Great writeup Brian and Great response, Dylan. I worry that the increase in the US cost structure (Like today’s United Interconnect case) will cause firms to decide to exit the US markets altogether because of the lack of ability to compete. This is one of the reasons that pickup trucks are expensive in the US (For more info, check out the Chicken Tax; https://fee.org/articles/chicken-tax-makes-trucks-expensive-and-unavailable/).
It seems that an end result of protectionist policies is that consumers must pay more for inferior products. Because of the nature of demand curves, this means that less consumers are involved in the marketplace and many transactions go unmet. This makes markets less efficient and destroys value in the country that these policies are designed to protect.
You’re totally right in terms of the deterioration of DoD assets because of climate change. After the comments of a few of our sectionmates, I am less convinced of the efficacy of DoD directly lobbying in Congress. Perhaps DoD can still request funding for climate-change related initiatives from the perspective of mission readiness? It’s tough to walk this tightrope, as Steve mentioned below.
I agree somewhat about the reactivity of DoD’s approach to their supply chain, but I do think that the actions they are taking have proactive benefits as well: Putting better processes in place to assess climate impact across the supply chain is itself a proactive step that improve DoD’s footing in response to climate change issues into the future. I do agree that a spotlight on suppliers and procurement processes with respect to the posture on climate change may be helpful, but to other comments I’m not sure how far DoD can go in terms of climate change lobbying without eroding their own credibility.
I agree MWS about the need for collaboration. Frankly, if there was more of an institutional appetite for collaboration in Congress, we could be making more progress on a range of issues facing America and the world today.
You’re right, Steve, about the erosion of credibility that would occur if DoD lobbies this aggressively. Mark and James raised these points as well.
I think the key to removing the political logjam is increasing the alignment of the incentives of all parties involved (see my reply to Lilian’s comment below). This could be done legislatively by (1) expanding cap & trade, (2) providing massive tax breaks to firms who reduce emissions, and (3) subsidizing firms that create emissions reducing technologies. In order to do this, of course, a government would need to be in office that is willing to do these things.
More importantly, even the steps I just proposed only help to realign some of the incentives: Fervent opposition that has every reason to stop climate legislation will continue to exist.
You’re right about the place of a Federal Agency. I’m still wrestling with what remaining options for action that leaves us with.
I agree that this issue is terrifying, and I think it hasn’t gained traction partly because of the nature of the threat of climate change.
The threat of a physical attack is plain to understand, whereas the gradual nature of climate change and it’s effects seem less immediate.
Additionally, it is in the (relatively short-term) interest of certain groups and individuals to deny the existence of climate change. Although it is easy to be critical from the outside, it is no surprise that a political leader opposes climate change legislation when many of their largest donors, especially those in the fossil fuels industry, oppose this legislation. These donors, in turn, oppose the legislation partially because compliance with climate legislation imposes real costs on their businesses, as we saw in the EcoSecurities and Southern Company FIN1 cases.
I think the key to solving this issue in the US is aligning the interests of the different parties toward (1) reducing emissions and (2) carbon recapture technologies that can help reverse the changes that have already occurred.
Excellent point about failed states: There is a school of thought that argues that climate change has already contributed to destabilization in Syria. You’re right about the lack of large scale wars. I don’t want to seem apocalyptic, but my concern is the potential for large scale conflicts between states because of resource scarcity.
Thanks for pointing out the need for DoD to remain unbiased. You’re totally right, is there anything DoD can do proactively, or is the only way to mitigate this growing threat to use the ballot box?
Persuasive points, Mark – I didn’t consider the reputational risks inherent in my proposal. You’ve correctly pointed out that DoD is the world’s single greatest emitter. Can DoD play any proactive role at all, as they are subordinate to civilian government? To Christina’s point, they are being (perhaps appropriately) reactive.
Great analysis! It is so key that HPE is emphasizing their own energy consumption. An electric car is not clean if the electricity it uses is generated by burning coal. In the same way, HPE can still be harming the environment (and their own future bottom line) if their electricity is not generated renewably.
To address your second question, I think HPE should directly engage with policymakers to guide climate change mitigation efforts. Particularly in areas where HPE is a large employer, they should lobby their representatives in both houses of Congress both Federally and at the State Level to demand that action be taken in order to protect their long term interests. This translates to constituent jobs, which representatives are incentivized to protect. They can increase their lobbying power by partnering with other large companies in their districts who also have a measurable financial interest in minimizing climate change and mitigating it’s effects.
I agree 100% on establishing Subsidiaries or other entities in more hospitable areas. I would argue that in the event of a hard Brexit, AstraZeneca (AZ) should go further and relocate it’s corporate headquarters to an EU member state. Though as a American I wish to argue for relocating to the US instead, the current trend of Nationalism and Isolationism is impacting us as well, for for this reason it may not be in AZ’s interest to do so. In terms of recruiting talent, relocating headquarters to the EU, even if only on paper, would help hedge against talent acquisition and retention challenges.
Though it is unfortunate for the UK that AZ may be among many companies to make such a decision, perhaps this presents an opportunity for negotiation: AZ should collaborate with other large UK firms to lobby the government to vote against leaving the EU. This effort would be much less expensive and yield a much more desirable outcome if successful.
I think an event-driven roadmap around key decision points is the way to go here. Though the uncertainty is difficult to quantify, the value of assessing different areas of risk is key. Rassini may even decide to enter or exit the market for certain auto parts based on a probability tree analysis of the different cash flow scenarios under each policy outcome.
Another key point for Rassini to consider is the cost of simply waiting out this administration until the Oval Office is occupied by an executive more amenable to the economic efficacy of trade deals. It may be that case that although there may be a short-term negative impact, the long-term benefits outweigh these near-term costs. This is a question that can be answered qualitatively and can help provide guidance in terms of the degree of “tolerable short-term isolationism” that Rassini can withstand in order to remain a going concern into the future.
Great overview of an interesting side-effect of the digital revolution. I agree that a significant obstacle is public opinion. Simply considering the jobs displaced as automated ships take sail across the world, there will certainly be resistance. Drawing on lessons from the past, one hopes that the erosion of sailing jobs will be part of a cycle of creative destruction, and not simply destruction. Thought difficult to predict, the rise in autonomous sea vehicles may give rise to many other jobs that simply did not exist before, both in an outside of the shipping industry. Simply lowering the costs of shipping goods can potentially increase economic activity by making transactions that were previously untenable profitable.
The consequences are unpredictable, but there is no question that change is coming. How the megatrend of technology and automation unfolds in the shipping industry and who is hurt the most by these changes are questions that can only be answered definitively with time.
This is such a fascinating dilemma. Thought it seems that Reinsurance companies like this will be forced to bear the brunt of climate change related weather events, there is hope for mitigation:
I agree with ELH that predicting mother nature is a quite a challenge indeed. I’m not sure that weather satellites will help much as the risk exposure is over the next few decades, not so much the near future that satellites can help us predict and understand.
To this end, I really like Ryu’s point about mitigating the risk and attempting to quantify it as best as possible. Surely there are other collaborators in large organizations who have a shared interest in (1) understanding the pace of a changing global climate and (2) mitigating the effects of a changing global climate as much as possible.
Excellent writeup. I think that Wal-Mart (WM) should certainly be leading digitization for suppliers and retailers. It is in their interest as they will have lower waste due to spoilage and correspondingly higher profits, assuming that the costs of digitization do not exceed the savings.
More interestingly, I’m skeptical that growers will be willing to support efficiency efforts that go beyond their own fields. Certainly they, just like any business owner, would be eager to reduce the waste involved in producing their product. The growers may perceive WM’s downstream waste reduction efforts as a threat, certainly in the short-term: If consumption demand remains flat, but less produce is wasted, one would expect lower demand from the growers. A solution to this tension is to increase demand for products such as Spuglies and Ecoscraps as a way to utilize the full capacity of the growers, provide better quality to consumers, and increase WM’s cash flow while decreasing their costs.