Technology change is accelerating. You could even say that the rate of acceleration is accelerating — known as a jerk. Technology is changing exponentially — and for investors understanding the implications of exponential technology is essential.
Investing in the age of the jerk and exponential technology
As this is the last ever Thought for Day (after 11 years), I thought I would end on a topic for which I am passionate. It concerns accelerating tech, tech that sees acceleration accelerate, which is what a jerk is, and it concerns exponential change. The implications for investors are far-reaching.
When people say: “This time it is different,” they are being ironic, what they mean is that “this time it is never different and that to say otherwise is to ignore the lesson of history.” So, when I say 'technology change is accelerating and the implications are profound', they respond by saying: “Oh, I see, this time it is different.” I would agree with this philosophy in one respect, this time it really isn’t that different. To argue that technology is changing super rapidly is not to describe something new, it is to describe a phenomenon which is literally older than the hills. It is just the implications that are new.
What is a jerk?
Mathematically speaking a jerk is the derivative of acceleration. If these things interest you, a derivative of a jerk is called a snap, a derivative of that, a crackle and the derivative of that, a pop. Sometimes things can go backwards — you can, for example, have a negative jerk. If a car is speeding down the motorway, the driver spots an accident ahead and slams on the brakes, the car de-accelerates. But if it isn’t enough and the car hits another vehicle anyway and comes to an abrupt stop, it has seen a negative jerk.
Why jerks are not new
Ever since life first appeared on this planet, we have seen a gradual acceleration of change. But now and again, something occurred that led to a spurt in the rate of change — or a jerk.
- It happened when the first complex organism appeared in an event called singular endosymbiosis.
- With the development of photosynthesis, there was a negative jerk, followed by a positive one.
- Evolution jerked with a period known as the Cambrian explosion.
There was a negative jerk followed by a positive jerk when the meteorite wiped out the dinosaurs.
- A jerk with the Rift Valley formation, when an ape became bipedal and learned how to talk.
- With the development of writing.
- The development of the printing press.
- The first industrial revolution (around 1760 to 1820.)
- The second industrial revolution (around 1865 to 1914.)
- The third industrial revolution (IT revolution; the last two decades of the 20th Century.)
Now, there have been many other examples; the above is a potted history.
The lesson of history and why this time is not different
But there are three lessons from the above:
- To suggest that a period of rapid change won’t occur is to ignore the lesson of history: to deny the idea of periods of super-rapid change is to say “this time is different.”
- Each jerk led to a profound change in either life on Earth or humanity.
- These jerks or periods of rapid change are becoming ever more frequent.
So, when I say we are entering a period of extraordinary change, I am merely applying the lesson of history.
The fourth and fifth industrial revolutions
What is this latest jerk — actually, I think there are two.
The fourth industrial revolution is well underway. It is about information and how we organise and apply data. It will be the most important period of change since the end of World War 1.
The fifth industrial revolution has also already started, but in a smaller way. For better or worse, it will involve technology augmenting us. The smartphone is an example of technology augmenting us (for better or worse.) Other technologies such as mind to computer interfaces, artificial neurons, and the ability to transfer memories from one organism to another will have an even more profound impact. And in case you think that sounds like science fiction let me assure you such technologies are under development. See: Meet the Two Scientists Who Implanted a False Memory Into a Mouse or indeed the Elon Musk company Neuralink.
When I say to people, I think technology is changing super-fast; they sometimes reply: “Yes, I already know that.” I reply saying: “Did you know that Facebook has been working on technology that enables you to type by thinking into a computer?”
Why is it occurring now?
Several factors are driving this change. Among them:
- Convergence — when different technologies converge and create something new. The Internet is the greatest tool ever invented for creating convergence.
- Exponential technologies — some technologies such as computers, (especially quantum computers) genetics science, renewables and energy storage solutions are advancing exponentially. This means we don’t notice the change much at first, but it very soon becomes super-rapid. And then even more rapid.
- Ideas build upon existing ideas which is why writing and the printing press were so important. The Internet is the greatest medium ever invented for supporting the spread of ideas.
- Digital evolution. The most creative process we know of is evolution. Evolution can literally occur a million or even millions of times faster than natural evolution in a digital environment.
The Kasparov idea
The chess player Gary Kasparov is especially famous because when he was the undisputed best chess player in the world, he was defeated by the IBM computer Big Blue. This was back in the late 1990s. These days Kasparov lives in the US, is a massive Putin critic and once said: “Technology is the reason why people are alive to complain about technology.” He is a great advocate of the idea that human plus computer is a more powerful combination than just computer. He says a human and computer working together make a better chess player than any one computer.
Elon Musk has a similar idea. The slogan for Neualink is “If you can't beat em, join em.” He believes technology is going to change in the ways I describe here whatever happens. Humanity can either sit back, watch it and become obsolete, or embrace it and let it change us. You may find his solution scary, but I think it is better than the alternative.
What are the technologies and applications?
- AI and in particular neural networks and deep learning.
- The Internet of Things and Industrial Internet of Things.
- Drone technology.
- Energy storage.
- Genetics science.
- CRISPR/Cas 9.
- Super materials such as Graphene.
- Augmented and virtual reality.
- Cultured or clean meat.
- 3D Printing.
- Quantum computers.
- Autonomous cars, leading to car sharing, will be one of the most disruptive economic shocks since Henry Ford learned how to tap into a mass market.
- Real-time language translation tools.
- AI-based personal assistants will be with us all the time, and will interact with us by speech and in time by thought.
- Hologram to hologram communication.
- Cheaper and more plentiful energy.
- Cheaper and more plentiful food as we learn to either advance clean meat exponentially or use insects as meat alternatives.
Examples of breakthroughs this Century
- The isolation of Graphene in 2004.
- Advances in optogenetics in 2005 when a paper was published showing how a protein in a specific type of algae reacts to light. This was a key moment in the development of optogenetics; technology for turning targeted neurons in the brain on and off, with extraordinary applications.
- The discovery of DNA scissors to be able to edit DNA using CRISPR/cas9 in 2012.
- Protein folding advance from Google subsidiary DeepMind in 2020.
No one knows so how do you invest?
No one knows precisely how these technologies will pan out. The implications are exciting but also terrifying. I attempt to explore these implications in my book: Living in the Age of the Jerk.
But investors simply must seek to understand what is going on. Technology changes will affect every corner of the globe and companies that can master them, or better still be a pioneer, may thrive. Those that don’t will go bust.
Investors could look at the obvious companies that I have written about here enough times: Apple, Alphabet, Microsoft, Amazon etcetera. Or go a little smaller. See for example Will Nvidia join the trillion-dollar club?
They can also study the smaller techs. Not all will make it, but some will see spectacular success.
They can look at funds, or ETFs. The Ark Invest ETF is especially interesting. Until recently, I didn’t know much about Ark Invest, but its CEO Cathy Wood's ideas seem to align perfectly with mine. I gather — that the ARK Invest ETF isn’t available to UK investors. But what you can do is see the companies it invests in.
PS: So long and thanks for all the fish.
These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees.