Business Insight Zone

(Please bear with a little bit of roundabout Friday-afternoon philosophizing here. And please share your opinions in the comments.)

In a 1986 lecture, computer scientist Richard Hamming talked about his work at Bell Labs during the early days of digital computing. There was never enough computing power available for all the projects that the Bell Labs scientists and engineers wanted to do, so they had to get clever about how to optimize their programs to run better with less horsepower. Much the same thing happened in the Soviet Union during the Cold War, where good computing hardware was often available only for top-secret projects tied to nuclear weapons or the Soviet space program. (Even then, the state of the art for Soviet computer hardware would often stagnate for years or decades at a time. ) But just like their contemporaries at Bell Labs, Soviet computer scientists were very clever, so they learned to optimize what they could — namely, the code running on the machines.

The contrast to modern computing is clear. Increases in the performance of components, especially microprocessors and memory devices, mean that the laptop on which I’m writing this has more computing power than anything Richard Hamming ever got to use during his heyday. But it also means that I need not be very clever about which files to keep and discard, since there’s plenty of hard-drive space for everything, and it also means that Microsoft, Adobe, Mozilla, and the other software makers whose programs run on this machine need not worry much about “bloat” in their applications. In other words, when more microprocessor cycles and memory space can typically be had on the cheap, software writers don’t need to put much of a premium on efficiency in their code.

Something similar has prevailed in the recent history of energy. Coal and oil have been so cheap for so long that no great emphasis has been placed on efficiency. There have been exceptions, as when Toyota, Honda, and other makers of fuel-efficient cars became more popular in the US market after the oil shocks of the 1970s. Sometimes, external factors like regulation to promote efficiency or to limit pollution have led manufacturers — of cars, washing machines, power plants, or what have you — to improve the efficiency of their products. But for much of recent business history, cheap energy has been so abundant that its users have not needed to worry about conserving it.

Some of this logic still prevails. Coal remains cheap and abundant, and consumers have come to expect ubiquitious availability of cheap electricity. That’s why both the US and China continue to see so many new coal-fired power plants. And despite strains in the world’s system of producing oil, it’s clear there are many billions of barrels of reserves still to be pumped. There’s increasing debate about exactly how long our stocks of coal and oil will last, but under any likely scenario the answer is measured in decades or centuries.

This is different, though, from asking how long our stocks of energy will be cheap — and it pays to remember that it’s the historic cheapness of energy that has profoundly shaped Western standards of living over the past hundred-plus years.

Here, then, is the $64-trillion-dollar question:

What consequences unfold if the price of energy rises high enough that no one sees energy as a commodity that they can afford to waste?

You tell me.

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(Vacuum tube photo by Marcin Wichary. Oil rig photo by jurvetson — yes, that Jurvetson.)