The Power of Exponentials

Nothing is more powerful than the law of exponentials (Buffett refers often to the power of compounding interest). We all like to think in a linear fashion. If I work twice as hard, I will get twice the benefit. Products around me will continue to get incrementally better over time. The next version of software x will look like its predecessor but with added features and functionality. The biggest challenge with running technology firms is that technology advances exponentially. As a result, we get comfortable with a linear view of the world with a specific horizon, and our firm/product/service gets "curve jumped". Mainframes moved to mini-computers moved to PC’s moved to client/server moved to hosted solutions which is not moving to handheld/portable computing going to ???(bio computing). At each transition, the leader of the former (DEC, Microsoft, Sun, etc) wave is not the leader of the next. As Steve Jurvetson always points out, Disruption occurs at the Edges often out of the mainstream or at the interstices between disciplines.

So, what are examples of exponential advances:
— computing power & transistor density
— (heat emanating from laptops…)
— storage density
— bandwidth
— Internet users
— genes mapped
— proteins crystallized
— imaging resolution
— etc…

This makes the life of the average citizen better but the life of a Tech CEO rather difficult. There have been a host of suggested frameworks written about to manage this…Only the Paranoid Survive (Grove), The Innovators Dilemma (Christiansen), Crossing the Chasm (Moore), etc. Great reads if you are interested in this stuff.

What does this mean for a tech entrepreneur in a product business:
1) Be Paranoid. Exponential change hits very quickly and once it hits, it advances rapidly passing you by. Never, ever get comfortable with the notion that you "have no competitors".
2) Eat Your Own. This is a cliche, but yet firms do not do it. They get wed to their approach and their product. Use greenfield efforts or whatever it takes.
3) Plan Exponentially. If your product road map does not show exponential improvement in both cost and features, you are vulnerable. You often have to force your team into this mode by started with the end goal (10x performance) and make them show how it is possible.
4) Promote Out of the Box Thinking. Use off sights, consultants, brainstorming to create new ways at looking and addressing issues. How else can we solve problem A? Corporate inertia will perpetuate your current approach in a linear manner. If all you have is a hammer, everything looks like a nail.
5) Reality Check with Customers. Your way has to be the best way, correct? Firms spend a lot of time rationalizing why other approaches are getting traction and their "superior" solution is not. Be prepared to change or acquire as needed to stay ahead of the curve. Remember, the customer isn’t stupid (rationale #1).

What can we expect in the future? Snapshots from US News & World Report’s "Download us_news_report.doc

" has an array of very interesting statistics comparing 1900 to 2000. You should remember that  with exponentials, the progress made in next 20 years will match the progress from the past 100 years. In 1900, homes with electricity (8%), miles of paved road (10 miles), farm population (30 million, about 45% of total population), births taking place at home (95%), homes with bathtubs (14%), adults graduating from high school (6%). Of course, while life expectancy has risen from 46 to 74 years, cancer deaths have risen from 64 per 100,000 to 200 per 100,000.

Buckle up for the future…

4 thoughts on “The Power of Exponentials

  1. I echo the thoughts stated earlier, how is this any new information? It looks like regurgitated information I’ve heard for years, including through business school. The future will always go towards improvement, over time, society is becoming more efficient. The thoughts here do not echo anything that has not been said in the past.

  2. I echo the thoughts stated earlier, how is this any new information? It looks like regurgitated information I’ve heard for years, including through business school. The future will always go towards improvement, over time, society is becoming more efficient. The thoughts here do not echo anything that has not been said in the past.

  3. While we all talk about “progress”, I found the specific statistics from the linked report of interest. Of course, the linked site is now down, so I have attached the stats in a Word doc.
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  4. While we all talk about “progress”, I found the specific statistics from the linked report of interest. Of course, the linked site is now down, so I have attached the stats in a Word doc.
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