Exponential: Order and Chaos in an Age of Accelerating Technology

by Azeem Azhar

This is what is meant when we say that Moore’s Law is a social fact rather than a hard law: the semiconductor industry has been hell-bent on meeting it.

Between 1975 and 2019, photovoltaics dropped in price some 500 times – to under 23 cents per watt of power.

According to some estimates, 60 per cent of the physical ‘inputs’ in the global economy could be produced biologically by 2040.

Additive manufacturing is still a tiny business. You’ll find it in prestige products and in highly specialist sectors of the economy – lightweight parts for fighter jets, or medical implants. But the underlying technologies are on an exponential course.

In the Exponential Age, we’re experiencing multiple breakthrough technologies in the four broad domains of computing, energy, biology and manufacturing.

The doubling of volume does lead to relatively constant declines in per-unit price. And this holds true for the hallmark technologies of the Exponential Age.

Exponential technologies are being driven by three mutually reinforcing factors – the power of learning by doing, the increasing interaction and combination of new technologies, and the emergence of new networks of information and trade.

At the heart of Amazon’s success is an annual research and development budget that reached a staggering $36 billion in 2019, and which is used to develop everything from robots to smart home assistants. This sum leaves other companies – and many governments – behind. It is not far off the UK government’s annual budget for research and development.

The leading theorist of institutional change, Kathleen Thelen, has identified a number of key ways in which institutions adapt in practice. These include layering (when new norms get built on old ones), drift (where an institution keeps its policies in place, in spite of a changing context) and conversion (when an institution takes an old way of doing things and redeploys it in a different context).

On occasion, institutions can lend themselves to very rapid change. Wars and revolutions help. It took less than a year to create the International Monetary Fund after it was proposed at the Bretton Woods Conference in July 1944.

Put together these two forces – the inherent difficulty of making predictions in the Exponential Age, and the inherent slowness of institutional change – and you have the makings of the exponential gap.

Ronald Coase described this predicament well: in his rendering, organisational costs grow as firms get bigger and come to act as a force of gravity, slowing a company’s expansion and eating away at the advantages of scale.

Exponential technologies seem to imbue companies with powers that allow them to defy the force of gravity that held back firms of earlier generations. Economists call this new type of firm the ‘superstar company’. The superstar company rises rapidly, seemingly unburdened by the forces that hold traditional firms back. It seems to be more productive, more aggressive, more innovative, and able to grow faster. It dominates markets that already exist and creates markets that didn’t exist before. Superstar firms get bigger and bigger, dominating one market, then the next.

This network effect – in which the addition of every new member of the network increases the value of the network for everyone

Wherever there are network effects, there is the chance of a winner-takes-all market. Once a company has established itself as the market leader, it becomes extremely difficult to challenge it. And this effect is being driven by the consumers themselves. It is in the consumers’ own interest to join the biggest network – it is there, after all, that they will get the most value.

The rise of one of the first general purpose technologies of the Exponential Age – the internet – has allowed us to connect far larger numbers of buyers and sellers, without any rooms getting unbearably full or anyone getting tired legs.

If the network effect and the platform are the foundations of the exponential company, then intangible assets are the bricks that make it up.

These companies have inverted one of the basic laws of business: diminishing returns to scale. They have learnt to push past the law of gravity that once limited a company’s size.

Interoperability preserves the positive benefits of the network effect: even if I leave one particular social network or other service, I can still access users on the previous service.

we can limit the power of gargantuan Exponential Age firms by treating them less like ordinary companies and more like utilities

When it had its largest workforce, in 1980, General Motors employed 900,000 people. It sold more than 4 million cars a year, with revenues approaching $66.3 billion.18 Each employee accounted for about $74,000 in sales. Now consider the biggest firms of the Exponential Age. Alphabet, which owns Google, employed about 120,000 people in 2019, against revenues of $162 billion, clocking in at $1.4 million in sales per employee.

‘It is comparatively easy to make computers exhibit adult level performance on intelligence tests or playing checkers, and difficult or impossible to give them the skills of a one-year-old when it comes to perception and mobility.’

if an environment is designed for a person, it is likely to be too complicated for machines now or any time in the near future.

It was not automation itself driving job losses, but the difficulties faced by the companies that didn’t automate.

If we’re looking at the long-term fallout of exponential technologies, our concern should not be with the quantity of work around for humans to do. It should be with the quality of options that are available.

Lyft and Uber drivers show remarkable levels of satisfaction with the flexible work set-up: 71 per cent of drivers want to remain independent contractors, albeit down from 81 per cent prior to the Covid-19 pandemic.

The technologies of this era create new ways of working, with the smartphone and the task-matching algorithm allowing firms to rely on pools of freelance talent. And our labour laws haven’t yet caught up. That workers are forced to rely on court decisions – rather than clear rules – reveals that the gap is far from closing.

if a Google employee dies, the company gives their surviving partner 50 per cent of their salary for a decade after their death

A 2018 Gartner report found that half of 239 large corporations were monitoring the content of employee emails and social media accounts.

Amazon automatically fires about 10 per cent of its factory staff annually, for not being able to move packages through the system quickly enough.

The future of work seems less defined by the absence of work and more by a growing chasm – between increasingly high-quality work for some, and increasingly low-quality, insecure work for others.

Half of all employees at Facebook, from engineers to marketers, accountants to salespeople, make $240,000 a year or more.79 Facebook’s content moderators, who are not employed by the firm but rather contracted via temping agencies, are paid on average $28,000 per annum.

it shows that new technologies – even surveillance technologies – don’t inherently lead to exploitation. Provided workers are given a say in how these technologies are used – and are given the opportunity to reject them – new workplace technologies need pose no threat to workers’ wellbeing.

A cheaper, more politically palatable alternative is already in place in Denmark – and is known as ‘flexicurity’. The flexicurity model has two sides. On the one hand, employers can hire, fire and tweak employment terms at will. On the other, employees are guaranteed extensive protections and benefits from the state should they find themselves unemployed.

evidence from the UK shows that for every 10 new high-tech jobs, 7 new low-wage service jobs are created.

History shows that meaningful improvements for workers rarely come thanks to the benevolence of bosses, but from pressure by employees.

If we are to build an employment settlement that is dignified, flexible, secure and equitable, workers will need to get organised.

These digitally enabled unions can close the exponential gap by making sure that employment laws and worker-employer relationships are constantly adapting as the economy changes.

Thanks to the wonders of 3D printing, components can be produced locally; while the design might come from anywhere, the finished product can be crafted in a local workshop and handed to a customer who lives close by.

High-tech entrepreneurs have started to bring farming closer to where the food will be eaten. Urban vertical farms, popular in Japan and spreading elsewhere, are unusually efficient.

As of 2020, vertical farms have a tiny share of the food market. But the market for high-intensity vertical farms is growing at more than 20 per cent per annum, on the march up our exponential curve.

The most solar-rich nation, Azerbaijan, only gets four times more sunlight per square mile of land than the most impoverished, Norway. That may sound significant, but it is a relatively minor variance. The equivalent density between the haves and have-nots for oil is more than a million to one.10

The average electric car stores about 50 kilowatt-hours of electricity: enough to run the typical British or American home for five days. It will become commonplace for our electric cars to lend their stored electricity to our homes when it is dark.

And so here we can make out a new system of global trade. Gone will be the world of poor countries manufacturing goods for rich countries, and shipping these products across the world. Instead, each rich country will begin to make its own goods at home, for a domestic market.

Decreasing reliance on commodities could immiserate large areas of the global economy, bringing with it untold political instability.

The emphasis we place on countries erases the fact that cities have long been the engine of wealth creation, scientific discovery, trade and culture. In the Exponential Age, this trend will not just continue but accelerate.

Strangers are the critical ingredient here: as the eminent American urbanist Jane Jacobs put it, ‘[Cities] differ from towns and suburbs in basic ways, and one of these is that cities are, by definition, full of strangers.’

By 2030, nearly 9 per cent of the world will live in just 41 cities.

Exponential technologies allow cities more autonomy and self-sufficiency in electricity, trade and food. The exponential economy favours the complex, high-skill activities that are best supported by large, diverse urban populations.

Many of the divisions in our society result from cities and nations – which have vastly different economic interests and political outlooks – being tied together under a single, over-centralised government.