Saturday, December 16, 2006

Prosperity or Scarcity?

One of my favorite topics to think about is the concept of prosperity consciousness. It sometimes seems that most of the world is gripped in a scarcity mentality despite overwhelming evidence to the contrary. Sometimes people blame wars on religions or mad dictators but, in fact, it probably is most likely due to the prevalence of a scarcity mentality.

I wrote earlier about my favorite economic book Unlimited Wealth by Paul Zane Pilzer. It's not difficult reading as you might expect from an economist, but rather entertaining. Pilzer traces the root of the scarcity mentality to the basic premise on which economics has been based - economics is the study of the limited supply of the worlds resources. If that premise is correct then it makes sense to fight over raw materials (gold, oil, etc.)

But what if resources are not scarce? What if in fact we have reached a point in our history that we can control, through technology, the supply of resources. What if, like the ancient alchemists, we can literally turn base metals into gold. In fact, today we can in essence do just that for most of our needs and the rate of technological advance is so rapid that I don't believe we will ever run out of anything we need.

Pilzer reminds us of how in 1973 leading scientist predicted that we would run out of oil by the 1990's, yet by 1990 there was such a surplus of oil that prices were at a historic low. What happened to cause that? Technologies like fuel injectors doubled fuel economy in cars and essentially doubled oil supply. New technologies allowed us to recover more oil from existing wells and dig deeper wells to find more oil. In fact, technology advanced so fast as a result of new R&D (money invested by the profits of the 1980's high prices), that it surpassed our ability to consume the oil and keep the price up.

In college, I worked on a co-op job for a large copper & coal mining company in R&D. One of my projects was transforming coal into oil products. It wasn't too hard to do, but it's not cost effective yet. There are more BTU's of coal, tar sands, and oil sands in the ground than oil. Once companies can get a decent return on investment. I also worked on a software program which simulated mining precious metals from the ocean bottom. I remember being overwhelmed by how large a source of gold, copper, platinum, etc. existed on the ocean bottom. I don't believe we'll ever be able to use all of this material. This has given me a perspective that resources in fact are not scare, but quite abundant.

One of the most intriguing examples of modern alchemy is the conversion of the most common of elements, silica (think of sand) into computer chips. This is about as literal example as can be made of converting a base material to gold. Food is another example. In the 1968 Paul Erlich published the Population Bomb - predicting widespread famine in 10 years (the world's population was only 3.6 billion in 1968). Today with a world population over 6 billion we have to pay farmers not to farm and most countries export food (even China!). The company I work for is constantly creating genetically modified crops that are increasing farm yields exponentially. We will never run out of food!!

So what does this have to do with a prosperity consciousness? Well, when we live our lives out of scarcity we miss opportunities. I see so many blogger's writing about being frugal or clipping coupons or budgeting. I believe that people that live in this consciousness are constantly jealous of others accomplishments and this creates lots of conflict between those who make money and those who want to take money away from those who make money. It drives our politics and promotes disharmony throughout the world. I think the current war against us by the radical Islamist's is driven by this attitude. It's hard to focus on generating new income streams when you are focused on penny-pinching or taking someone elses money.

Here's more thoughts from Pilzer:

  • technology is the major determinate of wealth because it determines the nature and supply of physical resources
  • the advance of technology is determined mainly by our ability to process information
  • the backlog of unimplemented technological advances (technology gap) is the true predictor of economic growth

"The first law of business is no longer "find a need and fill it" but "imagine
a need and create it

My sister-in-law is a perfect example of someone who has imagined a need and is using the technology gap to exploit it. She started a business which caters to attorney's. Lawyers are technologically very outdated. They keep all their records on paper and pay thousands of dollars per month to store and manage all those papers. My sister-in-laws idea was simply to employ technology to manage this information for the attorney's using technology. And she is succeeding beyond any one's dreams (except maybe her own!).

I've always hated the scarcity mentality. I hate going to thrift stores, clipping coupons, trying to watch every penny I spend. I'm not jealous of those who succeed, but truly admire them for what they have accomplished and found inspiration to keep going when I haven't gotten wealthy yet.

I hope someday Pilzer wins a Nobel Prize for his thesis.

1 comment:

Anonymous said...

Eh, I've never been too hot on penny-pinching myself. I always thought wouldn't it be better to make so much money you would never have to ever penny-pinch again?