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The Miraculous Effects of Innovation

About 12-13 years ago, no one could turn on the TV or read an article about current events that did not talk about an energy shortage.

Fear was gripping the nation that one day soon the world would run out of oil.  Charts were posted showing that at current consumption levels, we had 50 years or so of oil left . China and India with their surging economies and rising middle class were going to create such demand on this “limited” resource that it would cripple growth in this country. OPEC was adjusting the pricing of oil in part for political purposes. We were in a sense held hostage.

And the government’s solution to all of these problems at first was: Soybeans?!

It was during this time that I saw someone speak on this topic and his prophetic words rang true years later. He said “We will never run out of oil.  There is plenty of it in the ground but it is just too expensive to extract right now. As the price climbs and technology improves, supply will start to increase.  Between us and Canada, we could be energy independent.”

Look at where we’ve come in such a short period of time.  Technology advancements have opened up oil reserves that were impossible to access only a few years before. It has been a long time since an OPEC meeting made news.  We are expected to be energy independent in just a few short years.

So why were we so fearful and afraid?

As Matt Ridly of WSJ notes, static limits do not factor  innovation. “Ecologists can’t seem to see that when whale oil starts to run out, petroleum is discovered, or that when farm yields flatten, fertilizer comes along, or that when glass fiber is invented, demand for copper falls.”

This phenomenon deals with all sorts of resources: Natural gas, gold, phosphorus, silicon, forests, water, food, and dozens of others. One case after another exemplifies human innovation solving epic problems.

Perhaps Julian Simons is correct that the ultimate resource is the human mind.

The Internet of Things Will Be Huge

It’s started already. The internet is working its way into our life more and more. It’s connecting our phones, computers, kitchen appliances and our stores to one another. You can control your thermostat remotely, or stream TV shows from the internet onto you TV, or monitor your security system. But that’s just the start.

Bottom line, sensors placed in devices compile data and send it over the internet where it is turned into meaningful information. The implications for businesses, non-profits, and government can help them become more efficient and reduce costs. We are seeing:

  • A farmer easily monitor hundreds of cows to make sure they are healthy while he sits at a computer.
  • Doctors remotely tracking patients with heart conditions.
  • Street lighting adapting automatically based on weather reports
  • Delivery vehicles being rerouted because of accidents up ahead.
  • Smart grids automatically turning down certain household appliances during peak usage periods when brownouts may occur. Or just automatically change when it senses no one is home.
  • A waste management company was able to reduce residential waste by 17% and increase recycling by 49% due in part to monitors tracking usage.
  • Water systems in cities such as Beijing have reduced leaks by 40-50% thanks to sensors placed on many pumps in their infrastructure.

And guess what? That’s still just the start. In just a few years, some people expect more “smart devices” to be in use than smartphones, tablets and computers combined.

Cost vs. Value. And How Money Fits In.

Excerpts from a great post great post by Seth Godin:

“Five dollars to buy a snack box on an airplane is worth something very different than five dollars to buy a cup of coffee after a fancy meal, which is worth something different than five dollars in the grocery store. That’s because we get to pretend that the five dollars in each situation is worth a different amount.”

“Cost isn’t abstract, but value is.”

Young Savers: How to Retire a Millionaire

I was quoted in an article the other day about what young people can do to begin saving for retirement.  The article outlines a lot of great concepts and analogies:

  • Early Earl and Late Larry, a great chart showing the time value of money
  • A snowball rolling down a hill is like compounding interest where you can earn interest on your interest.

You can read the article here.

Technological Unemployment: Is It Different This Time?

In the past, technological advancements ushered in new industries and created new jobs that were better, safer, and offered better pay.  A small fraction of the population are farmers today and their producing more food than ever before.

Up until recently, technology advancements have improved tasks that were highly routine- Production-line, manufacturing, manual labor. It replaced our physical abilities. But some are saying that there is a new round of advancements that will change the equation and result in technological unemployment.

But could it be different this time?

For the first time, technology is replacing our mental abilities.  Apple’s Siri can understand our words, IBM’s Watson is beating the best and brightest in Jeopardy, Google is rolling out driverless cars, Netflix and Amazon have complicated algorithms that offer spot on recommendations for us.

We will be hearing more and more about this in the years to come.

Our take – A new technological revolution is starting and it will be a major disruption. There could be a period where certain jobs are at risk of being replaced by Siri or Watson or some other machine with a person’s name. But after a period of disruption, that innovation will eventually lead to new developments that will likely result in new jobs requiring new skills.  It’s similar to the period when the farmer moved to the city to work in a factory.

If you’re interested in reading more, take the time to read this article It’s well worth your time.