Faculty Q&As

Ten Questions: Faculty report from the frontier of management

John Sterman

1. Your main research, through the Sloan Sustainability Initiative, focuses on understanding public complacency about climate change. Surveys show that most Americans believe climate change poses serious risks, but at the same time are willing to “wait and see” what is going to happen before supporting any policies that have economic costs. Why isn't the general public more concerned about addressing climate change now?
Our research is motivated by the contradiction you've just described. Large majorities in the United States and other nations report that they've heard about climate change, believe that it's partly, if not largely, caused by humans — by our emissions of greenhouse gases — and they say they support legislation and international agreements to do something about it. However, they're also not willing to pay more for energy today. They're not willing to take the actions that would be needed — raising the price of carbon-based energy — to induce a transition away from fossil fuels, which generate greenhouse gases, and toward renewable, carbon-free energy sources. So we have this contradiction where people say they want to do something, but are not willing to pay for it right now.

The usual explanation for this is, “Well, what do you expect? Americans are selfish and short-sighted and they'll tell a pollster anything, but don't take any money out of their pockets.” If you want to take a cynical attitude like that, you'll certainly find evidence to support your view, but I think that's self-defeating. There's something deeper going on. People just don't understand the most basic dynamics of the climate system. They don't understand the connection between the goal of stabilizing the concentration of greenhouse gases in the atmosphere and the emissions reductions required to do that.

2. Why is that?
It's not really a problem of people not understanding the climate as much as it is that people don't understand the process of accumulation, what's known technically as stocks and flows. Stocks and flows are familiar to everybody in everyday life. A stock is any quantity that accumulates over time as the result of various inflows and outflows. We often call this “bathtub dynamics” because it is exactly like filling up your bathtub. The amount of water in the tub accumulates the amount of water that flows in from the faucet, less the water that flows out through the drain. The amount of money in your bank account accumulates the flow of money you deposit, less the flow of withdrawals. It's a familiar concept in real life, but people don't think in terms of accumulation. Instead, people commonly assume that the output of a system should look like —be highly correlated with—the input. This type of pattern matching or correlational reasoning just isn't right: for example, both the federal budget deficit and the national debt have grown dramatically over the past fifty years — they are highly correlated. Thinking in terms of correlations would lead you to conclude that cutting the deficit would also cut the debt. But of course that's incorrect: The debt is like a bathtub filled up by the deficit; cutting the deficit means the debt keeps growing, just not quite as fast. The only way to cut the debt is for the government to run a surplus, that is, to pay off the debt faster than they issue new debt. It's the same with the climate. Carbon dioxide (the most important greenhouse gas) accumulates in the atmosphere as we release CO2 by burning fossil fuels. CO2 is also gradually removed from the air as it is taken up by plants and dissolves in the oceans. Right now, emissions are about double the net flow out of the atmosphere. Removal isn't likely to rise very much in the future, and will eventually drop as the oceans increasingly saturate and as global warming triggers more wildfires and increases the rate at which carbon currently stored in soils and forests decomposes, adding more CO2 to the air. The atmosphere is like a bathtub we are filling with greenhouse gases twice as fast as it drains. To stop the rise in the water level, we have to reduce the flow in from the faucet until it is no more than the flow out through the drain. Emissions need to fall by at least half. However, when you ask people what should happen to emissions to stabilize the concentration of CO2 in the air, most say that all we need to do is stop the growth of emissions. In effect, they tell us that you can stabilize the level of water in your bathtub even while you pour water in twice as fast as it drains out. This type of reasoning suggests the problem isn't terribly urgent—but of course it violates one of the most basic laws of physics—conservation of mass. Our experiments show that even highly educated adults with lots of training in science, engineering and mathematics make the same error.

3. What is MIT doing to help the public better understand the problem and the urgency?
All one can do is create an opportunity for people to learn for themselves. Telling people what they need to do and how they ought to think, if it conflicts with deeply held beliefs, is just ineffective. Here you've got a situation where people's gut level intuition tells them that they don't need to cut emissions by that much, they just need to slow down and eventually stop the growth, and that will quickly stabilize the climate and stop global warming. So, if somebody says, “No, we need to cut emissions dramatically,” they reject it. They conclude that the person is just wrong, doesn't know what they're talking about, or that they're omitting other factors or pushing a private agenda. What's needed is to create learning environments in which people can discover for themselves the connections between our activities — the fuel we burn, the cars we drive — and what happens to the climate. Then people might be able to discover for themselves why it is important that emissions be cut and why it's urgent to start right now.

We've created a variety of online tools called Management Flight Simulators, which are interactive learning environments where you get to make decisions like what we should do about the emissions and you see the results. Some of them are role-play simulations.

4. Could you describe one?
In the S-Lab course on Sustainability, which I help to teach along with my colleagues Rick Locke, Rebecca Henderson, and Sarah Slaughter, we ran a simulation of an international negotiation to reach agreement on limiting greenhouse gas emissions worldwide. We divided the class into three groups, representing the developed nations, rapidly developing nations and the less developed nations. What you find is that the rich nations, such as United States, Europe and Japan, who are the biggest emitters, aren't willing to cut their emissions unless the developing nations such as China and India, whose emissions are growing the fastest, are willing to act as well. That mirrors the real-life situation. Many people in the US are against our doing anything unless these other countries take action as well. That's the position that our students also took in our simulation. Meanwhile, those representing India and China say, “Wait a minute. You folks in the rich countries are responsible for 70 percent of all of the emissions that have ever been generated so you are the ones who have created the problem. You can't deny us the development that you've enjoyed, so we're not willing to do anything unless you make the larger share of emissions cuts.” The poor countries—including Bangladesh and much of Africa, will suffer the most and are generating the lowest emissions, so they just feel powerless and angry. Given these attitudes, it's not surprising that the first round of negotiations failed to produce an agreement, so we ran the simulation model under the assumption that GHG emissions keep rising along the business as usual path. They find out that everybody—rich and poor alike—suffers because greenhouse gas concentrations keep rising, temperatures keep rising, ice sheets keep melting, sea level keeps rising. Then we let them negotiate again, running their proposals through the model each time. After several rounds they eventually came up with an agreement that could stabilize greenhouse concentrations below 450 parts per million. The negotiations bring out a whole set of mental models about the climate challenge, and about the people in other nations. It is difficult for people to see the integrative solution, the win/win solution, but the simulation model helps them see how everyone is connected. The simulation helps peel away some of the mental models that get in the way of people's constructive action. But, like an onion, you then reveal other ones.

5. Such as?
Take away the failure to understand accumulation and people often say “but cutting greenhouse gas emissions will hurt the economy.” But investment in energy efficiency and renewables actually creates jobs, and those jobs are here in the United States. Some people just say there is nothing I can do as an individual or it is just too late. They go from denial to despair. So there is a wide range of beliefs that get in the way here, from violations of basic laws of physics to the idea that there will be a magical, technical solution, to the idea that what they do as individuals can't make any difference, all of which I think are wrong, but none of which can be addressed by just telling people. They have to discover them for themselves.

6. You are also working on a project about alternative fuel vehicles and transportation systems. Please explain.
Transportation is a major contributor to greenhouse gas emissions. We've developed a set of models to help policymakers create a transportation system that is sustainable economically as well as ecologically. Transportation is about 30 percent of greenhouse emissions in the United States. It is also a sector that is overwhelmingly dependent on petroleum significantly contributing to our dependence on imported oil. More than two-thirds of the oil in the United States is imported today, with obvious economic and national security implications. The focus is how to shift the transportation sector in the United States — personal and commercial vehicles — from gasoline to some alternative fuel. There are many candidates— hydrogen, ethanol, biodiesel, hybrid electrics, plug-in hybrid electrics. And the curious thing is that there have been many attempts to do this in the past, almost all of which have failed. They have failed, not so much because the technologies weren't viable, but for economic, social and behavioral reasons.

7. What are the biggest challenges in getting consumers to transition to Alternative Fuel Vehicles?
Take the most obvious issue. Nobody wants to buy a vehicle that runs on some alternative fuel, even if it is identical in every way to the conventional vehicle — same power, same range, same comfort, same leather seats, same options — unless they are sure they can get fuel for it whenever and wherever they might want to drive. At the same time, energy suppliers aren't going to be willing to invest the billions of dollars in infrastructure to provide fuel stations unless they are sure there is going to be a market. This is a classic case of what is known as a “network externality.” It's a lot like the story of personal computers, where the computer that people find most attractive isn't necessarily the one that is technically best but the for which there is the most software and that everyone else uses,, which builds the advantage of the dominant platform even further. So, there's a tipping point leading the society to get locked in to the dominant technology—gasoline powered internal combustion engines. Once you are locked in it is hard to dethrone the dominant technology, even if a superior one comes along.

8. What is MIT Sloan doing to help us get there?
We are using our models to identify policies that can get us over the tipping point to create sustainable markets for vehicles powered by renewable, low-carbon fuels. Those models are behavioral, because you have to account for the way drivers think and behave, and they are spatial, because driving is all about getting from one point to another. We've calibrated our model for California, dividing the state up into small patches to look at where people live and where they need to go. We are now beginning to use those models to address the policy initiatives that are out there, and to help coordinate the actions between the key players in the state governments, the federal government, the auto companies, and energy supply firms, to get to a transportation system that is able to meet our needs for personal mobility without generating greenhouse emissions and ground level air pollution.

9. In the area of business education, you have studied how companies implement quality improvements programs. Can you tell me how companies are working to align goals for process improvement and cost reduction with environmental goals?
One of the most interesting companies right now from this point of view is Wal-Mart. Wal-Mart is very aggressively pursuing a sustainability program. It includes cutting energy costs in their stores and reducing packaging and transportation costs, but also looks at sustainable sourcing of the products they sell. They are the largest private firm in the country and largest private employer; they bring in the most shipping containers to the United States and the most goods coming from China and from other parts of the world; and they have one of the largest truck fleets. They simply can't be ignored. Much of what they are doing generates significant savings for them, which is consistent with their culture and mandate to constantly reduce costs and pass the savings on to consumers in the form of lower prices. Just to take one example, when they decided that they would feature compact fluorescent light bulbs in their stores, and not just stock them but put them on display in a prominent position where people would see them, sales of CFLs shot up, reducing electricity consumption. They installed auxiliary power units in all of their trucks so that the drivers wouldn't have to run the engines when they were taking a break or sleeping. This dramatically cuts fuel use and reduces noise pollution and air pollution, but also saves them money. That is a long-term investment. In the short-run, their costs went up. They had to buy these units and install them. It is only later that they see the accrued savings. Wal-Mart is a very large and successful organization, and they see the wisdom of making that investment. Many firms don't. They don't feel they can tolerate the upfront costs even if there are substantial long-term gains.

10. How do all of these areas — focusing on climate, alternative vehicles, organizational change, public health — fit together to support the larger goal of sustainability?
I think of sustainability as much more than just the environment. Without a healthy environment, you don't have anything else — you can't have a healthy economy, there can't be good jobs, you can't have healthy people and healthy communities. Likewise, we cannot expect people to protect the environment if there are no jobs, if they are hungry, if they cannot provide for their children. A healthy environment and healthy economy aren't in opposition but fundamentally aligned. We have to create a world that is sustainable ecologically, but also economically, socially, politically, and even personally. I think what ties them together is that, in every case, you have got pressures that push you toward short-term expediency. It often appears that it doesn't really matter much if you cut a few corners on product quality or generate more pollution there, but in fact all of these actions, while beneficial in the short-run, have the unintended consequence of undermining the capabilities of our organizations and society that are required for our long-term health. Whether it's pulling resources inadvertently from prevention in health care or preventative maintenance in a chemical plant or getting waste out of a production process that generates greenhouse gases, we always face pressure to do what is attractive in the short-run. And doing so is almost always harmful to our long-term well being. Much of the challenge of sustainability is helping people to understand these connections and helping create the incentives, for all of us, to consistently make the decisions consistent with our deepest aspirations.

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