In thinking of the potential change that could occur in electrical power distribution I am reminded of two tales. The first relates to the birth of the Internet and the second the birth of the electrical industry as we know it today.
Let me start with the Internet tale. Bob Kahn had related a tale to me concerning the early days of the Internet and I relate it here as best as I can remember, so my apologies to Bob if I am in error in some parts. I had left MIT and was at Comsat where we were providing the first international link in what was the ARPA net in 1975. Just a short while prior to that Kahn tells how he went to AT&T Bell Labs at Murray Hill to seek their help. He needed a modem to work over the telephone network and he thought rather than building his own he would do what was the most logical thing and get Bell Labs to provide assistance.
Bob arrived with perhaps one other person and in classic old AT&T style was met by a conference room filled with Bell Labs people including what was perhaps VPs and the like. Bob explained his intentions and he was then regaled and lectured by the Bell Labs folks that he had no right to do this, it was their network, remember Whittaker at the new ATT and his demands on the current Internet, he is now Chairman of GM, what a choice, and Kahn just sat there and submitted to the arrogance of the "owners" of the network. This lasted an almost interminable time. The answer put to him by ATT Bell Labs was that they would do this for the Government and in the manner and they would retain monopoly control. Kahn said thanks and retired to a place outside of Murray Hill.
From this Bob funded the work for new modems, packet switching, VLSI chip and what we now know as the core elements of our information society. The impetus was the arrogance of Bell Labs. Also their incompetence. For today I drove past the old Bell Labs Holmdel, a dead and decaying corpse of a building, the entries blocked, the grass growing like corn, and the place acres of desertion.
Lesson 1 is that the incumbents in a monopoly position are driven by maintaining their control despite the changing technological environment. Kahn was a gentleman and a genius who left the old and dying Bell System to its own demise and created by his insight and personality and leadership an Internet which is the example of a distributed network with a community of developers in an open environment.
Now to the second tale. In the book, The Forgotten Man by Shales is the tale of San Insull and the creation of the power industry as we know it today. The key for Insull was scale economy. Shales states that at the beginning every person was envisioned to have their own power plant, and indeed some did. However Insull saw that at the time there could be great scale economies in have a few large plants and a distribution network.
Lesson 2 is that there are times when scale has value, but the corollary is that there are times when the scale disappears. Scale is not an unchallengeable assumption. The Internet is distributed and has scale only as a result of its connectivity not because of a single ownership. The openness and distributed control enables the elimination of scale.
The conclusion from these two lessons is that first change is unending, remember Parmenides, and the only thing that remains constant is change. At the beginning scale has merit but there is a time when scale is a detriment. Microeconomists have no clue about this issue. They seem stuck in the 19th century. I wrote about this phenomenon in telecom networks twenty years ago.
Now to apply this to two areas of current interest is worthwhile.
First, electrical power generation. The GEs, IBMs, and others as well as all the incumbents will have the same response as Bell Labs had to Kahn and the ARPA Net proposal. Namely they will not only reject it but the will further institutionalize the past. Second, scale may no longer have merit especially if power can be generated in a distributed manner as we have argued and the intelligent grid can redistribute it effectively. But the question is who will do this? As I have said before, where is the Bob Kahn of today. Kahn did not want the Government to define and control this, he understood that the intelligence was in the universities and start up companies, like Linkabit and others, to do this. It was an entrepreneurial venture with an business and not Government backbone. He and ARPA facilitated this. He did so despite the troglodytes at Bell Labs.
Second is health care. The same logic applies. Except in this case the Government wants to control everything, ultimately through a plan managed by the Government.
What we need is a Government facilitator who knows how to work the system and not have an ego to control the system. This means frankly that Congress and the White House just get out of the way for they can contribute nothing but confusion, and bad deeds.
Let me start with the Internet tale. Bob Kahn had related a tale to me concerning the early days of the Internet and I relate it here as best as I can remember, so my apologies to Bob if I am in error in some parts. I had left MIT and was at Comsat where we were providing the first international link in what was the ARPA net in 1975. Just a short while prior to that Kahn tells how he went to AT&T Bell Labs at Murray Hill to seek their help. He needed a modem to work over the telephone network and he thought rather than building his own he would do what was the most logical thing and get Bell Labs to provide assistance.
Bob arrived with perhaps one other person and in classic old AT&T style was met by a conference room filled with Bell Labs people including what was perhaps VPs and the like. Bob explained his intentions and he was then regaled and lectured by the Bell Labs folks that he had no right to do this, it was their network, remember Whittaker at the new ATT and his demands on the current Internet, he is now Chairman of GM, what a choice, and Kahn just sat there and submitted to the arrogance of the "owners" of the network. This lasted an almost interminable time. The answer put to him by ATT Bell Labs was that they would do this for the Government and in the manner and they would retain monopoly control. Kahn said thanks and retired to a place outside of Murray Hill.
From this Bob funded the work for new modems, packet switching, VLSI chip and what we now know as the core elements of our information society. The impetus was the arrogance of Bell Labs. Also their incompetence. For today I drove past the old Bell Labs Holmdel, a dead and decaying corpse of a building, the entries blocked, the grass growing like corn, and the place acres of desertion.
Lesson 1 is that the incumbents in a monopoly position are driven by maintaining their control despite the changing technological environment. Kahn was a gentleman and a genius who left the old and dying Bell System to its own demise and created by his insight and personality and leadership an Internet which is the example of a distributed network with a community of developers in an open environment.
Now to the second tale. In the book, The Forgotten Man by Shales is the tale of San Insull and the creation of the power industry as we know it today. The key for Insull was scale economy. Shales states that at the beginning every person was envisioned to have their own power plant, and indeed some did. However Insull saw that at the time there could be great scale economies in have a few large plants and a distribution network.
Lesson 2 is that there are times when scale has value, but the corollary is that there are times when the scale disappears. Scale is not an unchallengeable assumption. The Internet is distributed and has scale only as a result of its connectivity not because of a single ownership. The openness and distributed control enables the elimination of scale.
The conclusion from these two lessons is that first change is unending, remember Parmenides, and the only thing that remains constant is change. At the beginning scale has merit but there is a time when scale is a detriment. Microeconomists have no clue about this issue. They seem stuck in the 19th century. I wrote about this phenomenon in telecom networks twenty years ago.
Now to apply this to two areas of current interest is worthwhile.
First, electrical power generation. The GEs, IBMs, and others as well as all the incumbents will have the same response as Bell Labs had to Kahn and the ARPA Net proposal. Namely they will not only reject it but the will further institutionalize the past. Second, scale may no longer have merit especially if power can be generated in a distributed manner as we have argued and the intelligent grid can redistribute it effectively. But the question is who will do this? As I have said before, where is the Bob Kahn of today. Kahn did not want the Government to define and control this, he understood that the intelligence was in the universities and start up companies, like Linkabit and others, to do this. It was an entrepreneurial venture with an business and not Government backbone. He and ARPA facilitated this. He did so despite the troglodytes at Bell Labs.
Second is health care. The same logic applies. Except in this case the Government wants to control everything, ultimately through a plan managed by the Government.
What we need is a Government facilitator who knows how to work the system and not have an ego to control the system. This means frankly that Congress and the White House just get out of the way for they can contribute nothing but confusion, and bad deeds.
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