Originally published in Perspectives on Business Innovation. Published on KurzweilAI.net May 1, 2003.

Ray Kurzweil is an inventor, an entrepreneur, an author, and a futurist. The creator of the first reading machine for the blind, speech recognition technology, and many other technologies that help envision the future, Ray Kurzweil is one of the most innovative creators of our time. His most recent book, The Age of Spiritual Machines, asserts that by 2020, computers will have outpaced the human brain in terms of computational power. His insights into the accelerating rate of technological change and the exponential growth of computing power shed light on the challenges we face in society and business. Christopher Meyer, Director of the Cap Gemini Ernst & Young Center for Business Innovation, sat down with Ray Kurzweil to discuss the implications of permanent volatility.

Meyer: The accelerating rate of change makes it difficult to stay innovative, especially because processes that worked in the past are becoming less and less effective. Why do you think traditional ways of inventing new products no longer work?

Kurzweil: Most projects fail, not because the R&D department can’t get it to work, but because the timing is wrong. Probably more often than not these days, projects are premature. All the enabling forces aren’t in place yet. But it’s also not a good idea to just target today’s world, because windows can be closed by the time you finish a project. So you really have to catch the wave at just the right time.

Meyer: Evolution has taught us a great deal about the accelerating rate of change. What can we take away?

Kurzweil: The Law of Accelerating Returns is the acceleration of technology, and the evolutionary growth of the products of an evolutionary process. And this really goes back to the roots of biological evolution.

Evolution works through indirection. You create something and then work through that to create the next stage. And for that reason, the next stage is more powerful, and happens more quickly. And that has been accelerating ever since the dawn of evolution on this planet.

The first stage of evolution took billions of years. DNA was being created and that was very significant because it was like a little computer, and an information processing method to store the results of experiments, and to build up a knowledge base from which it could then launch experiments and codify the results.

The subsequent stages of evolution happened much more quickly. The Cambrian Explosion only took a few tens of millions of years to establish the body plan to evolve animals. And we see that evolution, like certain technologies, has become mature and stopped evolving. Evolution has concentrated on other issues, specifically higher cortical functions. And that happened much more quickly than the Cambrian Explosion. Humanoids evolved over many millions of years, and Homo sapiens over only hundreds of thousands of years. And there again, evolution used the products of its evolutionary processes, which was Homo sapiens, to create the next stage, which was human-directed technology, which really is a continuation of the cutting-edge of the evolutionary process on earth, for creating more intelligent systems.

In the first stage of human-directed technology, it took tens of thousands of years, which is what you would expect for the next stage via the wheel, or stone tools, and that kept accelerating, because when we had stone tools, we could use them to build the next stage. So a thousand years ago a paradigm shift only took a century, like the printing press. And now a paradigm shift, like the World Wide Web, is measured in only a few years’ time. The first computers were built with screwdrivers and were designed with pencil and paper, and today we use computers to create computers. A CAD designer will sit down and specify a few high-level parameters, and 12 different layers of automated designs will be done automatically. The most significant acceleration is in the paradigm shift rate itself, which I think of as the rate of technical progress. And all of these are actually not exponential, but double exponentials because not only does the process accelerate because of our evolution’s ability to use each stage of evolution to build the next stage, but also, as the process, as an area gets higher price performance, more resources get drawn into that capability.

Meyer: As you’ve pointed out, technology’s rate of change continues to get faster and faster. If change is exponential, what will that mean for our future?

Kurzweil: The whole 20th century, because we’ve been speeding up to this point, is equivalent to 20 years of progress at today’s rate of progress, and we’ll make another 20 years of progress at today’s rate of progress equal to the whole 20th century in the next 14 years, and then we’ll do it again in seven years. And because of the explosive power of exponential growth, the 21st century will be equivalent to 20,000 years of progress at today’s rate of progress, which is a thousand times greater than the 20th century, which was no slouch to change.

Meyer: What examples of accelerating change do we see in society now? Are we responding in the right way to prepare for the future?

Kurzweil: We are still thinking in a linear fashion. We’ve extended out Social Security from 32 years to 39 years. Well, obviously there is some old model underlying that. We don’t absolutely know what the future will bring, and if you look at the models, they’re absolutely linear. We don’t take into account this law of accelerating returns, which is absolutely a factor.

If you look at the economy as a whole, either per capita or just the total economy, it is growing exponentially. But the various recessions, even the Great Depression, are relatively minor features that you really see in this chart that is a big exponential. And what’s interesting is that when the recession is over, including the Great Depression, it starts back to where it would have been had that never occurred in the first place. It does not represent even a permanent slowing down or delay in the underlying exponential.

The really pervasive phenomena is the exponential growth. We have exponential growth in productivity. Even that is understated because we’re measuring the value in dollars of what can be accomplished. But what can be accomplished for a dollar today is far greater than what could be accomplished for a dollar 10 years ago.

Computation is not the only technology that is growing exponentially. Communications, bandwidth, speed and price performance—both wireless and wired—are also doubling every year. Biological technologies, the price performance of base pair scanning, for example, have doubled every year.

Meyer: How has the accelerating rate of technological change affected society as a whole?

Kurzweil: Even with today’s technology, which is going to evolve further very rapidly, the opportunity for ideas to find the right people who are going to push them forward and to get the right ideas in the right places is really extraordinary, and a great facilitator of progress. And it’s a very liberating and democratizing force as well, and I think it’s really behind the trend toward democracy. It might seem like we’re moving toward democracy, but if you really look at the world compared to, say, 1990, there has been a tremendous movement in every area of the world. And not just at a sort of national political level, but at every level of society.

Meyer: What traditionally expensive items will be commodities in the future as technology enables progress?

Kurzweil: Well principally, business is more and more concerned with knowledge and information. And you know, we talk about an age where nanotechnology is fully in the mainstream, which is probably the 2020s. We can just convert information into any product. But we’re not that far from that today.

Look at modern factories. It’s software that secures the materials at the lowest possible cost and arranges for their just-in-time delivery, and then routes them and sends them on their way. And there are only a few people in the factory. You really have a conversion of inexpensive raw materials, very efficiently secured and routed and shipped and shaped by software into high-quality products. So we’re not that far from an information economy today.

The value in today’s economy is principally knowledge and information, whether information is a movie, music, or a piece of software, or some inventory control database. This trend will continue in an exponential way. The human knowledge base will be measured in bytes stored in databases, or patents filed, or whatever level you want to look at, and it is also growing exponentially.

The opportunity to have different kinds of experiences and access to information will have value. I think there are forces in both directions on things like land. Because on the one hand, while we could say that other types of products can expand without limit, we’re always going to have only a certain amount of land.

Meyer: How will our lives change?

Kurzweil: These new technologies are going to allow people to spread out, and we won’t have the concentrated demands like we see in downtown Manhattan because people will be able to live anywhere they want, without sacrificing efficiency. Once you get virtual reality going, people can have any kind of experience they want anywhere. This is a force that would make land less valuable. You don’t have to be in any particular physical space.

Meyer: How can you plan for the future of your business in such an age of unpredictability?

Kurzweil: Well, it’s an ongoing movement. We’re entering an age of acceleration. While acceleration was there 500 years ago, it was at that point of an exponential where it looked like a flat, horizontal line. The first time the rate of change was really disrupted, at least one of the early harbingers of that, was with the weavers in the English textile industry, who had had a weaving guild that had been passed down for centuries through their families. The new textile machines that suddenly emerged in the first phase of the industrial revolution destroyed the weavers’ livelihood. It seemed that employment would soon be a thing of the past, and then they realized that it instead lead to prosperity, and rather than making the same number of shirts with fewer people, they could make a whole wardrobe of shirts. The common man and woman could have well-made clothing, and then the prosperity led to the different types of pursuits, and leisure time, and industries to create the machines, and so on.

But from that time on, the idea that the “times they are a changing” became evident. You no longer expect your grandchildren to live the same lives that you did, and your lives are very different from your parents’ lives.

Today there’s an axiom that the only constant is change. But what people don’t recognize is that the world itself has changed because the greater change is accelerating. So our whole concept of what it means to be human is going to be changing, and it is going to be merging with our technology.

Meyer: So, must we live with a new mindset, particularly as we try to create new business models?

Kurzweil: Technology-based innovation these days requires collaboration between different disciplines. This is because innovation today typically involves interdisciplinary work. So one thing that you need is experts in each of those areas.

Second, it’s also possible for people to anticipate change too rapidly. The last booms we’ve seen have been an example of that. The perception by the stock market that the Internet was a profound revolution was absolutely correct—and the same thing for telecommunications—but that doesn’t mean that there isn’t a pace for that, and it doesn’t mean that every business model that’s different from the past is going to succeed. The investment got ahead of itself, and people were willing to invest in unproven ideas.

Meyer: What will happen to organizational life cycles in this time of accelerating change?

Kurzweil: There are more challenges to organizational lifetimes, in that an organization cannot be devoted to one business model. And the models we have underlying society at every level are going to be challenged, whether you’re talking about the role of schools, or religious institutions, or business in general. All of these models are going to have to be redefined. A particular business model, General Motors’ that’s selling cars, or U.S. Steel’s that’s selling steel, will have a lifetime. Some of them have lasted decades, but in keeping with the law of accelerating returns, that part of the business model is going to get shorter and shorter. And of course, we see in the heart of technology itself, already very rapid business models.

If you look at a company like Microsoft, and if you look at their stock, it’s been pretty stable through this very difficult stock market. Some people would say that their success is due simply to the fact that they have the so-called monopoly in operating systems. I would point out that PCs are only one type of computer. There are Internet servers, there are hand-held computers, there are game computers, computers in cameras and in other specialized devices. Microsoft is involved in all of these areas, but does not dominate any of them. Their success in my view is because they have a significant ability to adapt. I think it comes from Bill Gates’ justified concern, what he calls his "paranoia" about relying for too long on any particular business model, but rather trying to predict where technology and the industry are going.

So we see that a company can be stable if it’s committed to a high level of quality of its personnel and their ability to anticipate change, and relentlessly question every assumption about their business, and develop systematically models of where every level of their organization is going in the world ahead. Companies need to be committed to innovation and really to measuring the duration of their models. What happens in these companies is that the old-line business model has all of the political power because it is producing the profits and the revenue.

An organization needs to be set up to empower the people who disrupt things from inside, but it has to be based on some disciplined methodology of understanding some realistic model that incorporates an exponential rate of change to understand realistically how long different models will last, or how long specific assumptions will last. That doesn’t mean every disruption should be supported because some aren’t going to work. But organizations have to be able to redefine themselves at a faster and faster pace.

© 2003 The Cap Gemini Ernst & Young Center for Business Innovation. Published on KurzweilAI.net with permission.