OPPORTUNITIES BEFORE EFFICIENCIES

Don’t Solve Problems; Seek Opportunities

Until Charles Darwin’s discovery of evolution, life was surveyed in the present tense. Animals were probed to see how their innards worked, plants dissected for useful magical potions, the creatures of the sea investigated for their strange lifestyles. Biology was about how living organisms thrived day to day.

Darwin forever transformed our understanding of life by insisting that life didn’t make sense without the framework of its billion-year evolution. Darwin proved that even if all we wanted to know was how to cure dysentery in pigs, or how best to fertilize corn, or where to look for lobsters, we had to keep in mind the slow, but commanding dynamics of life’s evolution over the very long term.

Until recently, economics was about how businesses thrived year to year, and what kind of governmental policy to institute in the next quarter. The dynamics of long-term growth are quite remote from the issues of whether the money supply should be tightened this year. The study of economics has no Darwin yet, but it is increasingly clear that the behavior of everyday markets cannot be truly understood without keeping in mind the slow, but commanding dynamics of long-term economic growth.

 

OPPORTUNITIES BEFORE EFFICIENCIES

Over the long run, the world’s economy has grown,…

…on average, a fractional percent per year. During the last couple of centuries it averaged about 1% per year, reaching about 2% annually this century, when the bulk of what we see on earth today was built. That means that each year, on average, the economic system produces 2% more stuff than was produced in the previous 12 months. Beneath the frantic ups and downs of daily commerce, a persistent, invisible swell pushes the entire econosphere forward, slowly thickening the surface of the earth with more things, more interactions, and more opportunities. And that tide is accelerating, expanding a little faster each year.

At the genesis of civilization, the earth was mostly Darwin’s realm–all biosphere, no economy. Today the econosphere is huge beyond comprehension. If we add up the total replacement costs of all the roads in every country in the world, all the railways, vehicles, telephone lines, power plants, schools, houses, airports, bridges, shopping centers (and everything inside them), factories, docks, harbors–if we add up all the gizmos and things humans have made all over the planet, and calculate how much it is all worth, as if it were owned by a company, we come up with a huge amount of wealth accumulated over centuries by this slow growth. In 1998 dollars, the global infrastructure is worth approximately 4 quadrillion dollars. That’s a 4 with 15 zeros. That’s a lot of pennies from nothing.

What is the origin of this wealth? Ten thousand years ago there was almost none. Now there is 4 quadrillion dollars worth. Where did all of it come from? And how? The expenditure of energy needed to create this fluorescence is not sufficient to explain it since animals expend vast quantities of energy without the same result. Something else is at work. “Humans on average build a bit more than they destroy, and create a bit more than they use up,” writes economist Julian Simon. That’s about right, but what enables humans, on average, to ratchet up such significant accumulations?

 

OPPORTUNITIES BEFORE EFFICIENCIES

The ratchet is the Great Asymmetry…

…says evolutionist Steven Jay Gould. This is the remarkable ability of evolution to create a bit more, on average, than it destroys. Against the great drain of entropy, life ratchets up irreversible gains. The Great Asymmetry is rooted in webs, in tightly interlinked entities, in self-reinforcing feedback, in coevolution, and in the many loops of increasing returns that fill an ecosystem. Because every new species in life cocreates a niche for yet other new species to occupy, because every additional organism presents a chance for other organisms to live upon it, the cumulative total multiplies up faster than the inputs add up; thus the perennial one-way surplus of opportunities.

We call the Great Asymmetry in human affairs “the economy.” It too is packed with networks of webs that multiply outputs faster than inputs. Therefore, on average, it fills up faster than it leaks. Over the long run, this slight bias in favor of creation can yield a world worth 4 quadrillion dollars.

 

OPPORTUNITIES BEFORE EFFICIENCIES

It is not money the Great Asymmetry accrues,…

…nor energy, nor stuff. The origin of economic wealth begins in opportunities.

The first object made by human hands opened an opportunity for someone else to imagine alternative uses or alternative designs for that object. If those new designs or variations were manifested, then these objects would create further opportunities for new uses and designs. One actualized artifact yielded two or more opportunities for improvement. Two improvements yielded two new opportunities each–now there were four possibilities. Four yielded eight. Thus over time the number of opportunities were compounded. Like the doubling of the lily leaf, one tiny bloom can expand to cover the earth in relatively few generations.


Both life and wealth expand by compounding increase, which gives them an eternal slight advantage over death and loss, so that over time there is constant growth.

Perhaps the most potent physical force on earth is the power of compounded results, whether that is compounded interest, compounded growth, compounded life, or compounded opportunities. The inputs of energy and human time into the economy can only be supplied in an additive function, bit by bit, but over time the output is multiplied to compound upon itself, yielding astounding accumulations.

A steady stream of human attention and thought is applied to inventing new tools, devising new amusements, and creating new wants. But no matter how small and inconsequential, each innovation is a platform for yet other innovations to launch from.

 

OPPORTUNITIES BEFORE EFFICIENCIES

It is this expanding space of opportunities…

…that creates an ongoing economy. It is this boundless open-ended arena for innovations that spurs wealth creation. Like a chain reaction, one well-placed innovation can trigger dozens, if not hundreds, of innovation offspring down the line.

Consider, for example, email. Email is a recent invention that has ignited a frenzy of innovation and opportunity. Each tiny bit of email ingenuity begets several other bits of ingenuity, and they each in turn beget others, and so on compoundfinitum. Unlike a piece of junk mail, an email advertisement costs exactly the same to send to one person or one million people–assuming you have a million addresses. Where does one get a million addresses? People innocently post their addresses all over the net–at the bottom of their home page, or in a posting on a news group, or in a link off an article. These postings suggested an open opportunity to programmers. One of them came up with the idea of a scavenger bot. (A bot, short for robot, is a small bit of code.) A scavenger bot roams the net looking for any phrase containing the email @ sign, assumes it is an address, pockets it, and then compiles lists of these addresses that are sold for $20 per thousand to spammers–the folks who mail unsolicited ads (junk mail) to huge numbers of recipients.

The birth of scavenger bots suddenly created niches for anti-spam bots. Companies that sell internet access seed the net with decoy phony email addresses so that when the addresses are picked up by scavenger bots and used by the spammers, the internet provider will get mail they can track to find out where the spam is coming from. Then the provider blocks the spam from that source for all their customers, which keeps everyone happy and loyal.


Each new invention creates a space from which several more inventions can be created. And from each of those new innovations comes yet more spaces of opportunity.

Naturally, that innovation creates opportunity for yet more innovation. Creative spammers devised technology that allows them to fake their source address; they hijack someone else’s legitimate address to mail spam from and then flee after using it.

Every move generates two countermoves. Every innovation creates an opportunity for two other innovations to succeed by it.

 

OPPORTUNITIES BEFORE EFFICIENCIES

Every opportunity seized…

…launches at least two new opportunities.

The entire web is an opportunity dynamo. More than 320 million web pages have been created in the first five years of the web’s existence. Each day 1.5 million new pages of all types are added. The number of web sites–now at 1 million–is doubling every 8 months. (Think lily pond!) A single opportunity seized in 1989 by a bored researcher began this entrepreneurial bloom. It is not the lily leaf that is expanding now, but the lily pond itself.

The number of opportunities, like the number of ideas, are limitless. Both are created combinatorially in the way words are. You can combine and recombine the same 26 letters to write an infinite number of books. The more components you begin with, the faster the total possible combinations ramp up to astronomical numbers. Paul Romer, an economist working on the nature of economic growth, points out that the number of possible arrangements of bits on a CD is about 10^ billion. Each arrangement would be a unique piece of software or music. But this number is so huge there aren’t enough atoms in the universe to physically make that many CDs, even subtracting all the duds that are just random noise.

 

OPPORTUNITIES BEFORE EFFICIENCIES

We can rearrange more than just bits.

Think of the mineral iron oxide, suggests Romer. It’s rust. More than 10,000 years ago our ancestors used iron oxide as a pigment to make art on cave walls. Now, by rearranging those same atoms into a precisely thin iron oxide film on plastic we get a floppy disk, which can hold a reproduction of the same cave paintings, and all the possible permutations of it wrought by Photoshop. We have amplified the possibilities a millionfold.

The power of combinatorial explosions–which is what you get with ideas and opportunities–means, says Romer, “There’s essentially no scarcity to deal with.” Because the more you use opportunities, the less scarce they get.

Everything we know about the structure of the network economy suggests that it will bolster this efflorescence of opportunities, for the following reasons:

  • Every opportunity inhabits a connection. As we connect up more and more of the world into nodes on a network, we make available billions more components in the great combinatorial game. The number of possibilities explodes.
  • Networks speed the transmission of opportunities seized and innovations created, which are disseminated to all parts of the network and the planet, inviting more opportunities to build upon them.

Technology is no panacea. It will never solve the ills or injustices of society. Technology can do only one thing for us–but it is an astonishing thing: Technology brings us an increase in opportunities.

 

OPPORTUNITIES BEFORE EFFICIENCIES

Long before Beethoven sat before a piano…

…someone with twice his musical talents was born into a world that lacked keyboards or orchestras. We’ll never hear his music because technology and knowledge had not yet uncovered those opportunities. Centuries later the fulfilled opportunity of musical technology gave Beethoven the opportunity to be great. How fortunate we are that oil paints had been invented by the time Van Gogh was ready, or that George Lucas could use film and computers. Somewhere on Earth today are young geniuses waiting for a technology that will perfectly match their gifts. If we are lucky, they’ll live long enough for our knowledge and technology to make the opportunity they need.

 

OPPORTUNITIES BEFORE EFFICIENCIES

Oil paint, keyboard, opera, pen…

–all these opportunities remain. But in addition we have added film, metal work, skyscrapers, hypertext, and holograms as but a few of the new opportunities for artistic expression. Each year we add more opportunities of every stripe. Ways to see. Methods for thinking. Means of amusing. Paths to health. Routes to understanding.

The Great Asymmetry of economic life ceaselessly amasses new opportunities while relinquishing few old ones. The one-way journey is toward more and more possibilities, pointing in more and more directions, opening more and more new territories.

“A few decades from now there will be ten billion people on the planet, and sophisticated computers will be cheaper than transistor radios,” writes science fiction writer David Brin in his manifesto The Transparent Society. “If this combination does not lead to war and chaos, then it will surely result in a world where countless men and women swarm the dataways in search of something special to do–some pursuit outside the normal range, to make each one feel just a little bit extraordinary. Through the internet, we may be seeing the start of a great exploration aimed outward in every conceivable direction of interest or curiosity. An expedition to the limits of what we are, and what we might become.”

 

OPPORTUNITIES BEFORE EFFICIENCIES

As the transmission of knowledge accelerates,…

…as more possibilities are manufactured, the unabated push of incremental growth also speeds up. In the long run, creating and seizing opportunities is what drives the economy. A better benchmark than productivity would be to measure the number of possibilities generated by a company or innovation and use the total to evaluate progress.

In the short run, though, problems must be solved. Businesses are taught that they are in the business of solving problems. Put your finger on a customer’s dissatisfaction, the MBAs say, and then deliver a solution. This bit of hoary advice inspires business to seek out problems. Problems, however, are entities that don’t work. They are usually situations where the goal is clear but the execution falls short. As in, “We have a reliability problem,” or “Customers complain about our late delivery.” In the words of Peter Drucker, “Don’t solve problems.” George Gilder distills the essence further: “When you are solving problems, you are feeding your failures, starving your successes, and achieving costly mediocrity. In a competitive global arena, costly mediocrity goes out of business.”

 
 

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-- KK