We have reached the second half of the chessboard

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Exponential growth is a concept that is inherently hard to grasp for human beings, as we tend to understand the world in a linear fashion. When attempting to explain the concept of exponential growth, the wheat and chessboard problem is often quoted.

While the origins of the problem takes on many different variations, the essence of the legend is a chess game between an ancient Indian king and a travelling sage. When the king asked what the sag wanted as a reward if he won, he modestly proposed that he received one grain of rice on the first square of the chessboard, and consequently doubling the number of grains until the 64th square of the board. While this may seem harmless at first, at the end of the chessboard the number of grains would accumulate to 18 quintillion, which is equal to about 210 billion tons and is allegedly sufficient to cover the whole territory of India with a meter thick layer of rice.

While exponential growth may seem harmless at the beginning and too overwhelming to comprehend at the end, the acceleration begins once we reach the second half of the chessboard. According to Andrew McAfee, our human intuition can’t cope with the constant doubling once we reach to 33rd square of the board.

If I were to receive USD 1 every birthday starting the year I turned on year old and doubling for every year I aged, I would receive USD 8,5 billion the year I turned 33 and would have accumulated USD 17 billion (assuming I placed all my money in a huge piggy bank). Mere five years later at 38, my accumulated wealth would enable me to acquire Apple. By the time I turn 50 I would have accumulated USD 1 quadrillion, equivalent of high estimate value for all derivative contracts in the world. At the 64th square, I would sit on top of a pile of USD 18 quintillion, which for the most of us would be considered as a theoretical number.

While computing power does not accumulate the same way as wealth, exponential growth serves as fundamental for Moore’s law, and we passed over to the 33rd square sometime between 2006 and 2013 depending on how it is calculated. Even though Moore’s law at some point will become obsolete, exponential growth in technology is applicable beyond microprocessors. This is what Ray Kurzweil refers to as the law of accelerating returns. Exponential trends have existed for hundreds of years, they were at that very early stage where an exponential trend is so flat that it looks like no trend at all when we look at it with our linear perspective.

This pace of technological growth makes it increasingly difficult to predict the future, and there was not many year ago when self-driving cars were considered totally unrealistic and a concept that should be left to science fiction.  On that note, Uber just announced that you can now order a driverless car in Pittsburg.

As technology grows exponentially, the cost shrinks accordingly. 1 GB of hard drive storage has an average cost of USD 0.019 today, but  would set you back  USD 11 000 back in 1990. Advances in the field of genomics over the past quarter-century have led to substantial reductions in the cost of genome sequencing, accelerating the pace of innovation in biotechnology. An inevitable outcome of technological innovation is according to The Zero Marginal Cost Society by Jeremy Rifkin that the marginal cost of products and services will eventually move towards close to zero.

This also affects user adoption. While product developers of the past were busy contemplating on how to cross the chasm to mainstream adoption, the technology adoption life cycle moves at such a rapid pace, one should be more concerned about how to renew ourselves before the next big thing comes around.

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Time to 50 million users

This constant renewal is essential for survival. It is easy to look back at Kodak’s missed attempt to capitalize on digital cameras, but how many of you are carrying arround a compact digital camera today?

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It is plausible that the potential threat of the iPhone were easily dismissed as an inferior product, and just like bankers are clinging to the consolidation that Apple will never become a bank, the digital camera industry most likely were comforted by that fact that it was highly unlike that Apple would become a camera manufactorer.

This is a textbook example of disruptive innovation, where an inferior product manages to be good enough for customers, thus challenging existing paradigms.

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Apple never became a camera manufacturer, but they managed to render the category digital compact cameras obsolete. Apple, Google, Amazon may never become a bank. Not because they are unable to, but because they do not want to. However, history has taught us that the ability to exploit disruptive technology to address changing consumer behavior enables challengers to take on incumbents in a new way.

We should expect to see technology having a huge impact on every aspect of society in the years to come from everything to artificial intelligence, widespread adoption of blockchain technology, gene editing and human augmentations just to name a few areas. This will shape customer behavior, business models and required skill sets and leadership in a new business environment where speed and agility are the primary competitive advantages.

 

 

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