Wednesday, July 6, 2016

Disruptive Technologies & Exponential Growth

Lately, I’ve been thinking a lot about disruptive technologies & exponential growth. Over the course of past few weeks, discussions have been abound between fellow bloggers Jay from FI Fighter, Bryan from Income Surfer, and yours truly discussing investment themes. In trying to identify good investing options, we keep directing our focus towards technology and its disruptive nature. It is no secret that the ‘green’ movement is not a niche anymore and is now mainstream.


Jay from FI Fighter recently posted this article: Disruptive Technology – Always Underestimated, which I highly recommend readers to read and follow the thought process and also follow up on the links posted (there’s a lot there). It presents a great picture of how things are changing. Fast.

We humans are terrible at understanding exponential growth. Due to the way we evolved, we humans always think in linear terms or incremental changes. We don’t expect things to change fast and almost always get the timelines wrong. Even the ‘green’-oriented media gets most timelines wrong. When making predictions, they always predict that things will look better for the solar and renewable energy space by 2040 or 2050. That timeline is completely off-base. When you truly understand exponential growth, you realize that its going to come much faster than that.

 
linear-vs-exponential-41

One only needs to look at history to realize how quickly things change. When the motor vehicle was new in early 20th century, most people discounted it as just a niche market. Folks laughed at the idea and never thought that the horse-and-buggy was going to be disrupted. So, did it take 40-50 years for the market to get disrupted? No. It took 12-13 years. Same goes for other disruptive tech that has followed – the computer, the internet technology, the smartphone revolution etc.  Now, we stand on the cusp of disruption in the energy space.

To best illustrate exponential growth, I always refer people to what Ray Kurzweil has to say about it, who puts it beautifully. For those unaware, Ray Kurzweil is a futurist and a visionary, who has done amazing work in the past and currently works for Google. There are some absolutely amazing articles and videos online that I highly recommend if you want to get an idea of what the future will look like. Ray Kurzweil has the following to say about exponential growth:

Here’s another way to think about it: imagine you are going to walk down a road taking steps a meter in length. You take 6 steps, and you’ve progressed six meters (1, 2, 3, 4, 5, 6). After 24 more steps, you’re 30 meters from where you began. It’s easy to predict where 30 more steps will get you—that’s the simplicity of linear growth.
However, setting anatomy aside, imagine you could double the length of your stride. Now when you take six steps, you’ve actually progressed 32 meters (1, 2, 4, 8, 16, 32), which is significantly more than the 6 meters you’d move with equal steps. Amazingly, by step number 30, doubling your stride will put you a billion meters from where you started, a distance equal to twenty-six trips around the world.
Ray Kurzweil has identified that solar is the future of all human energy needs and points to the fact that we are already at 2% of meeting the world’s total energy needs. He also points that people might think that its a “fringe market”, but when you are on the exponential growth path, you only need a few strides to reach the goal. With the current renewable energy meeting 2% of the world’s needs, we are only 6 doublings away (about 12-13 years) from reaching the 100% goal of reaching all of the world’s energy needs! From that point on, it’s free energy forever.

This is a nutshell is what disruption is. There will be massive repercussions across various sectors of the economy – from the obvious oil market to transportation to utilities to food & water. Investors who pay attention and position their portfolio can come out on top or lose a big portion of their fortune. I intend to evaluate some of my thoughts in a follow up article in the coming days. Stay tuned!

Meanwhile, I invite you to watch the following clip (about 1 hr long) which is a great overview of the disruption and where the world is headed. The speaker, Tony Seba, also highlights which sectors to look for growth and investment.




Looking for investment ideas and want to stay up-to-date with the development in the industry? I curate interesting reads and links on the Renewable Energy sector on Pinterest. Follow to stay up to date.

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