The “Resource Revolution” Is Coming – Will It Be As Big As The Tech Revolution?
Warning: This is not just another article about the renewable energy “boom” (or should I say, supposed boom). Inarguably though, “sustainability” has become part of the nation’s daily lexicon. What has driven this? Why did we have ‘false starts’ before? Most importantly, what is different about now?
The early seeds (of the march towards sustainability) were planted during the 1973 OPEC crisis. To be sure, things happened…such as the founding of the National Renewable Energy Laboratory in 1974…to the rise of recycling campaigns a few years later in the 1980s.
Yet, oil prices came down (and stayed under $25 for twenty years). R&D remained in laboratories and universities. Landfilling continued. Conventional fuel consumption continued to rise. Not much changed for three decades.
The answer is either simple or complex depending on how one looks at it. The complex answer provides a different analysis for every subset of the markets. The simple answer is just this – all the drives towards finding new energy sources, natural resource optimization, energy efficiency, even environmental awareness generally…were all instigated by, and only grounded in, artificial market forces.
That is not to say the science and philosophy behind the pushes were flawed. It is rather that the science and philosophy were ahead of the real market demand and human society has a stubborn tendency to by reactive rather than proactive.
Let’s start with a look at the artificial market forces. The world’s historic reactivity to oil prices, for example, has ripple effects that make no logical sense. After the ’07-08 surge in oil prices there was tremendous talks about America’s foreign oil dependence and the need for energy independence – but how does installing solar panels in the U.S., where oil is not used for electricity generation (except in Hawaii), do anything in terms of lessening dependence on foreign oil? In many ways, the dialogue, whether driven by media, marketing or policymakers, distracts markets and capital investment (not to mention the public’s attention) away from what is really needed.
I see it almost every day – people in the market who feel burned by having supported unsustainable sustainability investments.
We truly are at a turning point though. Yet we now find ourselves in a “boy that cried wolf” situation as a result of all the artificial drivers of the last 40 years.
What makes today different? For starters, 2.5 billion new members of the middle class world-wide over the next 20 years and the real demand of those people – the demand for energy, natural resources, building materials…even Scotch!
I mention this in part to be tongue-in-cheek, but it’s a tiny example of how real the demand is. The rise in demand in Asia – China in particular – for single-malt Scotch Whiskey was simply not predicted. So when the industry was making Scotch 20 or 30 years ago that is now becoming available for consumption (for those who aren’t connoisseurs, Scotch is aged in wood barrels for 10-30+ years before being sold), they didn’t anticipate the demand in Asia. There are even investment funds that purchase Scotch bottles and have seen significant ROIs by surges in the prices of the underlying assets – the Scotch itself!
In the 2014 book, Resource Revolution: How to Capture the Biggest Business Opportunity in a Century, Stanford professor Stefan Heck and McKinsey director Matt Rogers discuss how the addition of this 2.5 billion people to the middle class over the next twenty years will force a resource revolution.
So this is far different than temporary surges in oil prices and a lot of “noise” by policy makers and the media in response. This is real demand – and when there’s demand, someone will supply that demand.
Heck and Rogers argue that this is an opportunity and that human ingenuity will solve the challenges and meet the demand. A global overpopulation crisis or resource scarcity crisis need not occur. I agree.
I also think this will result in a much larger market than the tech boom of the last 20 years. The size of the markets, the capital required, the innovation needed, the nature of the demand…this is real. It is the next industrial revolution, except it is much bigger. This time the very size and nature of the demand itself will require sustainability. So perhaps let’s not call it the next industrial revolution, but rather the Sustainable Revolution.
© Copyright Bjørnulf Østvik 2016