TCS Daily

Our Battery-Powered Economy

By James D. Miller - March 14, 2005 12:00 AM

The New Scientist reports that a prototype battery that "can be fully charged in just 6 minutes, lasts 10 times as long as today's rechargeables and can provide bursts of electricity up to three times more powerful is showing promise in a Nevada lab." The wealth-generating benefits such a battery would yield illuminate why I'm optimistic about the American economy.

The interconnectedness of our high-technology economy means that an advance in one area benefits many industries. Better batteries would help the producers of cell phones, laptops, PDAs, digital cameras, GPS devices, portable TV and DVD players, and would probably lead to products that can't exist within the limits imposed by today's portable power sources. Continuing improvements in chip speeds, computer memory, wireless connections, parallel processing and many other technologies will likely offer similar widespread benefits.

Enhanced batteries will increase incentives for those companies that make battery-dependent goods to improve their products. Of course, better laptops, cell phones, and digital cameras will require even better batteries and so further increase financial incentives for battery innovation. Much of our economy is currently characterized by such positive feedback effects where an advance in one technology creates incentives for improvements in other technologies, further increasing incentives for improving the initial technology.

The U.S. financial system insures that the inventors of better batteries would get enough capital to market their technology. It used to be that only the rich could finance their dreams. Venture capital markets, however, allow any American the money to pursue his ambitions if he can explain why these ambitions will lead to great profits.

The rapid economic development of India and China multiplies the gains to Americans of new technologies. Indian and Chinese consumers would eagerly use new and improved batteries, and this expectation of future customers increases the venture capital available to the improvers. In our information economy, much of the cost of creating new products comes from design and testing. As these design and testing costs can be spread out over more customers, companies profit by hiring additional designers. Consequently, the economic development of India and China means that firms can afford to spend additional money incorporating the latest technological advances into their products.

Many humans resist change, but the hyper-competitive world marketplace forces firms to use the latest technologies. For example, even if all laptop makers got together and decided not to update their products to use new batteries, other firms would enter the laptop industry and quickly dominate it. Even giants such as Intel and Microsoft know that a mere two years of technological inactivity could destroy them.

Just as the competitive marketplace would force firms to incorporate better batteries in their products, competition among nations means that no competent government could politically restrict the sale of greatly improved batteries. If the U.S. decided it was unfair to old battery makers to allow new batteries to enter the marketplace and so stopped the sale of these new batteries, then we would find it impossible to export not only batteries but also laptops and cell phones. Modern day capitalism is creating a race to the top in which nations can't afford to restrict technologies.

Better informed customers also enhance the benefits of new technologies to firms. Anti-capitalists used to argue that companies could shape customer desires through marketing with the result that firms had no need to innovate because it was much simpler just to advertise. But the Internet has made it easier for customers to get accurate information on product quality, so firms know that they will be rewarded quickly for selling superior products and punished speedily for not using the latest technologies.

Companies have greater incentives then ever before to innovate and then incorporate these innovations into products. And the more technology we discover, the greater the benefits of future technological development. Over the next thirty years this cycle will make many Americans very rich.

James D. Miller writes The Game Theorist column for TCS and is the author of Game Theory at Work.


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