By Sarah Kear Peel
Sometimes hedging your bets is the best way to address a problem.
Last week I attended the Enterprise Toronto Innovation Camp 2011. The panel discussion on Innovation and Green Business was excellent for the depth and breadth of entrepreneurs: Allison Sletcher from Earth Concerns cleaning service, Rob Grand from Grassroots Environmental Products, Mark Cutrara from Cowbell Restaurant, and Francisca Quinn of Loop Initiatives.
However, the light-bulb-goes-on new learning for me was in the keynote delivered by Ron Dembo of Zerofootprint. In about 6 minutes he distilled the importance of risk thinking in how we approach innovation - especially in emerging markets like “green” business.
“The future is always uncertain”, began Dembo, “but there are shades of randomness.” Some phenomena occur with a great deal of predictability, such as returning to school in September (my example). There is zero to very little randomness in this annual activity, so whatever irregularities do pop up, such as a new grade 1 student who is not yet a landed immigrant, we know how to address them. There are plans, rules, and scripted responses. The answer to this deterministic problem is to execute a set response or strategy.
Then there are phenomena, such as Climate Change, where the best possible solutions are not yet known. As Dembo pointed out, “What we do know is that carbon dioxide in the atmosphere is on the rise, but what is uncertain is the effect this increase in CO2 will have.” In this case, the problem is stochastic, or random, so the best response possible response is to hedge, with a portfolio of options. In this case, Dembo suggested investing in a mix of renewable or low-carbon energies, simply because we don’t yet know which one is going to come out “the winner”. There are still too many unknowns with solar, wind, biofuel, or nuclear energy.
Now, I am familiar with the “balanced portfolio” approach to sustainability in business, and you can read about it in an earlier blog I wrote on Peter Senge’s book, The Necessary Revolution. What I most appreciated about Ron Debo’s talk was that he explained the roots of why a balanced response is always best when the future is unknown and full of big risks.
© 2012 
