nine the substitute

More Scarce Than the Milk of Queens

In Herman Melville’s classic Moby-Dick, Ishmael, the narrator, describes what a visitor might see if he or she descended below the deck of the whaling ship Pequod, to the forecastle where the off-duty crew were sleeping.

“For one single moment you would have almost thought you were standing in some illuminated shrine of canonized kings and counsellors. There they lay in their triangular oaken vaults, each mariner a chiselled muteness; a score of lamps flashing upon his hooded eyes. . . . The whaleman, as he seeks the food of light, so he lives in light.”¹

Whale men lived in light because the holds of their ship were full of whale oil, “the food of light,” a substance Melville has his narrator call “more scarce than the milk of queens.”

Whale oil, in its time, was the premium source of illumination in the world. It produced a bright, clear flame, with less smoke than coal oil, less smell than lard oil, and more illumination than camphene (a mixture of camphor, turpentine, and alcohol.) While the middle class and poor burned lesser fuels, the wealthy chose whale oil for their lamps, or smokeless candles manufactured from whale oil.

The sperm whale, in particular, was the source of the highest-quality oil, which could be used for candles, lamp oil, soap, machine oil, and cosmetics. The very highest-quality oil, congealed into a waxy form called spermaceti, could only be harvested from the head of a sperm whale. Severed heads would be lashed to the sides of whaling boats to return to port. If that was not possible, a sperm whale head would be brought on deck, a hole would be cut in it, a sailor would climb in and hand out bucket after bucket of oil and spermaceti to be held in the ship’s holds. It was a brutal process that nearly spelled the end of sperm whales.

In 1846, the American whaling fleet had 735 whaling boats in it. Whaling was the fifth-largest industry in the United States. In the early decades of the 1800s, American whalers killed perhaps 8,000 sperm and right whales a year and possibly as many as 15,000 a year, all in the search for whale oil. The nineteenth century saw the deaths of as many as a quarter million sperm whales in the quest to satisfy consumer appetites.²

Whales breed. They are, in principal, a renewable resource. Yet they breed slowly. A sperm whale gestates in its mother for 14 to 16 months, and then nurses for two to three years, during which time both mother and calf are extremely vulnerable. A female sperm whale will only give birth to a single calf every three to six years. Newly born sperm whales won’t reach sexual maturity for a decade, or almost two decades in the case of males. The damage the American whaling industry did to sperm whale populations proved long lasting.³ Across a few decades, whalers killed off an estimated one out of every three sperm whales on Earth.

The remaining sperm whales, many of them survivors of pods that had been decimated, became wary of humans and aggressive when approached. Melville’s inspiration for Moby-Dick, indeed, was the sinking of the Essex, a 283-ton whaling ship that attempted to harpoon a pod of mostly female whales. As the Essex approached, it was rammed and sunk by a large and enraged bull sperm whale who struck the ship once, turned, dove, and came up to ram them again below the water line, caving in the hull before swimming away.⁴

The combination of fewer whales in the sea, more fear of human boats on their parts, and the occasional aggressive reply from a bull sperm whale made whaling a harder and more expensive proposition. Starting in the 1830s and 1840s, whaling boats had to sail farther and longer, with heavier armaments, to bring home their catch.*

While sperm whales (and their relatives, right whales) became more difficult and more expensive to catch, demand at home and abroad continued to grow. The result was a surge in prices. In 1820, whale oil sold for $200 a barrel (in 2003 prices). In the mid-1840s, prices rose sharply as demand increased. While production was also increasing, it could not keep pace with the amount of whale oil that consumers in the United States and abroad were interested in. At its price peak in 1855, whale oil sold for a whopping $1,500 a barrel. By 1864, not only was whale oil incredibly expensive, the amount available had begun to decline. Prices were so high that even the wealthy turned to lower-quality sources of light. Yet the high price continued to encourage whalers to put to sea in search of whales that could make them rich.⁵

The whale oil crisis (and the crisis in sperm whale populations) wasn’t solved by the discovery of more whales. It was solved through innovation. The high price of whale oil and the fortune to be made by anyone who could produce a replacement sent people around the world in search of a replacement.

In 1846, a Canadian physician and geologist named Abraham Gesner, well aware of the whale oil shortage and the money to be made, wondered if a substitute could be found in other flammable substances. In an experiment later that year, he found that if he heated up dry coal in a glass vessel and then allowed the vapors that it gave off to condense in a separate vessel, he had a clear liquid that burned with a clean, bright, high-quality flame. He named this liquid kerosene and patented the process of producing it. Eight years later, in 1854, production began in the United States. Kerosene began to gradually replace both whale oil and cheaper, lower-quality fuels for lighting. In 1864, when whale catches collapsed, kerosene filled the gap.

By 1890, demand for whale oil had been almost completely replaced by demand for the now off-patent kerosene. The mighty whaling fleet of 735 ships had shrunk to 65 ships, less than a tenth of its former strength. The amount of whale oil on the market had dropped by 90 percent. The price of whale oil had dropped back to near its 1820 levels, even with diminished supplies. The price of kerosene was lower still. In 1865, whale oil sold for $1.77 per gallon (in 1865 dollars), and the newly available kerosene sold for 59 cents per gallon. By 1896, lack of demand had lowered whale oil’s price to 40 cents per gallon (in 1896 dollars), but technological improvements, competition between suppliers, and increases in supply had lowered kerosene to 7 cents a gallon. The new technology was more economical, larger in supply, and more humane.⁶

Through innovation, by experimenting with new ways to solve a problem and finding one, Abraham Gesner lowered the price of illumination, and may just have saved the sperm whale from extinction.

Kerosene’s day as the chief source of illumination wouldn’t last long. In 1876, Thomas Edison demonstrated the first incandescent light bulb, and by the early 1900s, electric lighting was spreading like wildfire. But for a few decades, Gesner’s discovery of a way to produce an illumination fuel from coal both lowered prices for consumers and slowed the slaughter of whales.

Peak Guano

The case of kerosene and whale oil is one of substitution. A new recipe for an illumination fuel, using coal and distillation, produced a new fuel that was more abundant and cheaper to harvest than the previous contender. Nor is that story unique. History is full of cases of new knowledge leading to resource substitutions, particularly in times of scarcity.

Fertilizer is one such story. For thousands of years, farmers have known that manure could be used to enrich the soil and grow more food. Manure adds nitrogen to the soil, though that wasn’t understood until much more recently. But even without understanding why or how fertilizer worked, farmers used it.

Manure comes from more than cows. Hundreds of years ago, the Incas in Chile and Peru discovered that guano—droppings from birds and bats—was an effective fertilizer for their soils. In 1802 a Prussian named Alexander von Humboldt studied the technique and published his findings in Europe. By the mid-1800s Peru was exporting vast amounts of it to European and American farmers.

Six miles off the coast of Pisco, Peru, are the Chincha Islands, small pieces of rock less than a square mile in total that, in the mid-1800s, had the world’s largest deposits of precious guano. Layers of the stuff up to eighty feet deep covered the land. For two decades, more than a hundred ships plied a continuous trade, bringing slaves to the islands to work shoveling the guano, and taking away holds full of the odorous fertilizer to destinations in Europe and the United States. The trade was so profitable, and guano so vital and plentiful, that in 1850 the Chincha Islands may have been the most valuable pieces of real estate on the planet. The sale of guano from them provided 60 percent of the Peruvian government’s revenue. They were so important to agriculture in the United States that President Millard Fillmore mentioned them in his 1850 State of the Union address, declaring that it was the duty of his government to ensure that guano could be imported from the islands.

In other words, Peru was the Saudi Arabia of its time. The Chincha Islands were its Ghawar oil field.

The lightly guarded, incredibly valuable islands proved to be a tempting prize. In 1864, the Spanish fleet seized them, placing the Peruvian governor under arrest. The seizure infuriated the Peruvian government and ignited fears through South America (where many countries had recently won independence from Spain) of a Spanish re-conquest of the continent. Peru went to war with Spain. Chile, Bolivia, and Ecuador came to Peru’s aid. The Spanish fleet shelled and burned to the ground the undefended Chilean port city of Valparaiso to punish Chile for its entrance into the war. The act very nearly drew the British and American fleets into the war on the side of Chile and Peru. Naval battles were fought. Dozens of ships were sunk. In the end, the Spanish Admiral committed suicide, his fleet limped home, and the Chincha Islands once again belonged to Peru.

Ten years later, the precious guano over which the war had been fought was gone. All of it that could be dug up had been. In all, 12.5 million tons of guano had been mined and shipped for use as fertilizer. “Peak guano” had arrived and passed. The islands that had sparked a war were once again worth next to nothing.

The end of the Chincha guano drove the fertilizer trade to another source—Peru’s salt plains in the Tarapaca Desert. Charles Darwin, on his voyage of the Beagle had visited the desert and noted its rich supplies of saltpeter, which locals used for fertilizer. After a brief chaos, the supply of saltpeter from the desert replaced the now-ended guano shipments. The Tarapaca Desert was now one of the most vital pieces of real estate on earth. And like the guano islands, it proved to be a tempting target. So tempting that in 1879, Chile went to war with its neighbor and former ally to seize the desert. After a bloody two-year war, Chile proved victorious. In 1881, with control of the Tarapaca Desert, Chile was more than the world’s Saudi Arabia. It had a near monopoly on nitrogen fertilizer. It was as rich in that resource as all of OPEC, the United States, and Russia combined are in oil.

That fact alone, combined with the prices the Chileans charged, set others around the world on the search for a replacement. So did the risk of eventual depletion. In 1898, Sir William Crookes, in his inaugural address as president of the British Academy of Sciences, announced what we might now call “peak saltpeter.” Peru’s supplies were running out, he said. The fertilizer extracted from the desert wouldn’t last forever. At present rates of extraction, he predicted that it would be entirely mined within another twenty to thirty years. And when it was gone, agricultural yields would crash. “England and all civilized nations stand in deadly peril,” he announced. “As mouths multiply, food sources dwindle.”

Crookes challenged the world’s chemists to find an alternate source of fertilizer, drawing nitrogen directly from the air. Since nitrogen makes up 78 percent of the atmosphere, a technique that could create fertilizer from that source would produce a nearly limitless supply. Two men rose to that challenge. In 1905, German chemist Fritz Haber demonstrated a way to create ammonia (which contains nitrogen and can be used as fertilizer) by directly extracting nitrogen from the atmosphere. From 1905 on, German chemical company BASF employed another scientist, Carl Bosch, to scale up the process. And in 1913 Bosch succeeded in using Haber’s process at industrial scales. The Haber-Bosch process, as it’s now called, produces almost all of the synthetic fertilizer used in the world today. One percent of the world’s energy is devoted to it. That 1 percent roughly doubles the amount of food the world can grow. Innovation succeeded in both finding a substitute for the finite resources of guano and saltpeter and in using that substitute to dramatically increase the amount of food on the planet.

Substitution Everywhere

Everywhere we look, when resources are scarce or prices high, innovators flock to the task of finding a substitute.

The incredible utility of diamonds—the hardest natural substance on Earth, and an ideal drill bit tip—combined with their incredibly high price led General Electric to begin searching for a way to create them artificially in 1940. That, in turn, brought synthetic diamonds to market fourteen years later. Today they’re widely and cheaply used in industrial drilling applications, while naturally occurring diamonds are reserved for jewelry.⁷

World War II provides other examples. In July 1941, the Nazi government of Germany forced France to sign a treaty for “Common Defense” of Indochina with Japan. This essentially gave Japan control of Vietnam, at the time the source of 50 percent of the rubber used in the United States. Five months later, Japanese forces invaded Malaysia, defeating British forces there and taking control of most of the remaining rubber plantations in the world. This left the Allies in a quandary. Without rubber, they couldn’t create tires for jeeps, trucks, and planes vital for the war effort. They couldn’t put soles on boots for soldiers. The Allies, deprived of a vital but overlooked natural resource, scrambled for a way to wage war. They found that in the work of American chemist Waldo Semon, the inventor of vinyl and then a scientist at B.F. Goodrich. Semon and the Allies scaled his process for a synthetic rubber he called Ameripol, replacing the missing natural resource with a new innovation, and ultimately allowing the war to be won.

Germany, on the other hand, suffered from a lack of oil with which to make fuel in the years leading up to World War II. At the same time, the country had substantial deposits of coal. To provide fuel, the Germans commercialized a process developed by chemists Franz Fischer and Hans Tropsch (the eponymously named Fischer-Tropsch process) to convert coal into a synthetic fuel similar to gasoline.⁸

It’s said that necessity is the mother of invention. The opportunity for fortune is another. As resources become scarce, prices rise. And those high prices motivate investment in innovation. The high price of whale oil spurred Abraham Gesner and others to search for a replacement. The high price and finite supplies of saltpeter spurred Haber, Bosch, and Bosch’s employer BASF to search for a replacement that could be produced in large volumes. The high price of natural diamonds spurred the search for a way to create synthetic diamonds.

Whenever the need has been great, or the financial rewards high, inventors have come calling. And innovation has allowed us to find substitutes for every resource that’s come into short supply in the past. The combined global brain of humanity, mediated by the institutions of science and the market, and by our ever-increasing ability to communicate with one another, is more than just Darwinian. It doesn’t just randomly combine ideas to get new ones and select for those that are useful. It anticipates problems and directs resources to solving them.

It’s as if, in the millennia before a meteor wiped out the dinosaurs, evolution saw the coming event and began to intentionally select for small, warm-blooded mammals that could survive the massive global cooling that followed. But natural evolution doesn’t work that way. It was purely luck that early mammals existed and were well positioned to take advantage of the cataclysm that ended the dinosaurs.

Not so our global brain. It isn’t just reactive. It isn’t random in the new ideas it creates or in those it selects for success. Our global brain can also peer into the future, see the problems and opportunities that are looming, and move to address them proactively. And our ability to do so is increasing with every passing year.

Why have we succeeded in finding substitutes for scarce resources while the Maya and the residents of Easter Island failed? We have more brainpower. We have more innovative capacity. We have more minds today than ever before. Those minds are less tied up in subsistence agriculture, and more freed to spend time creating and improving ideas. Each person, on average, is far more educated than ever before, increasing their ability to innovate. We’re connected by ever better ways to communicate and collaborate—from the printing press up through Internet sharing of scientific papers and data, increasing our collective intelligence. We have better tools that we’ve invented, from slide rules to supercomputers, that amplify our ability to solve problems. And all of that is amplified and guided by the Darwinian institutions of science and the market, which accelerate the evolution of new ideas

Innovation is our most important capability. Tapping into it and further augmenting it is our best strategy for overcoming any potential limits to growth.

* Not unlike the fishing boats of today.