Investors must grab the opportunity that is technology on the trajectory of the Jerk

Technology isn’t merely accelerating. It is following the trajectory of the Jerk — let me explain what that means and why this is a profoundly important issue for investors.

Article updated: 16 July 2020 11:00am Author: Michael Baxter

'This time it never is different,’ say sceptics. Some don’t even bother with saying ‘never’ they just say ‘this time it is different’ but say it in a sarcastic voice.

So in the past, during phases of extreme market ebullience, when valuations went sky high, or some new product or technology had emerged, the bulls proclaimed a new era, a new paradigm, and said, in all sincerity ‘this time it is different.’ Then, when things went south, reality set in, the bubble burst, and all that erstwhile optimism seemed like naivety.

I have a different take, change is, as it were, not new. To go through periods of rapid change is normal. To deny it is in itself to argue things are different. To someone who dismisses the concept of periods of rapid change, I ask this. “Why don’t you believe it, do you think that this time is different?”

I also happen to think that we are going through such a period of rapid change now, which will be followed by a period of even more rapid change.

This is where the work Jerk comes in. In mathematics, Jerk refers to the derivative of acceleration or the second derivative of velocity. So imagine a car driving at a constant 60 miles per hour, its speed is constant. Then over say ten seconds its speed increases to 70 miles per hour. That’s acceleration. Suppose then, over the next ten seconds, its speed increases to 100 miles per hour; its acceleration has accelerated. That is what a Jerk is.

If you are interested, the acceleration in a jerk is called a snap, the next derivative is a crackle, and acceleration of acceleration of acceleration of acceleration of acceleration is called a pop.

I think we are Living in the Age of the Jerk, which is the title of my new book, just released. 

The jerks in history

It is not a new development. There have been many Jerks in both history and natural history. In the story of evolution, there have been distinct events that marked an acceleration in the rate at which change was accelerating. So the story of life is one of acceleration with occasional jumps or Jerks in that acceleration. That is why if you were to represent the tale of evolution as a 24-hour clock, the last hour or so sees most of the activity — the dinosaurs went extinct at around 11.40 in the evening, for example.

As for us, humans, in the past, individual breakthroughs occurred that represented an acceleration in change. The invention of fire, agriculture, and writing all coincided with an increase in acceleration — a Jerk. The discovery of how to make bronze and then iron were other such advances.

The development of the printing press kicked off the Reformation, the Renaissance, created a chain of events that led to the English Civil War and French Revolution and then created an environment that was ripe for the First Industrial Revolution that began around 1760.

The First Industrial Revolution represented a Jerk; then from around 1867 to 1914, we saw the Second Industrial Revolution.

There are often time lags between an industrial revolution and its impact on the economy — it takes time to learn how to make an idea and turn it into a product with mass appeal. The golden age of economic growth occurred roughly between 1950 and 1973 as a delayed reaction to the Second Industrial Revolution.

The economy slowed markedly from the mid-1970s as by then we had fulfilled most of the potential created by the Second Industrial Revolution. By the mid-1970s, the economic policies that had helped support growth in an era where there was so much untapped potential, ceased to work and instead we got inflation.

Sometime later, probably during the 1990s, we saw the Third Industrial Revolution, the IT Revolution, and this did lead to a pickup in growth. Still, it was short-lived as the breakthroughs of this era were not as significant as those of the Second Industrial Revolution.

The Fourth and Fifth Industrial Revolutions

The Fourth Industrial Revolution is about data and information. AI, the Internet of Things, 5G, and the Cloud, are the building blocks of this revolution.

It is hard to say for sure when it began, but I suspect we can date it’s birth back to the point when broadband internet access emerged.

The domination of the giant techs, of which the four largest are worth around $5 trillion,  easily more than the four largest oil companies, even including Aramco, is a result of the Fourth Industrial Revolution. 

PwC has projected that AI will contribute $15.7 trillion to the global economy by 2030, . Other studies have come up with similarly large numbers for the economic impact of 5G and The Internet of Things — although China is likely to become the biggest beneficiary of this revolution. 

As for the Fifth Industrial Revolution, its impact will be truly profound. It is about augmentation. It will augment us.

The revolution has already begun because the smartphone is an augmentation device. So you could say that the Fifth Revolution started in 2007 with the announcement of the iPhone. 

In many ways, the story of Apple serves as a good accompaniment to the emergence of the Fourth and Fifth Industrial Revolutions, but it is the products that follow the smartphone that will truly change the world.

Post-smartphone, we will always have AI assistants with us, whispering into our ears, telling us what we want to know, and maybe what the AI thinks we need to know. Augmented reality will enable long-distance communication hologram to hologram — the need to meet in person becoming less important. Green screen restaurants will emerge, so we can have lunch or dinner with our loved one or business colleague even though we might be separated by hundreds of miles. Real-time language translation tools applying speech recognition will enable us to talk to anyone in any language, even if we are physically on different sides of the planet. Our augmented reality device will be able to playback memories, remind us who people are when we meet them but can’t put a name to the face or recall why we know then.

At the same time, DNA editing technologies such as CRISPR/cas 9 will enable us to edit our DNA.

Our interfaces to computers will be by speech, in time even by thought. That is what Elon Musk’s company Neuralink is working on. 

We will also see cultured meat, creating a plentiful supply of meat while simultaneously freeing up land, helping us win the war against climate change. We will see quantum computers, performing some functions a million times faster than the current state of the art computers. We will see nanotechnology. And we will see autonomous cars — which will converge with the sharing economy creating transport as a service (TaaS), meaning that car ownership will dwindle.

The Fourth Industrial Revolution is in full swing, and I expect it to have a significant economic impact later this decade.

The Fifth Industrial Revolution’s impact on the world will follow: but I expect we will start to witness its extraordinary effect by the end of this decade and by the middle of the next, things will look different — just as things looked very different after certain other periods in the past.

You might not like what you read, such changes may terrify you, but they will happen all the same. That is what it will be like to Live in the Age of the Jerk. And we must all prepare, and the investor equivalent of Kodak or Blockbusters will be those who dismiss this and says, sarcastically, ‘Oh, I see, this time it is different.’

These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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