After the Bell: Exponential innovation
Okay, quick test: if you have invested R100, earning 10% interest a year, how much will you have in 10 years? It's kinda disappointing; you will end up with R259. Keep going for 30 years, though, and you end up with R1 745, which feels pretty good.
This little illustration reflects a common human problem; we are really bad at thinking exponentially. Most mathematical calculations we do automatically are linear: how long is it; how much time will it take; what is the distance between, etc. The sequential divisions are equal. Perhaps I’m exaggerating; I’m sure there are lots of people who do think in exponential terms, but generally, I would say it is true that most people struggle to think about things in that way without prompting.
And this is why investment houses constantly encourage people to consider the power of compound interest. This prompt helps people get their heads around the unfamiliar notion and encourages saving. As Albert Einstein did not in fact say, “compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.’
To overcome this defect in perception, we often give names to the prompting process. One well-known example is Moore’s Law, the observation that, at a certain time, the number of transistors in an integrated circuit doubles about every two years. By giving it a name, we have fixed the context.
This is relevant because I think it’s a truism of modern society that the speed of technological innovation is increasing. It seems like it’s increasing at a hectic pace, and that is because – and I am not making this up – it is. And one of the reasons this is so is because technological innovations tend to build on one another, creating new technological innovations, and so on.
Just to take one example, did you know the first video ever put up on YouTube was “Me at the Zoo”? It was a 19-second video of YouTube’s co-founder Jawed Karim, who was 25 at the time, in front of two elephants at the San Diego Zoo. Karim indulges in a boyish double-entendre, mentioning the thing about elephants is their long … trunks. It was uploaded to the site in 2005.
Karim and his two cofounders weren’t really considering the possibility of the enormous success of the site at the time because the site faced lots of technological issues. It was hard enough getting a picture up on the internet at the time, never mind a piece of film footage.
But they were obviously onto something because the site took off, and when Google approached them a year later with an offer of $1.65-billion, they grabbed it. Mistake. YouTube on its own is now probably worth around $700-billion, but of course, they did not and could not imagine that would transpire.
But what else they couldn’t know was that iPhones would be invented the following year, that microprocessors would increase in power exponentially, and that bandwidth would become much cheaper as fibre optic cables were laid at a furious rate around the world. All those things, and more, were precursors to YouTube’s eventual success.
The reason I am going on about this is that the World Economic Forum published its Top 10 Emerging Technologies Report 2023 today. And if you thought that AI was going to change the world, you have another think coming, as my mom likes to say. It is, of course, but it’s not alone, and although its effect is probably going to be the most profound, the other stuff is pretty mind-blowing too.
The list is, in short: AI, flexible batteries, sustainable aviation fuel, designer phages (viruses that infect specific types of bacteria), the metaverse, wearable plant sensors, spatial omics (DNA sequencing on steroids), neural electronics, sustainable computing, and AI-facilitated healthcare (different from ordinary old AI because it involves drug design).
All these topics are huge subjects on their own, but taken together, they reflect something akin to the exponential expansion of technology. And if you are worried about AI, then I think there is just a chance you might be really freaked out by electrodes in your brain making you think faster. But this is the world we now live in.
What is remarkable about this list is not only the crazy diversity and the wide span of innovation but how much each aspect of each technology relies on some other innovation. Where would spatial omics be, for example, without breakthroughs in DNA sequencing which are now only two decades old?
Obviously, for humanity, this raises all kinds of questions, some ethical, some practical. There are complicated questions regarding equity too; proponents of technological change often argue it is broadly pro-democratic, although there is a huge debate there. But for investors, the consequence is unequivocal: this is all just manna from heaven.
So with gusto ..