A cautionary tale about arrogance in the energy business

Hubris Defined

Arrogance isn’t a quality typically associated with a dictionary. But I’m going to tell you a story about how a seemingly tiny tweak in a dictionary caused its user to make a strategic faux pas I often see in the energy business.

The publisher of the Standard Oil Bulletin — I’ll call him Richard — was in a good mood. Like any word lover, he was keen to explore his new dictionary. Passing his hand over the cover, he admired the latest Funk & Wagnalls New Standard Dictionary of the English Language.

“This 1914 edition is a beaut,” Richard said to his coworker Bill. “Let’s see what it says about our business.” He was itching to look up that first word.

Opening the book, Richard thumbed through its crisp pages till he found the section. His right finger ran down the columns as he scanned for the one word that best described his employer’s main product. “Let’s see here,” he muttered under his breath, “fill, finch, fort, fudge … aha — FUEL!”

“What does it say, sir?” Bill asked with a hint of anticipation. As an editor, he knew full well that, in addition to defining a language, a dictionary subtly reflects a society’s contemporary attitudes.

Silence for a moment. Then a smile. Richard raised his left index finger above his head and read aloud with animated confidence, “Fuel: Combustible matter used to kindle or sustain fire or produce heat as oil, wood, etc.”

Lowering his arm, he read it again to be doubly sure. He was grinning like the cat that ate the canary when he looked up. “Bill, it doesn’t even mention coal. It’s not in the definition. Ha! Coal is out. Oil is definitively in. Now that’s a story we can write about!”

It’s no surprise the 1914 New Standard Dictionary didn’t include coal in its definition of “fuel.” By then, coal-fired steam engines were in fast demise, replaced by oil-based engines.

Pulling up a chair to his trusty Remington, Richard rolled in a fresh sheet of paper and began plunking on the keys, transcribing the definition.

“PLEASE note,” he went on, “and it may be taken as a sign of the times — that oil is set down first of all.” Swiping a firm carriage return, he continued. “Coal is not even mentioned; those dictionary-makers have already counted out coal as a fuel, or at best, leave it to the imagination of the reader to include it among the also-rans!” Great introduction, he thought smugly.

Richard was an efficient writer, so it didn’t take him long to finish the column. The gist: diesel engines and furnaces were changing the world. In the process, the once-mighty fuel called coal was being displaced by growing supplies of crude oil and refined petroleum products from his own company.

He readied his final sentence with unrestrained passion for Standard Oil and for providing the world with this new type of energy. “The convenience of this service to steamship operators can readily be imagined,” he typed, “and the Company has materially added to its fuel oil business because of it.”

That done, Richard rolled the last piece of paper out of the typewriter, tidied the pages together and handed over his work. “Bill, let’s put this on page four.”

The young editor brightened. “Sure thing, boss. Those coal guys are goin’ outta business!”

Related Vignettes

THE HARM OF HUBRIS

That article, “To Sustain Fire or Produce Heat,” was published in the October 1914 Standard Oil Bulletin. Over a hundred years later, in an antiquarian bookstore, I bought a copy.

I started my career at the Chevron Corporation, originally known as the Standard Oil Company of California. That’s one reason I had to add this publication to my collection of energy ephemera.

But the other reason was the lesson embedded in this article. I recognized that gloating.

The Standard Oil Bulletin gloated about coal’s exclusion from the definition of “fuel,” but coal has stayed in the game for centuries, and energy leaders should never count out such low-cost energy systems.

For many years I’ve studied macro trends, business tactics and investment strategies. What has struck me repeatedly is the suddenness of changing fortunes: how quickly companies, even entire energy industries, can swing from the euphoria of commercial success to the long faces of failure. Personally, and by watching others, I’ve learned the folly of counting out a competitor prematurely — and of doing so with arrogance.

That’s lesson number one from Richard’s story: avoid permeating any hint of hubris into company culture.

This isn’t to say I don’t like positive-minded messages. What makes me uncomfortable about this article is the writer’s hasty notion that coal was an “also-ran.” Sure, he grants that it “might have been cited as a pretty good example of combustible matter still somewhat extensively used for making fire,” but that’s a lot of qualifiers. His position is clear: coal is a has-been fuel on its way to obsolescence.

Richard and his real-life counterpart joined a long line of naysayers quick to write off coal. In fact, I have books going as far back as the 14th century that predict the demise of coal!

In 1914, their exuberance was understandable. By October, World War I was only three months old. Coal-fired ships and railroad locomotives were quickly converting their engines to petroleum. So were army tanks and vehicles, benefiting from the mass commercialization of engines in cars like the Ford Model T.

Despite the use of oil in planes, trains and automobiles, coal hasn’t lost much ground in the last century. After oil, it’s the second-most-used fuel in the world, rebutting many attempts at substitution along the way, and sometimes even regaining ground. During the oil crises of the 1970s, coal pushed oil out of the market for electrical power generation.

So why has coal been so resilient for so long?

By any measure, coal’s ongoing growth as a cheap, economical fuel for things like power generation has been remarkable. The reason this black lumpy stuff has endured — even despite its negative environmental effects — relates to one of the most important lessons in the energy business: low-cost fuels are highly resilient and difficult to displace.

Both the Funk & Wagnalls editor and the Bulletin writer failed to acknowledge the tenacity of an entrenched business that supplies cheap products. Their premature interpretation of world energy markets in 1914 shouldn’t be lost on today’s leaders, especially those competing to shape our energy future.

Why has coal been so resilient for so long?

Yet as I flip through the Standard Oil Bulletin, it strikes me that this same hubris exists heading into the 2020s, as wind, solar and other renewable energy sources challenge the market share of coal, oil and natural gas. Headlines proclaim the end of fossil fuels with Richard’s same high-spirited enthusiasm. Implicit in them is echoes of denial of the incumbents’ strength. And all too frequently, I’ve watched companies lose valuable time and money when being cavalier about the aggressive resolve of an entrenched competitor.

My advice to anyone in the energy business, regardless of their product, is to never underestimate the staying power of a low-cost producer that delivers easy energy. If such an urge arises, I suggest grabbing a dictionary and looking up two words: “hubris” and “denial.” Commit them to memory but never put them into practice — together, they can take down businesses.

Never underestimate the staying power of a low-cost producer that delivers easy energy.

Hubris Defined

THE HARM OF HUBRIS

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