Wednesday, September 12, 2007

The chicken & the egg: supply and demand

This very short article got me thinking about how consumer-oriented business works these days. First, a blurb:

One of British capital’s top tourists destination-Science Museum-... will showcase two high performance green-machines that can reach speeds of up to 150mph.

Developed by researchers at Imperial College for the Formula Zero competition, the hydrogen powered car runs off hi-tech hydrogen fuel cells. A full-size version could accelerate faster than a Porsche.

The car enthusiasts will also be able to see Warwick University’s 95% biodegradable and Recyclable racing vehicle with a shell sourced from hemp, tyres from potatoes and cashew nut shell brake pads.

Since I have been frugal with the images lately (for no reason), I submit, for the sake of education alone, a picture of a Porsche (2008 GT2 to be exact):

Perfection... but I digress.

I love the idea of eco-racers and other esoteric uses of non-petroleum fuel. They generate excitement uniquely and open people's eyes to the CAPABILITY of the existing alternatives. Both of these alone are great reasons to continue a pursuit like this. But I also like it for a completely different reason.

How does business work in 2008 (I'll call it that since everyone seems to live a year ahead of themselves)? To answer this question, think about where and how people spend their money outside of absolute necessities. There is no reason to figure out where this money comes from, how it could be spent differently or how much each person spends for this example. We're just looking at where money that doesn't keep you alive, sheltered and basically fed.

This money, regardless of source, tends to flow quickly out of your possession into the hands of companies that sell products and services. Maybe you splurge on a pair of jeans or sunglasses, maybe you let yourself buy that sexy little iPhone, maybe, because you were good, because you deserve it because you work so hard, because why should you have to live the ascetic life?, you traded your 4-year-old piece of junk car for something that smells like new polymers and redefines (kg x s)/m^2. Maybe you did all three. You devil you.

What you did in all those cases is fall prey to some type of marketing. Am I judging or condemning you? Not at all, marketing is effective. You don't want the iPhone because you have a primal need for wi-fi connectivity and real-time traffic, you want it because it looks like sex and works like a charm in the pure white womb of the Apple store. Businesses vying for your surplus cash (also known affectionately as "available credit") have to convince you that you need this, they have to install a sense of desire or you will have no reason to buy what they sell.

What I am saying is not new or creative or innovative; I am stating the (hopefully) very obvious. Here is where it gets interesting...

Right now, no one really NEEDS a hybrid or solar panels or hydrogen fuel. Gas can be $2, $3 or $4 and your day-to-day life does not change. The earth can gain 1 or 2 or 3 degrees and, honestly, you probably won't even notice. If you save energy, consume less, re-use more and recycle, you're doing it altruistically and I commend you for that.

But, put plainly, we're not going to improve our general environmental situation with altruism. We're going to get there with money, lots and lots of money. And where is this money going to come from? Trees. That's right, big money trees....

Plan B, however, has the money coming from the same place it always does: the marketplace. Without demand, there simply is no product. If you have a product to sell that does not immediately alleviate some condition, you create some kind of demand for it through creative and/or persistent marketing.

So if you have supply and no demand, you create demand. If you sense a demand without a product, make the product. What if there is no demand AND no supply but a clear reason for both to exist? You have to get creative. You create the demand (the vehicle) without a product (the fuel).

Make things you just can't make the old way. Give people value and innovation and creativity. Build it for the early-adopters, the ones who have to have the the have-to-haves. Open the source up, reach out to the people for ideas, start internet forums, cruise the blogs. Hold eco-racing events, invite people to drive your new ideas, get the buzz going. Explore every possibility, watch all the technologies, experiment perpetually. Uniquely design them, make them stand out and grab people's attention.

Understand that it is the right thing to do. Then understand you will make gobs of money from it. The first company to put it all of this together in a truly sustainable package will set the bar... and rake in the cash.

Make these vehicles and the supply, the power to move them, will follow.

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