Why we underestimate technological change!

After my post“Fast is the new big“, I wrote in the Investments section that our perception of technological development is linear, while actual technological progress is exponential. Obviously, many people who are professionally involved with technology are not aware of this fact. They therefore fundamentally underestimate the technological possibilities of the coming years. The discussions I have had over the last few days have also led me to conclude this.

(Reading time: 3 minutes)

I had literally written:

…because technological development is progressing exponentially, but we don’t realize it because we think that the past can serve as a yardstick for the future. It is the nature of exponential development that we do not realize for quite a long time that it is not linear. We therefore base our investment criteria on this historical linear perception. We are therefore fundamentally mistaken and that is precisely why it is so dangerous.

One of the first objections was how I could make such a claim, as there is no basis for it. I have to reply: Yes, there is. In his magnificent 2001 essay“The Law of Accelerating Returns“, Ray Kurzweil dealt with precisely this issue in a more or less scientific manner and drew conclusions for the future. He examined the historical biological and technological development and can statistically prove that this development is exponential.

Why exponential?

It’s actually quite simple: technological development as we know it is basically nothing more than the continuation of evolution on a non-biological basis. Put simply, an evolutionary process consists of a step-by-step improvement. In each step, the evolving object is improved and tested in its environment. The object is thus improved in small steps according to the try & error principle, in which the functioning variant is pursued further.

It is this process that has made us what we are today: Complex organisms that are able to penetrate complex issues and thus gain an advantage. Ray Kurzweil now says that we are continuing this evolutionary process with the help of non-biological aids, as our biological bodies are not able to increase in intelligence at the same rate. Each technological improvement means that the next technological improvement can be achieved more quickly. A simple example: without the invention of the hammer, the invention of the wheel would have been slower.

In this process, technology is improving rapidly and it is doing so faster and faster. If you look at Ray Kurzweil’s historical data, you can see that this is happening with incredible reliability. Even huge events such as the Second World War do not seem to be able to affect this development.

The exponential improvement of the exponential improvement

What Kurzweil goes on to prove is that the rate of improvement of the steps also grows exponentially. This is astonishing at first glance, but on closer inspection it is logical. The combination of different technology strands enables an overall acceleration of the entire technological evolution. A (simplified) example: the rapid decoding of the human genome was made possible by computer technology, among other things. The knowledge gained about DNA helps us to better understand how the brain works, which in turn helps us to develop better computer technology.

The results of this?

The result of this is that we will see a technological development in the coming decades that will eclipse everything we have experienced so far. Things will be possible that we cannot even imagine today. And they will not only be possible in 200 years, but in 20. Kurzweil makes various points about this. I find his calculation regarding computing power impressive. Kurzweil makes the following statements:

1. We will achieve the equivalent of the computing power of a human brain for $1000 in 2023.
2. We will achieve the equivalent of the computing power of a human brain for 1 cent in 2037.
3. We will achieve the equivalent of humanity’s entire biological computing power for $1000 in 2049.
4. We achieve the equivalent of the entire biological computing power of mankind for 1 cent in 2059.

Ray Kurzweil, who has been working on this topic for a long time, also made a series of micro-predictions, all of which have come true. This is not surprising, as he simply continued to follow the historical exponential curve for these predictions.

Why most people underestimate development

When we imagine this today, it sounds surreal and we are inclined to say that it will all take much longer. Why? Quite simply because our perception of the last few centuries is that of slow progress. Kurzweil on this:

From the mathematician’s perspective, a primary reason for this is that an exponential curve approximates a straight line when viewed for a brief duration.

And a hundred years, for example, is a very short time in this case. We therefore perceive technological development as linear and relate this perception to the future, while actual technological development is making much greater progress.

Because we are doubling the degree of progress every decade, we will see the development of a century, measured by the degree of progress today, in just 25 years.

Can this growth continue?

Kurzweil clearly says yes and describes possible paths. However, much of this is simply incomprehensible to most people. And it paints a picture of a world in which most people today do not want to live. Is that a bad thing? No, I say. Here’s a simple thought experiment: Would people from the 17th century have wanted to live the way we do today? Probably not. Would our living environment and our social interactions have been alienating? Probably very much so. Our perception and attitude towards them will grow accordingly.

Ray Kurzweil is certainly also a freak who blindly assumes that people will use all new technology for themselves almost immediately. He is also criticized for this. I also believe that all available technology will be used sooner or later, but until a technology is adapted by society depends primarily on social parameters. Kurzweil consistently ignores these in a sometimes religious-sounding euphoria.

However, we should not be tempted to dismiss his “law of accelerating returns” as complete nonsense for this reason. Kurzweil can prove a corresponding development too precisely from historical data, and his predictions have been correct too often so far.

However, it is clear that the next few decades will bring technological progress that will fundamentally restructure our society and therefore our economy. Almost all existing structures will be redefined. What we call the digital transformation is just the tepid beginning of a profound, irreversible technological upheaval.

 

Reading tip: Ray Kurzweil, “The Law of Accelerating Returns”