Cold North Pole decisions (rational decision and bounded rationality)

1st of may, 2014. The first barrels of North Pole oil arrive in the Rotterdam harbour (volkskrant, 2014). As part of a larger campaign against oil drilling in Nort Pole waters, Greenpeace tried to block the deliverance of the oil by ship. The action resulted in 30 greenpeace crewmembers arrested, including the captain of the Rainbow Warrior ship. 

The North Pole drilling plant is owned by Gazprom, the largest (and only) Russian gas and oil company. The company locates and extracts oil and gas, in order to expand the sales of these two. With the most prominent stocks depleting all over the world, it is important for Gazprom to search for new stocks of gas and oil by all means to keep maximizing sales. This is how they found a stock of oil in the North Pole area, started drilling and became the first exploiter of North Pole fossil fuel stocks. The company aims to improve stock value (Victor, 2008)

This message aims to show how rational decision making (1) and rational organization processes (2) finally lead to actions, using the example concerning Gazprom described above. Using the 2003 article by Jones (bounded rationality and pilitical science), the two processes are motivated. To conlcude, a quick idea will be givin on what factors can be highly influential on Gazproms' rational organization process.

This decision by Gazprom can be seen as a rational decision. This actor has moved to action, which can be explained by three processes (Elster, 2007) that may have played a large role when taking the decision:

- Given the beliefs on the world Gazprom operates in, the action extracting oil from North Pole area's is optimal (expanding sales). 

- Engineers/economists at Gazprom most likely came up with evidence that support the beliefs described above (eg. expected profit)

- The evidence provided must result from an optimal investment in information gathering (eg. possible scenarios on politics, economic processes and consumer behavior)

Another way to look at Gazproms' decision is using the bounded rationality theory that Jones(2003) brings forward. Jones names different aspects of bounded rationality at the organizational level, in other words, an environment of limited information, can constitute a rational decision, but bound to the limits of this environment and the information one is able to obtain within the environment. 

An example of this can be described by the Agenda Setting aspect of bounded rationality. Greenpeace is something that must have been on the agenda of Gazprom, though in spite of Greenpeace's actions, Gazprom continues their drillings in the North Pole. From this we can conclude that Gazprom has put Greenpeace in a less prioritized category. 

Another underlaying process that motivates Gazprom for continuing extracting oil from the Norh Pole is the periphal(parallel) processing aspect of bounded relationality, stating that this type of processing describes how companies deal with multiple streams of input simultaniously, using the method that the company is used to (the known solutions). Serial processing states that a firms' search for new solutions will only occur if past prepared solutions are recognized as invlalid. So far, Gazprom is doing well at reaching its' goal (increasing stock value). Their current activities in the gas and oil industry are succesfull and therefore there is no reason to alter their organizational routines: locating and extracting oil and gas. It has always made profit and greenpeace actions have not caused serious damage or problems to the company before, so why change would Gazprom change behaviour?

Appearently, Greenpeace has little influence to change the agenda setting of Gazprom. So what could be influencial? Victor (2008) describes Gazproms future as challenging, mainly due to uncertenties in oil and gas prices and political pressure. American and European regulations can highly influence Gazproms' sales. It is likely that these subjects will have a much higher priority on the agenda then Greenpeace has. 

References:

Jones, 2003. Bounded rationality and political sciences

Victor, 2008. Gazprom: Gas giant under Strain.

Volkskrant, 2014. Consulted sep 2014.

http://www.volkskrant.nl/vk/nl/2664/Nieuws/article/detail/3646403/2014/05/01/Russische-olietanker-houdt-Rotterdam-en-Den-Haag-bezig.dhtml

Numbers, numbers & numbers. (maximization of profit)

I grew up with a little book. I lost it while I was aging but, for last christmas, my mother gave me a new copy of this book: The little Prince.

There is one thing in this book that amazed me so much; it is the part where the author explains how grown ups only see numbers as valid answers. If you introduce someone to your parents, what will they ask? "How old is he?", "What grade is he in?", "How much do his parents make?". They will not ask what his favorite sport is. What his favorite food is. What he did on holiday last summer. How have numbers become so important to the grown ups?

This is what I see happening around me. Numbers are more and more important. How much do you make per hour on your side job? How many comissions did you do? How much profit can you make out of your business? It's about maximisation. Concerning the above, I don't think it is weird at all that Shell is one of the most popular companies to work for in the eyes of the average Delft student. you can do the biggest projects, the farest away over the world, travel the most miles and lay the longest pipeline. A friend of mine was speaking of a project he was working on. "This is really one of the coolest projects I've worked on so far!". "Oh how's that? Please explain". "Well it's an 80 Million dollar project, the most expensive i've worked on!". - Maximization, again.
This maximization, it's nothing but a maximazation of profit. "0,1 % of the 80 million goes to the construction management consultant (which is my friend), can you see how much that is?!".

What happens if this maximization becomes standard? I could see culture and arts die. Why subsidize a local workshop facility? Put the same money in a fund, wait a couple of years and get your profit. Bet this artist could not make the same profit within the same amount of time? Nope. But could the fund inspire as many people as the artist could have? No, because the fund is an abstract. It is nothing. The money is untracable. What did you sponsor exactly with your money?

However, not all maximization of profit is bad. My position in this is: look at the actual reward. This is something different then profit. I built my own music speakers once. It took me 3 weekends. Cost me around 120 euro's in materials. 3 weekends is 3 * 2 * 8 = 48 hours. I earn 10 euro's per hour when at my side-job, so in total these speakers gave me a profit of  -600 euro's. But the reward was outstanding. I have unique speakers, I custumized them according to my own preferences. I learned to work with wood, paint, and laque. I learned to wire and solder the electrical components. I cannot prove if the reward compensates for my "loss of 600 euro's". It does feel that way though. For me that's enough.

So, how rewarding is it to invest in a fund? No idea, because I don't know what I invested in. How rewarding is it to sponsor the local football club? Well, look at the smiling faces of this boys football team with brand new outfits. I wonder how rewarding it will  be, if all coorperations that run on maximation, run on reward? I can't even imagine. 

This puzzles me: Hopping on & off the train.

We all have been there. Slowly the train comes to a halt. You press the button and with a PSHHHHH the door pushes an opening for you to get off the train. As soon as the door opens, a wall of people appears. We now have a very clear example of conflicting interests:

- I want to get off the train -> <- The wall of people wants to get in the train.

I take the first step to the outside of the train, hoping that the wall of people notices that I would like to get out. The wall of people does not move. I try to make eye contact with the wall of people. The wall looks back at me, and starts to move towards me. They seem to be in hurry, which I can imagine. The conductor will blow his whistle in a minute. However, I need to be off the train in time, since staying on the train means that I will see the train doors close from the inside, meaning I will miss my destination. Then the wall breaks. One or two people squeeze out of the wall, quickly jumping in the train. One of them bumps into my shoulder; train doors are not dimensioned for two people entering and one person getting off at the same time. More people squeeze out of the wall and enter the train, and I feel that if I don't throw myself into the wall, hoping that I will break through, I will be stuck in this train for the rest of my life. I lunge myself in the crowd. People react agressively, pushing me to the left and right. I firmly put my feat on the floor and push through. I pop out of the wall, like a zit that is pressed out with brute force.

Now, the puzzle here is: What is the cause for this seemingly inefficient behaviour to happen?

I have three possible explanations for this.

1.
Education. Maybe people are not educated well enough on how we can effectively hop on and off the train. Parents could give wrong examples, where children adopt these. In Singapore, I've seen an attempt in education:

The arrows clearly indicate where to stand. Unfortunately, also in Singapore I have experienced the phenomenon described above. Maybe the the arrows are not big enough?

2.
Stress and comfort. Morning traffic in Holland is hectic. Recently, the president of the Nederlandse Spoorwegen stated in an interview that delays are something that are becoming normal when traveling with the NS; one cannot expect trains to run perfectly on time anymore. One cannot expect to have a seat anymore as well. Therefore, having a seat in the morning is a luxury. This is why people may want to rush in the train; they are stressed and they seek comfort.

3.
Anonimity. Especially in big cities, public transport is used by so many travellers that one can remain anonymous within the mob. The more anonymous, the easier to commit a crime, the less the risk someone will personally prosecute you. This makes bad behaviour easier to commit as well. "I don't care if these people think I am an ***hole, I want my seat in the train". When people recognize you, this becomes more difficult.

Now you may wonder, how is this an industrial ecology puzzle? In line with this course, we could see the use of a train as a social system, just as how we can see a community, city or country as a social system. In the social system train, I see a certain solution to a multi-actor problem (me and the wall of people). We have conflicting interests, and there is little time to try and see how other actors see the same problem, and what their goals and interests are. This seems to be an issue in Industrial Ecology as well. Most Industrial Ecology problems involve many actors with many different goals and interests.

As for the 3 explanations above, maybe these explanations apply in real industrial ecology problems as well? Why does the management of a large factory with a lot of waste heat not use this heat in a symbiosys?

1. Maybe the management has not been educated/informed about the consequences of heat loss, or the efficiency we could reach when heat is used
2. Maybe a large intervention in the factory causes stress for the management, who are constantly pushed to achieve greater profit.
3. Maybe the management does not need to engage in a symbiosis because their factory is not dependant on a good image anyway, it is an anonymous factory.

To conclude, both small and big problems seem to be ruled by actor behaviour. How can this behaviour be changed for the good? And then what is the good?