PESTLE

Green Technology--part 1 of about a hundred and thirty two posts, I imagine

One symptom of the complicated nature of green technology can be seen in the fact that I assign four categories to this post--economic, environment, politics, and, only lastly technology.

Green technologies can be separated into the following categories:

Generative: Nuclear, biomass, biofuels, solar, wind, tide, and maybe more

Recuperative: Recycling, re-using, retrofitting for insulation, etc.

Distributive: Smart power grids, micro-generation, land-use policy, etc.

The stated goal of green technology is to displace fossil fuels. The politics is fraught. The economics is dubious. The technology needs work. And the environment is waiting.

Just some brief notes from the generative side of things:

This year, the US passed Germany and became the largest producer of wind power. Are people celebrating? Do people even know? Germany, meanwhile, is the largest subsidizer of solar power--in a land that is not famous for being sun-drenched. Do people know or care?

In 2005, the US used about 21% of all energy consumed, about 100 quadrillion BTUs. In 2007, about 7% of US energy production was renewable (mostly nuclear and hydroelectric). President Obama wants to double that in the next three years. This would involve either doubling the number of nuclear power plants, tripling the number of dams, increasing 100 fold the number of windmills and solar panels, or some combination thereof. It's a challenge.

The challenge got bigger when oil prices collapsed (and those who think they will bounce right back should be talking to Brazil's Petrobras about their production plans). And, as nuclear power plants and dams are both contentious and long-term in the planning, we are left contemplating the wind, the sun, biomass and, presumably, our navels.

It seems to me that it would take about the same effort as did gearing up military production for World War II. (This may not be a coincidence--many are writing about how WWII 'cured' the Great Depression).

Windmills cost several million dollars ($4.2 million in 2001, although prices may have declined. They may also have increased, as they are incorporating more technology.) Solar panels are cheaper. America has lots of sun. But any way you slice it, renewable energy doesn't double for $50 billion, the price I heard Obama give. Perhaps he wasn't including nuclear and hydroelectric in his initial calculations? I'll check for the next post.

More later.

Update: Well, the President didn't answer my questions in his speech, but here are the bullet points from the Obama-Biden Comprehensive New Energy Plan for America, published in August of 2008:

Provide short‐term relief to American families facing pain at the pump • Help create five million new jobs by strategically investing $150 billion over the next ten years to catalyze private efforts to build a clean energy future. • Within 10 years save more oil than we currently import from the Middle East and Venezuela combined • Put 1 million Plug‐In Hybrid cars – cars that can get up to 150 miles per gallon – on the road by 2015, cars that we will work to make sure are built here in America  • Ensure 10 percent of our electricity comes from renewable sources by 2012, and 25 percent by 2025 • Implement an economy‐wide cap‐and‐trade program to reduce greenhouse gas emissions 80 percent by 2050

I need to do some more digging, apparently.

China's decline

It's a testimony to something--I dunno, PR, fear, political distaste--that we pay so much attention to China. After 20 years of near double digit growth, their stated GDP is about $2.7 trillion U.S. dollars, compared to the U.S. figure of over $13 trillion. They produce about as many patents as the Netherlands, 19% of their population lives on less than $1 per day, and the average adult has 6.4 years of schooling. (These stats are from Nationmaster.)

China has a lot of what they call 'mass incidents,' which in other countries would be called demonstrations or riots. 87,000 last year. 20 years of double digit growth and 87,000 mass incidents per year. That's not a sign of a governmental system with widespread legitimacy amongst the governed.

Now, no developed country that I know of achieved that status without a hiccup--most countries had several long periods of economic stagnation or decline. Someone will have to explain to me why China should be the exception to this pattern. One such hiccup has arrived for China, and my 5-year prediction is that they will suffer through a depression that makes Western recession look mild. Remember one thing from this post, if no other: Hard times are harder for the poor. China is poor.

Their economy is export driven. People aren't importing their products. Their own consumers have a strong tradition of saving. They are not going to start spending when times get bad. Their economy is not free. There is no band of young entrepreneurs in garages plotting an internet boom. Their country is savagely corrupt. Companies that have invested heavily there will soon find out what that means in times of trouble. This will deter new waves of investment after Western economies start to recover. 

Now, however, their economic problems are also ours. They own a lot of our debt. The US has depended on it in its economic calculations. They will not be able to continue purchasing Treasuries. In another post I will look at the effects on Western politics and economics.

Technology Trends 4

If I were speaking to you face to face, I would now put on a very serious look and speak very slowly.

The next five years will see more innovation and invention than the past 12. That covers the entire life of Google, as well as the invention of Facebook, Twitter, etc., on the web, and the explosion of mobile telephony, the iPod, mobile software as services, etc., in telecommunications. We will see an extra zero on the number of products using nanotechnology, RayBan (or equivalent) head mounted devices that give full computer screen capabilities, an explosion in E-books, and much, much more. Your mobile in 5 years will be more powerful than the latest desktop PC is today.

But the next five years will probably not see a silver bullet cure for cancer, Alzheimer's or heart disease. Nor will genetics provide a detailed future history of your medical outcomes.

Robotics will advance into your home, if not your office.

A child born in the next five years in the developed world will probably have a zero percent chance of ever being lost in his or her lifetime. He or she will at some point not be convinced that's a good thing.

This analysis is based on simple extrapolation of patent filings, and should be (still) considered conservative. The wild and crazy stuff is for another post.

A pretty picture (Technology trends 3)

If you're into picking winners in scientific advances over the next few years, this chart from WIPO should help you:

Technology trends (2)

Think back to the year 2000--the new millenium, the Y2K bug, the looming internet bust. Can you remember what you thought and how you felt back then?

If someone had asked you to predict what technology areas would grow the fastest over the next five years, what would you have predicted? (I'm glad I didn't publish my thoughts then...)

The World Intellectual Property Organisation has kindly catalogued and tabled international patent activity for the years 2001-2005, and has even charted average annual growth.

Perhaps because of the Y2K bug, 2001 saw the absolute peak in patents filed for IT methods for management. There was an annual 10% drop in patent filings in this area over the next 5 years. Most other IT-related patent filings grew by about 5% per year, which is quite robust.

Chemistry did badly. In 11 categories, 8 saw absolute declines, including biotechnology. Only pharmaceuticals saw growth, and it was a paltry 1.7% per year. (In case you're wondering why all the big pharmaceutical companies are eating each other, it's because the IP cupboard is bare...)

Mechanical engineering didn't do much better. Of 8 categories, three showed negative growth and the other 5 grew slowly, with the exception of transport, which managed 3.8%.

So what was the overall winner? The biggest growth? The scientific advances that should now be showing up in the products and services we are buying today?

Second was optics, with 5% annual growth, and 103,390 patent filings in 2005. First, predictably, was computer technology, with 5.3% growth and 144,594 patent filings.

What this tells me as a back-of-the-envelope analyst is that Moore's Law will continue, that there's a bit of hype in biotech, that I don't want to own stock in pharmaceuticals, but the next generation of transportation equipment might change, for the better and the greener. Hasten the day.

Packaging new knowledge

This post is the 'background' post, designed to set the stage for a 5-year forecast of technology trends worldwide. There may be other 'background' posts--remember I'm trying to show my work.

New scientific or technological progress is often measured in discrete packages known as patent applications or academic publications. These are easy to count and give an idea of progress. It isn't perfect, as backlogs in patent offices, copycat patenting and publishing, etc., can throw the stats off a bit, but as these practices aren't new, one hopes that the overall measure of progress is valid.

Growth in the number of patents has, over the past 50 years, been dramatic--but largely driven by the adoption of patent regimes by new countries, such as China. But let's turn the lecture over to the World Intellectual Property Organisation (WIPO) for a moment:

"Worldwide patent activity increased by 4.9% between 2005 and 2006, mostly due to increased filings by applicants from China, the Republic of Korea and the United States of America

The total number of applications filed across the world in 2006 is estimated to be 1.76 million, representing a 4.9% increase from the previous year. Between 2005 and 2006, the number of filings worldwide by applicants from China, the Republic of Korea and the United States of America increased by 32.1%, 6.6% and 6.7% respectively

Patent applicants tend to come from a relatively small number of countries of origin. For example, applicants from Japan, the United States of America, the Republic of Korea, Germany and China accounted for 76% of total patent filings in 2006. Chinese residents increased their share of total worldwide patent filings from 1.8% to 7.3% between 2000 and 2006, mostly due to increases in domestic patent filings.

Although the number of patent applications filed across the world has increased at a steady pace, the rate of increase is less than the rate of increase observed for other economic indicators such as GDP and trade."

Hence my previous post saying that a 1% increase in CAGR in patents would have a dramatic effect on a number of important living conditions.

When was the last time you looked to the law to find hope?

The creators of 130 million creative works in 45 countries have chosen the Creative Commons license to protect and share their intellectual property since 2001. The non-profit organisation that runs CC has a lot to be proud of, not least their expansion into science and education.

The impact of the Creative Commons is only now taking hold. Five years in the future, and remember that five years is what we're looking at for PESTLE, this legal mechanism that allows people to designate the level of protection they desire for their creative work will be having a significant impact. And we're not talking anime and garage bands. Academic researchers and scientists have been desperate for a way of sharing their work without losing all their rights, to help colleagues in developing countries (although it actually works both ways--no real need to be patronizing about it, especially when you look at biology). The Creative Commons license provides this. 

Sometimes, removing an impediment to progress is more important than coming up with the next big idea. Friction free intellectual property. It's bigger than it sounds.

5 year prediction: The number of patents actually increases by 1% over trend as a result of Creative Commons spreading base knowledge around the world.

This is hugely important. According to WIPRO, the average CAGR in patents has been 3.5% since 1960. This 49 year period is widely regarded as having been a good period for innovation. If the CAGR can increase to 4.5%, it reduces the time needed to double annual patents from 20 years to 15. In all probability, that would mean millions of lives saved through better healthcare technology, hundreds of millions of lives improved due to better products and services, and a healthier and cleaner environment. 

Keep it clear, keep it clean

One plank of President Obama's economic recovery plan involves investing in cleaner energy infrastructure and resources. It is good, common sense conservation that we should applaud vigorously. However, it is accompanied by serious discussion of targeting technologies and channeling investment into some things that are greener than they are good. This could be dangerous in a lot of ways--as our recent experience with ethanol subsidies shows, governments can mess things up when they decide to support a technology for political reasons.

And it's not just governments. General Electric, a hard-headed, intelligent organisation that has made profits in almost every way possible, made the decision a few years back to target the green market. If you look at their stock price over the time period since they made that decision, you have to wonder what prompted their decision. To be fair, the recession hammered their stock price along with everybody else's, and the green market may require patience--GE may yet be rewarded for this decision. As a stockholder, I certainly hope so. But I hope they won't be rewarded by misallocated government spending that is targeted by wrong assumptions. In the long run, that will benefit no-one.

We don't yet know what the best way to produce electricity will be in five years' time. It may be nuclear, wind, solar, natural gas, tidal... most likely some combination, which will require serious thought and good planning. We don't yet know the best way to power personal transportation five years out.

We do know how to insulate houses and reduce energy consumption in large buildings.

We do know how to stimulate and finance effective research into best practice regarding energy.

We do know how to reduce energy consumption.

We should start there and wait for science (and yes, market decisions) to lead government investment decisions down the road.

Who will own this century (3)

In 1809 few would have predicted American dominance at any point in that century. The British and the French were battling for supremacy, and the Portugese and the Spanish were, too. It would be only five years before the Brits took time out from their continental struggles to burn the White House, something conveniently papered over by our celebration of the Battle of New Orleans, fought after we surrendered. America had a population of 7.2 million, a GDP of $700 million ($97 per capita--wow--equivalent to $1,303 in year 2000 dollars). We still had a lot of basic history and development in front of us.

The Founding Fathers had already predicted our future, and had pledged their lives, fortunes and sacred honor to achieve it. Not really sure how many people just nodded pleasantly at the notion. 55 years later the American era began.

All of which is to say that picking the owner of this century isn't as obvious as it may seem.

But, if healthcare really does grow to 13% of U.S. GDP by 2050, than the best technology providers will get a good chunk of that. That seems like a big win for American companies to me, and should lead to Americans providing solutions for the rest of the world--exporting added information value, which is what we do pretty well.

Don't know if you're reading it here first, but nanotechnology will change the world in this century more than electricity did in the last. Here again, America is front-running, leading in patent applications and with more than 1500 commercial products already using nanotech. Another big win for us--the Japanese in second and Chinese in third, may have difficulties exploiting this sector.

Genetics will mostly contribute to the healthcare sector cited above, and American companies (that aren't acquired by foreign pharma) will grow rapidly.

Robotics is the other sector that I predict will contribute mightily to human progress this century, and the country that leads here (as with the other sectors) will have a good chance to own this century. The Japanese currently claim the lead--but so do the South Koreans. And in the last linked article, it makes it clear that "The United States, which has the world's best fundamental technology, is currently the leader in developing special purpose robots, and the country is strengthening R&D for developing applied robotics technologies. The United States is consolidating its lead-in defense-robots and concentrating on developing technologies for robots used in space exploration, medical, rehabilitation and other specialized services. The United States is also using its advanced technology in fundamental areas such as artificial intelligence, mobility, as well as sensor and sensing technologies in developing software required to fulfill the conditions of robots with strong capacity for intelligence."

I'll talk about Green Technology in another post. These three are enough to convince me that this century has every chance of being American as the last one.

Who will own this century (2)

I think we'll need a series of posts on this--let's see how much I can get through on a Friday night.

Nationmaster lists 22 countries with over 60 million people. I arbitrarily declare that the minimum for owning a century. Let's rank them on how they score on a set of criteria that I also arbitrarily declare to be the only, the crucial things that will matter (please tell me you understand that I am being ironic...)

Saturday morning. Well, this involved some preparation. The criteria I've chosen include some that are chosen to measure the physical base from which our eager contestants start this contest--population, GDP, etc. It also includes some that try to see which way they are facing--towards the future, the present or the past? Things like corruption and military spending help here. Then we try and look at capabilities for the future--life expectancy at birth, which measures so many different things that it should be a shrine at which we all worship regularly, university enrollment and graduation, etc.

This is specifically what I measured: Ranking on Nationmaster in population, GDP, life expectancy at birth, corruption index, military spending as percentage of GDP, enrollment in tertiary education as percentage of age eligible population, births per 1000 population.

These things are all measured and ranked on Nationmaster. I then perform the magic PESTLE calculations which contain the secret algorhythms designed to divine the destiny of organisations and companies the world over (ed. You mean you count their scores and low score wins? tf. er, yes).

Here are the countries of the future, ranked by potential to lead. Your actual mileage may vary.

Country                 Total
1. United States:             240
2. France:                       281
3. United Kingdom:         312
4. Japan:                        415
5. Germany:                   424
6. Turkey:                      457
7. India:                         464
8. Brazil:                        474
9. Mexico:                      497
10. China:                       512
11. Russia:                      522
12. Egypt:                       536
13. Thailand:                  541
14. Philippines:               568
15. Iran:                         571
16. Vietnam:                   587
17. Pakistan:                  604
18. Ethiopia:                   623
19. Indonesia:                 627
20. Bangladesh:               669
21. Dem Rep Congo:        701
22. Nigeria:                    702

Notice the mathematical precision and uniformity of the columns. Note also that in my previous post on this subject, I wasn't too far out when I just eyeballed the subject, but note also that my cultural point of view probably obscured the potential of Turkey and Mexico. That's why we do this.

If you want me to include other criteria, go to Nationmaster and look up a category and email me and I'll add it in and re-run the total. Or, if you want to check my work and do some of your own from scratch, here's the Excel worksheet I used: Download Who Will Own This Century

Analysis and interpretation in a later post.