September 20, 2023
How often do you do something because you’ve been told it’s the “right thing to do”?
Or because you’ve heard that it’s what successful people do when they find themselves in this sort of situation?The world is much too complicated for us to navigate on our own.
We depend on advice and examples set by others to help us make sense of our choices—and to make hundreds of decisions each day.
Unfortunately, this exposes us to manipulation and the power of persistent stories.
Let’s review a couple of mainstream examples, then bring the issue closer to home by asking why so many companies pay for ETRM functionality they seldom use.
Is your company running risk controls like VaR every day, or even every week?
Beyoncé’s club anthem reminds us of a widespread cultural symbol: pledging one’s love for someone—and commitment to the relationship—by giving them a ring.
As far back as ancient Rome, grooms placed metal rings on the fourth finger of their betrothed’s left hand—believed to contain the vena amoris, a vein leading straight to the heart.
From the 2nd century C.E. onwards, gold rings became more common, reflecting the giver’s wealth and becoming part of marital dowry.
In the 12th century, the Christian church declared marriage to be a holy sacrament and that no man should place a ring on a woman’s hand unless he meant to marry her.
But what about the diamond?
Until the 1940s, many different gems were used as engagement ring stones. The recent popularity of diamonds can be attributed to one company: De Beers.
At the time, they controlled most of the world’s supply of diamonds but were faced with dwindling demand following the economic malaise of the 1930s.
To turn their situation around, De Beers embarked on one of the most infamous marketing campaigns of all time.
De Beers created both status expectations and a new cultural standard by giving Hollywood actresses diamonds to wear in their movies, turning the undervalued stones into glamorous symbols of romance.
In 1947, they introduced the slogan “a diamond is forever” and in 1953, De Beers’ products adorned Marilyn Monroe in the movie “Gentlemen Prefer Blondes” as she sang “Diamonds are a Girl’s Best Friend.”
By the 1990s, over 80% of the engagement rings purchased in the United States incorporated diamonds, compared to only 10% in 1939.
De Beers successfully exploited the power of status and cultural inclusion to drive a lasting demand for its product, supporting dramatically higher prices and causing millions to spend much more than they otherwise would have on a token of their affection.
This has become a persistent story; we take it for granted that engagement rings should bear diamonds.
For a less savory example than diamonds, we turn to cigarettes.
Over 25 million Americans have died prematurely in the past 50 years due to the negative health effects of tobacco smoke—despite widespread understanding that smoking is hazardous to your health.
How did cigarette companies manage to keep marketing their product for decades, even after the danger was known?
The answer, once again, is a persistent story.
It began as far back as 1929 when Edward Bernays—one of the fathers of modern public relations—organized groups of women to smoke in public during New York’s Easter Day parade, a publicity stunt on behalf of the American Tobacco Company that called the cigarettes “torches of freedom”.
In the decades since, people have been taught to crave the status of a movie actor, rock star, or detective. The freedom epitomized by the Marlboro Man.
It shouldn’t work, but it does. People are sensitive to status symbols and group affiliation.
No one wants to feel left out by their peers.
How many industries use this playbook to sell us things that are against our interests?
We know that diamond mining is a brutal, dangerous, and dirty industry—one that exploits and endangers impoverished workers, some of them children.
We know that smoking tobacco is likely to lead to life-threatening illnesses and shorten our life expectancy.
We refuse to give up things that are part of our cultural identity, that we’ve grown up with and aspired to along the way.
The status quo is incredibly resilient, especially when we’re told compelling stories about status, affiliation, and the risk of doing something different.
So, what examples do we find, right under our noses, in the world of energy trading?
The persistent story that we hear throughout the world of energy trading and energy transaction management is that you must include a stochastic ETRM platform in your technology stack.
Who propagates this story?
Primarily, the people who control access to the working capital that producers, traders, and consumers need to finance their operations.
If you’re not using a major ETRM system, we’ll have to limit your credit availability.
And, building upon that narrative, the purveyors of legacy, outdated ETRM platforms.
Why is this so?
Why should a company with well-understood risks invest in an over-specified but outdated system that they will never fully use?
What’s wrong with an energy transaction management system that includes the necessary risk management functionality?
Many companies—especially smaller players—are paying for expensive tools they marginally need, don’t want, and barely use (except to check the box that they have an ETRM system).
They would be far better served by a modern, fit-for-purpose platform that helps them make smarter decisions, faster, while still ensuring an abundant level of risk management and control.
But it’s a persistent story, and it’s much easier to follow the herd and check the box than it is to follow a smarter path, less traveled.
What is your company doing?
If you’d like to discuss your ETMS and ETRM needs—and the opportunity to reimagine your energy operations—we’re here to help.
At Trellis Energy, we believe that a modern natural gas supply chain should be digital, efficient, and easy to manage, ensuring the delivery of clean energy when and where it’s needed. We’re in business to make that a reality for natural gas in North America.
Talk to us about Digital Simplification for your climate, trading, and logistics goals.