Definition of Leverage

The Merriam-Webster Online Dictionary defines leverage as the action of a lever or the mechanical advantage gained by it; a lever is an inducing or compelling force. For the purposes of this discussion it is a magnifying force that results in an output bigger than the input. The types of leverage include:

1. Time - A small force working over a long time can achieve big things (ie compounding in all its forms).
2. Effort - A small amount of (problem-focussed) work now saves a larger amount of work later (ie a stitch in time saves nine). For example: Easily removing a sun cancer while it’s small versus a much larger procedure later.
3. Biological systems - The wonderous amplification that plants and animals are famous for (eg the reproductive rate of our friends the buck-toothed big-eared rodent that we call rabbits).
4. Teamwork - The magnification that occurs when a group of people work together, united by a common goal that fosters the achievement of synergistic results.

Pareto Principle

The Pareto Principle is named after an Italian economist called Vilfredo Pareto. In the late 1800s he found that 80% of his country’s income was earned by 20% of its inhabitants. His ideas were rediscovered by management innovator Joseph Juran in the mid-20th century, who generalised them to business applications.

The theory has been called the law of the vital few, and is a rule of thumb that is often (although not always) operational in our daily lives. The basic principle is this: that a small number of factors lead to a disproportionately large outcome. Examples: Much of the world’s wealth is controlled by a relatively few individuals; most of the world’s population live in a few countries; most of the conventional oil reserves are in a few countries; within each country, most of the oil comes from a few fields; most health-care resources are used by relatively few people.

Once you understand the theory you can use it to make decisions, develop theories, and make predictions (for example I have done that in the last two sections of this entry). Another feature of the theory is that it often applies at any scale. Take the population example that most people live in a few countries - it is also likely that most people in those countries live within a few areas, and within those areas most people congregate in a few spots.
Click here to read the Pareto Principle entry at Wikipedia.

Chaos Theory

Entries at Wikipedia: Chaos Theory, Butterfly Effect, Complex Systems, and Complex Adaptive Systems.

Outcomes

Some of the features that result from the principles discussed above include:

• Exponential growth
• Butterfly Effects (non-linear relationships)
• Unpredictability
• Sudden change and tipping points
• Disproportional Importance
• Feedback Loops

General Lessons

1. Start now - The miracle of compound interest works over time; a little effort now might pay big dividends later.
2. You can’t buy time - The corollary of the previous point - if you miss the window of opportunity to implement a certain strategy, then you’ve missed it for good: perhaps its conserving a particular type of vegetable or grain variety used in a traditional society (ie seed banks) that later turns out to have a unique resistance to disease. If you miss the boat and the variety diappears without seed being saved then it is gone for good.
3. Unpredictability - things can change for the better or worse without warning (eg a sudden adminstrative decrease in oil reserves; a fundamental technological breakthrough).
4. Threshold effects - Many biological and sociological systems (eg crowds) are characterised by the presence of threshold effects; the system is able to buffer change and maintain stability until it is exhausted; there is then a sudden switch to a different state. Examples: (1) Compensated renal or hepatic failure (can undergo a swift transition to overt failure and death due to a seemingly small change in some factor); (2) Stock market crashes ( a slow rise to the top and then a sudden drop without an obvious precipitant); (3) Rapid decline in oilfield production due to EOR techniques.
5. Non-linearity - One small thing can have a disproportionate and unexpected influence in a certain system. For example the failure of a small but key component in an oil refinery or the space shuttle. Also may be called the Ripple Effect.
6. The 80/20 rule - The distribution of most things is not homogenous but rather heterogenous. For example, most oil comes from a few large fields; a few countries have most oil reserves; a few multinational pharmaceutical companies make most of the profits.
7. Importance of research and design - While systems may be inherently unpredictable, sometimes one or a few disproportionately important factors can be identified by careful research, and an appropriate strategy designed.

Implications for peak oil:

• Not all strategies and mitigation efforts will have equal effect - some will not work while some will be widely successful; it might be difficult to tell which will work before implementing them.
• It is likely that the majority of the problem will be fixed by a few of the solutions.
• Identify and do the easiest and cheapest things first - they can be done now while more complex things are prepared. Due to the unpredictability of the system, they may turn out to have unintentional positive leverage in the future. An example - during the space race, NASA reportedly spent millions trying to design a pen to work in space (ink needs gravity); the Russians used pencils.
• Do things now that must be done now (like planting an acorn) because they need time to come to fruition: a tree needs time to grow. Some of the strategies in the Hirsch Report need to be started now due to the scale required.
• Identify and implement those with the best return on investment - for example lowering the speed limit to reduce petrol consumption.
• Be alert for unintended positive and negative consequences (eg growing corn for ethanol might accelerate soil erosion; rising asphalt prices have emerged as a key issue recently with > $70 oil).
• Include biological systems (ie animals and plants) due to the inherent leverage.
• Beware strategies that look at themselves in isolation and don’t see the big picture (eg the amount of ethanol that can be produced from spare arable land will not be enough to replace oil consumption by itself, even though the volumes produced could be substantial).
• The solution will probably include a host of small, locality-specific solutions rather than the “one big thing”: much like there are different ecosystems, and differenct niches within each.
• Aim to use tipping points positively by developing and exploiting a critical mass (such as public awareness).
• Model biological systems to capture their exponential nature (for example “viral” education campaigns).

Implications for health care:

A few strategies might make all the difference.

More soon.