November 2011

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What has all that to do with building automation?

Nino Kurtalj
Nino Kurtalj, President,
BrightCore Division
Elma Kurtalj Ltd

Contributing Editor

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How many article abstracts do you find telling you that energy efficiency and conservation are considered key means for reducing greenhouse-gas  emissions?  Very nice, energy efficiency will save our planet! How many people are really taking it seriously? How many people with power to do something are really acting? The truth is that a very small number of people, if really any. 

The simple reason for that is energy efficiency is not something that we can eat, use or directly trade with it.  It is something that will affect us in the more or less distant future. For a lot of people, it seems tomorrow is the distant future! That is my experience.

Is that really a truth? No, energy inefficiency is really affecting our daily lives, our monthly pay check and bills.  It is not just about global warming it is about our jobs and GDP, surplus and deficit. It is about how we use the energy that we are more or less importing. Energy is the blood of our economy, not money. So, how did it happen that we misunderstand this two facts? Probably, people who understand money do not understand energy and vice versa. It is not unusual that different technical disciplines use different measurements for energy; kWh, joule , ergs, calories, Btu.  Therefore, such misunderstanding is understandable. 

A long time ago we lost the understanding of where our wealth really comes from. Our civilization virtualizes everything, even the monetary policy which for years has no longer been based on the  gold standard. It is absolutely virtual. Today, everything is virtual except poverty.

So, how does everything work today?  Governments need to pay for services like schools and hospitals, the military, and so on.  The source for funds is the collection of taxes, and that is the way these expenses are covered. Unfortunately, the amounts collected are never enough to cover expenses. So governments borrow from the banks and individuals, and pay interest on the money they borrow. The total borrowed money is the National Debt. This is the model happening throughout our world. 

Three years ago when the financial crises started, government actions just attempted to  prevent the collapse of the banking system. They were not ready to deal with the primary fault, which created the problem. Today, people finally understand that the system is rewarding the people who really created the crisis, and that the system is doing little if anything to help the victims. That is one reason why we see people on the streets. They understood!

Truth is that banks create both new money and debt when they make loans. Without the money creation process, without doing anything else, the money supply would collapse. However, governments are still able to create more of their own money. In plain english, somehow governments outsourced money creation to the banks, and that is one of the biggest causes of our current problems.

To fix this situation the government itself has to create and spend the money. Instead of propping up the banks, which is not a sure way of fixing the situation, since money created by the banks has on the other side loan, the government has to create the money since that money has on the other side direct new value. How could governments create the money, which could be spent on building and fixing our infrastructure and the average Joe's living standard? Simply, we have to go to the roots of everything. Throughout history, nature was always a source of wealth. By managing and producing energy, we are able to reengineer the national debt.  Such processes will help in reducing our oil dependency, and will create new jobs in this new industry of energy conservation from simple insulation of homes and offices to energy usage management. Banks should serve our society by handling people’s accounts.

If it is so simple, why are politicians not doing it? Why are they not governing on behalf of the people who elected them?  Did you ever hear of any political campaign not having a job mantra?  If they know what we like to hear, why are they not using the Energy/Jobs/GDP/Surplus/Deficit model, to create money the proper way? The only reasonable answer is that they are educated not to care. Since in the global picture, it is not important where the jobs are created. This is not the most important thing for our global financial engineering economy. In this global economy, profit is a global thing too. Therefore, there is no more local economy. It appears that the local economy exists just for the average Joe, the one who is looking for the job. Everybody else gets their pay check from global corporate accounts. The problem is the average Joe is a typical consumer and represents the majority, and he is becoming extinct. To sustain the system, we have to sustain the average Joe!
The unwritten rule of business to produce it cheap and sell it expensive is losing ground if the average Joe is broke, and stock option owners will have to forget the profit right-now-not-tomorrow model.

In such a concept, there is very little need for innovations, this model just needs financial accuracy and good transportation logistics.  Unfortunately, if the average Joe does not produce and earn, he cannot  spend. To help him to produce, we need innovations. There is no future without innovations. There is no real growth without innovations and production. Average Joe has to produce new value to be able to be a reliable consumer, and the government should, by creation of legal structures and support of energy-related innovations, create money.

We need a new deal. It will not be a new dam or road it has to be a new energy model which will create money based on smart grid indicatives. We need it now not tomorrow, since it could be too late if the processes do not happen quickly.

Unfortunately, very few people really understand the genuine power of innovations and creation of money. Mr . Steve Jobs was one such person. He was living the innovations. Somehow, he could  push the concepts which really changed the world. I believe it was very hard at the beginning, but as he succeeded in breaking the speed of sound the rest of the voyage was a pleasant glide. Why we do not have more such people? I am sure it is not just about these exceptional people it is about an environment which is not able to understand real needs. In most cases, circumstances create great people, but great people create circumstances too.

Control Solutions, Inc Do we have such people in our industry? Do you know someone who has the power to do the change through innovation, which will affect all of us, as Mr. Steve Jobs did? I am not trying to answer this question. I am just putting it on the table. It is a time of change, if we do not do it, we will continue to suffer without seeing any way out. We have to change a paradigm. We have to do it now.  

For years corporations were moving most of the production from the developed world to cheaper countries. I am not an economy expert, but products manufactured overseas are helping other economies to grow but not the consumer one, and at the end there are no more consumers.  More than that, through time, the ability to produce will be lost forever in consumer countries. The sides are changed, are we ready for that change?

If we look into the trade balance structure of developed countries, we can see that year by year the deficit increases for energy.  Eu27 from November 2009 to November 2010 increased by 19%!!!  In the same time, the manufacturing goods surplus rose from 156bn to 142bn.  If we look at US data, we can see that the US economy for the last 30 years has been in a deficit, and it is growing every year. This deterioration in the trade balance (the difference between exports, which create jobs, and imports, which eliminate domestic employment) is reducing employment, especially in manufacturing and other industries producing traded goods. Furthermore, by combining the trade deficit with the energy deficit, we are creating an irreversible process of destruction. As we see the deficit grow rapidly in the future it will result in the continuing global financial crisis.  Although financial markets will in a critical moment begin to recover throughout the world, the real economies of many developed countries will remain in recession. Are our governments understanding where we are going?

The steady growth in the US trade deficits over the past two decades eliminated millions of U.S. manufacturing jobs. Growing trade deficits eliminate good jobs and reduce average wages in the economy. That is a reason why we see people on the streets now.

We see that profit-driven corporations are not seeing people within national boundaries as their consumers. They have a much wider understanding of who the consumers are. Corporations do not have a nationality, anyone  who consumes is a member of their Consumer Nation, and all have just one rule.  Production will be arranged where the prices for production are the lowest.

However, what has all this to do with the building automation and energy-efficiency industry?

Clearly, energy usages and management as well as the production and conservation of energy will be one of the key drivers of our future wealth or poverty.

One EIA study shows that the US economy today used half of the energy to product each real dollar of GDP compared to the 1970s.  It is not that nothing is happening!  However, since a structure of economy changes from production to services, most of the new value is produced through financial services instead of manufacturing.  What we see now is that services' products are not really touching regular people.

First of all, by lowering of the energy consumption, we are lowering our deficit directly, second we are creating new jobs.  For example, Denmark in the 70's was importing 100% of their energy, today they are exporting energy, by 2050 they will be free of fossil fuels. The wealth of the nation is directly connected with the way we treat energy conservation and consumption in general, and the government through their institutions has the biggest responsibilty in the process.

If that is so clear, why is the process not faster? There is a simple answer. Technical people are not running the countries and corporations. Business and finance people are in most cases very far from the technology, but they understand very well law and finance matters. These lobbies are ruling the world by utilizing their understanding of things.

As an industry we have a very low profile. Combining that with the daily routine, and earning speed difference, compared with the financial industry earnings makes our industry generally unattractive.

In our business, measurement unit is a week, month, year. Financial people are sometimes acting in milliseconds. We are very far distanced  worlds. Our time fractions are at a level of day, max hour. They are thinking milliseconds. We are just too slow.

Therefore, some other model of our existence should be delivered. We have to find a way to make a situation where business people see as clearly as possibly energy data in balance sheets through assets and liabilities,  Once they see their energy inefficiencies as a misused national wealth potential they will act in a millisecond.

Changing low profile behavior means changing a whole value system as we know it. Such tasks could be done through a kind of revolutionary activity. We have to change the way we calculate a new value, and we have to impose new barriers to promote sustainability.  We have to change  the average politician head! They have to be trained for the problems in society that are happening in front of us. We have to return money creation to the government responsibility instead of having it as pure bank business.

As an industry we have to explore the possibilities in the integrations of dissimilar systems, efficiency measurement per KPI like manufacture unit or m2 represented by created new money. This is a new value proposition, which is positioning our industry as a key of all future wealth.  We do not have all the answers, but our contribution could be one of the biggest in the creation of  a new paradigm.

Reliable ControlsThese changes should go much faster, unfortunately the system what we have is not ready to act with decision making towards such wealth creation change.

Our corporate leaders rarely understanding the real business beneath the profit. They more and more rely on Excel data, and the problem-solving situations happen to be a second-class issue. Generally, if something is not in the balance sheet, it does not exist.

My proposition is about changing that fact. It is about moving virtual money created by automation and energy efficiency to a credit potential totally different to the current model. Created money in that paradigm does not have a loan on the other side, instead of a loan we have energy savings as a source of the money. As such, it will affect corporate stock value and the stock owners will be able finally to see that virtual money. We have to become a recycling civilization where the level of sustainability directs money creation.
If we can help them to see the big picture, and how they will be able to create money through energy and technologies through innovations, and in the same time explain how to sustain their business and grow, we will move the mountain.

We willl not be able to do this without the help of consumers and our average Joe; he has to understand how all the energy and automation will help him to have a new job. A job which is not just another expendable service one, but on the contrary the right one, the one which is producing really a hard core, new value, and the one which is helping to lower the national deficit. We have to create from our average Joe, a hero. If we succeed the change will be tremendous. Second, we need to have on our side the average outdated politicians, we have to help them understand the facts on how to create money without the debt rising.

Today's society as a system is as complex as a modern jumbo jet, and we have to know that the pilots are the right guys, how they are trained and what qualifies them for the duty. Without the right crew, the jumbo jet will continue to go down as it is going now.

As the Internet revolution speeds up delivery of information, it opens to today's people the ability to get unfiltered information very quickly, much faster and more direct than ever. In short, society functions today as a different type of airplane, one which needs more skilled and trained pilots (politicians) than the one used during the second world war campaigns.


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