In 1865, William Stanley Jevons, an English economist, observed a curious phenomenon: as steam engines in Britain became more efficient, coal use didn’t fall — it rose. Efficiency lowered the cost of using coal, which made it more attractive, and demand surged.

That insight became known as Jevons Paradox. To put it simply:

• Technological change increases efficiency or productivity.
• Efficiency gains lead to lower consumer prices for goods or services.
• The reduced price creates a substantial increase in quantity demanded (because demand is highly elastic).

Instead of shrinking resource use, efficiency often accelerates it — and with it, broader societal change.

Coal, Then Light

The paradox first appeared in coal: better engines, more coal consumed. Electricity followed a similar path. Consider lighting in Britain:

Period	True price of lighting (per million lumen-hours, £2000)	Change vs. start	Per-capita consumption (thousand lumen-hours)	Change vs. start	Total consumption (billion lumen-hours)	Change vs. start
1800	£8,000	—	1.1	—	18	—
1900	£250	↓ ~30×	255	↑ ~230×	10,500	↑ ~500×
2000	£2.5	↓ ~3,000× (vs. 1800) / ↓ ~100× (vs. 1900)	13,000	↑ ~13,000× (vs. 1800) / ↑ ~50× (vs. 1900)	775,000	↑ ~40,000× (vs. 1800) / ↑ ~74× (vs. 1900)

Over two centuries, the price of light fell 3,000×, while per-capita use rose 13,000× and total consumption rose 40,000×. A textbook case of Jevons Paradox — efficiency driving demand to entirely new levels.

Computing: From Millions to Pennies

This pattern carried into computing:

Year	Cost per Gigaflop	Notes
1984	$18.7 million (~$46M today)	Early supercomputing era
2000	$640 (~$956 today)	Mainstream affordability
2017	$0.03	Virtually free compute

That’s a 99.99%+ decline. What once required national budgets is now in your pocket.

Storage mirrored the same story: by 2018, 8 TB of hard drive storage cost under $200 — about $0.019 per GB, compared to thousands per GB in the mid-20th century.

Connectivity: Falling Costs, Rising Traffic

Connectivity followed suit:

Year	Typical Speed & Cost per Mbps (U.S.)	Global Internet Traffic
2000	Dial-up / early DSL (<1 Mbps); ~$1,200	~84 PB/month
2010	~5 Mbps broadband; ~$25	~20,000 PB/month
2023	100–940 Mbps common; ↓ ~60% since 2015 (real terms)	>150,000 PB/month

(PB = petabytes)

As costs collapsed, demand exploded. Streaming, cloud services, social apps, mobile collaboration, IoT — all became possible because bandwidth was no longer scarce.

Intelligence: The New Frontier

Now the same dynamic is unfolding with intelligence:

Year	Cost per Million Tokens	Notes
2021	~$60	Early GPT-3 / GPT-4 era
2023	~$0.40–$0.60	GPT-3.5 scale models
2024	< $0.10	GPT-4o and peers

That’s a two-order-of-magnitude drop in just a few years. Unsurprisingly, demand is surging — AI copilots in workflows, large-scale analytics in enterprises, and everyday generative tools for individuals.

As we highlighted in our TSF Thesis 3.0, cheap intelligence doesn’t just optimize existing tasks. It reshapes behaviour at scale.

Why It Matters

The recurring pattern is clear:

• Coal efficiency fueled the Industrial Revolution.
• Affordable lighting built electrified cities.
• Cheap compute and storage enabled the digital economy.
• Low-cost bandwidth drove streaming and cloud collaboration.
• Now cheap intelligence is reshaping how we live, work, and innovate.

As we highlighted in Thesis 3.0:

“Reflecting on the internet era… as ‘the cost of connectivity’ steadily declined, productivity and demand surged—creating a virtuous cycle of opportunities. The AI era shows remarkable parallels. AI is the first technology capable of learning, reasoning, creativity… Like connectivity in the internet era, ‘the cost of intelligence’ is now rapidly declining, while the value derived continues to surge, driving even greater demand.”

The lesson is simple: efficiency doesn’t just save costs — it reorders economies and societies. And that’s exactly what is happening now.

If you are building a deep tech early-stage startup in the next frontier of computing, we would like to hear from you. This is a generational opportunity as both traditional businesses and entirely new sectors are being reshaped. White-collar jobs and businesses, in particular, will not be the same. We would love to hear from you.

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