”Small opportunities are often the beginning of great opportunities enterprises.”
–Demosthenes
”In periods of profound change, the most dangerous thing is to incrementalize yourself into the future.”
–Kurt Yeager
Knowledge, it has been said, is the key to success. It is a statement that is hard to disagree with unless you buy into that old adage that ignorance is bliss. Proceeding on the assumption that if you believed the latter you probably wouldn’t be reading this book, I will go farther out on a limb and state that for years one of the world’s better recognized fonts of knowledge has been the Encyclopedia Britannica–a reservoir of 30,000-plus pages of information replete with titillating tidbits of data about everything from atoms to zettabytes (a term I will introduce to you later).
In the late 1990s the revered encyclopedia came under assault from a new form of media distribution–the CD-ROM. Able to store vast amounts of information in a more convenient, colorful, and vivid fashion, Encyclopedia Britannica was forced to deal with this new competitive threat and proceeded in good haste to provide its information in a similarly fresh, snappy, and visually pleasing format.
By 2001 the company was back on its feet and headed down the sweet path of profitability. No sooner, though, had that storm passed when another began forming on the horizon. But just as a hurricane begins with a single molecule and is not immediately discernible, so was this one.
The storm was called Wikipedia, and it started in 2001 with nothing more than 100 encyclopedia-like entries drafted by a few amateurs and posted to a Web site. It seemed innocent enough. After all, how likely was it that a bunch of strangers, working for free, could someday produce an encyclopedia that would rival the esteemed Encyclopedia Britannica in terms of depth, breadth, and accuracy. It sounded about as plausible as a few molecules in the middle of the Atlantic Ocean turning into a Category 5 hurricane.
Yet in late 2005 Wikipedia smashed into the Encyclopedia Britannica. That year the prestigious scientific journal Nature announced after a comprehensive study that the average entry in Wikipedia was nearly as accurate as the typical Encyclopedia Britannica entry.
The advantage is still in Encyclopedia Britannica’s favor, but how much longer will it be able to withstand the gale force winds? The answer: not much. That is because we are now living in a world of exponential advances, and the scales are tipped in Wikipedia’s favor.
To begin, the very subject matter of the encyclopedia, which is to say knowledge itself, is growing exponentially. It has been said that human knowledge is doubling roughly every seven years. If true–and given how the other forces that will be outlined later in this chapter are adding to the sum total of knowledge–it leads to the almost ridiculously sounding (but mathematically verifiable) conclusion that by 2050 everything we know today will represent less than 1 percent of the sum total of the world’s knowledge.
Even if one disagrees with this statement, it is difficult not to acknowledge that radical advances in medicine, physics, chemistry, and biotechnology are changing both the content and value of the material in encyclopedias and that the old print-and-publish method of storing and displaying such information is, if not obsolete, at least impractical.
Neither a printed encyclopedia nor even a CD-ROM can react to this volume of change. Only Wikipedia, by posting information directly to the Internet, can respond in a timely fashion.
Wikipedia also has the advantage in terms of human horsepower. Advances are happening so fast, in so many different fields, that it is virtually impossible for the staff at Encyclopedia Britannica to keep pace. The challenge is not nearly so great for Wikipedia because it doesn’t have a staff. Instead it relies on a self-selected universe of experts and enthusiasts to keep track of all of these developments.
Third, Wikipedia has a distinct economic advantage. Not only does it not need to print its material in either book or even CD-ROM format, it doesn’t need to pay an army of researchers and writers or underwrite the cost of housing any physical resources or employees.
The final kicker is this: Even if the Encyclopedia Britannica decides to put all of its content online for free, most people will still go to Wikipedia because its content consistently shows up near the top of most search engines. (A quick search on Google for the terms “atom” or “zettabyte” bears out this fact.)
What Encyclopedia Britannica is facing is a severe reaction to the exponential economy, but it is not alone. In fact, if history is any guide, a number of other companies, institutions, and organizations will soon be facing a comparable amount of change in the not-too-distant future.
Brother, Can You Spare a Paradigm
According to Thomas Kuhn, the famous American intellectual and author of The Structure of Scientific Revolutions, a paradigm is defined as a set of practices that define a scientific discipline during a particular period of time. The Oxford English Dictionary defines a paradigm as “a pattern or model.” In broader terms, in today’s vernacular it is often thought of as a specific way of viewing reality.
Using the example of the Encyclopedia Britannica, the company’s first paradigm was that knowledge was produced by experts, transcribed into books, and sold to customers. In the 1990s the paradigm shifted slightly. Information was still produced by credentialed experts, but it was distributed more regularly and in a digital format.
Sometime around 2005 the paradigm lurched more violently. Information was posted by amateurs to a Web site on a continuous basis and could be accessed by anybody and downloaded for free–in eight languages (and counting) no less.
The example highlights another extraordinary aspect of the exponential economy: The rate of paradigm changes is itself advancing exponentially. According to Ray Kurzweil, author of The Singularity Is Near: When Humans Transcend Biology, paradigm shifts are doubling every ten years. To hammer home this point, Kurzweil provides a wonderfully simple way of thinking about these changes.
For starters, he assumes that a paradigm for a business can be said to have shifted when 25 percent of the population incorporates the new technology. By this measure, it took the telephone, from the time it was invented, thirty-five years to be adopted by one-quarter of society. The radio took thirty-one years, the television twenty-six years, the personal computer sixteen years, the Internet seven years, and Wikipedia just five years.
A slightly different prism through which to view this rate of change can be found in Standard & Poor’s rating of equity risks, which ranks companies on an alphabetical scale with A+ denoting the least risky and D signifying the most risky. In 1985, 41 percent of all companies earned an A+. By 2006 this figure plummeted to 13 percent. “The future,” as Yogi Berra once said, “ain’t what it used to be.” It is becoming far more risky.
The tangible evidence that paradigms are shifting ever faster is all around us. Since 2001, 50 million (and growing) mp3 players and iPods have changed the way people listen to music. YouTube and video-sharing sites have caused the major television networks to adjust their business models, and the Internet and blogs have changed the nature of the newspaper business and political campaigns.
Ask yourself this: Three years ago would you have been able to define the terms blog, wiki, and Wi-Fi or have been familiar with the terms RFID and Web 2.0? However, there is no time to even catch your breath because vlogs, mash-ups, WiMAX, Smart Dust, social networking, grid computing, and Web 3.0 are already looming on the horizon.
Now it is not my contention that exponential advances will change everything, but I do agree with Warren Buffet’s right-hand man, Charlie Munger, who once said that since it is impossible to know everything it is important to load up on a few key insights. The exponential growth of technology is one of those key insights.
Before going any further, let me also add that I agree with Kenneth Boulding, a brilliant Oxford-educated economist, who once said, “Anyone who believes exponential growth can go forever in a finite world is either a madman or economist.”
Exponential growth in almost every field does have limits. But–and this is an important but–society is nowhere near the outer limits of the growth that it will experience in computers, data storage, artificial intelligence, genomics, brain scanning, robotics, nanotechnology, and knowledge.
Still, in an effort to avoid long-term prognostications this book will keep the discussion within the realm of the practical by limiting most extrapolations to no more than eight iterations–or doublings–out. Considering that transistors, bandwidth, and the number of gene sequences are all doubling every eighteen months, the number of Internet nodes and brain-scanning capability is doubling every twelve months, and the number of robots is doubling every nine months, this will limit the scope of the discussion to between six and twelve years out. As luck would have it, Wikipedia has provided the perfect word by which to frame these discussions: zenzizenzizenzic.
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Welcome to the Exponential Economy: Prepare to Jump the Curve
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