• long Read

No Risk, No Reward

Nine amazing and instructive lessons on the power of breaking the mold, the genius of the unexpected move, the thrill of standing out from the crowd, and the virtues — yes, virtues — of conservatism.

When did risk become a four-letter word?

Maybe it was after the dotcom implosion, which left hundreds of thousands of hard-working professionals wondering why they left the confines of big companies to join an ill-fated frenzy. Maybe it was after the collapse of Enron, a once-dull company in a still-dull industry that won raves from pundits and the press — until its head-spinning financial shenanigans sent it hurtling into oblivion. Whatever the root causes, the business culture has gone from revolution to counterrevolution, from “let’s make our move” to “let’s stick to our knitting.”

There’s just one problem: Even in a slow-growth economy, companies can’t win big in the marketplace by doing things only a little bit better than the competition. Even in a conservative environment, it’s hard to deliver a truly compelling message to customers if you sound like everyone else. Even with an unforgiving climate on Wall Street, merely cutting bottom-line costs doesn’t do much to spur top-line growth.

How can we learn to take risks again? In this rule book for risk takers, you’ll meet people and organizations that are still prepared to gamble — intelligently, shrewdly, selectively — even in a period of insecurity and instability. Their stories offer lessons in strategy, marketing, leadership, R&D, and innovation. They also remind us that the good moves we don’t make can be as consequential as the bad moves we do make — that playing it safe isn’t always playing it smart.

I. Strategy: “You can’t think traditionally in these circumstances.”

“I love this!” Bryan Bowers exults. “It’s what we were put here for.” And then he catches himself. Bowers understands that his enthusiasm may not appear exactly … seemly. After all, we are meeting just two blocks from the ruins of the World Trade Center, four weeks after the terrorist attacks.

But Bowers can’t help himself. He is an insurance guy who has spent his career steeped in the predictable. Now he is reveling in the chaotic. The events of September 11 were unmodelable, capricious, and without precedent. As such, “the pillars on which the insurance business is based have been shaken,” he says. “You have to rethink the premises now, or the market rethinks them for you. You can’t think traditionally in these circumstances.”

Today, Bowers understands, just because something hasn’t happened before doesn’t mean that it won’t happen now, or soon, or sometime. The future is discontinuous and, therefore, risky by definition. By speeding the flow of information, technology has concentrated that risk even more.

Bowers is chief underwriting officer of the Centre Group, a member of Zurich Financial Services Group that provides unconventional solutions to risk-based problems. It was founded in 1988 by graduates of Warren Buffett’s Berkshire Hathaway Inc. to capitalize on insurance anomalies and applies proprietary models to risks that others wouldn’t touch. While Centre is a relatively small player, it has snagged slices of enormous, often exotic, undertakings: a luxury ocean-liner condominium project, a power plant in the Colombian rain forest, and a steel-galvanizing plant in Estonia. In 2000, the group’s 350 employees generated $882 million in revenue on assets of $7.6 billion.

Bowers fits the cowboy mold: He’s a Brit and a rugby player, a big man who laughs more than you’d expect from someone who (still) works with actuarial tables. The world may have entered an era of extraordinary discontinuity, but the only way to insure risks is still to model the hell out of everything. For an average opportunity, Centre runs at least 10,000 simulations. The company needs to ask, How likely is it that something will happen? How much will we lose if it does? And for how long will we have to pay out?

Such simulations are done less to predict the future — that is, to eliminate risk — than to figure out which risks are the most profitable to take on. If Centre can package a transaction in a way that removes both the most catastrophic outcomes and the most favorable ones, the slice that remains may prove to be secure and profitable for both insurer and insured. The moral: Don’t stop taking risks — but make sure the risks you do take play to your strengths.

The other moral: “A model,” Bowers says, “doesn’t necessarily get you to the truth.” Eventually, math stalls out and something more human — intuition, experience, wisdom — has to take charge. After all of the pricing and demand scenarios had been run for the Estonian steel plant, it was Centre’s experience with project finance in Europe, its contacts with industry experts, and its faith in the company’s managers that swung the deal.

“Much of what we’ve done,” Bowers says, “is more art than science. At some point, we have to synthesize what we’ve learned over the course of a business career and make a decision in the face of incomplete information. And we have to know when we can’t make a decision.”

II. Playing It Safe, Part 1: The God Gamble

Here are the stakes — the most staggering ones conceivable: On one hand, eternal happiness. On the other, infinite damnation. The question: “God is, or He is not. But to which side shall we incline?”

Blaise Pascal, the 17th-century French intellectual, religious zealot, and intermittent party animal, proposed that wager sometime around 1660. Besides being the first apparent attempt to combine theology and mathematics, contends Ian Hacking, a professor of philosophy at the University of Toronto, Pascal’s dilemma arguably represented the birth of what we now consider to be decision theory.

In 1664, Pascal experienced one of his periodic mystical revelations and retired to the convent of Port-Royal in Paris. There, he devised his wager as an inducement for men to follow the ways of Christianity.

“A game is being played at the extremity of this infinite distance where heads or tails will turn up,” he wrote. “What will you wager?” If it turns out that God does not exist, then you are marginally better off having lived a life of as much earthly pleasure as possible. That is, it pays to have behaved badly. But if you choose that course and God does exist, then you are doomed for all time. Ugly downside.

If, on the other hand, you have pursued a pious life leading to faith, then “there is here an infinity of an infinitely happy life to gain” if God does exist. And if He doesn’t, you may have frittered away 50 years when you could have been drinking and carousing. However, that’s a modest sacrifice set against the prospect of unending salvation. As Pascal frames the dilemma, betting on the side of God’s existence is unquestionably the better choice.

According to Hacking, Pascal’s musings contain valid decision-theory arguments “of a sort properly classified and characterized only in this century.” As a result, Pascal also may have made the first scientifically grounded argument in support of playing it safe: If one outcome seems overwhelmingly preferable, take it — even if it is not certain.

III. Marketing: “To not take a risk is to risk being ignored.”

Hot babes in leather! That’s it — hot babes in leather, full-body suits, and stiletto heels. They’ll spank and scream and shackle each other. We’ll have bondage! And Grace Jones! And — oh yeah — we’ll pitch some wristwatches.

Drew Neisser grins at the thought of that coup. He is not, on the face of it, a hot-babes-in-leather guy. He is 45, clean-cut, and clothed in sensible garments. But the Casio “Time Me Up, Time Me Down” party — that was his baby. He’s still surprised that Casio bought in. “That was the last idea I ever expected a client to buy,” he says.

Renegade Marketing’s Rules for Guerrilla Warfare I
1. Seek this response from customers: “Wow, I never expected that from your company!”
2. Seek this response internally: “How the heck did they get that one approved?”

Renegade Marketing Group, lodged four floors up in Manhattan’s Chelsea Market, is a guerrilla-marketing firm. No, wait — they hate the term “guerrilla marketing.” To them, guerrilla marketing involves high-school kids hassling you with flyers on street corners. What Renegade does, it claims, is promote “unconventional relationship building.” What it really does is push clients toward the marketing edge.

Renegade Rules II
1. Don’t discuss “risk-factor details” with your boss until moments before the launch.
2. Videotape your stuff and only show it if it works.

“If you launch your marketing strategy with the goal of minimizing risk, you’re starting from a point of weakness,” Neisser argues. “Look at what Nike has done over the years. The company is not without failures. But most of its work has succeeded, because Nike recognizes that unless it takes risks, it’s not going to be the brand of choice.

“You have to be prepared to step out of your brand. Brands are evolving life-forms, and being safe with your brand is the biggest risk. If things go wrong, consumers will forgive you. To not take a risk is to risk being ignored.”

Renegade Rules III
1. Focus on a well-defined target group.
2. Gain genuine insight into that target’s idiosyncrasies.

There was the “Geek Olympics” that Renegade staged in Seattle for IBM’s developerWorks initiative. The idea was to boost IBM’s reputation among the notoriously quirky, inbred software-developer community — whose members actually like being called geeks. During the evening, guests negotiated an obstacle course of mind games and computer problems. The value-added bonus: a full-sized cutout of Star Wars character Jar Jar Binks — widely reviled in geek circles — set up for target practice.

Such gigs are, in fact, all about target practice. A marketing tactic that’s unpalatable to the masses becomes startlingly right when applied to the right niche. On one level, Casio’s bondage gambit seemed dicey. But when aimed at a crowd of Manhattan fashionistas, it won exactly the right sort of attention for the company’s G-Shock watches. “It’s all about relevance,” Neisser says. “It used to be that research was all about mitigating risk. We’d do a focus group and show an advertisement to 10 people — and if 7 or 8 liked it, we’d have some comfort that this was a good program.

“Now what we want to know is, Does it resonate for two of them? Were two of them so fired up about it, we couldn’t get them to shut up? Because you’re no longer marketing to 7 out of 10. You’re marketing to one.

“We’re at an interesting juncture with one of our clients right now. It’s an integrated campaign that plays with words, and some of the words aren’t grammatically correct. The client could easily say, ‘It’s not correct. Don’t run it.’ But that’s exactly why we should run it. That’s what attracts people’s attention. And the one or 2 out of 10 people who get it say, ‘That’s really cool.’ “

Renegade Rules IV
1. Define objectives in the context of the entire communication plan.
2. Set tangible metrics.
3. When all else fails, blame it on Renegade.

IV. Playing It Safe, Part 2: How much fuel is enough?

A plane departs Newark, New Jersey for Los Angeles. If the flight goes smoothly, it will burn around 40,000 pounds of fuel. If there are glitches, such as lousy weather or congestion over LAX, the plane will need more fuel. Every pound of fuel adds cost and weight, requiring even more fuel.

The problem: How much is just enough? Too much, and the plane incurs more costs (fuel represents the second-biggest operating expense for airlines). Too little, and the plane may have to divert to another destination — an outcome that’s less safe and far more expensive.

It’s a calculation that Continental Airlines makes thousands of times a day. It’s also a modern iteration — more complex, if less profound — of Pascal’s foray into decision theory. Mitch Dubner, Continental’s director of operations planning, reveals how he figures the odds.

One major consideration is the equipment. A Boeing 737-800, the workhorse for many Newark-L.A. flights, is smaller and consumes less fuel than the 757-200s that also travel that route. A plane that is fully loaded with passengers and cargo, of course, needs more fuel. Then, a host of weather variables are considered. Steering around a thunderstorm adds to flight time. So do heavy winds.

Are there 15 planes lined up for takeoff at Newark? Will air-traffic control allow takeoff on the long runway? A longer runway sends the plane to a higher, more fuel-efficient altitude faster. If gridlock seems likely at LAX, operations managers will add fuel for several laps around the airport.

At the current price of about 60 cents a gallon, the fuel onboard a Newark-L.A. flight is worth between $3,300 and $4,500. If Continental could reasonably save $100, it would. But what’s reasonable? If an LAX flight runs short on fuel, it may have to divert to Las Vegas or San Diego. The costs of that are huge. Imagine what’s involved in getting 150 passengers from San Diego to L.A., getting the plane back to its point of origin, and accommodating the L.A. customers stalled by the missing plane. “Disconnects,” says Dubner, “cost us a whole lot more than carrying the fuel.”

So to what extent does the cost of adding more fuel diminish the chance that a diversion will be necessary? At what point can Continental tolerate the risk? The answer is, it always pays to play it extremely safe. The Federal Aviation Administration requires every commercial flight to add 45 minutes’ worth of fuel to the minimum amount required for an on-time arrival. On top of that, Continental typically tacks on another 30 to 60 minutes’ worth.

V. Leadership: “Wealth is created during periods of uncertainty.”

This is how Yoram “Jerry” Wind sees it: Everything bad that has happened during the past year — the dotcom implosion, the recession, terror, the war — destroyed the illusion that we operate in a world that is continuous and continuously prosperous. As it turns out, our world is nothing like that. Our lives are routinely disrupted, our work dislocated.

But to dwell on cataclysm would be to miss the opportunities that cataclysm creates. “Wealth is created during periods of uncertainty,” Wind says. “You can go back to Frank Knight,* who said in 1921 that the only risk that leads to profit is unique uncertainty. Making money depends on identifying opportunities in a turbulent marketplace.”

Neatly pigeonholed, Wind is a professor of marketing at the University of Pennsylvania’s Wharton School. But in practice, his head travels everywhere. As founding director of Wharton’s SEI Center for Advanced Studies in Management, Wind grapples with ideas and management strategies that underlie “the 21st-century enterprise,” as he calls it. He proposes three essential characteristics of organizations that flourish in times of turmoil.

1. Disciplined opportunism. Think of the world right now as one magnificent fire sale. “There are huge tactical opportunities to buy cheap assets,” Wind says. “You can buy technology or talent for very little money and build assets that will create the great companies of the future.

“But you need to have discipline about this,” he continues. It’s one thing to snap up a failing technology outfit for half of its book value. It’s another to land an asset that truly plays to your company’s strategic strengths.

2. Continuous learning — and unlearning. According to Wind, “The fundamental challenge is to ask, What do we do, and why do we do it? We do things because they’ve worked in the past. But those things may not work in the future.” In a fast-changing marketplace, the assumptions driving your current vision and strategy won’t stay compelling for long.

“We talk about the learning organization,” says Wind. “But we have to balance learning with unlearning. What can I learn from the past, and how can I unlearn the things that might constrain me? Balancing the two, learning and unlearning, must be a dynamic process. And the CEO must drive this. The CEO should be the ‘chief unlearning officer.’ “

3. Adaptive experimentation. In a turbulent environment, Wind says, no strategy is optimal. So you have to create an environment of continuous experimentation — a way to design projects that allows you to learn, adapt, and change. These experiments must be big experiments, because it’s hard to measure the difference that small changes make. But even more important, why waste the resources required for experimentation on something that isn’t really new?

“In general, companies that do what they think is safe, that try tiny changes, don’t get results. Companies that are bolder get bigger results. Why? Because radical experimentation forces everyone to innovate. And because it’s a competitive weapon: If you’re experimenting a lot, other companies can’t figure out what you’re doing.

“Most important, experimentation allows you to learn really fast what’s happening out there. It forces you to continually reexamine strategy, because you’re constantly measuring your experiments. Experiment, measure, modify, and react. It’s a powerful way of learning.”

*Economics primer: Frank H. Knight was cochair of the department of economics at the University of Chicago from the 1920s to the late 1940s. In his classic book published in 1921, Risk, Uncertainty and Profit, he distinguished between risk and uncertainty. Risk, he argued, was a randomness — as in a game of roulette — whose probability could be determined. Uncertainty implied unknown and perhaps unknowable probabilities. Will human cloning be commonplace in a generation? That’s an uncertainty.

Change per se, Knight wrote, does not drive profit. Just because you operate in a dynamic world doesn’t ensure opportunities to make money. Likewise, a risky situation isn’t necessarily profitable. Since the odds are calculable, they are calculable by anyone and so not unique. But “change may cause a situation out of which profit will be made, if it brings about ignorance of the future.” Profit “is in fact bound up in economic change … it is clearly the result of risk, but only of a unique kind of risk, which is not susceptible of measurement.”

VI. Customers: “People are more open-minded than we give them credit for.”

At the 2001 Detroit Auto Show, GM’s Buick division unveiled the Bengal, its latest concept car. It was a stirring creation — a two-tone, metallic-blue convertible roadster that reeked of power and dash. It looked fast. It was sexy. And in many ways (most of them good), it was strikingly unBuicklike.

The average age of people who buy Buicks is 62. That isn’t to knock 62-year-olds. The problem is, if you sell to 62-year-olds for too long, you become overly cautious. You start to think that those older people don’t like change. So you never change, because it’s too risky.

The other problem is that 62-year-old customers die sooner than the fortysomethings who buy BMWs. And so, the challenge: If Buick changes too much, all of its older customers might start buying Lincolns. But if the company never changes, it risks running out of customers.

Dave Lyon thinks a lot about this dilemma. He is chief designer at the Buick Brand Center. He is 33 and has worked at GM for 12 years, most recently with Cadillac. Now it is his job to change the way that Buick imagines the future of its cars. The Bengal was his design.

“This used to be a very risk-averse place,” says Lyon. “Car design was determined in focus groups. We would take different ideas to the customer clinic and then go with the design that was most popular. The idea was to take the risk out of the decision — just do what the customer wanted.

“But with focus groups, people are put in small rooms with bad lighting. That doesn’t put them in the mood for the future. In focus groups, people seem to be more conservative than they really are. I think that people are more open-minded than we give them credit for. And besides, what did well in the clinic one year might not do so well three or four years later. By the time the car is actually released, the world will have moved and people’s perceptions will have changed. So you aren’t eliminating the risk. You’re doing just the opposite.

“I look back at the 1950s, when Buick made dramatic cars: the ’53 Skylark, beautiful convertibles, powerful sedans. We aren’t doing that now, making young people say, If only I had enough money for one of those. Instead, we’ve left ourselves with a line of very competent appliance cars. They’re like dishwashers: They’re okay, but you don’t fall in love with them. For people to let go of that much cash, they’d better be in love. And a conservative car doesn’t get people to fall in love.

“So instead of designing cars in focus groups, we’ve started using concept vehicles as a way to show where and how we can take risks. We take the car to auto shows, where people are tuned to think with an open mind. Then we come back with a strong public reaction — and in a much stronger position to negotiate.

“That’s where the Bengal came from, and the LaCrosse [a futuristic, four-seat sedan] before that. We said, Maybe we could make a vehicle that is dramatic enough to be noticed by younger people and that still appeals to older customers. No matter how radical we go, if the car can’t be recognized as a Buick, we’ve gone too far. So we included cues to make the designs recognizable, like the Buick grille, port holes, and cross-car taillights. It’s a very different execution of classic Buick traits — a way of designing a car that’s new but not so new that it could be a Hyundai.”

Caught again in an industry downturn, GM recently decided not to put the Bengal concept vehicle into production. The fate of the LaCrosse hasn’t been decided yet. In the meantime, Lyon is working on an overhaul of the LeSabre, one of the company’s most conservative models. That redesign won’t appear for several years, but Lyon promises “a dramatic statement.”

VII. Innovation: The Pasadena startup machine

There was a time when every dorm room, it seemed, was a startup waiting to happen. Throughout the 1990s, kids cobbled together business plans between classes, won funding, and jumped into business. Risk? What risk? Plunging into a new venture seemed all too easy.

Ah, the fickleness of youth. These days, most of the kids are back in class. Venture capitalists say that they’re seeing precious few proposals out of MIT, Stanford, and almost every other university, save one: the California Institute of Technology.

In fact, Caltech says that it actually spun out the same number of startups in 2001 — a poor time, needless to say, for new ventures — as it did in the boom year of 1999. While startup enthusiasm has faded on most campuses, Caltech has blossomed into a robust new-company machine.

This didn’t happen by accident. During the past seven years, Caltech’s Office of Technology Transfer has carefully developed a strategy for cultivating commerce. “We focus on nurturing entrepreneurs scientifically more than other schools do,” says Rich Wolfe, the office’s associate director. That is, the university focuses more on the science itself than on the ensuing commercial opportunity.

That’s what grabbed Uri Cummings and Andrew Lines, two PhD students at Caltech who founded Fulcrum Microsystems Inc. in 2000. “There is a pervasive philosophy at Caltech that no problem is unsolvable,” Cummings says. “There’s a focus on scientific ingenuity that is thrilling to be around. Caltech has so many entrepreneurs because the school doesn’t make it about business or focus on how much money they’ll get out of it. Caltech is a catalyst, moving technology from the university out into industry, and students are thrilled to be a part of it.”

Before starting Fulcrum, Cummings and Lines worked for six years with Caltech computer-science professor Alain Martin on an asynchronous-circuit design for semiconductor chips. They ventured into commercialization while still in the throes of their doctoral program.

That they could afford to do that points to another, more practical aspect to Caltech’s approach. Other universities typically require entrepreneurs to pay up-front application and licensing fees for the use of technology patents. But Caltech believes that such payments stifle entrepreneurship, since young companies usually have little cash to spare. Instead, the school typically takes equity stakes in startups, and it defers collection of patent payments until fledgling companies are financially secure.

For Caltech, it’s a long-term bet. “The reality is that universities rely far more on their endowments than they could on any fees to be collected from the initial licensing process,” Wolfe says. “So we seek a bite of the apple — and we hope that if one of these entrepreneurs founds the next Intel, he’ll not only share the equity but also bestow a gift on the university in remembrance that we took care of him when he was just getting started.”

Cummings and Lines may be in a position to do just that. Fulcrum has won about $20 million in venture funding amid the toughest venture market in recent history. Its founders have hired a credible CEO, Bob Nunn, who formerly ran Vitesse’s telecom division, and hired 24 top students from their alma mater. And they’ve garnered rave reviews of their chip design from technology journals.

One thing that Cummings and Lines haven’t done yet: finished their degrees. Officially, both are now “on leave.” They may not be back.
— Alison Overholt

VIII. Past Company: The greatest business risk ever taken

Imagine you’re running a large, global company. You can stick with the strategy that has worked for decades and face the gradual erosion of your market share. Or you can bet a sum that is more than twice your annual revenue on a new product that will wipe out everything you’ve sold before.

That was the bet that Thomas Watson Jr. made on April 7, 1964, when IBM unveiled its new System/360. “The most important product announcement in the company’s history,” Watson proclaimed. He was dead-on: The IBM System/360 was an enormous departure, a bold gamble that would change everything — not just at IBM itself, but throughout the computer industry — for decades to come.

IBM had invested $750 million in R&D to create the system and another $4.5 billion on factories, equipment, and inventory. (A project of comparable scale would cost IBM $210 billion today.) The resulting product line eventually made nearly all of IBM’s vacuum-based machines obsolete. “If we messed up, we were left with nothing,” says Fred Brooks, project manager for the 360 and now a professor at the University of North Carolina at Chapel Hill.

In hindsight, we know that Watson’s bet proved outrageously fortunate. Orders flooded in for the 360, the first family of computers ever to be expandable and internally compatible. Within three years, IBM’s revenues had more than tripled to $7 billion — and Big Blue quickly outdistanced its rivals. (Remember Burroughs? RCA? Sperry?)

But the lesson here isn’t that brass-balled risk taking is the essence of leadership. “A lot of us think that success is about the boldness of the gamble,” says Nancy Koehn, a professor of business history at Harvard Business School. “Success is more complex. It’s about understanding what’s bold about the boldness, about knowing how to keep the risk from coming back to bite you, and about knowing what your organization will get from taking such a big step.” The System/360, in other words, paid off not because it was an extraordinary risk, but because IBM managed the risk extraordinarily well.

IBM hedged its gamble in several ways. First, Koehn notes, it had remarkable market intelligence. Watson also instituted what we would now call an internal SWAT team to spearhead development and to spread the 360 gospel. IBM managed its cash flow effectively (though at one point, it made a hasty stock offering). And it applied capabilities that fit the nature of the risk. “IBM knew R&D, and it knew how to commercialize products,” Koehn says. It was that cultural intuition and self-knowledge that allowed IBM to break with its past — and, in turn, to forge its future.

IX. Playing It Safe, Part 3: “It’s like a big chess game.”

“What I do for 12 hours a day,” says Mitchell Moore, “is talk about the weather.” Moore is safety director at Stevens Transport, a refrigerated-truck company based in Dallas. It’s his job to know the weather wherever any of Stevens’s 1,700 drivers are headed — and to do something about it.

“Right now, I’m looking at 41 drivers in the Northeast, where there’s some ice on the roads. We know what’s going to happen, so we have options. We can maneuver around the storm or drive through it. It’s like a big chess game.”

A big chess game. That’s just what weather forecasting is about. It’s a science rooted in educated guesses about a swirling, constantly changing mix of conditions. People can’t control the heat or when and how much it rains. But we’ve learned a lot about forecasting those conditions and about softening their financial impact. In effect, we’ve taken the risk out of weather risk.

For one thing, we have made enormous advances in climatology. “Eight or 10 years ago, long-range forecasts just weren’t possible with today’s level of accuracy,” says Joel Myers, founder and president of AccuWeather, the company that sells Stevens Transport its weather data. Since then, scientists have figured out how important oceans are — and have employed more and better satellites to gauge water temperature. Using computer models, they can produce 15-day predictions for increasingly intimate slices of the globe. “These forecasters can look at their radar,” Moore marvels, “and see the very spot where one of our trucks is.”

In the past five years, Wall Street has developed instruments that can hedge the business risks associated with weather. In part, such products are a natural progression in the explosion of financial derivatives. But those products have also been made possible by the Web, which allows rapid access to the historical data needed to create models.

Lynda Clemmons and her colleagues first started thinking about weather hedges in 1996, when they were working on a utility acquisition at Enron. There was no way, they learned, to protect themselves against the financial impact extreme weather could have on revenue. So they developed a product that paid more for power as the temperature rose — something akin to a traditional call option.

Since then, Clemmons and her team have sealed a deal with Atmos Energy Corp. to protect the utility against mild winters. They also engineered an instrument that safeguards Elektrizitatswerk Dahlenburg, a German utility company, against excessive rainfall.