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April 26, 2005

Globalization and Innovation

In the current issue of Wired, Lisa Margonelli speculates that China may become the alternative fuel capital of the world.  That would be great.  And could be the stepping stone to a hydrogen economy for the rest of us.

Why China?  Well, in 2000 according to sources quoted by Wired, Chinese owned only one percent of the world’s cars.  The rapidly forming middle class there is getting off their bikes and into cars just as Americans and Europeans did.  If only 10% of Chinese citizens have cars by 2020, there will be close to 150 million cars on the road there – 13% of the world’s total, close to the total number of cars currently owned in the EU.  China has already gone from being a net oil exporter to being the second largest importer.  Eighteen of the 25 most polluted cities in the world are in China.  So there is plenty of need to reduce the hydrocarbon burn.

There is plenty of need in the US, too, but we are proceeding at a snail’s pace.  Why?  One reason is because we already have a huge gasoline infrastructure and it works.  But China has no infrastructure of any kind to support the number of cars expected on its roads in the next decade and a half.  There is no legacy favoring a gasoline distribution system.  Greenfields are great for innovation.

If an alternative energy distribution system evolves in China, we all gain.  The obvious gain is that we won’t have to compete as much with China for oil supplies nor breathe China’s increased emissions. But the greater gain is that any technologies which develop to support China’s hydrogen economy, should that come to pass, will be available for us to deploy as well.  The size of the Chinese energy market assures that there will be investment in both technology and manufacturing to support it.  So, by the time, we are ready to deploy a greener and more sustainable energy infrastructure, all the parts we need should be available at commodity prices. 

That’s not a bad thing.  We may get to alternative energy faster and cheaper than we would have otherwise because China, without legacy infrastructure, is better situated and has greater need to take the lead.  I’m not making a moral or political judgment, just pointing out a POSSIBLE rosy scenario which is a side effect of globalization and the growth of nonUS economies.

Just a note on fuel cells: they are really glorified batteries, energy storage devices, not an energy source.  They have to get charged up.  To me that means building nuclear power plants to produce the electricity that charges the fuel cells.  However, since off-peak electricity can be used for most charging, existing hydro and wind energy facilities as well as nuclear can be used more efficiently than they are today.

And a prediction:  when we pull into a service station to “charge up” instead of “fill up”, we won’t really do that.  Charging takes too long.  Instead we’ll swap a discharged fuel cell for a charged one in some automated way, much the way we swap propane tanks when we need more fuel for our outdoor grills.  The discharged cells will be recharged, mainly at night, at the local service stations which will have to be served by a huge-capacity electrical grid.  This is the kind of infrastructure which might evolve in China.

I disagree with Wired’s opinion that the Chinese command economy is better equipped to make the choices needed to move to a twenty-first century transportation energy infrastructure than a free economy.  China’s success has been despite central planning, not because of it.  The Chinese businessmen I’ve met ignore Beijing as much as they can – and that’s pretty easy to do in such a vast country.

Japan and especially Korea have deployed real broadband DSL much faster than the US has.  Is this a bad thing?  Well, I hate not being first as much as any entrepreneur but we have befitted by the commoditization of DSL and home networking components in the markets that developed before ours.  We have learned what works from these markets.  And, despite the foot dragging of legacy carriers and doom and gloom from the pundits, we’re on our way to a broadband economy as well.

Globalization isn’t an option; it’s a necessity.  The poor need to become unpoor.  As they do, they will consume more resources.  As other economies grow, a greater percentage of innovation will take place outside the United States.  Surviving and thriving on a globe which we do not dominate means learning to benefit ourselves from innovation elsewhere.

I also blogged on the need to return to nuclear power in the US.

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Listed below are links to weblogs that reference Globalization and Innovation:

» US can piggyback on globalization-driven innovation from Ashish's Niti
Tom Evslin talks about how US can benefit from innovation happening elsewhere because of globalization:Globalization isn’t an option; it’s a necessity. [Read More]

» Globalization and Innovation from gmtPLUS09
Within China is the solution to delivering alternative energy faster and cheaper. It's not a point of political/economic contempt or competing against. For China to take the momentous lead - aided because it has no legacy infrastructure to be relied [Read More]

» Intellectual Happy Hour from Opine Online - The Rubicon Blog
Tom Evslin refers to an article in Wired Magazine on the impact of China's population and growth on the development & deployment of alternative fuels. It's a great commentary, but I don't necessarily agree with Tom on his views of globalisation and d... [Read More]

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