09/16/2010 11:20 am ET | Updated May 25, 2011

Scarcity: The Fountain of Innovation

Monday morning Tianjin, China and it's the first session of the World Economic Forum's "Summer Davos 2010" event. Ironically, after a filling breakfast in opulent surroundings, my panel colleagues and I are discussing scarcity. With concerns about peak oil, peak water, peak real estate, peak financial markets - and just about peak everything else - scarcity is on the minds of business and political leaders alike.

The panel members come at scarcity from diverse disciplines. I come at it from the perspective of environmental sustainability, where scarcity has been a polemic since at least the 18th century (although the roots go deeper to Roman times in the west and ancient Chinese culture in the east). Most people remember the "Limits to Growth" debate about resource scarcity posited by the Club of Rome in 1972, but the modern dispute begins with the early economists like Robert Malthus, who in 1798 recognized that exponential growth can't go on forever.

When we talk about resources scarcity, we tend to think of energy and material constraints. But that's only half of the story because it forgets a third important resource: human creativity. It is our current state of know-how that determines how scarce something is. Give a 1970s muscle car to 1 billion Indian drivers and oil will become scarce fast. But if you give them Priuses, it's a different story. Scarcity is relative. And the mere act of perceiving scarcity changes the game.

Great designers understand this. Charles Eames says design is all about innovating around constraints. And it's the constraints - the scarcity - that fires the designer's creativity. Smart business people "get it" too. Amazon founder Jeff Bezos embraces self-imposed scarcity saying, "One of the only ways to get out of a tight box is to invent your way out." These guys are bright and talented, but as is often the case, our best scarcity tutor is Mother Nature herself.

Nature is the ultimate example of leveraging the power of self-imposed constraints. Just look outside your window. Amazingly, 95 percent of every living thing you see is made out of just four elements: carbon, hydrogen, oxygen and nitrogen. Out of the 90 plus naturally-occurring elements in the periodic table, nature constrained herself to just four in manufacturing the living world. Most importantly, scarcity of design options has not limited nature's creativity. There are tens of millions of diverse species and even more miraculous functions. Just think of the super computer banging around in your skull or abalone nacre, a substance that humbles our best high-tech ceramics. And nature builds all these wonders, not by tapping into the intense heats and pressures possible with fossil fuels, but from the free rain of renewable energy of the sky.

Nature can do this because of eons of innovating under (self-imposed) scarcity. The result is a tremendous store of know-how encoded into the DNA of living things. Now to be fair, nature has had over 3 billion years to experiment. But remember, nature experiments randomly, subjecting haphazard mutations to the forces of natural selection. If the mutation makes a critter more fit, then the knowledge is conserved in DNA and added to nature's patrimony of know how. If not, it's deleted.

This fact gives us an innovative advantage. Unlike nature, we can be purposeful in our design decisions, not random. Given the right signals, that is the right constraints, we can innovate ourselves out of scarcity problems. As my WEF Panel colleagues rightly point out, however, it does take some time. Proactive policy that corrects externalities and market failures before a crisis point is reached is needed. But business and government leaders should not fear constraints. Given the right signals innovative designers, engineers and entrepreneurs can get us out of the box.

Cross-posted from Forbes