Monday, January 7, 2013

The Law of Diminishing Returns

[Approximate Reading Time: 5 minutes]
[Mood: Contemplative]

If you took freshman Economics in college, you would  have probably heard of the law of diminishing returns. Simply put, it says: if we continue to expend more and more effort and resources on a particular problem, there comes a point when the efforts stop producing as much benefit as they used to.

To take a simple analogy, if you don't water a plant at all, it will shrivel and die. If you water just a little bit, it might survive but barely so. If you continue to increase the amount of water slowly, the plant will begin to thrive... up to a certain point. After that point, no matter how much more water you add, the plant wouldn't grow any faster or stronger. The benefit (health of the plant) diminishes and too much water might even harm the plant.

The law of diminishing returns appears to be baked into nature everywhere. We're already in the zone when it comes to oil and resource extraction. When oil was first discovered, it was literally gushing out of the earth and very little effort was required to get more of it from the wells. Several decades later, we reached a point where every barrel of oil invested would yield 100 barrels. That was a pretty good deal! Today, it's down to just 10 and falling rapidly. There will come a point in the near future when it simply doesn't make sense to extract any more oil because we will need to spend more energy to extract it than it provides us back. It matters little how much oil we have in our reserves. This law will force us to abandon those reserves anyway. Bio-fuels like corn ethanol are essentially financial and ecological disasters because it takes more energy to produce a gallon of corn ethanol than the gallon contains in stored energy. Without large government subsidies the economics wouldn't even work.

We're now seeing this same law play out in Technology. It doesn't appear that way because we're constantly blanketed with new technologies and products that claim to improve our lives one way or another. Are they really living up to their promise? It's a different question as to whether technology is or has been beneficial to mankind historically. We could debate that from various angles and reach different conclusions. But we're faced with a new question today: are improvements in technology delivering anything worthwhile anymore today to the individual? And will they tomorrow? The key here is to look at the benefits of new technological development to the citizens and the people of the world vs. corporations, government and other centralized forces. Such a distinction brings to light the parties to which much of the benefit accrues. These parties try to convince you that the next new smartphone is going to make your life easier and you may believe them. It's time for us to question that belief. I've personally felt that my smartphone has made me grow poorer in memory and has robbed me of my sense of direction.

We can illustrate this law in action by looking at the windshield wiper as an example. When it was first introduced, the wiper needed to be operated manually. We literally had to rotate the wiper left and right using a little lever, not unlike how we adjust rear-view mirrors manually from the inside of an older model car. Hooking up a motor to the wiper was a wonderful and rather useful technological development. We could now focus on the road ahead and leave the work of rotating the wipers to the motor. Because driving in rain is more challenging than normal driving, this advance was as much a safety development as it was a convenience feature.

The motor worked just fine but we noticed that things could be improved further. Among the dozens of advances in wiper technology, both big and small, was the development called "intermittent wipers". We could now adjust the rate at which the wipers swept the windshield depending on how much rain was falling. This too was a useful development indeed but not as useful as hooking up the wipers to a motor in the first place. The law of diminishing returns had kicked in but wipers still seemed to have ways to go.

Where do we go from here? The relentless forward march of wiper technology continued. No one seems to have sat down and thought about how far we have come with wipers since the early days and said, "we've come a long way, we should probably leave wipers alone and look at other problems". All the various wiper design departments at the big car manufacturers of the world were not going to go away so easily. The VP in charge of the wiper department wasn't going to simply disband the team and put them to other tasks. The mantra is preservation and maintenance of existing human organizations, in this case, the wiper design departments. Welcome to the world of rain-sensing wipers.

We can argue how useful rain-sensing wipers really are (it seems they let us do other things instead of worrying about turning on the wipers, like, fiddling with our smartphones) but I think you will agree that the leap from intermittent wipers to rain-sensing intermittent wipers is not as big a leap as the one from manual wipers to powered wipers. The word "leap" might actually be an exaggeration for such a development. When was the last time we heard of a breakthrough in wiper technology? The law of diminishing returns has kicked in and in full force.

Let's also not forget that it didn't take a whole lot of effort to hook up a motor to the wipers but it takes a whole lot more to make rain sensing wipers. We necessarily have to use more sophisticated electronics and computerized design techniques to create any more improvements, as marginal as their benefits are. Today, not only do we see less improvement but we need to expend more effort as well. More and more input, less and less output!

Let me repeat it: we used to put in a little bit of effort (hooking up a motor to the wipers) and got much benefit in return (driving in rain became much safer and much more convenient). Today, we put in a lot of effort (entire departments engaged in wiper design improvements with sophisticated tools, computerized modeling techniques, advanced manufacturing capabilities, etc.) to get very little in return (we save one quick turn of a knob).

We're seeing the law of diminishing returns play an increasingly important role in almost all areas of today's technology-driven life. Automobile engine efficiency improved dramatically over the decades but it now takes enormous amounts of sensors and electronics to squeeze out any further gains. Domestic and international travel times had decreased for decades until the decreases started slowing down dramatically. Newer materials, lighter aircraft, better engines, etc. today give us not much more than we had in 1980 or 1990. We are also seeing it in other walks of life: most of the progress against hunger was achieved before 2007/08. Since then, global progress in reducing hunger has slowed and leveled off.

Is there a point when we will sit back and say, "we've enough technology now. Let's do something else." Perhaps not. We've built an entire economy on the theory of constant technological progress and we're not about to dismantle it and go home any time soon. So-called "progress" is relentless. We will exhaust all our remaining (meager) resources and our very selves in the search for that extra bit of efficiency or convenience, won't we?

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