Friday, October 21, 2005

Peak Oil meets Global Broadband

The Peak Oil theory holds that global oil production will peak soon, and that as production declines, energy prices will increase rapidly. This will lead to major social disruption, including radically more expensive transportation. Let’s stipulate for the purposes of this scenario exercise that the Peak Oil proponents are right.

Activities that require moving physical objects around will be hurt. Shipping a product directly to you from China in a retail FedEx package will be much more expensive than buying a locally produced good. Suburbia, which is premised on cheap gasoline, will crumble, and flying across the country for Thanksgiving will be a thing of the past.

On the other hand, moving information will be essentially free thanks to global broadband networks. The stuff of knowledge work will move easily: phone calls to tech support, medical x-rays, software that needs to be rewritten, contracts to be drawn up and reviewed, and so on.

Our sense of space will be warped: relatively speaking, distances crossed by bits will shrink, and distances crossed by atoms will grow.

This scenario exercise is more than just a good topic for a term paper. It highlights the different dynamics of the two scarcities that lie at the heart of a knowledge economy: energy and brain power.

One implication is “Move, then customize”. Materials will be moved in bulk, ie cheaply, and tailored to the customer as close to them as possible. Micro-manufacturing will become common, and matched to local power generation from non-fossil energy sources. People will keep devices a long time, but upgrade the software often.

There will be marked physical differences between communities, as they produce and consume tangible goods locally. You’ll be able to recognize where someone’s from by how they dress. On the other hand, entertainment and convictions will move more freely where they’re not constrained by local conditions. Expect more culture wars about abstract notions like intellectual property rights and freedom of expression.

Knowledge processing can be easily off-shored, but not the production and manipulation of stuff. Since humans need physical proximity for creativity, places where many brains can be concentrated will have an advantage: Beijing, Bangalore, and the Bay Area, for example.

Second tier cities will suffer, since their best-paying jobs will be knowledge work that will be undercut by off-shoring. For example, Washington State has forecast the occupations with the fastest annual growth rate in the period 2002-2012. Here they are in order of decreasing income (estimated average wages indicated at some inflection points):
Lawyers ($100k)
Computer Software Engineers, Systems Software
Computer Software Engineers, Applications
Computer Programmers
Registered Nurses ($60k)
Computer Support Specialists
Construction Laborers ($35k)
Dental Assistants
Hairdressers, Hairstylists, and Cosmetologists
Security Guards
Landscaping and Groundskeeping Workers ($25k)
Receptionists and Information Clerks
Janitors and Cleaners, Except
Maids and Housekeeping Cleaners
Laborers and Freight, Stock, and Material Movers, Hand ($24k)
Note that the top four are knowledge jobs which could relatively easily be provided at a distance. The jobs that aren’t subject to out-of-region competition are the low-income ones at the bottom of the list.

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