Part 2 (1/2)
The new field of advanced materials science involves the study, manipulation, and fabrication of solid matter with highly sophisticated tools, almost on an atom-by-atom basis. It involves many interdisciplinary fields, including engineering, physics, chemistry, and biology. The new insights being developed into the ways that molecules control and direct basic functions in biology, chemistry, and the interaction of atomic and subatomic processes that form solid matter is speeding up the emergence of what some experts are calling the molecular economy.
Significantly, the new molecules and materials created need not be evaluated through the traditional, laborious process of trial and error. Advanced supercomputers are now capable of simulating the way these novel creations interact with other molecules and materials, allowing the selection of only the ones that are most promising for experiments in the real world. Indeed, the new field known as computational science has now been recognized as a third basic form of knowledge creation-alongside inductive reasoning and deductive reasoning-and combines elements of the first two by simulating an artificial reality that functions as a much more concrete form of hypothesis and allows detailed experimentation to examine the new materials' properties and a.n.a.lyze how they interact with other molecules and materials.
The properties of matter at the nanometer scale (between one and 100 nanometers) often differ significantly from the properties of the same atoms and molecules when they are cl.u.s.tered in bulk. These differences have allowed technologists to use nanomaterials on the surfaces of common products in order to eliminate rust, enhance resistance to scratches and dents, and in clothes to enhance resistance to stains, wrinkles, and fire. The single most common application thus far is the use of nanoscale silver to destroy microbes-a use that is particularly important for doctors and hospitals guarding against infections.
The longer-term significance that attaches to the emergence of an entirely new group of basic materials with superior properties is reflected in the names historians give to the ages of technological achievement in human societies: the Stone Age, the Bronze Age, and the Iron Age. As was true of the historical stages of economic development that began with the long hunter-gatherer period, the first of these periods-the Stone Age-was by far the longest.
Archaeologists disagree on when and where the reliance on stone tools gave way to the first metallurgical technologies. The first smelting of copper is believed to have taken place in eastern Serbia approximately 7,000 years ago, though objects made of cast copper emerged in numerous locations in the same era.
The more sophisticated creation of bronze-which is much less brittle and much more useful for many purposes than copper-involves a process in which tin is added to molten copper, a technique that combines high temperatures and some pressurization. Bronze was first created 5,000 years ago in both Greece and China, and more than 1,000 years later in Britain.
Though the first iron artifacts date back 4,500 years ago in northern Turkey, the Iron Age began between 3,000 and 3,200 years ago with the development of better furnaces that achieved higher temperatures capable of heating iron ore into a malleable state from which it could be made into tools and weapons. Iron, of course, is much harder and stronger than bronze. Steel, an alloy made from iron, and often other elements in smaller quant.i.ties, depending upon the properties desired, was not made until the middle of the nineteenth century.
The new age of materials created at the molecular level is leading to a historic transformation of the manufacturing process. Just as the Industrial Revolution was launched a quarter of a millennium ago by the marriage of coal-powered energy with machines in order to replace many forms of human labor, nanotechnology promises to launch what many are calling a Third Industrial Revolution based on molecular machines that can rea.s.semble structures made from basic elements to create an entirely new category of products, including: * Carbon nanotubes invested with the ability to store energy and manifest previously unimaginable properties; * Ultrastrong carbon fibers that are already replacing steel in some niche applications; and * Ceramic matrix nanocomposites that are expected to have wide applications in industry.
The emerging Nanotechnology Revolution, which is converging with the multiple revolutions in the life sciences, also has implications in a wide variety of other human endeavors. There are already more than 1,000 nanotechnology products available, most of them cla.s.sified as incremental improvements in already known processes, mostly in the health and fitness category. The use of nanostructures for the enhancement of computer processing, the storage of memory, the identification of toxics in the environment, the filtration and desalination of water, and other uses are still in development.
The reactivity of nanomaterials and their thermal, electrical, and optical properties are among the changes that could have significant commercial impact. For example, the development of graphene-a form of graphite only one atom thick-has created excitement about its unusual interaction with electrons, which opens a variety of useful applications.
Considerable research is under way on potential hazards of nanoparticles. Most experts now minimize the possibility of ”self-replicating nan.o.bots,” which gave rise to serious concerns and much debate in the first years of the twenty-first century, but other risks-such as the acc.u.mulation of nanoparticles in human beings and the possibility of consequent cell damage-are taken more seriously. According to David Rejeski, director of the Science and Technology Innovation Program at the Woodrow Wilson International Center for Scholars, ”We know very little about the health and environmental impacts [of nanomaterials] and virtually nothing about their synergistic impacts.”
In a sense, nanoscience has been around at least since the work of Louis Pasteur, and certainly since the discovery of the double helix in 1953. The work of Richard Smalley on buckminsterfullerene molecules (”buckyb.a.l.l.s”) in 1985 triggered a renewed surge of interest in the application of nanotechnology to the development of new materials. Six years later, the first carbon nanotubes offered the promise of electrical conductivity exceeding that of copper and the possibility of creating fibers with 100 times the strength and one sixth the weight of steel.
The dividing line between nanotechnology and new materials sciences is partly an arbitrary one. What both have in common is the recent development of new more powerful microscopes, new tools for guiding the manipulation of matter at nanoscales, the development of new more powerful supercomputer programs for modeling and studying new materials at the atomic level, and a continuing stream of new basic research breakthroughs on the specialized properties of nanoscale molecular creations, including quantum properties.
THE RISE OF 3D PRINTING.
Humankind's new ability to manipulate atoms and molecules is also leading toward the disruptive revolution in manufacturing known as 3D printing. Also known as additive manufacturing, this new process builds objects from a three-dimensional digital file by laying down an ultrathin layer of whatever material or materials the object is to be made of, and then adds each additional ultrathin layer-one by one-until the object is formed in three-dimensional s.p.a.ce. More than one different kind of material can be used. Although this new technology is still early in its development period, the advantages it brings to manufacturing are difficult to overstate. Already, some of the results are startling.
Since 1908, when Henry Ford first used identical interchangeable parts that were fitted together on a moving a.s.sembly line to produce the Model T, manufacturing has been dominated by ma.s.s production. The efficiencies, speed, and cost savings in the process revolutionized industry and commerce. But many experts now predict that the rapid development of 3D printing will change manufacturing as profoundly as ma.s.s production did more than 100 years ago.
The process has actually been used for several decades in a technique known as rapid prototyping-a specialized niche in which manufacturers could produce an initial model of what they would later produce en ma.s.se in more traditional processes. For example, the designs for new aircraft are often prototyped as 3D models for wind tunnel testing. This niche is itself being disrupted by the new 3D printers; one Colorado firm, LGM, that prototypes buildings for architects, has already made dramatic changes. The company's founder, Charles Overy, told The New York Times, ”We used to take two months to build $100,000 models.” Instead, he now builds $2,000 models and completes them overnight.
The emerging potential for using 3D printing is illuminating some of the inefficiencies in ma.s.s production: the stockpiling of components and parts, the large amount of working capital required for such stockpiling, the profligate waste of materials, and of course the expense of employing large numbers of people. Enthusiasts also contend that 3D printing often requires only 10 percent of the raw material that is used in the ma.s.s production process, not to mention a small fraction of the energy costs. It continues and accelerates a longer-term trend toward ”dematerialization” of manufactured goods-a trend that has already kept the total tonnage of global goods constant over the past half century, even as their value has increased more than threefold.
In addition, the requirement for standardizing the size and shape of products made in ma.s.s production leads to a ”one size fits all” approach that is unsatisfactory for many kinds of specialized products. Ma.s.s production also requires the centralization of manufacturing facilities and the consequent transportation costs for delivery of parts to the factory and finished products to distant markets. By contrast, 3D printing offers the promise of transmitting the digital information that embodies the design and blueprint for each product to widely dispersed 3D printers located in all relevant markets.
Neil Hopkinson, senior lecturer in the Additive Manufacturing Research Group at Loughborough University, said, ”It could make offsh.o.r.e manufacturing half way round the world far less cost effective than doing it at home, if users can get the part they need printed off just round the corner at a 3D print shop on the high street. Rather than stockpile spare parts and components in locations all over the world, the designs could be costlessly stored in virtual computer warehouses waiting to be printed locally when required.”
At its current stage of development, 3D printing focuses on relatively small products, but as the technique is steadily improved, specialized 3D printers for larger parts and products will soon be available. One company based in Los Angeles, Contour Crafting, has already built a huge 3D printer that travels on a tractor-trailer to a construction site and prints an entire house in only twenty hours (doors and windows not included)! In addition, while the 3D printers now available have production runs of one item up to, in some cases, 1,000 items, experts predict that within the next few years these machines will be capable of turning out hundreds of thousands of identical parts and products.
There are many questions yet to be answered about the treatment of intellectual property in a 3D printing era. The three-dimensional design will make up the lion's share of the value in a 3D printing economy, but copyright and patent law were developed without the antic.i.p.ation of this technology and will have to be modified to account for the new emerging reality. In general, ”useful” physical objects often do not have protection against replication under copyright laws.
Although there are skeptics who question how fast this new technology will mature, engineers and technologists in the United States, China, and Europe are working hard to exploit its potential. Its early use in printing prosthetics and other devices with medical applications is gaining momentum rapidly. Inexpensive 3D printers have already found their way into the hobbyist market at prices as low as $1,000. Carl Ba.s.s, the CEO of Autodesk, which has invested in 3D printing, said in 2012, ”Some people see it as a niche market. They claim that it can't possibly scale. But this is a trend, not a fad. Something seismic is going on.” Some advocates of more widespread gun owners.h.i.+p are promoting the 3D printing of guns as a way to circ.u.mvent regulations on gun sales. Opponents have expressed concern that any such guns used in crimes could be easily melted down to avoid any effort by law enforcement authorities to use the guns as evidence.
THE WAVE OF automation that is contributing to the outsourcing and robosourcing of jobs from developed countries to emerging and developing markets will soon begin to displace many of the jobs so recently created in those same low-wage countries. 3D printing could accelerate this process, and eventually could also move manufacturing back into developed countries. Many U.S. companies have already reported that various forms of automation have enabled them to bring back at least some of the jobs they had originally outsourced to low-wage countries.
CAPITALISM IN CRISIS.
The emergence of Earth Inc. and its disruption of all three factors of production-labor, capital, and natural resources-has contributed to what many have referred to as a crisis in capitalism. A 2012 Bloomberg Global Poll of business leaders around the world found that 70 percent believe capitalism is ”in trouble.” Almost one third said it needs a ”radical reworking of the rules and regulations”-though U.S. partic.i.p.ants were less willing than their global counterparts to endorse either conclusion.
The inherent advantages of capitalism over any other system for organizing economic activity are well understood. It is far more efficient in allocating resources and matching supply to demand; it is far more effective at creating wealth; and it is far more congruent with higher levels of freedom. Most fundamentally, capitalism unlocks a larger fraction of the human potential with ubiquitous organic incentives that reward effort and innovation. The world's experimentation with other systems-including the disastrous experiences with communism and fascism in the twentieth century-led to a nearly unanimous consensus at the beginning of the twenty-first century that democratic capitalism was the ideology of choice throughout the world.
And yet publics around the world have been shaken by a series of significant market dislocations over the last two decades, culminating in the Great Recession of 2008 and its lingering aftermath. In addition, the growing inequality in most large economies in the world and the growing concentration of wealth at the top of the income ladder have caused a crisis of confidence in the system of market capitalism as it is presently functioning. The persistent high levels of unemployment and underemployment in industrial countries, added to unusually high levels of public and private indebtedness, have also diminished confidence that the economic policy toolkit now being used can produce a recovery that is strong enough to restore adequate vitality.
As n.o.bel Prizewinning economist Joseph Stiglitz put it in 2012: It is no accident that the periods in which the broadest cross sections of Americans have reported higher net incomes-when inequality has been reduced, partly as a result of progressive taxation-have been the periods in which the U.S. economy has grown the fastest. It is likewise no accident that the current recession, like the great Depression, was preceded by large increases in inequality. When too much money is concentrated at the top of society, spending by the average American is necessarily reduced-or at least it will be in the absence of an artificial prop. Moving money from the bottom to the top lowers consumption because higher-income individuals consume, as a fraction of their income, less than lower-income individuals do.
While developing and emerging economies are seeing increases in productivity, jobs, incomes, and output, inequality within these countries is also increasing. And of course, many of them still have significant numbers of people experiencing extreme poverty and deprivation. More than one billion people in the world still live on less than $2 a day, and almost 900 million of them still live in ”extreme poverty”-defined as having an income less than $1.25 per day.
Most important of all, among the failures in the way the global market system is operating today is its almost complete refusal to include any recognition of major externalities, starting with its failure to take into account the cost and consequences of the 90 million tons of global warming pollution spewed every twenty-four hours into the planet's atmosphere. The problem of externalities in market theory is well known but has never been so acute as now. Positive externalities are also routinely ignored, leading to chronic underinvestment in education, health care, and other public goods.
In many countries, including the United States, the growing concentration of wealth in the hands of the top one percent has also led to distortions in the political system that now limit the ability of governments to consider policy changes that might benefit the many at the (at least short-term) expense of the few. Governments have been effectively paralyzed and incapable of taking needed action. This too has undermined public confidence in the way market capitalism is currently operating.
With the tightly coupled and increasingly ma.s.sive flows of capital through the global economy, all governments now feel that they are hostage to the perceptions within the global market for capital. There are numerous examples-Greece, Ireland, Italy, Portugal, and Spain, to name a few-of countries' confronting policy choices that appear to be mandated by the perceptions of the global marketplace, not by the democratically expressed will of the citizens in those countries. Many have come to the conclusion that the only policies that will prove to be effective in restoring human influence over the shape of our economic future will be ones that address the new global economic reality on a global basis.
SUSTAINABLE CAPITALISM.
Along with my partner and cofounder of Generation Investment Management, David Blood, I have advocated a set of structural remedies that would promote what we call Sustainable Capitalism. One of the best-known problems is the dominance of short-term perspectives and the obsession with short-term profits, often at the expense of the buildup of long-term value. Forty years ago, the average holding period for stocks in the United States was almost seven years. That made sense because roughly three quarters of the real value in the average business builds up over a business cycle and a half, roughly seven years. Today, however, the average holding period for stocks is less than seven months.
There are many reasons for the increasing reliance on short-term thinking by investors. These pressures are accentuated by the larger trends in the transformed and now interconnected global economy. As one a.n.a.lyst noted in 2012, ”our banks, hedge funds and venture capitalists are geared toward investing in financial instruments and software companies. In such endeavors, even modest investments can yield extraordinarily quick and large returns. Financing brick-and-mortar factories, by contrast, is expensive and painstaking and offers far less potential for speedy returns.”
This short-term perspective on the part of investors puts pressure on CEOs to adopt similarly short-term perspectives. For example, a premier business research firm in the United States (BNA) conducted a survey of CEOs and CFOs a few years ago in which it asked, among other things, a hypothetical question: You have the opportunity to make an investment in your company that will make the firm more profitable and more sustainable, but if you do so, you will slightly miss your next quarterly earnings report; under these circ.u.mstances, will you make the investment? Eighty percent said no.
A second well-known problem in the way capitalism currently operates is the widespread misalignment of incentives. The compensation of most investment managers-the people that make most of the daily decisions on the investment of capital-is calculated on a quarterly, or at most annual, basis. Similarly, many executives running companies are compensated in ways that reward short-term results. Instead, compensation should be aligned temporally with the period over which the maximum value of firms can be increased, and should be aligned with the fundamental drivers of long-term value.
In addition, companies should be encouraged to abandon the default practice of providing quarterly earnings guidance. These short-term metrics capture so much attention that they end up heavily penalizing firms that try to build sustainable value, and fail to take into account the usefulness of investments that pay for themselves handsomely over longer periods of time.
THE CHANGING NATURE OF WORK.
One thing is certain: the transformation of the global economy and the emergence of Earth Inc. will require an entirely new approach to policy in order to reclaim humanity's role in shaping our own future. What we are now going through bears little relation to the problems inherent in the business cycle or the kinds of temporary market disruptions to which global business has become accustomed. The changes brought about by the emergence of Earth Inc. are truly global, truly historic, and are still accelerating.
Although the current changes are unprecedented in speed and scale, the pattern of productive activity for the majority of human beings has of course undergone several ma.s.sive changes throughout the span of human history. Most notably, the Agricultural and Industrial revolutions both led to dramatic changes in the way the majority of people in the world spent their days.
The first known man-made tools, including spear points and axes, were a.s.sociated with a hunting and gathering pattern that lasted, according to anthropologists, almost 200 millennia. The displacement of that dominant pattern by a new one based on agriculture (beginning not long after the last Ice Age receded) took less than eight millennia, while the Industrial Revolution required less than 150 years to reduce the percentage of agricultural jobs in the United States from 90 to 2 percent of the workforce. Even when societies still based on subsistence agriculture are included in the global calculation, less than half of all jobs worldwide are now on farms.
The plow and the steam engine-along with the complex universe of tools and technologies that accompanied the Agricultural and Industrial revolutions respectively-undermined the value of skills and expertise that had long been relied upon to connect the meaning of people's lives to the provision of subsistence and material gains for themselves, their families, and communities. Nevertheless, in both cases, the disappearance of old patterns was accompanied by the emergence of new ones that, on balance, made life easier and retained the link between productive activity and the meeting of real needs.
To be sure, the transformation of work opportunities required large changes in social patterns, including ma.s.s internal migrations from rural areas to cities, and the geographic separation of homes and workplaces, to mention only two of the most prominent disruptions. But the net result was still consistent with the hopeful narrative of progress and was accompanied by economic growth that increased net incomes dramatically and sharply reduced the amount of work necessary to meet basic human needs: food, clothing, shelter, and the like. In both cases, formerly common pursuits became obsolete while new ones emerged that called for new skills and a reconception of what it meant to be productive.
Both of these ma.s.sive transformations occurred over long periods of time covering multiple generations. In both revolutions, new technologies opened up new opportunities for reorganizing the human enterprise into a new dominant pattern that was in each case disruptive and, for many, disorienting-but produced ma.s.sive increases in productivity, large increases in the number of jobs, higher average incomes, less poverty, and historic improvements in the quality of life for most people.