Energy

Energy creation without constraints is just a bomb in space.

Simplified piston animation.
Simplified piston animation. (Photo credit: Wikipedia)

I have found it has become quite vogue to go into long rants about how great everything would be if only there was more freedom and less restrictions. Probably because we live in such a safe time and place in the world, we don’t realize how much the laws and structures around us protect us from risk and harm.

Yet, many seem to feel that we should let the energy of the markets run free, and it will sort itself out.  It is imperative that you don’t constrain or restrict it in any fashion, otherwise you won’t reach the highest levels of productivity. Structures to constrain it will emerge themselves.

Well, at least structures that haven’t already emerged naturally from millenia of political growth and evolution.

I would like to entirely ignore any discussion around the immorality of using social darwinism through the markets for the moment. Instead, let’s take a more pragmatic angle.

I think I understand where the idea behind removing all market interventions comes from. If there is no artificial constraints to the system, then from a game theoretic perspective, the system should achieve an effective Nash Equilibrium where all parties are getting the maximum benefit they can possibly want. While not a social optimum, it has the effect of allocating resources in a fashion which no one person can take responsibility for and is still maximized for a really bastardized version of maximized. As well, structures should form that protect those most capable of producing the maximum capital, similar to how political structures form to protect those with the most power, usually with lots of guns.

What is it maximized for? Generation of value in order to trade and make capital, which can be used to make more value which can be used to make more capital. It’s very similar to a runaway reaction in thermodynamics — heat encourages other molecules to breakdown and release more heat until you have a maximum release of energy in a very rapid period of time. Generate the most value and capital as quickly as possible, and you will be the most successful in a pure capitalist system.

Arguably, generating lots of value can be an end in itself. Yet, that doesn’t make sense to me. What is the point of producing value without any aim as fast as possible? In a similar vein, if you have a runaway energy-producing reaction without any constraints, you simply have a bomb. I guess if you want to blow something up, it’s useful. However, in most circumstances it’s not very productive.

There is a concept I heard while I was working with Stuart Kauffman that I really enjoyed: “enabling constraints.” The idea, ultra-simplified, is that by putting constraints in complex or chaotic systems it is possible for emergent behaviour to be encouraged. You move the chaotic system towards the critical line until it is in an optimal position to produce complex behaviour. One way I visualize it is in the terms of an explosion — Uncontained, an explosion is pretty much useless. Put an explosion into a metal tube and put a piston on one side, you have the start of an engine. A method for turning chaotic and destructive behaviour into something that is productive and useful. A method to derive work from chaotic energy production.

I’ve mulled over this in relation to a variety of societal structures. For example, sports benefit greatly from enabling constraints. There is no baseball or football or hockey without at least some rules. These rules make the sport interesting, and emergent behaviour in the form of strategies exciting to watch. Without any rules, most sports would likely degenerate into some variant of UFC except with hockey sticks, or on a running track. You have to note that even UFC has a cage that constrains the fight to the arena.

In relation to economics, the link seems even more obvious. I generally see value-creation as a form of energy in an economic system. Successful companies work almost like volatile compounds, as described above. In the purest form, they continue to create value as quickly as possible with the only intention of bringing in more capital to allow them to create more value. Yet, if the analogy continues the companies will all continue to produce value quicker and quicker with no structure or creation.

Thankfully, in most modern societies, we have constraints in the system that allow corporations to produce directed value for society as a whole.

Value!

For example, if a company’s only purpose was to maximize profit, then most would just make giant piles of cocaine and heroin and be done with it. No better business than the drug business, once they are hooked you have customers for life, as short as their lives may be. Hence, we have laws in place explicitly there to prevent this destructive form of value-creation.

There are other softer constraints though, for example religion. These are enabling constraints to guide value-creation towards more emergent behaviour that benefit the group as a whole. However, as our society becomes more secular and individualistic, as morality becomes more relativistic, the strength of that constraint is decreased significantly. So, while we have still have independent ideologies, the constraint differs for each individual — having all particles heading in a different directions with no structure is simply chaotic behaviour and wastes a large amount of value creation.

However with enabling constraints, the value creation can cease being chaotic and volatile and instead in some sense be more productive.

To be honest though, I don’t know what constraints would be most effective, how to implement them, or what would work best. I have theories on what would work based on societal structures which have guided growth in society to this point. We are where we are, in safe, more or less clean, and low risk societies because of these structures. I think knocking them down, as we have been, for the utopian thinking of constraint-less capitalism is asking for trouble.

Energy creation with no constraints is simply a bomb in space and value creation with no constraints is just as pointless.

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Exponential Growth == Good!

One of the pet things that excite me every day is the possibility of exponential growth from renewable power sources. This isn’t because I’m a hippy trying to save the planet, it’s because the more I do the numbers, the more it just makes good economic sense. (I’m simply a frustrated entrepreneur at heart one of my good friends told me. Lots of idea, not enough capital and time to implement them all.)

Specifically Wind/Solar/Geothermal Power sources. High upfront cost, yes, but low maintenance cost. You don’t need to buy wind to power a wind plant, you do need to pay for coal to power a coal plant. From the perspective of exponential growth, as long as I make more than it costs year to year, window/tidal/solar is an obvious long-term business plan.

Let me explain. Let’s go with wind power. The first one will cost and likely not make me much within the first year. Say 10 Mil for the first windmill.

Short of minimal maintenance we get most of the capital from selling to the grid. Back of envelope calculation, I’m guessing about 4-6 mil per year. So this means approximately every 2 years, we can double the number of windmills and pay interest/dividends on initial investment. So in 10 years, we could, in theory, have 2^5 = 32 windmills, and in 20 years, have over a thousand of them.

But where can we build this massive bounty of windmills successfully without large land costs, problems with low wind speeds, good location near the grid, or people complaining about their “views.”

I’ve thought hard about this, and realized that perhaps if we build up near Churchill, where no one lives, there’s tons of cheap land and if you look at the following map, lots of high wind locations.

Mean Annual Wind Velocity at 50M above ground.

Ok, that’s great.  How far are we from the main power grid, or at very least a powerline that feeds into the main powergrid up there. Well, let’s take a lot at the next map.

Generating Stations and Power Lines, Manitoba

Beautiful, what can you see there, in the vast empty spaces of the north of Manitoba… A beautiful 500kV powerline directly into the heart of where we want to build this exponentially growing wind farm.

So, we have cheap land, easy access to the largest power grid in northwestern America, and great wind resources… What is the last problem we need to resolve.

Well, as anyone who reads newspapers in Ontario is used to seeing around windmills, there’s the inevitable NIMBYism. (Not in my Backyard), by people who think these beautiful pieces of modern architecture will somehow destroy their great view of trees and rocks.

Well, let’s look at this map of population density in Canada.

Population Density in Canada from 2002

What do you notice around the Hudson Bay, particularly near where Churchill is.

There is almost no one living there. Ie. There is very little change for NIMBYism, and the few people who are there will likely be very happy to have the oil-sands level windfalls from jobs and capital due to the power production.

Note, this is all back of envelope, but doesn’t this sound like a great business plan to you? Up there with the original business of Hudson’s Bay when they built York Factory and started the creation of a business that has prospered and lasted for over 300 years.

Yes, because we are only starting with 1 windmill, it will take a while to get up to scale, but exponential growth is exponential growth. Given 10 iterations, we would be at 1024 windmills, 20 iterations, and we’d likely be generating enough power for the entire northeast corridor simply from wind… Then with that cheap energy, the real fun begins for Canada and Canadian manufacturing. 😉

Pretty exciting, eh?

KJR

ps. I would love to take this, put it into a business plan, get the capital and start building. However, I need an engineer to help me out with the technical parts. Perhaps if I could nail this down, the BDC or someone with some real capital would be interested in this long term plan.

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