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Ballard Power's Revolution

We need rules in our lives, but we also need to question rules. Companies find opportunity in questioning assumptions, but it is a dangerous business -- you have to be careful to break the right rules. Ballard Power breaks rules by making fuel cells for automobiles, which may make the internal combustion engine obsolete. A best-selling author on the subject has offered a report about Ballard Power on Soapbox.com.

By Tom Gardner
August 21, 2000

[Editor's note: Today's editorial from Rule Maker Tom Gardner offers his assessment of Ballard Power as a Rule Breaker. For a different perspective, see parts one and two of Brian Lund's look at fuel cells and Ballard.]

Rules. They bind our lives -- some loosely, some tightly. Some of them are written down, others not. Yield when merging. Use number two pencils. Show your ticket at the door. Employees must wash hands. Buckle up.

Rule making and rule breaking are powerful counter forces in all of our lives. I can still hear the echo off a banister and down the hardwood floors of my childhood, "Thomas, there is a rule in this house that...." You didn't eat in the living room. You picked up your socks off the floor. You said your prayers. You didn't spit on your brother.

With age, though, we came to understand that without rules, life would fall into disrepair. Our homes would sag with strewn clothes, rotten food in the sink, plaster walls crumbling, ivy grown through the kitchen window. Without rules, our days would fall apart. Feuds would spill into the street. Dogs would roam the neighborhood. Free enterprise would fold its tent. The world would gate up around us.

Amen for rules.

But then there are so many of them worth testing. Don't start a sentence with the word "but." (But why not?) Don't wear blue jeans to the office. (But why not?) Don't question your broker's judgment. (But why not?) Don't ask the Queen if the monarchy is dead. (But why not?) Don't name your financial business "Fool." (But why not?) Testing rules and challenging conventions are the drivers of innovation. They're the only roadways to progress.

Of course, which rules to break, and how to break them, is the challenge of business. What if wife and husband, Sandy Lerner and Len Bosack, hadn't broken with convention and linked together Stanford University's computer networks fifteen years ago? Cisco Systems wouldn't have been born and grown into a $450 billion company today. But then what about Donald Trump? He tried to break the rules of debt financing and casino location, and lost. The company bearing his name, the stock ticker bearing his initials, is down 95% since 1996.

Violate the wrong rules in the wrong way, and you'll get broken. Break the right ones, and you might light up the sky with an explosion of value.

Today, one of the more compelling industries intent on smashing paradigms is fuel-cell energy. Its leader, Ballard Power Systems (Nasdaq: BLDP), has grown four times in value since the beginning of the year, en route to becoming an $8.5 billion business. The primary tenet Ballard's trying to break is the one that says our automobiles must rely on internal combustion engines burning non-renewable fuels. That rule has made us choke on air pollution in urban areas the world over.

It's a rule that can be broken, a witch ready to be shrunk with water. In fact, it's a rule Ballard is already breaking, with low-emission transit buses -- powered by fuel cells -- running in Chicago and Vancouver. And it's a rule Ballard plans to continue breaking across the world, with the help of automakers, government subsidies, and grassroots momentum.

Whether or not Ballard has the vision and patience to enduringly create shareholder value is open for debate. What seems less debatable, though, is that we're heading into the mother of all energy revolutions over the next two decades. Former long-time Saudi oil minister, Sheikh Yamani, recently offered this opinion in the London Telegraph: "Thirty years from now there will be a huge amount of oil and no buyers. Oil will be left in the ground. The Stone Age came to an end not because we had a lack of stones. And the oil age will come to an end not because we have a lack of oil."

Whether you're an energy junky or not, whether or not the phrase "platinum-coated polymer plastic membrane" thrills you, I recommend learning about the advent of fuel cells. As an investor, as a Fool curious about the world around you, you'll be richly rewarded. To learn more about fuel-cell technology and the dream of hydrogen-based energy, I very highly recommend to you "A Fuel Cell Primer: The Promise and the Pitfalls," published at Soapbox.com.

I agree with the eight reader reviews of the report, who all score it a five out of five stars. Tom Koppel, best-selling business author of Powering the Future: The Ballard Fuel Cell and the Race to Change the World, and Jay Reynolds, his co-author, have written a report for investors. It's a colorful, accessible, level-headed, and thoroughly researched account of the future of energy technology. With a deregulatory atmosphere and political leadership committed to lowering air pollution, I suspect there are many, many billions of dollars of public-market value yet to be created by the industry... value for us to share in.

Tom Gardner, Fool

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