Imagine a bespectacled Tyrannosaurus rex (in a tweed waist coat) on stage delivering the Richard Dimbleby lecture. His presentation is on energy transmitted as gravitational radiation. Maybe you find the idea amusing. I do. But it’s highly unlikely. Why?
Well for one, the T.rex went extinct 65 million years ago. Einstein didn’t publish his ideas about gravitational waves until 1916. And those ideas weren’t confirmed until gravitational waves were first detected in February 2016. They were always there, mind you. People just couldn’t see them, much less prove them.
Also, our domesticated T.rex in tweed would need to have evolved the ability to use language, understand theoretical physics and operate a PowerPoint presentation – he would have had to change himself into another creature entirely. It’s a big ask.
Don’t get me wrong. A T.rex would have impressive stage presence. But his ability to communicate important ideas about the future in a simple way would probably be limited.
As you begin Nick O’Connor’s book, The Exponentialist: Seeking your fortune on the new technological frontier, I have good news for you. The future is coming. You can understand it. You can prepare for it. And you can profit from it.
But as you stand on the precipice of the most exciting and unimaginable era of change in all of human history, don’t feel bad if you feel a bit like a dinosaur. I know I do. It’s all happening so fast. And some of it is incomprehensible. Just remember, the future has always felt like this to those living in the present.
Most the progress human beings have made in the last 20,000 years of our history has been made in the last 500 years. Think about it. Archaeologists and historians aren’t entirely in agreement about the development of human beings as a species. But we know more or less that around 130,000 years ago our brains became like what they are now.
That was a good start. Then, around 50,000 years ago, a “great leap forward” – another name for a possible genetic mutation – may have led to the evolution of language. This enabled better communication – the naming of things – and more complexity in our communication and thought.
Pre-historic humans in the Stone Age added tools to their language. The New Stone Age, or Neolithic period of history, saw changes in the Earth’s climate. As giant sheets of ice retreated to the poles, the entire planet became more temperate. Agriculture began to flourish. As it did, nomadic tribal wandering gave way to larger settlements and what we’d now call cities.
With cities came trade and the division of labour and changes in our relationship with each other and with technology. In ancient Egypt and Mesopotamia, written language as a way of keeping track of commerce began to emerge. That was another “great leap forward”.
You’d be tempted to think that since then, everything has been getting better all the time. That’s the core of our belief in progress: the technology will drive us to constant improvements in the quality of our life. As an article of faith it’s even simpler: modern man believes that tomorrow will better than today and that technology will make it so.
Yet our faith in the future is a relatively modern phenomenon. It’s driven by the technology we see and use every day. The more we see, the more we believe. It’s grown stronger as the visible signs of technological progress surround us. And not only surround us, but become more constant companions in our everyday life. How many times have you checked your phone/email/Facebook since you began reading this?
That’s another important point. Progress has been constant for the last 500 years. Moveable type emerged in the 1500s. Ideas could be communicated faster than ever. The mobility of knowledge changed the world and continues to do so with the internet.
During the 16th century, we began to see the world differently. Literally. The telescope and the microscope allowed us to see the universe in a whole different way. At the microscopic level, we began to see in ourselves a whole new universe we never knew existed.
It took them over three years, and it cost Ferdinand Magellan his life, but 18 members of his crew on the Victoria circumnavigated the Earth by ship. It was now possible to move people, goods, and ideas, around the world. With more mobility came more connections, more trade, more commerce… a positive feedback loop where the pace of technological change sped up.
The Scientific Revolution raised the pace of change yet again. The more we learned, the more we wanted to learn. The better our scientific tools got, the more we could learn. The Industrial Revolution saw the concepts of the Scientific Revolution begin to change the physical world in even faster ways. The steam engine, electricity, telephones, automobiles… one after another the innovations came in rapid fire succession and lead to even more disruptive innovation and change.
All of that is prelude to the stories Nick has written about in his book. To be honest, looking backward on technological progress might be more comfortable for you than looking forward. Why?
Nick shows you that there may be more technological progress in the next 20 years of human history than in the last 20,000 years.
Driven by breakthroughs in energy, intelligence, medicine, robotics, not only will you understand your world as never before, you will be able to change it, design it, and improve it in ways you never thought imaginable. And we will be joined in this endeavour by machines of our own making that can not only make themselves, but think for themselves.
This last bit – that human beings could become so powerful that they can create a new kind of life – raises profound spiritual and ethical issues. The evolution of technology will not stop as we grapple with those issues. We’d better hurry! In the meantime, strap yourself in.
Technological progress has been constant for the last 500 years. It’s about to get exponential. As Eoin Treacy has claimed, this exponential change, promises nothing less than the liberation of human potential. The T.rex couldn’t adapt to his world. You can.
Time travel and the world of tomorrow
My best guess is that humankind has just lost it. The pace of change is so fast that humans are no longer capable of connecting the big picture. We can no longer make much sense of the present or forecast the future.
Yuval Noah Harari, writing in The Sunday Times, 13 Sept 2015
There is no quality in human nature, which causes more fatal errors in our conduct, than that which leads us to prefer whatever is present to the distant and remote.
David Hume, A Treatise of Human Nature, 1740
Here’s a question for you. Don’t think. Just answer:
In front of you is a time machine. You have two choices. Choice one is to step through the portal and travel ten years into the future. Choice two is to travel 100 years into the future.
Which will it be?
Shall I set the dial for 2026 or for 2116?
Needless to say, this isn’t a choice I can truly offer you in the real world. No scientists have yet figured out a way of bending time in such a way that you can step through a door and travel through time. But just imagine for a second that they had. What would you choose?
I’ll hazard a guess at the answer. Given the choice, most people would plump for ten years into the future. Ten years from now feels attainable, within the realms of our imagination.
Stepping out of the time machine, you’d expect technology – which, after all, is the subject of this book – to have advanced at a rapid pace, much as it has over the last decade. The world will have changed. Chances are, things will be better – diseases that today are deadly will have been cured. New sources of energy that today are just theories will be on stream. Technologies that haven’t yet reached mainstream penetration – take virtual reality as an example – may well have altered the way we live our lives.
In short, it would likely be the world of today… but better.
The world of a hundred years hence is a different story. It feels utterly remote. The ideas, technologies, modes of living and working, methods of treating disease and conducting business will likely be so different from today’s, having been disrupted and reinvented and revitalised time and again in the century between now and then, that we’d feel untethered from reality. It would be a world entirely unlike our own.
Change on that scale scares people. Just imagine taking someone from the comfortable world of a century ago and transplanting them into today’s, filled with innumerable inventions that would seem to them virtually indistinguishable from magic. The television, antibiotics, the use of cars and planes, the computer, instantaneous communication on the internet… the number of breakthroughs seen over the last century would likely fill every page of this book, if I were to get carried away.
The point, of course, is that ten years of progress may feel exciting – that disease you were worried about may have been cured – whereas a century feels much more daunting: the world you knew has changed utterly.
There’s a kink to this kind of logic, though. It concerns a quality of technological progress that’s often misunderstood or forgotten altogether. And that’s the fact that for the past half-century or so, the rate of progress has been accelerating at an exponential rate.
This changes things in our time-travel equation. I’ll let the man most responsible for popularising the idea of accelerating technological returns, Ray Kurzweil, explain what it means, in his own words (emphasis added by me):
Now back to the future: it’s widely misunderstood. Our forebears expected the future to be pretty much like their present, which had been pretty much like their past. Although exponential trends did exist a thousand years ago, they were at that very early stage where an exponential trend is so flat that it looks like no trend at all. So their lack of expectations was largely fulfilled. Today, in accordance with the common wisdom, everyone expects continuous technological progress and the social repercussions that follow. But the future will be far more surprising than most observers realize: few have truly internalized the implications of the fact that the rate of change itself is accelerating.
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.
Put in simple terms, that means that our vision of how much the world will change in the future is restricted by what’s happened in our immediate past. We look at exponential growth and see linear growth.
Or to put it another way, take the “safe” option of travelling ten years into the future… and the world you experience will be much more like the “remote” world you’d imagined a century away.
I’ll explain exactly why that is as we go along. I’ll also explain why, while it might feel daunting at first, we’re actually living through one of the most exciting times in the history of humanity. The future is going to be much better than most people think. It’s going to “arrive” sooner than you’d imagine. And, as an investor, it could well make you wealthier than you ever thought possible.
The relentless march of progress is speeding up
There can be no doubt that the speed of technological change is accelerating. Most people know that computer processing power is increasing at an exponential rate – in what is known as Moore’s Law.
It’s the reason the iPhone 6 has 32,600 times the processing power of the 1969 Apollo era computers that sent a man to the moon.
Or, to put it more visually, it’s the reason that everything in the first picture below can now be done at a fraction of the price by the tiny piece of technology in the second.
But it’s not just technology itself that’s speeding up. Our responses to it are accelerating. People are adopting technology at an accelerating rate, as this chart shows:
If the world is on a relentless march of progress, we’re marching fast – and we’re speeding up. This in turn is translating into accelerating financial results, as demonstrated by the speed at which companies are growing from zero to a $1bn market cap:
What does all of this mean to you? What can you do about it? How can you stay ahead of the curve when everything is moving at such a frantic pace?
The quest for superior information: meet the experts making the tech revolution possible
Our goal in this book is to give you the insights you need to understand and profit from the world of technology. That’s easier said than done. To explain our approach, let me tell you a story.
It’s February 1977. A north London suburb. Two men, journalists, step out into the cold evening air.
Immediately, they’re rushed by a group of Special Branch police. They’re arrested. Within hours they’re locked up, denied bail and sent to Brixton Prison. This, more or less, is how the fascinating story of Duncan Campbell – one of the journalists in question – begins.
Their crime? Possession of unauthorised information.
Not possession of a firearm. Not contraband. Not drugs or stolen goods. Campbell ‘possessed’ something more powerful and valuable than that – information.
It’s easy to think of something like information as an intangible asset. But really, it’s a resource. The key to prosperity has always been access to the most valuable resources. In the past, successful civilisations gravitated towards the most basic resources.
Clean water. Abundant energy like wood, then coal or oil. Precious metals like gold and silver. Fertile land to grow food and raise livestock.
The same principle applies today – though with slightly different and sophisticated resources. Having a supply of oil on your doorstep may not matter to your survival (though as a society we need to buy or trade our way to access). But other things will. Superior information is one of them, especially when you’re investing.
In fact, having access to valuable, usable information – knowing the right thing at the right time – is as vital as any natural resource on the planet.
But how do you value information? How do you sort the ‘superior’ knowledge and insight from the raw data, or the faulty analysis?
With a natural resource it’s easier. How efficient and easy to extract is the energy? How scarce is the precious metal? How clean is the water? And how thirsty are you? How thirsty are your children?
It’s not so easy when you’re investing. Information is abundant. If you google the word ‘oil’, you’ll get 1.3 billion responses. How do you sort, rank and value all that data? I’d argue that there are two ways of looking at the idea.
1. How we know something
According to Nietzsche, there’s one important distinction to understand when valuing knowledge. There’s “Erfahrung” – what we know based on experience – and “Wissen” – what we know based on secondary information, such as books, the internet and television.
We know the oven is hot based on experience. We know the
Earth revolves around the Sun based on secondary information.
That’s one way of assigning a value to what we know. Erfahrung or Wissen. Primary and secondary. Where did we learn it? Is it based on direct experience or is it reported via someone else? And if the latter, do we trust the source?
But that’s just one way of looking at things. And since directly experiencing everything related to, say, the oil market in the UK is all but impossible (not without incredible contacts and infinite time), we can’t purely rely on direct information.
Which brings me to point two:
2. How useful it is to us
In Campbell’s case, he was accused of holding unauthorised and unlawful information on the security services in Britain.
Given that it’s impossible to be in possession of unlawful lies, it’s safe to assume that “information” here really means “facts”. Campbell had discovered something about the secret services’ activity in Britain.
The authorities were terrified that Campbell would publish what he knew, or worse, share it with espionage agencies abroad. So they had him locked up in an attempt to silence him.
That’s another way of marking out truly valuable information from the rest. It’s not enough to know something. You have to be able to act on it. Campbell could publish or leak what he knew. We’re looking for something that gives us an edge in the market. We want to act on insights that are scarce… valuable… not widely known or understood.
That, dear reader, is where this book comes in.
It’s the result of over a year of dedicated research, travel and debate. The theory is, if the world is going to change, let’s talk to the people making it happen. Let’s pursue superior information; people with first-hand experience of what’s happening. That means the entrepreneurs and business leaders leading the charge; the scientists and practitioners operating on the front lines; the academics and thought leaders studying what’s coming; the investors and financial backers taking the risks that make it all possible.
All told, we’ve spoken to scores of different experts on countless different technologies from all over the planet. You’ll find all of their insights in this book. One point that was nearly unanimous from everyone was this: huge change is coming, it is virtually unstoppable, and not everyone will be on the right side of it.
For instance, we spoke to Michael Bess, professor of history at Vanderbilt University in the United States, and author of Make Way for the Superhumans (note: the book is published under the title Our Grandchildren Redesigned in the US). As the title of his book suggests, Bess’s field of expertise is genetic editing. And genetic editing is no different from so many other technologies: there are huge opportunities and major risks, all bound together. In his words:
The main thing I want to emphasise is that I’m a combination of exhilarated and scared. There will be some fantastic benefits from these technologies, and some really potentially cataclysmic dangers. The idea is to go slow, because we need to be careful. We need to give ourselves time to adapt to the power that these changes are going to exert on our life as individuals and in society as a whole.
The most immediate obvious danger is that these technologies may exacerbate the rift between the haves and the have-nots. I worry about that within the developed economies – about the differential access to these technologies, who gets them, who doesn’t. In the case of countries that have not even been able to provide basic healthcare and education for their citizens, it’s going to be very difficult to provide these technologies to their whole population.
Within the wealthy countries, it could exacerbate the rift between the rich and the poor. On a global scale, it’s going to be even worse. I become worried that over time, if there are several generations of enhancements that have gone forward and that rift keeps widening, you will see a fragmentation of the species based on whether they have been able to get access to these things or not.
The haves and the have-nots. The winners and the losers. It’s an idea echoed by Erik Brynjolfsson, co-author of The Second Machine Age:
The changes in technology will happen faster than the changes in society and the economy. They tend to lag. One of the things we will see is both bounty and spread.
By bounty we mean that there will be a lot more wealth created. We’ll have a lot of free goods that won’t show up in the GDP statistics that nonetheless make us better off: things like Wikipedia and GPS and apps, or better ways of diagnosing cancer and connecting with people. That’s good news.
We’ll also risk seeing a growing gap between the rich and the poor in developing countries, and the middle class having trouble keeping up. That’s not inevitable, but that’s what we’ve been seeing in the past 10 or 20 years in the U.S., Europe and Japan.
One manifestation of that is that median income has been stagnating – even though the overall GDP has been growing, in particular the wealth of the top 0.01%. That may be exacerbated as digital technologies proliferate, but with the right policies, we can create shared prosperity.
Again, upsides and downsides. Where there is huge potential for gain, there is potential for loss. Truly disruptive technology does just that – it disrupts. If you’re invested in the disruptor, it’s great news. If you’re invested in the disruptee… that’s a different story.
David Brown, entrepreneur, angel investor and the creator of the blockbuster drug Viagra, has his own take on this. Brown believes we’re living through what he calls the Third Industrial Revolution. His theory is that each revolution is driven by a combination of three things: a new energy source, a new means of communication and a new source of finance.
With the first industrial revolution, it was coal, the steam-powered printing press and the stock exchange. In the second it was oil, the telegraph and the limited company.
This third revolution, Brown believes, will be powered by solar. The communication system is the internet. The financial driver will be the democratisation of the financial world, with peer-to-peer lending and other internet-driven forms of finance replacing the old system. If he’s right, the disruption to the incumbent structure would be significant. In his own words:
Because the internet was the driver of this industrial revolution, and it’s the communication system, many of the internet companies have registered as banks. Google is registered as a bank in Ireland and Germany. You can see what Apple is doing with Apple Pay, and what Google tried with Google Wallet, which didn’t work.
What’s the definition of a bank? It lends money to a broad customer base. These internet companies have massive customer bases – a billion customers with no infrastructure costs – and they’ve got money. Apple’s got $200 billion in cash. Banks are bust! It just takes one step now: for Apple and Google to start lending, and they are then replacing the current banking system.
I was teaching at the business school here in Cambridge last summer. There were people there from one of the big American credit card companies – one of the most famous ones. I gave a presentation saying I think all these old industries – banks, credit card companies – are going to be in serious trouble. The organiser came up to me and said, “You’ve probably upset a dozen people because they’re all from this credit card company.”
Then we had a barbecue outside at a very nice place, and I sat down at a table with a group of people, and it happened to be the ones from the credit card company. I thought, “Oh dear, I’m in trouble here.” They turned to me and said, “We agree with everything you’ve said. The company knows it from the inside that they’re in trouble.” Two of them said, “We resigned last Monday because we’re going to join the new revolution rather than staying with the old industry.” They’re starting their own companies. They know from the inside they’re in serious trouble.
Again and again, the experts we spoke to came back to this theme. The two sides of progress. Disruptors and disruptees. Technology could be as divisive as it is life changing.
Sam Volkering – futurist and financial advisor – agrees. Technology drives change. Change can be good. But people don’t always like the status quo being interrupted:
It’s going to effectively change the structure of social groups, in that our definition of work is currently: you get up, you go to work, spend your day at work, come home. In the last 50-odd years robotics has replaced a lot of labour-intensive roles. You see it a lot in manufacturing now: manufacturing plants use a lot of stationary robotics.
We’re now seeing a trend where robots or automated systems are starting to eat their way into middle-class jobs. You’ve got robo-advisors providing financial recommendations based on a huge amount of data input. So any kind of job that requires a bit of muscle power, or any reasonably repetitive work like bookkeeping – they’re just going to be replaced by automated systems or robotics. Things like self-driving cars – taxis, truck drivers, bus drivers – are not going to be needed, because why get a human to do a job that you can get a robot to do more safely, more reliably, and more consistently over a long period of time and at ultimately lesser cost?
That’s going to create more creative, highly skilled jobs, and jobs that perhaps don’t exist today that no one can predict. It’s going to be a shift of what we know as work. You might end up with three or four jobs on the go. There’s no such thing as a career anymore. You end up with several jobs as your work – micro-work.
That’s going to mean a shift of where people go physically to work, and how they interact and communicate with each other on a daily basis. It’s not going to be about getting up and going to the office, then going home. You might get up, go to a hub somewhere, interact with a bunch of people on one of your jobs. Then work from home for a couple of hours and then have to go to another community set. That’s going to create issues with transport and things like that.
Work is such an important part of our social fabric that when there’s a big shift in what it looks like, it’s going to create a lot of ancillary fluctuations in infrastructure: where we go, energy usage in various locations, etc.
People don’t like change, so that’s going to cause a lot of problems. You’re going to find a lot of people ending up out of work who haven’t had the foresight to reskill or retrain. It’s going to put a strain on economies, because they’re not going to be able to handle these people out of work, and there’s going to be a shortage of people needed for the high-skilled jobs that this change is going to create.
I could go on, of course, but I’m sure you get the point. To quote at length from the scores of technology experts we’ve spoken to at this point would make for an extremely long first chapter, and an extremely short book.
Why huge change is coming and no one can see it
The point is this. Huge change is coming. It will change your life in ways that are perhaps hard to foresee. The mission of this book – the reason we’ve spent the best part of a year tracking down the technology experts you’ll hear from – is to help you understand and anticipate the change.
Because change really does scare people. That’s normal. Every day I write to roughly 30,000 technology enthusiasts about the latest from the world of technology, medicine, energy and financial technology (fintech).
And the best part is: they write back. This gives me a rather good insight into the way people think about technology. Namely, that it is common – not among everyone, but among a significant enough proportion of people – to do everything they can to ignore technological change.
There’s a good reason for that. To explain why, I need to ask you another question:
How much have you changed in the past ten years? I’m talking about your personal traits and general personality. Are you the same person you were a decade ago?
Do you enjoy the same food, drink the same beer, read the same novels, watch similar kinds of films? Or how about where you live? The people you spend time with? The job you do (or don’t do)?
Are you essentially exactly the same as you were ten years ago?
Or have you changed?
If you said, “yes, I’ve changed” then you’re in the majority. At least, according to the results of a study conducted by Harvard psychologist Daniel Gilbert. I think the results had some pretty profound consequences for the world at large, and for us as investors. But we’ll get to that in a second.
First, let’s look at how the study worked. Live Science reported in 2015:
Researchers recruited participants online to fill out various personality, preference and value surveys as themselves 10 years prior and as themselves 10 years in the future. Over the series of studies, more than 19,000 people participated.
In each case, the researchers compared the look-ahead answers of 18-year-olds with the look-back answers of 28-year-olds, and so forth (comparing 19-year-olds with 29-year-olds, and 20-year-olds with 30-year-olds) all the way up to age 68. The older ages always reported changing in the past decade, but the younger ages did not expect to change nearly as much in the future as their elders’ experiences suggested they would.
In short, the vast majority of people recognise that they have changed a lot in the last ten years. But very few people are willing to project this change forward and understand that they’ll change just as much in the next decade.
I think that’s fascinating. It also has some pretty profound implications. It’s what Gilbert calls “the end of history” illusion – the mistaken belief that even though we’ve changed constantly our entire lives, the person we are today is somehow “fixed” and will stay the same for the rest of our lives. Back to Live Science:
When a 40-year-old looks backward, they say, “I’ve changed a lot in terms of my personality, in terms of my values, in terms of my preferences,” Gilbert said. “But when 30-year-olds look forward, they say, “I don’t expect to change a lot on any of those dimensions.”
I asked you a personal question. So I suppose it’s only fair to give away a few personal details about myself to prove that we’re all susceptible to this. I spend a seemingly endless amount of my life out on the streets of London, rain wind or shine, running anywhere between 40 and 60 miles a week. I run marathons. I compete in triathlons occasionally.
I’m not saying that to show off. OK, maybe a little. But I’m trying to make a point. If you’d told me ten years ago that in a decade’s time I’d be running marathons, I’d have laughed at you.
The same goes for a vast amount of other stuff I do now. Drinking real ale. Living in London. They’d all have seemed like the actions of a stranger to the version of me ten years ago.
I think it’s normal. But it’s perhaps instructive to understand the way we perceive change and the future. Because there’s a parallel to be drawn here between change on a personal level and mega-change in the world.
Again, look at how much the world has changed in the last ten, twenty or fifty years. Advances in science, technology and medicine have reshaped the way we live our lives.
In short, grand, sweeping changes to the world we live in aren’t the exception. They’re the rule. Many of these changes are brought about by technology. But equally, you could argue that the levels of debt, welfare and warfare spending, currency debasement and “financialisation” of the world today would shock someone living in the ‘60s, ‘70s or even ‘80s.
The point is: deep, often radical change – both good and bad – is a constant. Looking back, people accept this easily.
Yet people find it fundamentally difficult to accept that the world will continue to change in such a way in the next decade. They’re hardwired to believe that the world we live in today is the world we’re stuck with.
It’s a kind of “normalcy bias”. People fall into the trap of acclimatising so thoroughly to the world today that they become incapable of understanding and believing that change is coming, even when all the signs are there.
Or to put it another way, assuming that because something hasn’t happened before, it can’t or won’t happen in the future.
It’s a dangerous trap to fall into.
On the one hand, it can blind you to a very real and credible threat – like the idea that your bank could go bust.
On the other, it can mean you miss out on incredible, world changing investment opportunities that make some people a fortune. You’re going to hear about some of them in a second.
But it’s worth keeping in mind the fact that scepticism towards seemingly outlandish ideas and predictions is perfectly natural. It’s normal and healthy. It’s almost hardwired into our brains to expect tomorrow to be the same as today.
The illusion of stability is a comforting thought that helps us make decisions and plans for the future. But it’s important to understand that it can warp our perception of change and our decision making. I certainly experience this myself. At almost every stage of researching this opportunity, I’ve felt that deeply sceptical part of my brain pipe up, like a cynical old man sitting by the fire in a pub: “Won’t happen. Nonsense. Maybe in a hundred years.”
It happens to me all the time. And never more so than when I headed over to California to hear Ray Kurzweil speak.
The man who can see the future
Kurzweil is the closest thing you’ll get to a celebrity in the world of technological breakthroughs.
He’s written several bestselling – and remarkably prescient – books on the future of technology and the ways in which it’ll change our lives. If you’re interested, the most popular of them are probably The Singularity Is Coming and How To Build A Mind.
More than two decades ago, Kurzweil made a series of predictions about the future that were startlingly accurate. Kurzweil was writing long before the internet was widely used.
The age of personal computers, smartphones and tablets was ten years away. Looking back, he was writing in the technological equivalent of the Dark Ages.
Peter Diamandis and Steven Cutler describe Kurzweil’s predictions as follows in their 2012 title Abundance:
In his first book, 1988’s The Age of Intelligent Machines, Kurzweil used his exponential growth charts to make a handful of predictions about the future. They turned out to be uncannily accurate: foretelling the demise of the Soviet Union, a computer’s winning the world chess championship, the rise of intelligent, computerised weapons in warfare and, perhaps most famously, the World Wide Web.
Kurzweil made these predictions using a chart on a piece of paper. A chart that looked like this:
Just over a decade later, Kurzweil was back. Again, he made a series of predictions. Again, he based his arguments on a simple chart on a piece of paper. He did this in his follow up book, The Age of Spiritual Machines: When Computers Exceed Human Intelligence.
He made another 108 predictions… 89 came true.
This remarkably accurate ability to foresee the future has turned Kurzweil into something of a cult hero in technology and futurist circles.
So perhaps it was apt that when he was introduced onstage, it wasn’t a man but a computer screen that wheeled itself up to the microphone, with Kurzweil’s face staring out.
It sounds more interesting than it was. Kurzweil was speaking via a “Beam”. It’s essentially a self-driving Segway with an iPad on top.
Kurzweil had some particularly eye-catching things to say about where he believes technology is heading in the next two decades.
The prediction I found most interesting is his belief that our understanding of the brain and our ability to manipulate our biology will enable us to become much more intelligent.
His theory is that the neocortex – the part of the brain that’s responsible for the real high-level thinking humans are capable of – is also the most “recently” developed, in an evolutionary sense. He believes we’ll soon be able to manipulate it and therefore enhance our own intelligence. He suggested this will allow us to become funnier, more empathetic, more creative and the like.
Hang on a second. I know what you’re thinking. Your inner sceptic is piping up. So was mine. Because let’s face it: this sounds like the sort of far out sci-fi nonsense we could all trot out. Even if it does happen, it’ll be so far in the future as to be irrelevant.
And I can tell you, there were plenty of raised eyebrows in the conference hall (which was mostly full of doctors and healthcare professionals –not the sort of people who have the time to indulge in a lot of navel-gazing). I could feel my own inner sceptic calling Kurzweil’s bluff.
But then I thought: perhaps that’s the point.
Kurzweil’s made a career of making outrageous predictions… and being proved right. His pedigree is impeccable. He’s director of engineering at Google. He has 20 honorary doctorates. And he’s also a bona fide inventor. Here’s an excerpt from his biography:
Kurzweil was the principal inventor of the first CCD flatbed scanner, the first omni-font optical character recognition, the first print-to-speech reading machine for the blind, the first text-to-speech synthesizer, the first music synthesizer capable of recreating the grand piano and other orchestral instruments, and the first commercially marketed large-vocabulary speech recognition.
He doesn’t make these predictions to garner publicity. He doesn’t need it. He makes them because he has a long track record of looking at the cutting-edge science and technology of the day, extrapolating it forward and creating a vision for the future that most people just won’t accept.
Perhaps he’s mastered his own inner sceptic. Or perhaps he’s found the right balance between the two positions – understanding that change is constant and yet our brains will constantly want to reject it.
That’s a vital point to be aware of. And it’s especially pertinent to the book you’re about to read.
I’m going to show you just how close the world is to an epoch of absolutely astonishing change and progress. Some of what we share with you will seem unbelievable. For instance, the idea that we could access unlimited sources of new energy, add decades of quality life to the average lifespan, create super-intelligent beings and develop new ways of sharing the fruits of these innovations with the entire world, may seem crazy right now.
But again: that’s the point. Radical change isn’t the exception. It’s constant. We just have to open our minds to it.
The most powerful idea of the 21st century
Kurzweil’s predictions all have one thing in common. They’re an extrapolation on a single, powerful phenomenon that’s behind much of the last half a century of advances.
Ironically, it’s also an idea our brains find almost impossible to comprehend. That’s despite the fact that the human brain is, by some distance, the most powerful computer in the known universe.
It might not feel like it, but right now you’re reading and understanding these words using a “processor” that is many, many times more sophisticated and complex than even the world’s most advanced supercomputers. Inside your brain, 100 billion neurons with 1 quadrillion (that’s 1 million billion, or 1,000,000,000,000,000) connections called synapses wiring them together are quietly whirring away, turning this collection of marks on a page into something that makes sense.
Not only that, it’s storing this information away in your memory, ready to be recalled (almost) at will in the future. And it performs these kinds of functions day and night, without fail, for week after week, month after month, decade after decade.
Such immense power comes at a cost. It takes a vast amount of energy to run such a machine. Your brain accounts for only 2% of your body weight, but it sucks up 20% of the oxygen in your blood and 25% of your calorie intake.
All this power allows your brain to do things – to process information, make instinctive and intuitive decisions, recognise patterns, write poetry, and a million things besides – at speeds that far surpass what man-made technology can achieve. For instance, in early 2014 the world’s fourth most powerful supercomputer, a machine known as K, developed by the Japanese research group RIKEN and the German research group Forschungszentrum Jülich, attempted to “map” one second of one percent of human brain activity.
According to The Independent:
Using the K supercomputer, the fourth most powerful in the world, scientists in Japan replicated a network of 1.73 billion nerve cells and 10.4 trillion synapses. It took the K computer, with over 700,000 processor cores and 1.4 million GB of RAM, 40 minutes to model the data.
In plain terms, what that means is this: it took a highly sophisticated supercomputer, built at huge expense by a team of the world’s best scientists, 40 minutes to map what your brain can do in one second.
But this natural supercomputer has a weakness. A flaw that, ironically, makes it incredibly difficult for our brains to understand and comprehend… the power of other computers.
Because of Moore’s Law – an exponential doubling of computing power every 18 months. It’s perhaps the most important trend in the world right now, and has been for the last two decades. In a twist of fate, it also happens to be something almost the entire planet struggles to understand and anticipate.
The golden formula
Let me demonstrate my point.
Find a piece of A4 or A5 paper. If there’s nothing to hand, tear one out of the back of this book. I won’t be offended. Now, holding that sheet of paper in your hand, answer me this: If you were to fold it precisely in half five times in a row, how thick would the resulting wedge of paper be?
(Of course you could fold the paper yourself and then measure it with a ruler. But try to resist the temptation. This is all about mental perception.)
Well, folding the paper five times wouldn’t result in a very thick wedge. It’d be less than 1cm thick.
Now, how thick would the wedge be if you folded the paper in half 42 times?
Ten metres? A hundred?
Surprisingly, the resulting wedge of paper would stretch 380,000 kilometres into the sky – enough to reach the moon. Fold the paper 50 times and it’d reach the sun. Fold it 100 times and it’d be wider than the entire known universe.
How close did you get?
If you were within 10,000 miles you’re well ahead of most people. The reason is simple. This is exponential growth – a repeated doubling. And the simple fact is, the vast majority of people find it almost impossible to comprehend the scale and speed of exponential growth. We might each have the most powerful supercomputer in the universe whirring away between our ears, but we find it incredibly hard to visualise and anticipate just how rapidly the exponential function alters the world.
The reason for that is that we’re conditioned to think in terms of “linear” growth. That is, we look at how big something is now compared to, say, last year or last month, and tend to draw our conclusions from that. My house is worth 12% more than last year. My wage has grown 2%. The stock market is up 5% this year. This is how we view the world. It’s how we’re conditioned to think. In the investment world we’re constantly told that past performance has no relationship to the future, but the fact is, it’s part of being human to base our view of the future on our most recent experiences.
The problem is that this way of thinking can lead to some catastrophic decision-making at key turning points. We’re approaching one of those turning points right now.
But first, back to the problem – and the power – of exponential growth.
The problem our brains have with it is that we find it near impossible to perceive the early stages of it. Let’s say the piece of paper we were folding was 0.01 cm thick. We fold it in half; it doubles to 0.02 cm. A tiny amount. We fold again: 0.04 cm. Again: 0.08 cm. We’re talking about miniscule amounts of growth here. Mark them on a chart and they essentially all look like zero. And that’s how our brains see them – as growing at what appears to be an incredibly slow rate.
But it won’t stay like that for long. Once we break the “whole number” barrier (ie, we reach 1 cm), we’re only twenty doublings away from a millionfold improvement. We’re only thirty doublings from a billion.
The deception trap
If we were to map this growth out on a chart, it’d essentially be a long, flat line for a very long time, before a sudden explosion upwards on the right hand side of the chart. This is sometimes called the “knee” of the curve. It’s the point where things go vertical. In investment terms, it’s the point where vast sums of money change hands.
The problem is, there’s a long period of deception – where growth appears to be a flat line – before a sudden and disruptive moment where growth kicks up. It may appear like there was an “explosive” rate of growth towards the end. But that’s not true. The rate of growth remains constant throughout. It’s simply that we have trouble perceiving the nature of exponential growth until it’s almost too late.
Ray Kurzweil is famous for his predictions about the incredible advances of technology. But when you boil it down, what he’s really an expert at is first spotting an exponential trend (like Moore’s Law) and understanding just how powerful it’ll become over time.
Kurzweil uses one particular story to illustrate what he means. The story goes that a mathematician had invented chess. The king was delighted with the game and called the mathematician before him, telling him he could claim any reward he liked.
The mathematician replied that he wanted a grain of rice placed on the first square of the chessboard, and then doubled on each subsequent square.
The king protested, saying that such a reward wasn’t big enough. You know where this is going: the king couldn’t see the power of an exponential trend. By the 32nd square – half way across the board – the reward amounted to several acres of rice production. That’s a lot… but not an unimaginable amount.
But once you get onto the second half of the chessboard, things get out of hand very quickly indeed. By the 64th and final square, you’d need a pile of rice bigger than Mount Everest – more than all the rice in the world.
It’s just a story, of course. But Kurzweil uses it to make a point. The second half of the chessboard is where things change at an unimaginable rate. After nearly fifty years of exponential growth in computing power (Moore’s Law), we’re heading into the second half of the board right now.
The experts deceived
There are numerous examples of people falling into the trap. They span almost every continent and every industry on the planet. In 1986 analyst firm McKinsey estimated that the number of mobile phones in 2000 would be one million units. Mobile phones back then were… barely mobile. They were huge, expensive and unreliable. Predicting the market would grow from tens of thousands to a million seemed like a decent bet. But that was linear growth. What McKinsey failed to see was that the technology behind the mobile phone was improving at an exponential rate: it was getting smaller, cheaper and faster at a rate of roughly double every two years. They were making their prediction smack bang in the middle of the deception phase.
Their prediction was off by 108 million units. McKinsey got the numbers wrong by roughly 10,000%.
Sometimes people can’t recognise exponential growth. Other times they just don’t want to believe it. Let’s have a look at our friends McKinsey’s attempt to understand the mobile phone industry in the early 2000s.
Venture capitalist Vinod Kholsa investigated the forecasts made by mobile phone analysts at firms like Gartner, Forrester, Jupiter and McKinsey to see how they predicted the growth of the mobile phone industry over the preceding decade. What he found was that not only did the analysts fail to recognise an exponential growth trend… they failed four times in a row!
Kholsa’s study showed that in 2002, the experts predicted 16% year to year growth.
The market doubled.
In 2004, the experts predicted 14%. The market doubled.
You’d think by now the professional forecasters would have cottoned on to the trend. But no. They were deceived. In 2006, they predicted 12%. You can guess what the market did. The coup de grace came in 2008. The prediction this time: 10%.
The market doubled.
I haven’t shared these examples with you just to poke fun at the so-called experts. OK, maybe a little. But there’s a serious point here.
The people making these predictions are not stupid. We’re talking about highly qualified, highly paid professionals who are experts in their field. Economists. Scientists. Doctors. But they don’t see what’s happening. Very few people do. That’s the nature of exponential growth. As the physicist and world renowned lecturer Albert Bartlett began one of his most famous speeches, titled Arithmetic, Population and Energy, “the greatest shortcoming of the human race is our inability to understand the exponential function”.
The “not in my lifetime” fallacy
What all this boils down to is this.
It may not feel comfortable to think of a huge technological acceleration disrupting the way the world works. But to put it bluntly: our feelings on the matter won’t stop it happening.
I don’t mean to be rude in that statement. It’s a fact. All of the evidence we have points towards rapid and accelerating technological progress. That might scare some people. It makes some people want it not to happen. That’s because we’re almost conditioned not to expect change. The idea of it scares us. Our mission is to help you understand, anticipate and get on the right side of radical change.
By the way, it’s not unusual for people to want stability or to downplay the effects of disruptive technology.
For instance, I saw a Bloomberg story at the start of 2016 predicting that electric cars could cause the next oil crash. Here’s the argument:
With all good technologies, there comes a time when buying the alternative no longer makes sense. Think smartphones in the past decade, color TVs in the 1970s, or even gasoline cars in the early 20th century. Predicting the timing of these shifts is difficult, but when it happens, the whole world changes.
It’s looking like the 2020s will be the decade of the electric car.
Battery prices fell 35 percent last year and are on a trajectory to make unsubsidized electric vehicles as affordable as their gasoline counterparts in the next six years, according to a new analysis of the electric-vehicle market by Bloomberg New Energy Finance (BNEF). That will be the start of a real mass-market liftoff for electric cars.
All very interesting. We’ll discuss electric and driverless cars a little later. In the context of our discussion on change – and people’s fear of it – one line in the Bloomberg piece caught my eye (emphasis mine):
This isn’t something oil markets are planning for, and it’s easy to see why. Plug-in cars make up just one-tenth of 1 percent of the global car market today. They’re a rarity on the streets of most countries and still cost significantly more than similar gasoline burners. OPEC [Organisation of the Petroleum Exporting Countries] maintains that electric vehicles (EVs) will make up just 1 percent of cars in 2040. Last year ConocoPhillips Chief Executive Officer Ryan Lance told me EVs won’t have a material impact for another 50 years—probably not in his lifetime.
But here’s what we know: In the next few years, Tesla, Chevy, and Nissan plan to start selling long-range electric cars in the $30,000 range. Other carmakers and tech companies are investing billions on dozens of new models. By 2020, some of these will cost less and perform better than their gasoline counterparts. The aim would be to match the success of Tesla’s Model S, which now outsells its competitors in the large luxury class in the U.S.
The phrase “not in my lifetime” is probably the epitaph of the radically disrupted market. It sounds like wishful thinking to me.
Or to put it another way, someone who doesn’t want the world to change and so has dismissed the idea out of hand.
I get why people do this. It’s easier to dismiss the idea that the world is about to change than to accept and plan for it. It’s easier to believe that the world tomorrow will be the same as the world today.
But of course, history tells us that’s wrong.
If it’s not too grand a goal, it’s our intention in this book to help you get on the right side of history. To understand who the winners are and how to join them.