1848870469 (N) by Vincent Cable

Author:Vincent Cable
Language: eng
Format: mobi, epub
Tags: Biography & autobiography
ISBN: 9781848874381
Publisher: Atlantic Books
Published: 2010-01-07T22:00:00+00:00

Chapter 9

Big Oil

Most politicians pontificate about markets and companies without ever having participated in any entrepreneurial venture more demanding than a school tuck shop or a fund-raising raffle. To a degree, this lack of experience doesn’t matter. There are brilliant football managers who were hopeless footballers, and battle-winning generals who couldn’t shoot straight. But when the government’s Treasury bench is composed entirely – as it has been in recent years – of former lecturers, teachers, charity workers, criminal lawyers and professional politicians, it is difficult to believe that the quality of decision-making is not affected.

For many years my own understanding of the economic world was likewise largely confined to the public sector and to books. I had an acute sense of incomplete personal education. I looked, unsuccessfully, for a worthwhile role in the private sector. Somewhat late in life – now aged forty-five – I was invited to join Shell’s group planning team and jumped at the chance. One of my attractions to them was that I was an economist who knew quite a lot about the developing world and about environmental issues and, in particular, about the new issue of climate change. Capitalist enterprises are often attacked for being short-term in their outlook, but this could not be said of Shell. It had made massive investments with a perspective of decades, and it was starting to worry seriously about the implications for an energy company of global environmental threats from greenhouse gas emissions long before governments or environmental campaigning groups had grasped the significance of the issue.

Shell’s group planning is (or was) a unique institution in the corporate world. Many companies closed their corporate planning functions after the 1970s when there was a reaction against mechanistic forecasting and when headquarters staffing was stripped to its essentials in a leaner and meaner business environment. Shell’s, however, survived and flourished, and those who led the planning team – Pierre Wack, Peter Schwarz and Ari de Geus – later became almost legendary figures in the rather specialized and lucrative world of business gurus.

Shell’s team had earned its keep by developing a system of scenario planning which did not involve predicting the future but posed plausible if uncomfortable ‘what if?’ questions about the business environment. In a very large and successful company, largely invulnerable to takeover and inclined towards conservatism, senior managers saw value in this kind of regular internal challenge to their strategic assumptions. It had proved its worth in the late 1970s when it was almost universally assumed that high oil prices were here to stay. Shell planners warned that markets were working to reduce demand and increase supply and that oil prices could well crash for a prolonged period (as they did in the 1980s). This insight helped the company to survive and flourish in almost two decades of cheap (or low-priced) oil. When I joined, the company was trying to make sense of, and respond to, environmentalism, the cracks appearing in the Soviet Union, the growth of China, and the creation of monetary union in Europe.

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