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Why We Must Embrace Simplicity Now

Tuesday, January 17, 2012, 11:28 AM
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Why We Must Embrace Simplicity Now

by Gregor Macdonald, contributing editor
Tuesday, January 17, 2012

Executive Summary

  • What current gold demand is telling us about economic growth expectations
  • The dangerous conclusion from the famous Simon-Ehrlich wager
  • Simpler energy sources are becoming cost-competitive with complex ones
  • Why we will move towards greater simplicity, willingly or not 
  • Why many of our leaders are blind to this trend and will spend the next decade futilely fighting it. Will you?

Part I: Returning to Simplicity (Whether We Want To or Not)

If you have not yet read Part I, available free to all readers, please click here to read it first.

Part II: Why We Must Embrace Simplicity Now

The English thinker Thomas Malthus argued in his famous essay on the principle of population that there was no longer sufficient land to feed the world’s rapidly growing population, threatening poverty and famine. But an agro-industrial revolution soon transformed the economies of Europe and North America, and his fears proved unfounded. More recently, conventional wisdom held that market forces would always come to the rescue. Until ten years ago, this hope was largely fulfilled. During most of the 20th century, resource prices—of food, water, energy, steel, for example—declined, despite strong growth in the world’s population and even stronger growth in GDP. Prices fell because of a combination of new low-cost sources of supply and technological innovation. But in the past ten years, demand from emerging markets, particularly in Asia, has erased all the price declines of the previous century.

- Resource Revolution, from McKinsey and Company

It’s taken ten years of relentless inflation in food and energy, with myriad data showing declines in the quality and availability of many natural resources, for it to appear that the global consultancy McKinsey finally “gets it!”

I take this as a potential sign that Kahneman’s Availability Heuristic is about to undergo a sea change with regards to the prospects of technology-driven progress. Two hundred years of history exert a powerful force over people’s outlook, but a solid ten-year reversal of those trends just might be enough to induce some folks to begin reconsidering their previously-unshakable confidence in previous trends.

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