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When people hoped that a more skilled steam engine would help preserve the limited reserves of England, William Jens just warned the contrast: more efficiency, he predicted, and more and more consumed.
He was correct, of course, and its prediction is known as the Jevans contradiction, which is often applied, whenever efficiency benefits motivate people to use something more.
When cars found more fuel-skilled, people drove more; When the lightbalb became more efficient, people installed more of them; When HVAC became more efficient, people built large houses.
But they are described as an example of a “rebound effect”, where some, but not all, are offset by the use of expected savings from efficiency.
It was not even a digital revolution that the Jevon contradictions actually came into itself: the faster the law of Moore has reduced the cost of computing, our use of the computer has increased even faster.
As a result, things like semiconductor and cloud computing – where the fall in costs is a decline – both are great business and great investment.
The current craze for investing in AI is similarly dedicated to more efficient GPUs that enable a large expansion of use.
Microsoft’s truth Nadella is confident that this will happen: “Jevons of the contradiction attack again,” Posted In response to investors on X, briefly worrying that the arrival of Deepsek will reduce the demand for both GPU and Cloud Services.
So far, he seems correct – the efficiency profit from Deepsek and other more efficient LLMs is more than an offset.
But any investor in airline or telecom stock can tell you that it does not always work in this way.
In both cases, the efficiency increased, the cost fell and the use increased – but the investors still lost.
For example, there is a rapid increase in airline traffic as people start flying commercially in the 1950s (and only with the smallest cyclical recession):
It looks related to a highly investable chart and the Xavon contradiction Number Even better: Since 1970, the actual cost of air travel has declined by an average of 1.7%, while the underlying rate of air traffic has increased by 4.4% per year.
Anyone who was near those numbers in advance had probably started an airline or at least invested in airline stock – but they came to regret it: Warren Buffett called the airlines a “worst business” and airline stock as “Deathtrap for investors”.
Similarly, many people who properly predicted the internet traffic explosion in the 1990s – or UnderIt was also predicted – lost stock to buy stock in companies hosting that traffic.
Internet traffic rose 127% per year between 1997 and 2003 – Investors were more or less wiped out in the choice of Level 3 Communications, Global Crossing and Worldcom at the end of which period.
Now consider Crypto.
Most of the Crypto investment is dedicated to the notion that more efficient, low -cost blockspace will increase the demand for that blockspace.
The results have been mixed so far.
Cheap blockspace has an explosion of activity on blockchain such as Solana and Etharium layer -2S.
But this is mostly thanks to Memcoin trading, which is probably not a decades-length growth story-it is difficult to imagine that even cheaper blockspace will lead to more memecoin trading.
(Let’s hope, at least.)
The elasticity of the demand for blockspace seems to be seen without memecoin, only we may have to look at the atherium.
Initial hope is that the execution of-chain has been lost in execution to settle the atherium in disposal and data availability, it is disappointed.
At the atherium itself, the cost of transactions has exceeded 90% from 2021 peaks – but, per data Blockworks researchThe number of transactions is close to unchanged.
Worse is that the joint fee paid on all Etreum -aligned layer -2 blockchain does not compensate for the loss of fees at layer -1 atherium -hence the ecosystem does not seem to be an example of the Javon contradiction as a whole.
This does not mean that it is leading to failure.
Airlines and telecommunications industries have been extremely useful for the world, providing positive externality for society more than negative. Internalism That shareholders have suffered losses.
But this is a lesson to be learned: you can be correct about Javon contradiction and still lose money investing in it.
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