We all think we know where the price of oil is headed, especially the experts. They crunch the numbers and come up with predictions, and, well, like many predictions, they fail to materialize. Let’s go back to last fall to exemplify my point.
- Oil prices had been sliding, but on Oct. 1, the future still looked bright. For the next three months, oil would average $97 a barrel, according to a Bloomberg survey of 36 analysts. The first quarter of 2015 would be even better. The most pessimistic among them called for $91 a barrel.
Oops! The professional analysts missed that one. In the interest of fairness, though, I too have expressed my opinion about oil prices, oh, more than once in the last few months. True, my voice is an opinion, as I do not get paid to predict the future price of oil, but, so far, my opinion has been fairly correct, as I have assessed oil prices in the context of the macro fundamentals.
These include the current glut, but they also include the unstoppable current movement toward renewable energies, which touches upon the Saudi power structure. The two people holding the most power (in direct line to succeed) are a more aggressive and forward thinking pair. They understand that the higher the price of oil, the faster the transformation to renewable energies. Ergo, these two want to keep the price down to slow down the shift, so, when the glut comes, they just keep on pumping, not the reverse. Currently Saudi Arabia and OPEC are at near record pumping levels.
There is also the fundamental reality that Russia, Venezuela, and the other countries dependent on oil have to pump to stay alive (for both revenue and to protect market share), that Iran is storing some 30-million barrels on cargo ships and it is ready to unleash it as soon as it gets a nuclear deal ( and it will have to make deal or it will bust), and that US production might be tempered, but it will not be seriously shut down – there is just too much dang oil and it is just too dang easy to get now with fracking.
True, the price of oil jumped on the news that US oil inventories in Cushing Oklahoma dropped a bit, but the drop is not really significant and my guess (the operative word) is that the glut elsewhere in the world will soon mitigate the speculation on this news.
The problem with predicting oil prices, though, is that oil prices depend more on speculation than they do on the fundamentals. I might have been right the last few months, but tomorrow, Iran and Saudi Arabia might threaten to begin bombing each other, and then …
Oil, schmoil … Let’s look at a dinosaur, one of the originals – HP Computers.
- William Hewlett and David Packard led HP’s engineers to invent breakthrough products, like the 40-pound, typewriter-size programmable calculator launched in 1968.
At one time, HP was the king, but lousy customer service and the inability to keep up have brought the company to the brink of, well, evolution in order to save the species.
- HP has shed over 40,000 jobs since 2012, and it will split into two smaller but similarly troubled companies later this year (an operation that will itself cost almost $2 billion). HP Inc. will sell printers and PCs; Hewlett Packard Enterprise will offer servers and information technology services to corporations. That latter company will depend largely on a division whose annual revenue dropped by more than 6 percent between 2012 and 2014. Earnings shrank even faster, by over 20 percent. IBM, HP’s closest rival, sold off its server business to China’s Lenovo last year under similar pressures.
Sounds bad, and it is, but in today’s world, dinosaurs are smarter; they can evolve and survive.
- And yet, in the midst of this potentially existential crisis, HP Enterprise is working on a risky research project in hopes of driving a remarkable comeback.
Yup, the dinosaur is making an attempt to find a cave and wait out the blacked-out sky, so it can evolve and survive.
- Nearly three-quarters of the people in HP’s research division are now dedicated to a single project: a powerful new kind of computer known as “the Machine.”
The name itself is simplicity driving imagination. Read it aloud – the Machine. Sounds impressive enough, but there is a reality here that will make it tough for the dinosaur to ride out the storm – it has less food to tide it over and the sky is pretty darn black. HP spends much less of its gross revenue on R&D now than its competitors (IBM 6%, HP 3%) and, to boot, redesigning the whole species with little food, in a dark cave, alone, while the sky is really black is a job, a big job.
- For “the Machine” dream to be fully realized, HP’s engineers need to create systems of lasers that fit inside -fingertip-size computer chips, invent a new kind of operating system, and perfect an electronic device for storing data that has never before been used in computers.
This is a tall order for a dinosaur, even with the street cred of having survived longer than most all other species on the planet. Yes, you can be around a long time, but you have to evolve to survive, and that is the question: Can HP evolve? It is a tough order, and HP knows it.
- No one has built a fundamentally new operating system for decades. For more than 40 years, every “new” operating system has actually been built or modeled on one that came before, says Rich Friedrich, director of system software for the Machine. Academic research on operating systems has been minimal because existing systems are so dominant.
And there you have it. For 65-million years, Dinosaurs ruled because they were the dominant species; no one wanted to challenge that dominance. And then one day, the dinosaurs hit a rough patch with the black sky and all and a couple of little rodents adapted to the weak light, found food, had babies, and, well the rest is mammalian history.
Can HP change the computer landscape by creating a new way to compute? Can it evolve? That is the question, but it makes it worthwhile to watch this company as it tries.
Trade in the day; invest in your life …
