“The greatest shortcoming of the human race is our inability to understand the exponential function.” — Albert A. Bartlett
The phenomenon of exponentially accelerating technology is a relatively recent event in history, yet it is now a major driver of market dynamics. Many executives, however, are failing to factor it into strategy, jeopardising their organisation’s future fitness. In an increasingly VUCA world, organisations need to learn how to 'see around corners’.
What they are
Exponential Technologies underpin modern society. The term, coined by futurist Ray Kurzweil, refers to those technologies for which the power and/or speed doubles each year, and/or the cost drops by half. Robotics, IoT, AI, nanotechnology, gene sequencing, and solar panels are just some examples of many.
The phrase is derived from Moore’s Law and Kurzweil’s Law of Accelerating Returns.
In 1965, Gordon Moore, the co-founder of Intel, proclaimed:
“cramming more components onto integrated circuits … would lead to such wonders as home computers—or at least terminals connected to a central computer—automatic controls for automobiles, and personal portable communications equipment.”
He predicted the future very accurately.
His prescient observation that the number of transistors on a chip will double approximately every two years was famously dubbed Moore’s Law and remained remarkably accurate for 50 years (it has arguably reached its end date because of the physical limitations of silicon).
Law of Accelerating Returns
In 2001, Ray Kurzweil published a striking essay forecasting a not-too-distant time when machine intelligence will surpass human intelligence. In it he claimed:
“An analysis of the history of technology shows that technological change is exponential, contrary to the common-sense “intuitive linear” view. So we won’t experience 100 years of progress in the 21st century — it will be more like 20,000 years of progress (at today’s rate). The “returns,” such as chip speed and cost-effectiveness, also increase exponentially. There’s even exponential growth in the rate of exponential growth. Within a few decades, machine intelligence will surpass human intelligence, leading to The Singularity — technological change so rapid and profound it represents a rupture in the fabric of human history.”
Why it matters
Kurzweil’s key insight is the distinction between the ‘intuitive linear’ view of technological progress and the ‘historical exponential view’.
We have a cognitive deficit when it comes to imagining exponential growth. It is difficult for our brains. To understand this phenomenon better, have a quick look at Andy McAfee’s terrific telling of the Invention of Chess story.
To appreciate the exponential function in real terms, consider the supercomputer in your pocket. If you could time-transport a typical smartphone, say a Samsung S20, back to 1961, its computing value — its processing power based on the cost of computing back then — would be a phenomenal 200 trillion dollars; which was in the realm of science fiction back then, especially considering the entire global GDP was only 15 trillion.
As exponential technologies inexorably grow in power, VUCA conditions are created. As we can clearly observe, these technologies enable early-adopters to obtain asymmetric advantage as well as for a plethora of new entrants to disrupt market equilibria. The net effect is an ever-changing landscape.
Imagine for a moment, the multitude of business and societal changes that will soon occur due to just one exponential technology: synthetic media. Hundreds of startups are using AI to wholly or partially generate image, voice and video avatars that are indistinguishable from humans. To glimpse its power, take a moment to click on thispersondoesnotexist.com and generate an artificial human portrait in less than a second, or visit Synthesia to generate your own video using synthetic ‘talent’.
Soon anyone will be able to produce CGI (computer-generated imagery) at a fidelity previously only possible in Hollywood studios, for little or no cost. Nina Schick claims that “in about 5 to 7 years time experts expect 90% of video content on-line will be synthetic”. This will revolutionise entertainment, advertising, media, and corporate communications, but it will also erode trust as the tech inevitably gets weaponised and turned into 'deep fakes’.
If you consider all of the exponential technologies together, a different kind of world is emerging in front of our eyes — a “second machine age” as Andrew McAfee and Erik Brynjolfsson put it — with potentially as much societal upheaval as the first industrial revolution.
What to do
As executives, we need to learn how to better extrapolate exponentials. We need to develop early warning intelligence and practices to evaluate contingencies: a sort of futurology if you like.
Organisations need to do the same, they need to learn to “see around corners” as management theorist Rita McGrath articulately puts it. And strategy needs to remain agile, ready to adapt to emerging cognitions; a theme that will be explored in future transmissions.
The cognitive effort required to anticipate the consequences of exponential technologies is an overhead, but in a VUCA world it is essential.
Primer on Exponential Technologies, Singularity University. https://su.org/concepts/
Law of Accelerating Returns, Ray Kurzweil. https://www.kurzweilai.net/the-law-of-accelerating-returns
We’re not prepared for the end of Moore’s Law, MIT Technology Review. https://www.technologyreview.com/2020/02/24/905789/were-not-prepared-for-the-end-of-moores-law/
2030: from technology optimism to technology realism, World Economic Forum. https://www.weforum.org/agenda/2020/01/decade-of-action-from-technology-optimism-to-technology-realism/
Erik Brynjolfsson and Andrew McAfee. 2014. The Second Machine Age. http://secondmachineage.com/
Nina Schick, Deepfakes. https://ninaschick.org/deepfakes
McGrath, Rita. 2019. Seeing Around Corners: how to spot inflection points in business before they happen. https://www.ritamcgrath.com/books/seeing-around-corners/
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