The Diamond’s Law Era

In this column, Bill Campbell, CEO of EqRM and Managing Director of Equilibrium Capital Group, discusses why the era of Moore's Law is over.

For most of our lives, we’ve been living in the economic era of Moore’s Law.  From 1950 to now, whole new industries have been created.  Software, integrated circuits, displays, the Internet, websites, digital video and digital audio–collectively these have generated trillions of dollars in wealth. Yet the very words we use to describe them were not even in our vocabulary in 1950. 

Every two years, the techno-economics of Moore’s Law gave us massive new strength in tackling tasks we understood.  Every four years, it gave us the power to think about the problem in a new way.  And about every ten years, it gave us the power to conceive not just of entire new industries, but entire new ways of doing business. Those changes have fundamentally altered human society across the entire planet.  We’ve gone from a one billion person market economy to a 6 billion person market economy in just twenty-five years. Though it may not feel like it during the last couple of years, we are experiencing the greatest prosperity the world has ever known. 

Moore’s Law has now become a part of the structural truth of the planet-wide economy. Harvesting the Moore’s Law-driven margins has been the institutionalized strategy of some of the world’s largest players. Continuous innovation has become so institutionalized that it no longer drives industrial turnover and disruptive investment opportunity at scale.  

In this peculiar sense, the Moore’s Law era is over.  What’s next?

The Moore’s Law era’s legacy is a global economy of 6 billion (growing to 9 billion) market-based consumers, which is great for business–but we’re overwhelming the planet.  We’re generating more carbon than the ecosystem can absorb; eating more fish than the oceans can replenish; consuming more oil than we’re finding; using up more clean water than the hydrocycle can give us, exhausting more soils than we’re regenerating. 

I think these changes usher in the Diamond’s Law Era.  Here’s what that means:

This problem of the over-exploitation of free resources is known as the “tragedy of the commons,” and it is well known in economics at the local resource scale. Professor Jared Diamond of UCLA took a look at the same problem at the scale of whole isolated ecosystems in his book Collapse.  It turns out we aren’t the first human society whose prosperity has threatened to overwhelm the carrying capacity of our own ecological commons.  In oceanic or desert “islands” this phenomenon has been seen numerous times in history. 

In some cases it has led to the end of that society, or to its reversion to a primitive state: the Anasazi (soil salination and drought), the Greenland Norse (soil erosion and  winter food scarcity), the Easter Island Polynesians (a social structure of excess leads to felling all the forest giants on which the construction of oceangoing canoes depends, cutting the society off from Polynesian trade and impoverishing the island). But in others it has led to a phase shift in the relationship of that society to its own ecological resources–as inTokugawa Japan, Imperial England, and the Iceland of the early last millennium–that arrested and reversed, loss of the critical ecosystem elements.

The equation in the history is pretty straightforward.  If you find a way to identify economic value in the formerly free resource, sufficient to incent its preservation and enhancement, you can get through these crisis times.  If you do not, life will be bleak indeed. 

Wealth–the very concept of property–is something we invent as humans.  We tend to forget that we do this on purpose; we tend to view our wealth systems as structures of natural law.  And certainly they are rooted in something deeply true about human behavior.  But wealth only has meaning in the context of a human society.  A wealth structure must transform itself at times of threatened environmental collapse, or the wealth itself will be destroyed along with the society that houses it.  And it must work to make the society work better in the new way, or society will reject it.

And if those who wish to create wealth recognize the ecological change as the causing disruptions and change, then the place to create wealth is in products that identify, productize and deliver that phase shift.

This is the principle of Diamond’s Law: When collapse is threatened, financial wealth and ecosystem and social health must create, sustain, and enable each other.

We’re in the Diamond’s Law era now and this has a number of practical implications for investing and innovation. For example, cleantech investing will need to be thought of differently than classic venture investing (an investment structure which was optimized for Moore’s Law-driven innovation). Diamond’s Law-driven companies will look and feel different than Moore’s Law-driven companies. Customers and investors will be seeking different measures of results and value. And Diamond’s Law will change what it means to use the financial markets to drive sustainability in a fundamental way. We’re just getting started.

Bill Campbell is a Managing Director of Equilibrium Capital Group, an investment firm investing in and building asset managers in areas core to sustainability. Equilibrium's portfolio companies use operating assets to turn impact (negawatts, landscape and watershed refurbishment, water recycling, low impact living, low-carbon transportation) into scaleable investable returns. Bill has spent 30 years working with companies to create innovative capital and business structures that drive market leverage.

The Pivotal Leaders business network aims to grow the Northwest cleantech industry by cultivating leadership in Oregon, Washington, Idaho and British Columbia. Through this twice-monthly column, members of the Pivotal Leaders network take turns discussing some of the most pressing issues and trends facing cleantech entrepreneurs in the Northwest and beyond.