Friday, August 5, 2022

Lean Forward Down the Mountain

You’re high up on a snow-covered mountain, wind whipping through your hair as you ski past a blur of pine trees down towards a pristine alpine lake.  The terrain suddenly dips and a bolt of fear sprints up your spine as your eyes widen at how steep the slopes look.  Your instincts take over, and you start to pull back, to shift your weight to your heels and run from danger.  But just before you fall on your butt, your brain kicks in and you remember to lean forward to keep from falling, and you accelerate down the hill, in from the ride of your life.

When faced with challenging times, people, companies, and nations often instinctively lean back towards safety.  They become less risk averse and revert to their core business and customers, postponing or killing R&D efforts (yes, this applies to the US too.)  Instinctually this makes sense.  Why spend millions on fundamental research that sounds frivolous  in the middle of a recession?  But I would argue we need more crazy research like this, not less.  Here’s why.

We are bad at predicting the future.
We have observed that things get better over time, and so we naturally fit a linear curve to this and ingrain this into our expectations.  Up and to the right!  We expect steady, constant progress.  But if you zoom close enough into anything that appears smooth, you’ll find that it’s actually quite bumpy.  Here’s what that line should actually look like.
Though the overall slope is the same, this curve suggests that you will have times when progress is almost flat and times when growth is phenomenal.  That’s because technological progress is made, not through linear extrapolations of present technology but through new and fundamental shifts.  That’s why we don’t have steam powered trains taking us to the moon.  Instead we got the computing revolution followed by the internet revolution.

What this also means is that we will always be growing slower than we imagine we should.  That’s the flat part of the curve.  We’ll miss growth forecasts because the last revolutionary world changing technology that came out will start to settle out.  When the smartphone came out, growth was extraordinary.  Profits galore.  But now that everyone on the planet has one, and they don’t change all that much each year, growth has slowed.  This should not be a surprise.  When growth is gone, it is impossible to double your profit every year by reducing costs on a commodity.  Instead, growth will come from the value created from a yet unimagined new product or service.  It’s your job to invent it.

So when growth slows, it is a sign that the current technology is done.  You need to accelerate down that hill, invest more in R&D and innovation, so that you can make the jump to the next technology that will reimagine our world and create extraordinary amounts of value and opportunity.  So get bold.  Get crazy.  Our world can continue to go upward and to the right, but to do so will require continued innovations and investment in research that seems so frivolous it might just be genius.