Economics of Technology – Page 70

“Reports of Oil’s Demise Are Greatly Exaggerated”

Valves being checked by Brian Roe, at the Kern River oil field. Source of the photo: online version of the NYT article cited below.

(p. A1) BAKERSFIELD, Calif. — The Kern River oil field, discovered in 1899, was revived when Chevron engineers here started injecting high-pressured steam to pump out more oil. The field, whose production had slumped to 10,000 barrels a day in the 1960s, now has a daily output of 85,000 barrels.

In Indonesia, Chevron has applied the same technology to the giant Duri oil field, discovered in 1941, boosting production there to more than 200,000 barrels a day, up from 65,000 barrels in the mid-1980s.

And in Texas, Exxon Mobil expects to double the amount of oil it extracts from its Means field, which dates back to the 1930s. Exxon, like Chevron, will use three-dimensional imaging of the underground field and the injection of a gas — in this case, carbon dioxide — to flush out the oil.

Within the last decade, technology advances have made it possible to unlock more oil from old fields, and, at the same time, higher oil prices have made it economical for companies to go after reserves that are harder to reach. With plenty of oil still left in familiar locations, forecasts that the world’s reserves are drying out have given way to predictions that more oil can be found than ever before.

In a wide-ranging study published in 2000, the U.S. Geological Survey estimated that ultimately recoverable resources of conventional oil totaled about 3.3 trillion barrels, of which a third has already been produced. More recently, Cambridge Energy Research Associates, an energy consultant, estimated that the total base of recoverable oil was 4.8 trillion barrels. That higher estimate — which Cambridge Energy says is likely to grow — reflects how new technology can tap into more resources.

“It’s the fifth time to my count that (p. A11) we’ve gone through a period when it seemed the end of oil was near and people were talking about the exhaustion of resources,” said Daniel Yergin, the chairman of Cambridge Energy and author of a Pulitzer Prize-winning history of oil, who cited similar concerns in the 1880s, after both world wars and in the 1970s. “Back then we were going to fly off the oil mountain. Instead we had a boom and oil went to $10 instead of $100.”

. . .

“I am very, very seriously worried about the future we are facing,” said Kjell Aleklett, the president of the Association for the Study of Peak Oil and Gas. “It is clear that oil is in limited supplies.”

Many oil executives say that these so-called peak-oil theorists fail to take into account the way that sophisticated technology, combined with higher prices that make searches for new oil more affordable, are opening up opportunities to develop supplies. As the industry improves its ability to draw new life from old wells and expands its forays into ever-deeper corners of the globe, it is providing a strong rebuttal in the long-running debate over when the world might run out of oil.

Typically, oil companies can only produce one barrel for every three they find. Two usually are left behind, either because they are too hard to pump out or because it would be too expensive to do so. Going after these neglected resources, energy experts say, represents a tremendous opportunity.

“Ironically, most of the oil we will discover is from oil we’ve already found,” said Lawrence Goldstein, an energy analyst at the Energy Policy Research Foundation, an industry-funded group. “What has been missing is the technology and the threshold price that will lead to a revolution in lifting that oil.”

For the full story, see:

JAD MOUAWAD. "Oil Innovations Pump New Life Into Old Wells." The New York Times (Mon., March 5, 2007): A1 & A11.

(Note: ellipsis added.)

Also view the excellent little video "New Life for Old Oil Fields" that the NYT put together to accompany the article.

Kern River pipelines in front, and pump in back. Source of graphic and photo: online version of the NYT article cited above.

Internet Increases Labor’s Options

A "local" Phoenix talk show host, Joe Crummey, broadcasts from his home in California. Source of photo: online version of the NYT article cited below.

The Internet is sometimes viewed as labor’s enemy because it reduces the cost of outsourcing. But it goes both ways: labor can offer its services to a wider world because of the Internet.

LOS ANGELES, March 27 — When people hear the radio host Joe Crummey on Phoenix’s popular KFYI murmur sarcastically, “We don’t have enough human rights activists in this town,” they know he means Phoenix.

Ditto for when he offers to assess the “east side west side traffic right now.”

As it turns out, Mr. Crummey, whose favorite talk show topics include immigration, patriotism and Arizona politics, is indeed reporting for duty in the valley. Just not in the Phoenix Valley.

Rather, it is here, in the San Fernando Valley, where he works via the Internet from his home on the top of a hill in the Studio City section of Los Angeles. Listeners in Phoenix are none the wiser.

Armed with four computers, a digital recorder, a constant stream of Fox News and a professional microphone, Mr. Crummey holds court for three hours each weekday during Phoenix’s drive-home time slot — from about 400 miles away in a neighboring state.

For the full story, see:

JENNIFER STEINHAUER. "Live, From Station KFYI in …Well, That’s Complicated." The New York Times (Weds., March 28, 2007): A11.

Google Hires “Interesting” “Geniuses” & Provides Them a Workplace Where Interesting Geniuses Want to Be

A break lounge at Google’s Manhattan offices. Source of photo: online version of the NYT article cited below.

You could be forgiven for not knowing that a satellite Google campus is growing in downtown Manhattan. There is no Google sign on the building, and it’s hard to catch a glimpse of a Googler, as employees call themselves, on the street because the company gives them every reason to stay within its candy-colored walls.

From lava lamps to abacuses to cork coffee tables, the offices may as well be a Montessori school conceived to cater to the needs of future science-project winners.

. . .

“These are power geniuses,” said Jane Risen, a statuesque brunette who works in training for the sales staff and is considered among the best dressed on campus — she was wearing a brown blazer from the Gap. “If they don’t have the same social skill or style sense, they’re extremely interesting people or else they don’t get hired.”

. . .

The strategy of keeping employees happy and committed to spending endless hours on campus seems to be working. Richard Burdon, 37, an engineer who joined Google two years ago, has been staying past midnight to prepare for the introduction of a project. (Google’s Manhattan engineers have been responsible for developing Google Maps and are working on some 100 other projects.)

“Google is about as interesting as starting your own startup because you can really follow your own ideas,” said Mr. Burdon, who previously worked for Goldman Sachs, Sony and I.B.M. The only time he could remember leaving the office during the workday was to buy a friend a birthday present.

For the full story, see:

DEBORAH SCHOENEMAN. "Can Google Come Out to Play?" The New York Times (December 31, 2006).

(Note: ellipses added.)

Work and non-work at Google’s Manhattan offices. Source of photos: online version of the NYT article cited above.

As Online Book Sales Increase, So Do Total Book Sales

Source of graphs: online version of the WSJ article cited below.

The graph on the left would not surprise Chris Anderson of The Long Tail. Selling books online supplies greater variety, so that when online sales grow, overall book sales grow too.

(p. B1) For six years, Borders Group Inc. has pursued a distinctly unfashionable strategy: betting big on bricks and mortar while paying little attention to the online world. But with online sales capturing an ever-increasing share of the book business, the No. 2 book retailer is reversing course.

Today, Borders announced its intention to reopen its own branded e-commerce Web site in early 2008, ending an alliance with Amazon.com Inc. that had been the core of its online strategy.

For the full story, see:

JEFFREY A. TRACHTENBERG. "Borders Business Plan Gets a Rewrite; It Will Reopen Web Site, Give Up Most Stores Abroad, Close Many Waldenbooks." The Wall Street Journal (Thurs., March 22, 2007): B1 & B2.

Photo on left is a Borders store; image on right is of Borders CEO George Jones. Source of photo and image: online version of the WSJ article cited above.

Private Money Can Top Government Money in Space, as in IT

Lots of people are building new IT companies. You can start a company and sell it to Yahoo! or Google in a couple of years. But so can anyone else. Aerospace is different. To paraphrase John F. Kennedy in 1962: We choose to go to the moon not because it’s easy, but because it’s hard.

That’s why, as a long-time investor in IT and Internet start-ups, I’m now spending more and more time on private aviation and commercial space start-ups. I’m trailing an illustrius crew of IT pioneers: Elon Musk (Space-X, rockets, formerly with PayPal), Vern Raburn (Eclipse Aviation, very light jets, formerly at Microsoft, Symantec and Lotus), Jeff Bezos (Blue Origin, rockets, and still at Amazon, too!), Jeff Greason (XCOR, rockets and formerly with Intel) and Ed Iacobucci (DayJet, air taxi operator, and founder of Citrix).

. . .

On the space side, there’s a . . . strong parallel with the world of IT. The establishment in "space" is the government and especially the military, just as it once was (along with academia) for the Internet. I remember the days when commerce on the Internet was considered sleazy—but look at the innovations and productivity it unleashed.

In the same way, the current priests of space are dismayed by the privately funded space start-ups—unsafe, sleazy, frivolous. Imagine: Ads on the side of a rocket ship! Well, why not, if it helps pay for the fuel… and the R&D that designed the thing?

For the full commentary, see:

ESTHER DYSON "New Horizons for the Intrepid VC." The Wall Street Journal (Tues., March 20, 2007): A19.

(Note: ellipses added, except for the ellipsis following the word "fuel" which was in the original.)

GE Stands Up for Innovation and Free Choice

Randall Moorehead’s Phillips Electronics wants the government to force us to switch from the incandescent bulb on the left, to bulbs like the Phillips bulb on the right. Source of photo: online version of the NYT article cited below.

WASHINGTON, March 13 — A coalition of industrialists, environmentalists and energy specialists is banding together to try to eliminate the incandescent light bulb in about 10 years.

In an agreement to be announced Wednesday, the coalition members, including Philips Lighting, the largest manufacturer; the Natural Resources Defense Council; and two efficiency organizations, are pledging to press for efficiency standards at the local, state and federal levels. . . .

. . .

The Australian government said on Feb. 20 that it would seek to ban incandescent bulbs and replace them with compact fluorescents. Shortly thereafter, the environment minister of Ontario, Laurel Broten, said her province was considering a similar step, and a California assemblyman, Lloyd Levine, introduced a bill to do the same.

“Incandescent light bulbs were first developed almost 125 years ago,” Mr. Levine said, “and since that time they have undergone no major modifications.”

Kathleen Rogers, president of the Earth Day Network, one of the groups in the alliance seeking to end the use of incandescent bulbs, predicted, “I think you’re going to see these disparate efforts adding up to this great tidal wave.” The problem, she said, was that “the incandescent spends most of its life making heat, not light.”

But General Electric, which traces its origins to Edison, said that could change.

“It’s shortsighted to freeze technology in favor of today’s high-efficiency compact fluorescent lamps,” the company said in a statement. ”We’d rather keep innovating and offering traditional, commercial and industrial consumers more energy-efficient choices — not fewer choices.”

For the full story, see:

MATTHEW L. WALD. "A U.S. Alliance to Update the Light Bulb." The New York Times (Weds., March 14, 2007): C3.

(Note: ellipses addd.)

Concrete Used in Pyramids

T.W. Schultz used to emphasize that the level of technology in an economy depended more on the incentives and institutions for adoption and diffusion, and less on the invention of the technology, which he thought was a shorter hurdle than usually thought. The Antikythera Mechanism is one historical technology that dramatically supports Schultz’s view. If it survives scrutiny, the following article would provide an additional example supporting Schultz.

(p. A18) Reporting the results of his study, Michel W. Barsoum, a professor of materials engineering at Drexel University in Philadelphia, concluded that the use of limestone concrete could explain in part how the Egyptians were able to complete such massive monuments, beginning around 2550 B.C. They used concrete blocks, he said, on the outer and inner casings and probably on the upper levels, where it would have been difficult to hoist carved stone.

”The sophistication and endurance of this ancient concrete technology is simply astounding,” Dr. Barsoum wrote in a report in the December issue of The Journal of the American Ceramic Society.

Dr. Barsoum and his co-workers, Adrish Ganguly of Drexel and Gilles Hug of the National Center for Scientific Research in France, analyzed the mineralogy of samples from several parts of the Khufu pyramid, and said they found mineral ratios that did not exist in any known limestone sources. From the geochemical mix of lime, sand and clay, they concluded, ”the simplest explanation” is that it was cast concrete.

For the full story, see:

JOHN NOBLE WILFORD. "Study Says That Egypt’s Pyramids May Include Early Use of Concrete." The New York Times (Fri., December 1, 2006): A18.

More on Creative Destruction in Science Fiction

On April 11, 2007 I posted an entry noting a new science fiction book with the title Creative Destruction. Not having read the book, I wondered aloud whether the book contained any reference to Schumpeter.

Yesterday (4/13/07), I was delighted to receive an email from the author of the book, answering my question. With his permission, I reproduce his email below:

Dr. Diamond,

I noticed your blog entry about Creative Destruction, my computer-themed SF collection. You asked: Does Schumpeter get a mention?

Absolutely. Here are the opening lines of the foreword:

     If the Internet bubble had a patron saint, he was an obscure economist named Joseph Schumpeter.

     Schumpeter owes his posthumous celebrity to two words: creative destruction. In 1942, he wrote of the "… Process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.

     "Creative destruction," he said, "is the essential fact about capitalism." Every dotcom, of course, claimed its new technology would sweep out the old in a frenzy of creative destruction. Occasionally — think Yahoo! and Amazon — they were even correct.

The stories in the collection are most definitely science fiction — I have degrees in physics and computer science — but I also have an MBA from the University of Chicago.

Best regards,

– Ed Lerner

(Note: I have changed the format of the email, a little. The ellipsis was in the original.)

Woodrow Wilson: The Automobile is “a Picture of the Arrogance of Wealth”

It is the common characteristic of new products from creative destruction that new products are first so expensive that only the rich can afford them, but then fairly soon, usually within a few years at most, the price falls to the level that ordinary people can afford. At that point, what the rich gets are added features, at a high premium, but the basic product is widely available. Consider the automobile:

(p. 193) The autos of the time were a luxurious novelty. One model even offered electric curlers in the back seat for on-the-go primping. They were unreliable and expensive, costing around $1,500, twice the average annual family income. And they were enormously unpopular. Anticar activists tore up roads, ringed parked cars with barbed wire, and organized boycotts of car-driving businessmen and politicians. Public resentment of the automobile was so great that even future president Woodrow Wilson weighed in, saying, "Nothing has spread socialistic feeling more than the automobile . . . a picture of the arrogance of wealth." Literary Digest suggested, "The ordinary ‘horseless carriage’ is at present a luxury for the wealthy; and although its price will probably fall in the future, it will never, of course, come into as common use as the bicycle."

Source:

Kim, W. Chan, and Renée Mauborgne. Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. Boston: Harvard Business School Press, 2005.

(Note: ellipsis in original. Also, the book provides sources for each quote in the passage above.)

Bush Should Take Lab Coat Off

Decisions about which new technologies to develop should be left to the market, not the government. One reason is that markets generally make the more efficient choice. Another reason is that when technological risks are taken in the market, they are taken with voluntary private money; when risks are taken by the government, they are taken with your money that has been coerced from you through taxation.

With all due respect, President Bush should take the lab coat off.

(p. A16) FRANKLINTON, N.C., Feb. 22 — President Bush put on a white coat and visited a laboratory here Thursday to promote his goals for making alternative fuels from switch grass, woodchips and other plant waste.

After touring the laboratory, which is developing enzymes to make cellulosic ethanol, fuel distilled from plant byproducts, Mr. Bush spoke buoyantly about new technologies that may reduce the nation’s thirst for foreign oil.

For the full story, see:

EDMUND L. ANDREWS. "Bush Makes a Pitch for Amber Waves of Homegrown Fuel." The New York Times (Fri., February 23, 2007): A16.