Deep Water

Posted by: Sara on Friday, July 2, 2010.



Imagine you are a Petroleum executive in the CEO – Suite. It’s the end of the 3rd Quarter and your company’s numbers don’t look good. You didn’t make your revenue targets. Wall Street is not impressed and your price per share is going down. Share holder pressure is up.

Meantime you know that Oil reservoirs are decreasing world-wide. The proverbial low hanging fruit has been picked and you have to invest in exploration in uncharted territory. With the exponential growth in people around the globe who expect a modern lifestyle with all its comforts, consumer demand is on a steady rise. So is competition and so are your migraine headaches.

One of your most talented managers from the deep water exploration division comes to make a presentation. It’s a break-through. His team has discovered a new source of oil -- a deep well. The technology you’ll need to employ to tap this source is unprecedented and largely untested. The well is 5,000 feet below sea level and you’ll be drilling more than another 18,000 feet into the earth’s crust. But the reservoir is huge and represents a massive revenue stream. It’s risky yes, but the risks of losing market share are greater. There are safe guards you could employ, but they are expensive, not legally required, and will cut into profits, and profits are you number #1 responsibility to shareholders.

What do you do?

You say yes to Deepwater Horizon. The name of your company is British Petroleum.



What happens when a company defines its success by only one metric? In their relentless pursuit of profit, BP perpetrated one of the greatest environmental disasters in history and the full extent of the damage is still unknown. We do know that there is irreversible harm done to the birds and fishes and ecosystems of the Gulf as well as the livelihoods and traditions that go with them. What will the 5th generation Louisianan Shrimp Farmer do now? The distributor of New Orleans’ Oysters? The NYC restaurateur that showcases them on their menu? I had my teeth cleaned last week up here in the NorthEast and my dental hygienist is mad, “Those guys need to pay that shrimp farmer!” she steamed.

Deepwater Horizon was not a single event where BP ran into a bit of bad luck. Instead, it demonstrated a deeply ingrained pattern. As the New York Times reported in its lead story on July 13, their “Problems were not an anomaly, but a warning that BP was taking too many  risks and cutting corners in pursuit of profits according to analysts, competitors and former employees.” A safety specialist reported, “they were very arrogant and proud and in denial . . . It is possible they were fooled by their own success,’” having grown into a company with “soaring profits, fat dividends and a share price to match.” Describing BP’s Thunder Horse off-shore platform disaster in 2005 an engineer on the job reported, “BP’s bosses rushed construction on the vessel moving it out to the Gulf well before it was ready ‘to demonstrate to shareholders that the project was on time and on schedule.’” It was not.


I find the following fable as told in the movie, The Crying Game instructive in understanding the behavior of companies like BP:




The Scorpion and the Frog


One day, a scorpion looked around at the mountain where he lived and decided that he wanted a change. So he set out on a journey through the forests and hills. He climbed over rocks and under vines and kept going until he reached a river. The river was wide and swift, and the scorpion stopped to reconsider the situation. He couldn't see any way across. So he ran upriver and then checked downriver, all the while thinking that he might have to turn back. Suddenly, he saw a frog sitting in the rushes by the bank of the stream on the other side of the river. He decided to ask the frog for help getting across the stream.

"Hellooo Mr. Frog!" called the scorpion across the water, "Would you be so kind as to give me a ride on your back across the river?"


"Well now, Mr. Scorpion! How do I know that if I help you, you won’t try to kill me?" asked the frog hesitantly.


"Because," the scorpion replied, "If I try to kill you, then I would die too, for you see I cannot swim!"


Now this seemed to make sense to the frog. But he asked. "What about when I get close to the bank? You could still try to kill me and get back to the shore!"


"This is true," agreed the scorpion, "But then I wouldn't be able to get to the other side of the river!"


"Alright do I know you won’t just wait till we get to the other side and THEN kill me?" said the frog.


"Ahh...," crooned the scorpion, "Because you see, once you've taken me to the other side of this river, I will be so grateful for your help, that it would hardly be fair to reward you with death, now would it?!"


So the frog agreed to take the scorpion across the river. He swam over to the bank and settled himself near the mud to pick up his passenger. The scorpion crawled onto the frog's back, his sharp claws prickling into the frog's soft hide, and the frog slid into the river. The muddy water swirled around them, but the frog stayed near the surface so the scorpion would not drown. He kicked strongly through the first half of the stream, his flippers paddling wildly against the current.


Halfway across the river, the frog suddenly felt a sharp sting in his back and, out of the corner of his eye, saw the scorpion remove his stinger from the frog's back. A deadening numbness began to creep into his limbs.


"You fool!" croaked the frog, "Now we shall both die! Why on earth did you do that?"


The scorpion shrugged, and did a little jig on the drowning frog's back. "I could not help myself. It is who I am by nature."


Then they both sank into the muddy waters of the swiftly flowing river, dead and gone forever.

Here’s my point: It is the nature of the publically traded multi-national corporation to relentlessly pursue profits despite promises to the contrary. Like the scorpion, the company is not evil; it is simply designed to behave according to its character.


The charter of a company like BP, as it defines itself, is to maximize shareholder value. I submit it’s time to create a world where our interpretation of what this means shifts from shareholder value to sharing bold values. Bold that is relative to the culture of greed that we find ourselves in presently. For unlike the Scorpion, we humans do have the power to change our behaviors in accordance with our values. Here are some of the essential values shifts we need now to avoid the deep waters of BP-like profit-driven irresponsibility:


From:                                                                                  To:


* Shareholder Value      -->                                                    Sharing Bolder Values
* My profit                    -->                                                    Our prosperity
* Greed                        -->                                                    Generosity
* Hubris                       -->                                                     Wisdom
* Arrogance                 -->                                                     Humility
* Denial                       -->                                                     Accountability


A caveat is due here. I love business. I love the pace, innovation and entrepreneurial spirit of it. I’m in a third generation of CEOs and have run my own small business for two decades. My father, an immigrants’ son, came home from four years in the South Pacific during World War II with a few dollars in his pocket and took the risk to start a semi-conductor distributing company. With literal good fortune, he caught the Personal Computer Tsunami wave and prospered ultimately creating 200 jobs and steady growth blessing my family the privilege that we have enjoyed since. I have great admiration for contemporaries like Dean Cycon CEO of Dean’s Beans, John Broucek of New England Naturals, and the larger Patagonia, which, as my colleague Darcy Winslow says is, “one of the few companies that has figured out when ‘big is big enough,’” who use the prosperity of their businesses to create jobs, support communities and respect the environment. My cousin Andrew Merz has a deck-building business in Baltimore that employees ten and has a reputation for quality and customer service.

“I don’t need to grow profits every year,” Andy told me. I stay small by intention, keep my profits at about 8-10% a year, pay my guys the best salary and benefits in the business, and send my kids to good schools. I like to have time to coach soccer. It’s a good life -- I don’t need more.”


By contrast, Capitalism as defined by Wall Street’s metrics – where profits are required to grow exponentially quarter by quarter for companies to satisfy investors – is in direct conflict with Nature. Unlimited exponential growth in Nature is the domain of the cancer cell. Everything else grows to a height and then seeks its own sustainable limit. Whether that’s our bodies, a population of deer in the forest, the number of fish we can sustainably harvest, or levels of C02 in the atmosphere. All can enjoy the bounty of life while living in balance with nature.


I have some experience with large corporations to back up my views here. In the 90s and for the next decade plus, I started and ran a consortium of multi-national companies. Members included Nike, Ford, Xerox, Harley Davidson, Detroit Edison and more including, I’m sad to say BP. We worked with visionary pioneers inside these companies who – at some personal risk to their careers -- were determined to be business leaders for sustainability. Their aim was to learn from each other in efforts to decrease carbon footprint and use of toxic materials while increasing innovation in design of “green” products and services, with the goal of pursuing the “triple bottom line” of healthy profit, people and planet. It worked to a degree, with Nike for example shifting from being a labor-practices pariah to an acknowledged and awarded leader in Corporate Social Responsibility and products designed for sustainability. But ultimately for the majority of these companies, their Scorpionic nature prevails despite the best efforts of individuals within them. Witness Deepwater. The calculus is simple: at the proverbial end of the day in the CEO suite, when profits compete with people or planet, profits win. Period.

I participate in a monthly meeting via conference call with several of the Women leaders from our consortium, people I’ve worked with for years. I have huge admiration for their brilliance, integrity, humor and courage. As an example of their stature: one ran a multi-billion dollar division at a Fortune 100, another was the CFO reporting to the CEO of a major oil services company, another a PhD chemist and 25 year veteran of a world-leading Petroleum company, another an engineer and manufacturing leader at one of the Big Three. In our call this month we spoke of the BP debacle and our views having worked within and/or for these mega companies.


My co-founder of the group, a professor at a prestigious Business School began, “Do you think we were being duped by BP all those years and that they just used us for green-washing, or do you think they weren’t intentionally malicious, just full of arrogance and hubris?”


Our PhD petroleum company veteran responded, “There is too much fragmentation in these companies. Risk is assessed by one group, management and investment decisions by another. Communication is poor and no one wants to imagine the worst.” Our finance expert continued, “I was at the IFC recently and the talk was of stakeholder engagements and strategic community investment. Trying to bring these metrics into the calculation of NPV (net present value) for the issues we all care about. But the bottom line is these companies will not self-regulate. And why are we trying to re-define old measurement in a failing systems instead of designing things in a completely new way that works?”

Then our auto engineer spoke up, “Do we need a worst disaster than the financial crisis and now this? Where’s the leverage? We need a true revolution at this moment. The whole system has to change.”

Now remember, these women are successful business leaders and all about innovation. They KNOW we can and must do better. Our billion dollar division leader added, “It’s shocking how the ‘drill, baby, drill’ mentality is still alive and well here in the Midwest and I'm sure elsewhere. I’m visiting my mom and had a conversation with her husband about all the alternatives that are available TODAY, such as wave technology, the electrification of cities to support EV’s (Electron Volts), wind, solar, and so much more if politics and corporate interests and media mis-information didn't get in the way. Encouraged, my mom said ‘Why don't we hear anything about all that?’ My response: Change the channel (FOX is NOT news) and get informed. It’s time we heard the good stories of what’s possible in creating a world where all people thrive. By the way, The Buckminster Fuller Idea Index is a great place to find inspiration.


Here are a few things that I believe:


1) Life here on planet earth was not created to destroy itself. There is more than enough for all of us to thrive.
2) We don’t have an energy crisis, or a food crisis, or a climate crisis. We do have a crisis of imagination, generosity and political will.
3) Large, publically traded companies, “scorpions” by definition, can not and will not self regulate. Therefore we need strict regulations, oversight, penalties and incentives for the good gals and guys to do the right thing. Then they will do what innovators do by nature and create great beauty and prosperity.
4) Politicians need to answer to the public, not to publically traded corporations. Corporations can no longer be allowed to buy off our government. The Supreme Court ruling to the contrary in January of this year is a sorry act to the contrary and must be changed for democracy to prevail.
5) To help innovators create products and services in alignment with natural law – clean, green, pristine energy food and water – as is our birthright on this planet, the US Government must change its priorities in resource allocation. If you are a parent, would you spend $100 on guns for your kids for every $1 you spend on books? No way never. Yet that’s the ratio of our federal budget investment these days. Time to start spending our money on the pursuit of life, not death.

Lots more to be said, but my 8 year-olds just came up and said it’s time for lunch and a bike ride and swim as I promised. It’s what we call a “Color Purple” day referencing Alison Walker’s book and movie of the same name. In the story, the protagonist sees a magnificent purple flower and says to her companion and says, as I’ll paraphrase, “You see that flower. That purple flower is here now only. You know G-d gets pissed off if you don’t take a moment to love and bless that flower. . .” The kids, the Gulf, this day, this Earth, this life, it’s all Color Purple. Let’s love it with all we’ve got.

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