. Fortunately there’s a better way to prevent the direct transmission of power between generations. Instead of trying to make credentials harder to hack, we can also make them matter less…In a world of small companies, performance is all anyone cares about. People hiring for a startup don’t care whether you’ve even graduated from college, let alone which one. All they care about is what you can do. Which is in fact all that should matter, even in a large organization. The reason credentials have such prestige is that for so long the large organizations in a society tended to be the most powerful. But in the US at least they don’t have the monopoly on power they once did, precisely because they can’t measure (and thus reward) individual performance.

Credentials are a step beyond bribery and influence. But they’re not the final step. There’s an even better way to block the transmission of power between generations: to encourage the trend toward an economy made of more, smaller units. Then you can measure what credentials merely predict.

These observations are precinct and applicable to this day and age and actually have particular relevance as it relates to not only measuring performance, but also ensuring active engagement is made in broadening one’s usefulness to society. In a previous post, I discussed about the difference between passive and active consumer of information. Performance, as measured by credentials and certification, is an indication of past glory and accomplishment. Even if one assumes that these credentials are well tailored and made “unhackable,” I think the degree of relevance of these indicators have in evaluating a person’s knowledge on a given topic or the mental faculty to think and learn diminishes over time. This is mainly due to the pervasive occupation in a passive information consumer state. To overcome this one has to engage in an active, deliberate, and focused effort to continue to learn and develop the ability to absorb, digest, and apply new information. Hence, one has to transform oneself to an active consumer of information.

The danger I see with credentials and certification is that, specifically because they measure past glory, they can lead one into having an inflated sense of self-worth. If one is not actively engaged in learning, hidden behind the stellar indicators of accomplishment may be a brain that had deteriorated in its ability to ensure good performance now. Personally, I would not do away with credentials and the value put in attaining a good form of education as they still are the best ways we have for ensuring, not just that one has some abstract intrinsic amount of knowledge, but also the necessary basic preparedness and discipline it takes to learn. But, steps can be taken to ensure continual improvement, either self-induced or incentivized.

One thing that never fails to amaze me is the degree of complexity each of these objects, if we call them that, exhibit. The brain contains more than 100 billion neurons that are connected by a complex neural network, the internet is composed of pentabytes worth of data, and the universe is believed to have billions of galaxies. In spite of differences in the expanse of the physical size of these entities, the structure of neural networks between neurons, of galaxies clustered in a super-galaxy formation, and of the internet connections have striking resemblance. They can be represented as a composition of nodes and filaments. In future posts, I will attempt to gather information on the size-complexity-functionality correlation in these networks. For now, for your viewing pleasure, shown below are representations of the three:

Graphic representation of the internet

Neurons in a mouth brain and a simulated image of the universe

What is responsible for world-class achievement? How does success come to pass? The topic of performance and two books by Malcom Gladwell (Outliers: The Story of Success) and Geoff Colvin (Talent Is Overrated: What Really Separates World-Class Performers from Everybody Else) were discussed on Charlie Rose (12/19). It was an incredible program to watch as these two authors have cristalized two notions that I firmly believe are not only contributing, but determining, factors to achieving a goal or distinguishing oneself from others in any field of endeavor. These two ideas are concerned with:  

1. How conducive an environment one is brought in to that helps cultivate the the gifts and tendencies of individuals? Gladwell argues that, indeed, the fabric of recognized or unrecognized support system are behind some of the greatest achievers success. This support system that give a hidden competitive advantage to the high-achievers could come in the form of societal, cultural, or experiential. We have looked at a study that has recently come out that highlighted the effect of socioeconomic status on brain development. Needless to say, this is an example of the the impact of the environment has in endowing some with a structural advantage over others.
2. What role does disciplined and focused work ethic play in breeding success? Colvin argues that this has everything to do with it. In fact, it is not really that of natural gifts and advantages, but the persistent and focused hard-work applied to a field of study or experience that culminates into a world-class achievement. He points out that the building of greater advantage over others overtime through the understanding of past failures and the application of specific effort at addressing them is what leads to differentiation.

These two books, and other related publications, have successfully highlighted the importance environmental advantages in shaping up the outcome of an endeavor. That success is not an accident and a miraculous and immediate confluence of events to catapult one to a high level of dominance over others. It is the building of competitive advantage overtime by capitalizing on the smaller fast-starts given to one at each step of the way. Capitalizing on these fast-starts leading up to world class performance requires the application one’s mind and the discipline and perseverance to continue to improve over a long period of time. This is a prime example of what I would call the laws of incremental returns. In fact, this shall be the second law of incremental returns.

About the books via editorial reviews:

Outliers: The Story of Success (Amazon.com review)

Now that he’s gotten us talking about the viral life of ideas and the power of gut reactions, Malcolm Gladwell poses a more provocative question in Outliers: why do some people succeed, living remarkably productive and impactful lives, while so many more never reach their potential? Challenging our cherished belief of the “self-made man,” he makes the democratic assertion that superstars don’t arise out of nowhere, propelled by genius and talent: “they are invariably the beneficiaries of hidden advantages and extraordinary opportunities and cultural legacies that allow them to learn and work hard and make sense of the world in ways others cannot.” Examining the lives of outliers from Mozart to Bill Gates, he builds a convincing case for how successful people rise on a tide of advantages, “some deserved, some not, some earned, some just plain lucky.”
Outliers can be enjoyed for its bits of trivia, like why most pro hockey players were born in January, how many hours of practice it takes to master a skill, why the descendents of Jewish immigrant garment workers became the most powerful lawyers in New York, how a pilots’ culture impacts their crash record, how a centuries-old culture of rice farming helps Asian kids master math. But there’s more to it than that. Throughout all of these examples–and in more that delve into the social benefits of lighter skin color, and the reasons for school achievement gaps–Gladwell invites conversations about the complex ways privilege manifests in our culture. He leaves us pondering the gifts of our own history, and how the world could benefit if more of our kids were granted the opportunities to fulfill their remarkable potential

Talent Is Overrated: What Really Separates World-Class Performers from Everybody Else (Product Description at Amazon.com)

Expanding on a landmark cover story in Fortune, a top journalist debunks the myths of exceptional performance.
One of the most popular Fortune articles in many years was a cover story called “What It Takes to Be Great.” Geoff Colvin offered new evidence that top performers in any field–from Tiger Woods and Winston Churchill to Warren Buffett and Jack Welch–are not determined by their inborn talents. Greatness doesn’t come from DNA but from practice and perseverance honed over decades.
And not just plain old hard work, like your grandmother might have advocated, but a very specific kind of work. The key is how you practice, how you analyze the results of your progress and learn from your mistakes, that enables you to achieve greatness.
Now Colvin has expanded his article with much more scientific background and real-world examples. He shows that the skills of business—negotiating deals, evaluating financial statements, and all the rest—obey the principles that lead to greatness, so that anyone can get better at them with the right kind of effort. Even the hardest decisions and interactions can be systematically improved.
This new mind-set, combined with Colvin’s practical advice, will change the way you think about your job and career—and will inspire you to achieve more in all you do.

Via Wordle, below is a word cloud representation of the blog entries here. I’ll do this every week. We shall see the evolution in the composition/vocabulary of blog entries over time. Who knows, LIRs may find working their way in to this. On this first one, what is very striking is the pronounced usage of the most commonly used English words. It would be interesting to compare this with some other postings…

Here is a post at Condé Nast Portfolio about David Plouffe, who Obama referred to as being the unsung hero of his campaign. In a way, the sucess of the campaign they effectively put together is a good manifestation of the laws of incremental returns, one that was built by a gathering of resources and the seizing of opportunities at a sustained focus and drive over a prolonged period of time.

Seth Godin has a post on the high cost of access to source or moment of  information:

More than ever, there’s a clear relationship between how new something is and how much it costs to discover that news.”

One point of view that needs to be highlighted, however, is, in the current times, the acceleration between the limited introduction and broad distribution of the latest item/piece of information is high. So, what used to be the latest it “to be or have or know” does not stay that way for far too long. If one is to do the cost-benefit analysis of such acquiring of the now and waiting, a lot more people would probably be best-served if they were to be patient. This is a case in point for laws of incremental return (LIRs). While the high cost of living in the now may be acceptable for the affluent, for a great number, the immediacy and gratification of being a part of the latest it “to be or know or have” is simply too costly to justify the utility gained from it. Being patient allows one to experience a far smaller cost, give time for reasoned reflection on differentiating between need and want, and choose between multiple offerings giving similar utility. The urgency to consume and consume indiscriminately is partly to blame for the massively credit-ridden and troubled economic landscape we find ourselves in. Go ahead an wait it out. That latest expensive gadget that seems to be cool is soon going to be everywhere. If you wait long enough, there will come an even better one. The learning from this is that utility of your time/money is directly proportional to time. Let that be the first law of incremental return (LIR).

The old adage has it that patience is a virtue. In the day and age where attention is continually being interrupted and many of us are driven by the desire to find the shortcuts in life there is a case to be made for patience. I shall aspire to document thoughts and information that will go into the formulation of what I call the laws of incremental returns (LIRs). An attempt will be made to make the case for sustained development and application of ones faculty and its relative importance in achieving objectives. A quick brainstorming of areas of interest the will be explored in pursuit of formulation of LIRs include, but not limited to:

•          Economics: Aggregation and compounding

•          Education: Adaptation, refinement, and advancement of knowledge

•          Certification, accreditation, and access to opportunity

•          Research undertakings: Influence of past precedent of the discovery process (we stand on the shoulders of giants)

•          Interpersonal and inter-community relationships: The building of trust

•          Growth of faith

•          Governance: Institutional organization and efficiency

•          Physiological evolution and organization

•          Cognitive development

•          Decision making

•          On the functionality of the union of components being more than the sum of the individual components

•          Health and endurance

•          Creationism and evolution

•          Marketing, traction of ideas and popularity

•          Intelligence and smartness

•          Democratization