Is Smoking Good For The Economy?

I read a vitriolic attack by Duncan Bannatyne last week on taxes and it is pretty clear where his opinions lie on smoking. Frankly, I think most people would agree with him - smoking appears to be on the increase again.

In a bizarre situation in the Hubei Province in China, Local Government officials have been ordered to smoke in order to boost the local economy. The edict has ordered them to collectively smoke around 250,000 packets. There are also fines if the officials do not meet their targets or are caught smoking rival brands manufactured in other provinces.

Even local schools have been issued with a quota for teachers. It puts a new spin on kids smoking - they might actually get forced to go behind the bike sheds and have a puff. Of course, this flies in the face of national anti-smoking policies as directed from Beijing but this is aimed at boosting local tax revenues.

There is even a 'special task force' to enforce the quotas and one teacher was put on an 'official warning' when rival brand butts were found in an ashtray.

Capitalism And Other Agendas

While this is one of the most odd scenarios you can imagine, it is not so stupid as it looks. Capitalism and its pursuit will, in tough times, almost certainly mean sacrifice of more progressive values like Green Policy, Carbon Emissions and the search for alternative energy.

Even we practice it. While we loaded up the budget with £500m for a new wind power project, we are supporting the car industry with a £2.3bn bail out. While we put more money into energy efficient homes, we put 2p on the duty for fuel. While we spend on large overt advertising for giving up smoking, we add some extra duty on cigarettes and alcohol - we actually want the extra revenue, not to stop smoking or drinking.

In fact, of the tax revenues raised from alcohol and tobacco, a large proportion helps balance the bill for treating people on the NHS. One could argue the jobs created by smoking in the tobacco industry and the NHS are good for the country just as we rush to save the car industries with bail outs and scrappage when we know the cars contribute to the CO2 emissions in the atmosphere.

Capitalism has the habit of trashing many progressive ideas. People will always find good arguments not to change. Just the other day over a beer, a friend said that there was new evidence to show climate change was a myth and that we are more likely to have a massive eruption of a volcano which will blot out the sky than the damage we are doing as humans. So the message was carry on driving, flying, switching on lights as there is no point in stopping a good thing.

When times get tough, logic goes out of the window. The fancy words from Darling and Mandelson on building a new 'greener' economy is just waffle, as in the same breath they support industries which cause the problems.

The Future Is Here

Some would argue we are beyond the point of actually helping the planet and that is terrible thought as a legacy of this generation. But when you think about it, it's true and there are good reasons to think it. We are fighting more wars around the world with more lethal weapons than ever, we are emitting more CO2 into the atmosphere than ever, we are consuming the world's resources at a higher rate than ever before and we still fight wars over owning resources that may kill future generations as we consume them.

Yet, having realised we have a problem, we do not let up. In fact, we moan and wriggle about the cost of alternative energy research and pay less into it than on current energy research and marketing, while we pay $5 trillion in an instance to save banks.

The future of the world is in our hands but we live for the here and now. Just as you might leave a place tidy after you have used it, the world needs to be on a better course after this generation dies. However, our priorities are nowhere near where they should be.

The madcap and stupid edicts by the Hubei Province officials are exactly the logic we all use. Our future generations may pay a far heavier price than our tax bills for their future because of it. They may not be able to live.

Catching A Dragon

TV's Dragons Den has announced the first failure of one of its investments. JPM EcoLogistics called in the administrators last week. Deborah Meaden and Theo Paphitis had put in £100,000 for a 40% stake and they put in a further £27,500 after an emergency cash call despite asking all the right questions.

No Guarantee of Success

While Duncan Bannatyne was swift to point out all his investments were doing fine, both he and James Caan supported Meaden's views that Investors tend to look at a portfolio of investments to spread their risk and increase chances of a success. Meaden is right in saying '....if you don't take risks you have no economy.'

Of course, this is cold comfort for the Directors of JPM, Jerry Mantalvanos and Paul Merker, who went on the show in 2007 to seek investment in their haulage firm which ran its fleet on bio-diesel. They must have thought, as many do, that having high-profile investors you have a greater chance of success. It is also a body blow to firms which Lord Mandelson has described as contributing to the longer term view of decreasing emissions which seems curious that he has not selectively moved to help save it. But I would have thought it was just another soundbite in the sea of them from the Government at the moment.

The Reality of Business

What JPM's demise shows is that programs like Dragons Den are for entertainment value only. The reality is that there is no substitute for investors who are going to pitch in and support you. Fair play to Ms. Meadon and Mr. Paphitis for responding to the emergency cash call but I suspect that the Directors probably rued the fact their choice of investors was more based around celebrity than hard business facts.

I have no formula of success to reveal here but sometimes in a business like that, it would be wiser to look for investors who are like-minded or in the business. Unless you have a patentable, new technology that is ground breaking, firms of that nature are just a new, green take on an existing model and success was highly likely to be dependent on a few factors - 1) the price of bio-diesel as compared to normal diesel, 2) the comparative cost of maintaining the vehicles as compared to traditional haulage vehicles, 3) the comparative fuel economy of the vehicles but most importantly 4) the response of the competition.

Assumptions are usually the things that conspire to kill a business and sometimes it is too easy for an entrepreneur to get seduced by their own subject or idea to see how the market may respond. The haulage business is very traditional and mature and in austere times when cargo rates have been dropping, it was not the time to introduce premium rates to help satisfy Corporate and individual consciences about the environment.

Cost is king at the moment and so it is not surprising that such noble thoughts fly out of the window.

Sympathetic Investors vs Practical

One way around such a problem of having a fresh approach to an old, established industry with no greater innovation than a green edge was to have sought a long term investment by another haulage or similar firm who may have a vested interest to start a more green business. The reasons for this may be several but the most obvious would be that the industry is going to be forced down that route at some point in the future by legislation, it may be possible to seek greater help from Government if an old-style firm is seen to be practically investing in the future even by shareholding, and finally, it may actually be a really good bet.

How this could have practically helped is by JPM having a more practical investor. For instance, more business might have been able to flow to JPM from its investor on a spill over basis or because it is premium or the investor might have been more amenable to running JPM as a loss making investment for longer for reasons of legislative moves as explained above and by supporting it through the profit of the main company. It also provides a ready 'exit strategy' for all parties.

The problem with Dragon style investors is that they are investing purely on the worth of the business opportunity as they see it and from portfolio of risk point of view. They are not looking at it from a long term compliment to their own business or portfolio of businesses which may have afforded better protection to JPM.

The Dragons have responded with James Caan suggesting in future Dragons will want a bigger stake for their investment and I think that is very indicative of why Dragons are not good investors for everyone, although Duncan Bannatyne has still said his decisions will be made on a case by case basis.

No Right Answer

From an entrepreneurs point of view, there is no real right answer. Investment money is investment money. But as a rule of thumb in my book, if you do not have a patentable idea just a new take on an existing business, then you are going to run at loggerheads with the existing market. For that reason you must, must, must get your assumptions right and test them to destruction before you start because the incumbents in the industry will see you as a threat and treat you accordingly. So your Value Proposition, marketing, service levels and cost base must be able to stand the test.

In JPM's case, clearly they became victim to the desperation within a tight haulage industry. The Value Proposition around green haulage depends on the buyer's belief in a greener future. Today, and very sadly, that is not a strong enough reason to prefer the service when every major firm is looking at its cost lines.

Together with that, and their choice of investors, JPM walked into a trap of their own making. If only they had a business centred around environmentally carrying bank executive bonuses or disposing of bail outs more effectively - that would be a good business to be in.

A Sign of The Times?

I always remember Terminal 2 at Heathrow on a Monday morning for having security queues the length of the terminal and then back round on itself and check-ins fuller than a Wagamama queue at Saturday lunchtime in St Albans. This Monday morning, 12 January, there were no queues - anywhere. Is this a sign of the times?

Travel Industry Being Hit?

I know BA announced good profits last quarter and both Ryan Air and EasyJet still talk bullishly, but this morning, for the second time in less than a few weeks, I have been shocked by the small numbers of people at Heathrow Airport. I wonder if anyone else has observed the same or am I just lucky on timing?

I have some acquaintances in the travel industry and there is no doubt that leisure travel is significantly down with one major travel firm I know experiencing a 40% drop in revenue although conversely their profits had held good.

If my experience is anything to go by, my 6.00am Alitalia Flight to Rome this morning had absolutely no queue at the check-in, no queue at security and less than 25 people on the flight, including the attendants. We got away on time and arrived in Rome early. I can't remember the last time that ever happened to me on a Monday morning - even the traffic heading into Heathrow was very light.

The Terminal 5 Effect?

After the fiasco of Terminal 5's pathetic start up last year, perhaps the collective easing at Terminals 1 & 2 is now visible - I doubt it. In my experience, with the lack of automatic check-ins for most continental airlines, the check-in counters at Alitalia are usually mobbed an hour before the flight by cackling people in expensive suits or ski outfits. So having packed hand luggage only and checked-in the night before, I arrived far too early and could have had an extra 30 minutes in bed.

However, Dunn's Law of Consequential Effect, would have come in to play. This Law states that if you believe that any one of the following are true 1) the traffic will be light, 2) check-ins not full or 3) security queues not long, then if you allow less than rush hour times to get to the airport, then automatically all 3 assumptions will be wrong resulting in lateness equalling the cube of your delayed start time. This has been verified by extensive results in live experiments causing several missed flights and journeys of great stress.

Empty Economy, Packed Business Class

No this is not the title of some fantastical Chinese film. One curious observation of this morning's flight, was that the small, cramped section of Business Class of just 3 rows at the front were full, while the rest of us 'nose-pickers' spread ourselves out luxuriously in Economy Class for the 2 hour flight. Quite how firms can justify Business Class fares costing at least treble the price of economy on such short trips is beyond me, particularly in a recession. But then again I have always believed this for short hops. It's just companies adding to the perks of short-hop managers who are probably finding any excuse to be on a plane in order to look busy while accruing their tiered points for Executive Club so they can have nice holidays and get promoted to Gold next year - maybe even that BA Amex Card they all dream of. And it's not only greedy Bankers, lawyers and Accenture employees at that game. I once flew to Dusseldorf when the ENTIRE Business Class section was taken up by Vodafone employees, several of whom turned up to the meeting I was attending, which was ironic as I was pitching on webconferencing to help reduce their travel costs.

It struck me, as we landed at Rome, that perhaps Alitalia might have broken even on the empty flight thanks to those generous people in Business Class paying well over the odds for their tickets.

Good News for Emissions, Bad News for The Economy

The boom in continental air travel thanks to the likes of Taxless citizens like Stelios, has helped fuel the economy while transporting all those who leveraged their equity to buy a second property at the end of some obscure route. It was all part of the 'cause and effect' spiral of the boom in the last 10 years. Empty planes actually do nothing to help reduce carbon emissions but they do impact the economy as airlines like Alitalia, already a perrenial flirter with bankruptcy, may well have to start reducing flights if they cannot fill enough seats to make money. While this may be a welcome relief to those who are concerned with carbon emissions, it does mean the economy must be suffering all round.

Still, if I get another line of seats to myself on the way back, I shan't be complaining.

Climate Change - Real or Another Scientific Example of Hokum?

If you should Google 'Climate Change' long before you find the faddy sites from 'greenists' you will find information from the FT, the UK Government, Scottish Government, the Met Office, the Royal Society and Chevron. All bristling with compelling evidence that the earth's climate has changed due to human intervention.

In a discussion over dinner, a friend of mine asserted that this is just hokum presented by the green lobby based on misrepresentation of the very facts used to argue the case for Climate Change.

I must admit that I am personally concerned about whether such 'greenist' evidence is exaggerated after watching parts of Al Gore's 'An Inconvenient Truth' which frankly scared the pants off me, but I am also a pragmatist.

Common Sense - My Opinion

The earth has existed for billions of years and in that time there have been many incredible cycles as the earth and then life has evolved and in that long expanse of time there have been periods when the earth has alternated between very cold and very warm, full of noxious gas and even had its poles reversed. That's what we might describe as the phenomenon known as Nature at work. As the late Carl Sagan explained in his excellent series, 'The Cosmos', if the entire history of the planet were expressed as a calendar of a single year, humans appeared at approximately the last hour of the 31st of December. We are THAT new to this earth.

In that short human history compared to the rest of earth's age, humans have subjected the planet to a whole host of things from pollution to nuclear weapon explosions to World Wars to ozone depletion and lots more all of which have never occurred before in the cycles of the earth. Yet all of that has occurred in an amazingly short period of the earth's history and as we consume the vast resources left to us by that history we present ourselves with the conundrum about the earth's future.

The crux of the matter is that common sense says that human intervention has changed the planet because most of what we have done has never occurred before. But the 'Denyer' viewpoint would say that over a long period the earth has cycles anyway and our trivial existence will have no real effect.

'Denyers' see the issue as a question of lifestyle - much like smoking, choosing what cars they drive or wanting a free world to live in - because capitalism, and therefore the perceived progression of humans, does not square with some of the outcomes of believing that we have to do something about emissions and the like. Legacy is not their concern.

The 'Greenists' would assert the question of Climate Change, while rapidly upon us, is actually about legacy. If we do not do anything about the world we live in today, it will be future generations who will be affected by our laissez faire indecision. We will leave them a depleted and uninhabitable planet, and in their eyes, every minute we delay doing something about it could cost future generations years of life expectancy.

This is something I am very much bought into. Our responsibility as humans today is to make sure we leave a planet capable of sustaining human life for as long as possible in the future. Sticking our heads in the sand about Climate Change today will curtail the lives of our future generations, possibly even our next generation.

It's as fundamental as wanting your child to have a good chance, possibly any chance, in life.

The Evidence

A quick bit of research shows there are around 12 assertions by Climate Change opponents and the Royal Society has put together a team who looked at these and using evidence from sources such as the IPCC and the United States National Academy of Sciences, they answered these questions so I summarise their findings - forgive me if trivialise some of their learned research:

• The IPCC is too politicised so does not reflect the uncertainty of scientific opinion

In 2001, the Bush Administration commissioned the United States National Academy of Sciences to assess the IPCC's assertions. The answer was, “The IPCC’s conclusion that most of the observed warming of the last 50 years is likely to have been due to the increase in greenhouse gas concentrations accurately reflects the current thinking of the scientific community on this issue.”

That from the guys who did not sign the Kyoto Protocol.

• Many scientists do not think Climate Change is a problem and have even signed petitions

It's true there are plenty of scientists who dispute some of the evidence either in part or wholly. However, in the journal Science in 2004, Oreskes published the results of a survey of 928 papers on climate change published in peer-reviewed journals between 1993 and 2003. She found that three-quarters of the papers either explicitly or implicitly accepted the view expressed in the IPCC 2001 report that human activities have had a major impact on climate change in the last 50 years, and none rejected it.

Many of the opposing views are those from scientists funded by the US oil industry who even use the very same evidence to assert that action on Climate Change will have the opposite effect and actually bring about changes faster than doing nothing.

To illustrate this illogical thinking, I saw Top Gear the other night where Clarkson showed that the new nickel batteries in the Toyota Primus car cost more to the environment to make than the good they bring about. That's a fair comment. In the same program he also showed that a Primus driven flat out for 10 laps consumed more fuel per gallon than a BMW M3 driven at the same speed. He's right.

But he misses the point - driving BMW M3s or not having the Primus is not an acceptable alternative. Finding a Primus that is less cost on the environment is. Poo-pooing research and progress has been the stable argument of Denyers for years and has stifled the alternatives to the status quo.

• There is little evidence to show that the earth is warming - in fact parts are cooler and some parts of Europe were much warmer previously

The IPCC concluded that global warming is not uniform although evidence shows that the earth has warmed on average by o.6 of a degree centigrade in the 20th century and even pinpointed the 90s as the warmest decade since records began in 1861 and 1998 was in fact the warmest year on record.

There is a problem with this evidence, and I sympathise with the opponents. Over the billions of years of earth history, we have only measured temperature since 1861 - what if every period of a similar length showed a cycle of heating and cooling? And what of these areas that don't rise in temperature? Many argue that urbanisation causes 'heat islands' and for this reason the South Seas and Antarctica have not changed much in temperature.

Certainly, this evidence is not convincing on its own.

• The earth may be getting hotter but this has nothing to do with greenhouse gases such as CO2 - it's the sun's variations

About half the sun's radiation which reaches our atmosphere gets to the surface. Some of this radiation is absorbed and some of it is radiated back into the atmosphere which is then absorbed by 'greenhouse' gases such as CO2, methane and water vapour which helps keep the earth around 20 degrees centigrade warmer than it otherwise would be, this is known as the 'greenhouse effect' and it's what keeps us alive.

Increases in the concentration of greenhouse gases has caused a greater effect. CO2 strongly absorbs infra-red radiation, I know that much from my chemistry and the concentration of CO2 has increased from 280 parts per million before 1750 to 368 parts per million in the period up to 2000, a 31% rise. This is a level in CO2 in the atmosphere which has not been exceeded in the last 420,000 years of the earth's history. Doubters point out that the increase in CO2 is in fact due to Climate Change not caused by it. Funny that it has only risen that sharply since 1750, the dawn of the mechanised world.

The IPCC acknowledge that solar radiation and decreased volcanic activity played a part in the early 20th century, but the latter half was all ours.

• There is no accurate method of predicting temperature change in the future

Good - let's ignore it then and carry on emitting freely. I find that argument in the heartland of all doubters. However, if you just go back and think about the levels of concentration of CO2 in the atmosphere and look at the correlation between average earth temperature rise and the rise on CO2 levels, there would be some cause for concern at least.

• Scientists mislead us by pointing out extreme weather as indicative of Climate Change

Of course, you cannot put down the extreme weather conditions like Bocastle or New Orleans to to the rise in CO2 emissions alone - the earth is far more complex than that. Vast eruptions like Mount St Helena may just as well have been more of a cause. However, if you are happy that's the only answer, fine. Just remember that the IPCC say that there is now a 66-90% likelihood of an increase in volatile weather systems like El Nino due to the rise in concentration of greenhouse gases like CO2.

• There is conflicting evidence that polar ice caps are melting, heck, they're even getting thick in Antarctica

The Arctic ice cap thinned by 40% in the last few decades and by 15% since the 1950s - you can measure that for yourself. The Antarctica has not experienced the same. No worries then. It's just that if the Greenland ice sheet continues to melt at the same rate then a further 7m will be added to sea level. I'm ok, I live inland and on a high point. Those on the coast, kiss your backsides goodbye.

• There is little evidence that sea level has risen due to Global Warming

Sea level has risen on average between 0.1 and 0.2 cm per year during the 20th century, that's about 15cm then overall. I don't suppose the water flows off the corners of the earth when ice melts so expect it to continue. There are other factors which change our apparent sea level such as isostatic rebound but that's more to be with land shape than water level.

• Even if Climate Change is occurring it won't be dangerous

Keep your head in the sand and you'll be okay. If temperature continues to rise at the same rate and unevenly, then common sense, not science, says we are in for some rough weather. Many believe that methane (CH4) has far more of an effect in the atmosphere as a greenhouse gas and that's pretty much down to the output of all those cow farts etc. The problem is that CH4 is short lived in the atmosphere whereas CO2 has a prolonged life. Besides, there has not been a corresponding rise in CH4 concentrations over the period of measurement to explain the temperature rise only CO2 - so perhaps those little CH4 molecules have changed their fundamental properties and started absorbing far more radiation. We chemists, if I may call myself one, would argue that nature says that cannot happen.

• What evidence is there to show higher temperatures are bad for you?

Maybe Newcastle will no longer sell coal but nice claret - is that so bad? Well that's fine so long as the poor Southerners covered in water have the wherewith all to pay for it. As much good as it may bring, there would be corresponding consequences - again it's just common sense to realise that sunbathing at the North Pole is probably not good.

• There are too many uncertainties to make Climate Change believable

Again I can sympathise - the world is an uncertain place and we would sure like to believe that these nasty things cannot happen. Temperature itself is a man-made phenomenon and is simply the approximate indication of the energy given off through the friction of molecules moving about - it averages it out in a form we can understand. But down below are those molecules are moving and colliding and as they heat up they move faster and collide more. We know these tiny things can have incredible effects when summed up and this is the problem. The faster we make them move the more uncertain it gets.

What most agree upon is that it is better to not make them go much faster than they need to.

• The Kyoto Protocol is a waste of time as the US will not ratify it

I don't have to read the evidence here. Like Clarkson's Primus - if attempting to make something more effective at controlling emissions is itself contributing more to the problem (allegedly) then it's no point in trying. It argues that we just sit here and do nothing - that option is for cissies.

It's Not Our Future - It's Their Future

And we are back to square one. What will be, will be - Nature itself is more a cause of Climate Control than man and so we should do nothing. By the same argument, then what are we doing trying to fight the elements like cold, heat, disease, famine and what indeed are we inventing things for if not to better ourselves and survive and thrive as a species if indeed there is no point as Nature will win?

It's the argument that is applied with equal measure to the Third World - it's beyond our personal control so we leave it. Only when it threatens the onslaught of capitalism, democracy and freedom do we actually allow our Governments to do anything. For years 'Greens' have been ridiculed as faddists and using science wrongly, causing more disasters in trying to dispose of toxic wastes in Fjords than the open sea as a for instance.

Well, the capitalist world and corporations have a nasty track record of putting the pursuit of their own goals, well-being and wealth ahead of the general welfare of the world and others. If left to their own devices they would carry on regardless.

The future is ahead and we will be long dead by the time the consequences of our current actions and inactions have taken full effect. So we can either bury it or think, 'Is that what I want for my children or their children's children?'

For all of you who believe that you would die for your children, think only of this - are you prepared to let them die for you? Because that is a very likely outcome of your denial of this issue today.