predicting speed of change
Predicting Speed of Change
In my last musing I mentioned how Branko Milanovic in his Global Inequality described how he had read all the major economic forecasts of the second half of the twentieth century and found every single one was completely wrong. As a result, I found myself wanting to go back in time to some of technology’s major inventions and see whether the pundits of the day had predicted the impact of each invention accurately.
So, in 1804 when Richard Trevithick set his Puffing Devil in motion along a short length of rails, did his peers envisage that less than a century later the globe would be criss-crossed with tracks and canals, stage coaches and sailing ships would have been made redundant? In 1879 when Thomas Edison invented his electric light bulb did the pundits of the day predict that within a few short decades electricity would not only light up the world but also power a range of gadgets previously unimagined? At about the same time the internal combustion engine came onto the market and, in an equally short space of time, displaced horses and oxen, revolutionised agriculture and the battlefield and enabled man to fly with the birds – did anyone foresee all of that?
Moving to our own era, in 1995 when the cell phone and the Internet were new and shiny, did any of us predict that in less than twenty years most people on the planet would own a hand held computer that could see, listen, reason and communicate with the rest of humanity? Fracking technologies were only developed this century but by 2010 had revolutionised the American oil and gas sector and broken OPEC’s back.
In addition to wondering whether the full impact of each of these developments was predicted at the time they came onto the market, I am also struck that the time from inception to maturity shortened drastically from close on a century for the steam engine to just a handful of years for fracking.
Now we have three new technologies, all related, coming onto the stage, Renewable energy, powered by the wind and sun, is already cheaper than nuclear, coal and even gas. Batteries are getting both more powerful and much cheaper, allowing electricity to be stored for when the wind doesn’t blow and the sun doesn’t shine. As a result of both of these, the purchase and running costs of electric vehicles are dropping sharply. How long is it going to take for this combination to drive carbon off the planet?
Already we are starting to see the direct effects. Every major nuclear power plant construction company is in dire financial straits with Westinghouse poised to file for bankruptcy. According to a report on the world coal construction industry this week compiled by Greenpeace, the Sierra Club and Coalswarm, in 2016 pre-construction activity fell by 48%, construction starts by 62% and ongoing construction by 19%. In Norway more electric cars are sold than traditional gasoline models.
Then there’s a bizarre example. For the last few years ExxonMobil, Google and Apple have vied to be America’s largest listed company. But while ExxonMobil is huge, it is just a pygmy compared to Aramco, Saudi Arabia’s state oil company which is larger than the three combined. Now, as a result of low oil prices, the cash-strapped Saudi government is planning to list Aramco in one of the biggest listings of the decade. No doubt the share will be included in all the major indices and tracker funds will have to subscribe for shares. Pension funds everywhere will find themselves with a direct or indirect stake.
Just recently there have been a number of articles in the press speculating on when sales of oil products are likely to go into terminal decline with some experts predicting it could be as early as 2026, just nine years away. When that happens the oil surplus will lead to bargain basement oil prices in the short term and bankruptcies galore. Aramco, ExxonMobil and the rest could go out of business taking all their shareholders along for the ride down the greasy slope - as well as our pensions.
Of course, like all those other futurologists who were completely wrong, I might well be too. In the meantime it gives us more to mull on and maybe change some of our investment strategies.
In my last musing I mentioned how Branko Milanovic in his Global Inequality described how he had read all the major economic forecasts of the second half of the twentieth century and found every single one was completely wrong. As a result, I found myself wanting to go back in time to some of technology’s major inventions and see whether the pundits of the day had predicted the impact of each invention accurately.
So, in 1804 when Richard Trevithick set his Puffing Devil in motion along a short length of rails, did his peers envisage that less than a century later the globe would be criss-crossed with tracks and canals, stage coaches and sailing ships would have been made redundant? In 1879 when Thomas Edison invented his electric light bulb did the pundits of the day predict that within a few short decades electricity would not only light up the world but also power a range of gadgets previously unimagined? At about the same time the internal combustion engine came onto the market and, in an equally short space of time, displaced horses and oxen, revolutionised agriculture and the battlefield and enabled man to fly with the birds – did anyone foresee all of that?
Moving to our own era, in 1995 when the cell phone and the Internet were new and shiny, did any of us predict that in less than twenty years most people on the planet would own a hand held computer that could see, listen, reason and communicate with the rest of humanity? Fracking technologies were only developed this century but by 2010 had revolutionised the American oil and gas sector and broken OPEC’s back.
In addition to wondering whether the full impact of each of these developments was predicted at the time they came onto the market, I am also struck that the time from inception to maturity shortened drastically from close on a century for the steam engine to just a handful of years for fracking.
Now we have three new technologies, all related, coming onto the stage, Renewable energy, powered by the wind and sun, is already cheaper than nuclear, coal and even gas. Batteries are getting both more powerful and much cheaper, allowing electricity to be stored for when the wind doesn’t blow and the sun doesn’t shine. As a result of both of these, the purchase and running costs of electric vehicles are dropping sharply. How long is it going to take for this combination to drive carbon off the planet?
Already we are starting to see the direct effects. Every major nuclear power plant construction company is in dire financial straits with Westinghouse poised to file for bankruptcy. According to a report on the world coal construction industry this week compiled by Greenpeace, the Sierra Club and Coalswarm, in 2016 pre-construction activity fell by 48%, construction starts by 62% and ongoing construction by 19%. In Norway more electric cars are sold than traditional gasoline models.
Then there’s a bizarre example. For the last few years ExxonMobil, Google and Apple have vied to be America’s largest listed company. But while ExxonMobil is huge, it is just a pygmy compared to Aramco, Saudi Arabia’s state oil company which is larger than the three combined. Now, as a result of low oil prices, the cash-strapped Saudi government is planning to list Aramco in one of the biggest listings of the decade. No doubt the share will be included in all the major indices and tracker funds will have to subscribe for shares. Pension funds everywhere will find themselves with a direct or indirect stake.
Just recently there have been a number of articles in the press speculating on when sales of oil products are likely to go into terminal decline with some experts predicting it could be as early as 2026, just nine years away. When that happens the oil surplus will lead to bargain basement oil prices in the short term and bankruptcies galore. Aramco, ExxonMobil and the rest could go out of business taking all their shareholders along for the ride down the greasy slope - as well as our pensions.
Of course, like all those other futurologists who were completely wrong, I might well be too. In the meantime it gives us more to mull on and maybe change some of our investment strategies.
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