The Futurist

The World Wealth Report, 2005

The annual World Wealth Report from Capgemini, which is a worldwide census of millionaires, was released this week.  The report does not take inflation into account, using the threshold of $1 Million each year.  It also calculates net worth excluding primary residence, which can be misleading, as an American who withdraws $300,000 in home equity from his primary residence would be recorded as immediately seeing a $300,000 jump in net worth by merely this transferral of funds.  However, the report still has many useful data points that present interesting trends. 

Those with a net worth greater than $1 million increased 6.5% in 2005 to reach 8.7 million in number.  Among these, those with a net worth of $30 million or greater increased at an even faster rate - 10% - to reach 85,600. 

The variations in regional growth rates of millionaires match the performances of those particular economies closely.  Within the global average millionaire growth rate of 6.5%, the United States was very close to the mean at 6.7%.  Europe lagged by growing at only 4.5% and is rapidly shrinking its share of the world's millionaires, just as its share of world GDP simultaneously shrinks.  At the other end of the scale, the surge in India is remarkable.  The 19.3% growth of Indian millionaires in 2005 follows a 14% increase in 2004, for a two-year increase of 36%.  South Korea, already as prosperous many European nations, saw a 21.3% increase in millionaires. 

The aggregate wealth of millionaires reached $33.3 trillion in 2005, an 8.5% increase from 2004, which itself was an 8.1% increase over 2003.  That the trendline of annual asset growth appears to be above 8% shows us how economic growth is exponential and accelerating, as such rapid annual increases in wealth would have been unheard of just 50 years ago, let alone 200 years ago. 

Making some modest assumptions for continued acceleration of exponential growth, we can expect the world to contain 18 million millionaires by 2015 and perhaps over 40 million by 2025.  It is true that inflation should be considered as a factor, but the continuance of technology diffusion to the mass market should also be considered.  In other words, many items available to even lower income people today, such as email, cellular phones, realistic video games, Yahoo! Maps, iPods, and Wikipedia, were not available to even the wealthiest person just 30 years ago.  Similarly, even the wealthiest people today do not have many luxuries that the average person will have in 2015 and 2025. 

As millionaire status becomes something achieved by an increasingly larger share of the population, the psychology of wealth will continue to transform the culture of broader society as well.  More people moving up Maslow's hierarchy of needs will make a big difference on crime rates, the variety of recreational activities available, and even the frequency of warfare. 

There is much to look forward to.

Related :

These are the Best of Times.

World GGP Grew by 4.3% in 2005.

The Psychology of Economic Progress.

Economic Growth is Exponential and Accelerating.

The Nanotech Report 2006 - Key Findings

The 2006 edition of the Nanotech Report from Lux Research was published recently.  This is something I make a point to read every year, even if only a brief summary is available for free. 

Some of the key findings that are noteworthy :

1) Nanotechnology R&D reached $9.6 billion in 2005, up 10% from 2004.  This is unremarkable when one considers that the world economy grew 7-8% in nominal terms in 2005, but upon closer examination of the subsets of R&D, corporate R&D and venture capital grew 18% in 2005 to hit $5 billion.  This means that many technologies are finally graduating from basic research laboratories and are being turned into products, and that investment in nanotechnology is now possible.  This also confirms my estimation that the inflection point of commercial nanotechnology was in 2005. 

2) Nanotechnology was incorporated in $30 billion of manufactured goods in 2005 (mostly escaping notice).  This is projected to reach $2.6 trillion of manufactured goods by 2014, or a 64% annual growth rate.  Products like inexpensive solar roof shingles, lighter yet stronger cars yielding 60 mpg, stain and crease resistant clothes, and thin high-definition displays will be common. 

But a deeper concept worth internalizing is how an extension of the Impact of Computing will manifest itself.  If the quality of nanotechnology per dollar increases at the same 58% annual rate as Moore's Law (a modest assumption), combining this qualitative improvement rate with a dollar growth of 64% a year yields an effective Impact of Nanotechnology of (1.58)*(1.64) = 160% per year.  As the base gets larger, this will become very visible.

3) Nanotech-enabled products on the market today command a price premium of 11% over traditional equivalents, even if the nanotechnology is not directly noticed. 

The next great technology boom is upon us, and it is beginning now. 

Why the US Will Still be the Only Superpower in 2030

Version 2.0 of this article is posted here. 

One of the most popular dinner party conversation topics is the possibility that the United States will be joined or even surpassed as a superpower by another nation, such as China.  China has some very smart people, a vast land area, and over four times the population of the US, so it should catch up easily, right?  Let's assess the what makes a superpower, and what it would take for China to match the US on each pillar of superpowerdom. 

A genuine superpower does not merely have military and political influence, but also must be at the top of the economic, scientific, and cultural pyramids.  Thus, the Soviet Union was only a partial superpower, and the most recent genuine superpower before the United States was the British Empire. 

To match the US by 2030, China would have to :

1)  Have an economy near the size of the US economy.  If the US grows by 3.5% a year for the next 25 years, it will be $30 trillion in 2006 dollars by then.  Note that this is a modest assumption for the US, given the accelerating nature of economic growth, but also note that world GDP only grows about 4% a year, and this might at most be 5% a year by 2030.  China, with an economy of $2.2 trillion in nominal (not PPP) terms, would have to grow at 12% a year for the next 25 years straight to achieve the same size, which is already faster than its current 9-10% rate, if even that can be sustained for so long (no country, let alone a large one, has grown at more than 8% over such a long period).  In other words, the progress that the US economy would make from 1945 to 2030 (85 years) would have to be achieved by China in just the 25 years from 2005 to 2030.  Even then, this is just the total GDP, not per capita GDP, which would still be merely a fourth of America's. 

2)  Create original consumer brands that are household names everywhere in the world (including in America), such as Coca-Cola, Nike, McDonalds, Citigroup, Xerox, Microsoft, or Google.  Europe and Japan have created a few brands in a few select industries, but China currently has none.  Observing how many American brand logos have populated billboards and sporting events in developing nations over just the last 15 years, one might argue that US dominance has even increased by this measure. 

3)  Have a military capable of waging wars anywhere in the globe (even if it does not actually wage any).  Part of the opposition that anti-Americans have to the US wars in Afghanistan and Iraq is the envy arising from the US being the only country with the means to invade multiple medium-size countries in other continents and still sustain very few casualties.  No other country currently is even near having the ability to project military power with such force and range.  Mere nuclear weapons are no substitute for this.  The inability of the rest of the world to do anything to halt genocide in Darfur is evidence of how such problems can only get addressed if and when America addresses them.

4)  Have major universities that are household names, that many of the worlds top students aspire to attend.  17 of the world's top 20 universities are in the US.  Until top students in Europe, India, and even the US are filling out an application for a Chinese university alongside those of Harvard, Stanford, MIT, or Cambridge, China is not going to match the US in the knowledge economy.  This also represents the obstacles China has to overcome to successfully conduct impactful scientific research. 

5)  Attract the best and brightest to immigrate into China, where they can expect to live a good life in Chinese society.  The US effectively receives a subsidy of $100 to $200 billion a year, as people educated at the expense of another nation immigrate here and promptly participate in the workforce.  As smart as people within China are, unless they can attract non-Chinese talent that is otherwise going to the US, and even talented Americans, they will not have the same intellectual and psychological cross-pollination, and hence miss out on those economic benefits.  The small matter of people not wanting to move into a country that is not a democracy also has to be resolved. 

6)  Become the nation that produces the new inventions and corporations that are adopted by the mass market into their daily lives.  From the telephone and airplane over a century ago, America has been the engine of almost all technological progress.  Despite the fears of innovation going overseas, the big new technologies and influential applications continue to emerge from companies headquartered in the United States.  Just in the last two years, Google emerged as the next super-lucrative company (before eBay and Yahoo slightly earlier), and the American-dominated 'blogosphere' emerged as a powerful force of information and media. 

7)  Be the leader in entertainment and culture.  China's film industry greatly lags India's, let alone America's.  We hear about piracy of American music and films in China, which tells us exactly what the world order is.  When American teenagers are actively pirating music and movies made in China, only then will the US have been surpassed in this area.  Take a moment to think how distant this scenario is from current reality. 

8)  Be the nation that engineers many of the greatest moments of human accomplishment.  The USSR was ahead of the US in the space race at first, until President Kennedy decided in 1961 to put a man on the moon by 1969.  While this mission initially seemed to be unnecessary and expensive, the optimism and pride brought to anti-Communist people worldwide was so inspirational that it accelerated many other forms of technological progress and brought economic growth to free-market countries.  This eventually led to a global exodus from socialism altogether, as the pessimism necessary for socialism to exist became harder to enforce.  People from many nations still feel pride from humanity having set foot on the Moon, something which America made possible. 

China currently has plans to put a man on the moon by 2024.  While being only the second country to achieve this would certainly be prestigious, it would still be 55 years after the United States achieved the same thing.  That is not quite the trajectory it would take to approach the superpowerdom of the US by 2030.  If China puts a man on Mars before the US, I may change my opinion on this point, but the odds of that happening are not high. 

9)  Be the nation expected to thanklessly use its own resources to solve many of the world's problems.  If the US donates $15 billion in aid to Africa, the first reaction from critics is that the US did not donate enough.  On the other hand, few even consider asking China to donate aid to Africa.  After the 2004 Indian Ocean tsunami, the fashionable question was why the US did not donate even more and sooner, rather than why China did not donate more, despite being geographically much closer.  Ask yourself this - if an asteroid were on a collision course with the Earth, which country's technology would the world depend on to detect it, and then destroy or divert it?  Until China is relied upon to an equal degree, it is not in the same league. 

10)  Adapt to the underappreciated burden of superpowerdom - the huge double standards that a benign superpower must withstand in that role.  America is still condemned for slavery that ended 140 years ago, even by nations that have done far worse things more recently than that.  Is China prepared to apologize for Tianenmen Square, the genocide in Tibet, the 30 million who perished during the Great Leap Forward, and the suppression of news about SARS,every day for the next century?  Is China remotely prepared for being blamed for inaction towards genocide in Darfur while simultaneously being condemned for non-deadly prison abuse in a time of war against opponents who follow no rules of engagement?  The amount of unfairness China would have to withstand to truly achieve political parity with America might be prohibitive given China's history over the last 60 years.  Furthermore, China being held to the superpower standard would simultaneously reduce the burden that the US currently bears alone, allowing the US to operate with less opposition than it experiences today. 

Of the ten points above, Europe and Japan have tried for decades, and have only achieved parity with the US on maybe two of these dimensions at most.  China will surpass Europe and Japan by 2030 by achieving perhaps two or possibly even three out of these ten points, but attaining all ten is something I am willing to confidently bet against.  The dream of anti-Americans who relish the prospect of any nation, even a non-democratic one, surpassing the US is still a very distant one. 

A point that many bring up is that empires have always risen and fallen throughout history.  This is partly true, but note that the Roman Empire lasted for over 1000 years after its peak.  Also note that the British Empire never actually collapsed since Britain is still one of the the top seven countries in the world today, and the English language is the most widely spoken in the world.  Britain was merely surpassed by its descendant, with whom it shares a symbiotic relationship.  The US can expect the same if it is finally surpassed, at some point much later than 2030 and probably not before the Technological Singularity, which would make the debate moot.   

That writing this article is even worthwhile is a tribute to how far China has come and how much it might achieve, but nonetheless, there is no other country that will be a superpower on par with the US by 2030.  This is one of the safest predictions The Futurist can make. 

We Will Decisively Win in Iraq...in 2008 - Part I

What does it take to win in Iraq?  How do we know when we have won?

The Brookings Institute has the latest Iraq Progress Report, which All Things Conservative has summarized nicely.  Let's look at the data a bit more closely to see where key inflection points may emerge, and where Iraq will be in the next few years.

The first and most important projection is that Iraq's GDP will grow 16.8% in 2006 and 13.6% in 2007, making it the fastest growing economy in the world, and many times faster than the world average of around 4%.  This huge surge will snap Iraq out of its long misery (the US snapped out of the Great Depression in the same way with massive WW2-driven economic growth in 1942-45).  Many Iraqis are set to see their financial situations improve dramatically, and as stated by PR master Bill Clinton, "It's the Economy, Stupid".  Appeal to people's prosperity, and much else works itself out.

By 2010, Iraq will settle into a growth trend of about 7% a year, which is comparable to other developing countries in Asia - a trajectory that exudes the same optimism people have for, say, India or Malaysia due to such a growth rate.  Plus, on the Index of Political Freedom, Iraq has the fourth highest score of the 20 countries in the region, and scores much higher than any of its neighboring countries, with Iran (16th), Saudi Arabia (18th), and Syria (19th) scoring much worse.  How long will the citizens of those nations be quiet about not having the same freedoms as Iraqis? 

As individual Iraqis attain more prosperity, they have more of a vested interest in the stability and health of the socioeconomic system they live in, and simply have more things to enjoy in life.  More non-extremists will contribute towards reporting and fighting the destabilizing extremists in their midst.  There is a strong case to be made that as the prosperity of a society rises, its tolerance for chaotic violence drops greatly, and once nations cross certain thresholds of freedom and prosperity, they almost never engage in wars with other nations of similar caliber. 

On the metric of violence in Iraq, it appears that about 80% of Iraq has a murder rate no higher than in the roughest neighborhoods in Chicago, Los Angeles, or Miami.  This is worthy of being classified as 'violent criminal activity' rather than 'civil war'.  The remaining 20% of Iraq has a higher rate of violence, but no higher than it was two years ago.  Note that life expectancy in Iraq has actually risen. 

Lastly, it appears that 64% of Iraqis believe that Iraq is going in the right direction, and 77% are still glad that Saddam was removed.  If one excludes Sunnis from the polls, the figures above rise to 83% and 96% respectively.  Given that Shiites and Kurds are the ones Saddam had killed millions of, these high approval numbers are a surprise only to anti-American fanatics, who the Iraqis are obviously not listening to.  This shows that Iraqis have learned that a section of the Western public is rooting for them to fail, and that group is to be ignored.  It is only a matter of time until some articulate Iraqi blogger rises up and attacks the anti-American crowd's secret desire for the failure of Iraq, and receives massive visibility for doing so.  Now that will be fun.

So why will victory take all the way until 2008 if things are going so well?  Because victory cannot be declared until their is a perception of victory.  Part of this is President Bush's fault.  If he did a better job of advertising exactly the successes highlighted by the Brookings Inst. and repeated them often, this would uplift American morale, British morale, Iraqi morale, etc., and we would already have created the perception of victory in the world.  Instead, the thresholds of violence prevention, economic prosperity, and functioning government now have been set higher, and these will only be reached in 2008. 

In other words, Iraq can't just be as safe as Germany was by 1949, it has to become safe enough for American tourists to go for vacation in decent numbers (just as they currently go to Israel, Tanzania, or Thailand).  That is a very high bar to attain, but unfortunately one we have to meet in this political climate.  Only then will the fifth column no longer be able to deceive the fashion sheep that the war is a failure, and a broad perception of victory can emerge.  In total, it will have taken 5 years (2003-08) and 3000 US troops lost to hostile fire, but the majority of Americans (and Iraqis) will agree that we have won. 

Be patient, we are two-thirds of the way there.  Continue on to Part II.

Related :

The Winds of War, the Sands of Time

Who Hates America?

Zarqawi and the Anti-American Fifth Column

These are the Best of Times

The Psychology of Economic Progress

An Easy Way to Expose Concealed Anti-Americanism

Update : In the comments section, some have taken extreme offense to the suggestion that 75% of the data from Iraq is trending well, and just 25% is trending badly.  Then again, these same people are opposed to the War in Afghanistan after 9/11, so it is safe to say they are strongly anti-American (even though they are ashamed to admit it).  We will see these fifth-columnists become increasingly shrill and fanatical as Iraq progresses further.

Next-Generation Graphics - A Good Intro

IGN has a good article on what level of sophistication can be expected in video game graphics in the next couple of years.  While their optimism about the period between now and 2008 is cautious, this reaffirms the technological trends and is consistent with my prediction that the descendants of modern video games will become the most popular form of home entertainment by 2012, mostly at the expense of television. 

As always, viewing the pictoral history of video games gives an idea of the rate of progress that one can expect in the next decade. 

The Psychology of Economic Progress

The human brain may not have evolved significantly in the last 35,000 years, but the human mind has evolved greatly in just the last 200, in many parts of the world.  This is apparent once we observe the world through Maslow's Hierarchy of Needs. 

Abraham Maslow was an eminent psychologist in the 20th century who realized tthat the spectrum of human needs is more universally straightforward than it might appear, irrespective of culture.  He constructed a hierarchy of human needs based on each level of prosperity and satisfaction, and the Maslow hierarchy became a foundation of modern psychology.  He categorized each bracket of need-driven behavior as follows (sometimes, there are five levels).

1. Survival : The most basic human urge to survive is one where a person may disregard courtesy, culture, or religion in the pursuit of urgent necessities. An otherwise normal person may become unreasonable or even violent when his survival itself is uncertain. Animalistic behaviors may manifest themselves in the most desperate times.
2. Belonging : Once a human has progressed to a level where his most fundamental needs are no longer a cause of daily concern, then he seeks to be part of a community, whether it be his place of work or his social community. Harming another person to seize his possessions is no longer tempting or worthwhile.
3. Esteem : Once a person is secure in his career and community, and has progressed beyond the need to feel accepted by his friends or respected at his workplace, he strives to excel in multiple areas of his life. Building and maintaining an ego become the most important priority. Thinking of new ways to entertain himself is high on the priority list of the person at this level, and surplus money translates into materialism.
4. Self-Actualization : A person who has reached a level where his means greatly exceed his requirements of material contentment then may choose to focus his energies on activities that permit him to achieve his full potential.  He is no longer concerned with pure material gain or enhancing the quality of his recreation, nor does he feel he needs to impress others beyond the extent that he already has.  He seeks to become everything that he has the potential to become, and any time not spent pursuing this is treated as a waste. He seeks the company of other actualized people, and in such groups respect is gained from intellectual or artistic accomplishment. 

In centuries past, killing another person in order to take his belongings was common.  Today, the downside risk to one's career of even petty theft or minor fraud is enough that most people in the US today don't consider it.  As the world economy accelerated from centuries of slow growth to a period of rapid growth starting from the middle of the 20th century, we have seen a general decline in violence and disorder in developed societies, and also a decline in large-scale warfare in general.  Simply put, when more people have a stake in the stability and health of the system, they are more interested in maintaining and strengthening it, rather than disrupting it or trying to bypass it.

At the same time, a large segment of US society is stuck within the third level, esteem.  The pursuit of fancier cars, bigger homes, and more material status symbols is seen as the ultimate achievement in life, through a belief that quality of life improves in direct proportion to the degree of conspicuous consumption.  Relatively few have broken out of esteem and rise to actualizaton, the level where the great ideas that move humanity forward can emerge. 

In the US, perhaps 3% still reside in survival, 65% in belonging, 30% in esteem, and just 2% in self-actualization.  There is no country in the world with any more than a tiny minority attaining self-actualization yet, and such a nation would have to emerge in order to surpass the US in global power and influence.  Similarly, some cultures make it difficult for individuals to rise out of survival or belonging at all, ensuring that some nations have systems that cannot reduce poverty or nurture knowledge-based businesses. 

This is why globalization can benefit the world greatly.  While anti-Americans deride the spread of American culture, this also means that people in cultures that inhibit upward psychological advancement are now presented with a guide on how to rise until esteem.  The rapid growth in India and China, despite their cultures being heavily organized along belonging to a family and a community, has featured young people rising to embrace American-style esteem.  Thus, massive reductions in both monetary and intellectual poverty are underway.  At the same time, the complacent Americans stuck in esteem are forced to compete harder with India and China to prosper within globalization, which could induce more Americans to innovate their way to self-actualization. 

As we evolve into an information economy, where more and more people are occupied in knowledge-based careers, self-actualization will be attainable for millions of people. Through actualization arises the greatest examples of social innovation, entrepreneurship, and charity, and these forces will be the key to creating the wondrous new technologies and robust economic growth that we expect in the 21st century. 

This is a vast subject, on which more articles will follow. 

Virtual Worlds - BusinessWeek Catches On

The cover story of BusinessWeek this week is devoted to virtual game worlds and the real economic opportunities that some entrepreneurs are finding in them. 

I spoke of exactly this less than a month earlier, on April 1, about how video games would evolve into an all-encompassing next generation of entertainment to displace television, and also become a huge ecosystem for entrepreneurship.  It seems that we are on the cusp of this vision becoming reality (by 2012, as per my prediction). 

Milli, Micro, Nano, Pico

What would be the best way to measure, and predict, technological progress?  One good observation has been The Impact of Computing, but why has computing occurred now, rather than a few decades earlier or later?  Why is nanotechnology being talked about now, rather than much earlier or later?

Engineering has two dimensions of progress - the ability to engineer and manufacture designs at exponentially smaller scales, and the ability to engineer projects of exponentially larger complexity.  In other words, progress occurs as we design in increasingly intricate detail, while simultaneously scaling this intricacy to larger sizes, and can mass produce these designs. 

For thousands of years, the grandest projects involved huge bricks of stone (the Pyramids, medieval castles).  The most intricate carvings by hand were on the scale of millimeters, but scaled only to the size of hand-carried artifacts.  Eventually, devices such as wristwatches were invented, that had moving parts on a millimeter scale.

At the same time, engineering on a molecular level first started with the creation of simple compounds like Hydrochloric Acid, and over time graduated to complex chemicals, organic molecules, and advanced compounds used in industry and pharmaceuticals.  We are currently able to engineer molecules that have tens of thousands of atoms within them, and this capability continues to get more advanced. 

The chart below is a rough plot of the exponentially shrinking detail of designs which we can mass-produce (the pink line), and the increasingly larger atom-by-atom constructs that we can create (the green line).  Integrated circuits became possible as the pink line got low enough in the 1970s and 80s, and life-saving new pharmaceuticals have emerged as the green line got to where it was in the 1990s and today.  The two converge right about now, which is not some magical inflection point, but rather the true context in which to view the birth of nanotechnology. 

As we move through the next decade, molecular engineering will be capable of producing compounds tens of times more complex than today, creating amazing new drugs, materials, and biotechnologies.  Increasingly finer design and manufacturing capabilities will allow computer chips to accomodate 10 billion transistors in less than one square inch, and for billions of these to be produced.  Nanotechnology will be the domain of all this and more, and while the beginnings may appear too small to notice to the untrained observer, the dual engineering trends of the past century and earlier converge to the conception of this era now.

Further into the future, molecule-sized intelligent robots will be able to gather and assemble into solid objects almost instantly, and move inside our body to monitor our health and fight pathogens without our noticing.  Such nanobots will change our perception of physical form as we know it.  Even later, picotechnology, or engineering on the scale of trillionths of a meter - that of subatomic particles - will be the frontier of mainstream consumer technology, in ways we cannot begin to imagine today.  This may coincide with a Technological Singularity around the middle of the 21st century. 

For now, though, we can sit back and watch the faint trickle of nanotechnology headlines, products, and wealth thicken and grow into a stream, then a river, and finally a massive ocean that deeply submerges our world in its influence. 

The Next Big Thing in Entertainment - Part III

Here is a follow up to the two-part article, the Next Big Thing in Entertainment, where a prediction is made that the video game industry will give rise to something much larger, that transforms many dimensions of entertainment entirely.

I feel one additional detail worth discussing is the performance of stocks that may do well from this phenomenon.  A 5-year chart of four game development companies, Electronic Arts (ERTS), Activision (ATVI), Take-Two Interactive Software (TTWO), and THQ Inc. (THQI), plus retailer Gamestop (GME) provides an interesting picture. 

   

All 5 companies appear to have greatly outperformed the S&P500 over the last 5 years, despite this being a poor period for technology stocks.  Past performance is no indication of future returns, and it is difficult to predict with competitors will prevail over others, but a basket of stocks in this sector will be very interesting to watch for the next 6 years. 

The Next Big Thing in Entertainment - Part II

Continuing from Part I, where a case is made that the successor to video games, virtual reality, will draw half of all time currently spent on television viewership by 2012. 

The film industry, on the other hand, has far less of a captive audience than television, and thus evolved to be much closer to a meritocracy.  Independent films with low budgets can occasionally do as well as major studio productions, and substantial entrepreneurship is conducted towards such goals. 

This is also a business model that continually absorbs new technology, and even has a category of films generated entirely through computer animation.  A business such as Pixar could not have existed in the early 1990s, but from Toy Story (1995) onwards, Pixar has produced seven consecutive hits, and continues to generate visible increases in graphical sophistication with each film.  At the same time, the tools that were once accessible only to Pixar-sized budgets are now starting to become available to small indie filmmakers. 

Even while the factors in Part I will draw viewers away from mediocre films, video game development software itself can be modified and dubbed to make short films.  Off-the-shelf software is already being used for this purpose, in an artform known as machinima.  While most machinima films today appear amateurish and choppy, in just a few short years the technology will enable the creation of Toy Story calibre indie films. 

By democratizing filmmaking, machina may effectively do to the film industry what blogs did to the mainstream media.  In other words, a full-length feature film created by just 3 developers, at a cost of under $30,000, could be quickly distributed over the Internet and gain popularity in direct proportion to its merit.  Essentially, almost anyone with the patience, skill, and creativity can aspire to become a filmmaker, with very little financing required at all.  This too, just like the blogosphere before it, will become a viable form of entrepreneurship, and create a new category of self-accomplished celebrities. 

At the same time, machinima will find a complementary role to play among the big filmmakers as well, just as blogs are used for a similar purpose by news organizations today.  Peter Jackson or Steven Spielberg could use machinima technology to slash special-effects costs from millions to mere thousands of dollars.  Furthermore, since top films have corresponding games developed alongside them, machinima fits nicely in between as an opportunity for the fan community to create 'open source' scenes or side stories of the film.  This helps the promotion and branding of the original film, and thus would be encouraged by the producer and studio. 

Thousands of people will partake in the creation of machinima films by 2010, and by 2012 one of these films will be in the top 10 of all films created that year, in terms of the number of Google search links it generates.  These machinima films will have the same effect on the film industry that the blogosphere has had on the mainstream media. 

There you have it, the two big changes that will fundamentally overturn entertainment as we know it, while making it substantially more fun and participatory, in just 6 short years. 

The Next Big Thing in Entertainment - Part I

Previously, I had written about why the biggest technological changes take almost everyone by surprise.  Not many people recognize the exponential, accelerating nature of technological change, and fewer still have the vision to foresee how two seemingly unrelated trends could converge to create massive new industries and reconstruct popular culture.

Today, we will attempt to make just such a prediction.

Computer graphics and video games have improved in realism in direct accordance with Moore's Law.  Check out the images of video game progression to absorb the magnitude of this trend.  One can appreciate this further by merely comparing Pixar's Toy Story (1995) to their latest film, Cars (2006).  But to merely project this one trend to predict that video games will have graphics that look as good as the real thing is an unimaginative plateau.  Instead, let's take it further and predict :

Video Gaming (which will no longer be called this) will become a form of entertainment so widely and deeply enjoyed that it will reduce the time spent on watching network television to half of what it is today, by 2012.

Impossible, you say?  How can this massive change happen in just 6 years?  First, think of it in terms of 'Virtual Reality' (VR), rather than 'games'.  Then, consider that :

1) Flat hi-def television sets that can bring out the full beauty of advanced graphics will become much cheaper and thinner, so hundreds of millions of people will have wall-mounted sets of 50 inches or greater for under $1000 by 2012.

2) The handheld controllers that adults find inconvenient will be replaced by speech and motion recognition technology.  The user experience will involve speaking to characters in the game, and sports simulations will involve playing baseball or tennis by physically moving one's hand.  Eventually, entire bodysuits and goggles will be available for a fully immersive experience. 

3) Creative talent is already migrating out the television industry and into video games, as is evident by the increase in story quality in games and the decline in the quality of television programs.  This trend will continue, and result in games available for every genre of film.  Network television has already been reduced to depending on a large proportion of low-budget 'reality shows' to sustain their cost-burdened business models. 

4) Adult-themed entertainment has driven the market demand and development of many technologies, like the television, VCR, DVD player, and Internet.  Gaming has been a notable exception, because the graphics have not been realistic enough to attract this audience, except for a few unusual games.  However, as realism increases through points 1) and 2), this vast new market opens up, which in turn pushes development.  For the first time, there are entire conferences devoted to this application of VR technology.  The catalyst that other technologies received is yet to stimulate gaming.

5) Older people are averse to games, as they did not have this form of entertainment when they were young.  However, people born after 1970 have grown up with games, and thus still occasionally play them as adults.  As the pre-game generation is replaced by those familiar with games, more VR tailored for older people will develop.  While this demographic shift will not make a huge change by 2012, it is irreversibly pushing the market in this direction every year. 

6) Online multiplayer role-playing games are highly addictive, but already involve people buying and selling game items for real money, to the tune of a $1.1 billion per year market.  Highly skilled players already earn thousands of dollars per year this way, and with more participants joining through more advanced VR experiences described above, this will attract a sizable group of people who are able to earn a full-time living through these VR worlds.  This will become a viable form of entrepreneurship, just like eBay and Google Ads support entrepreneurial ecosystems today.

There you have it, a convergence of multiple trends bringing a massive shift in how people spend their entertainment time by 2012, with television only watched for sports, documentaries, talk shows, and a few top programs. 

The progress in gaming also affects the film industry, but in a very different way.  The film industry will actually become greatly enhanced and democratized over the same period.  For this, stay tuned for Part II tomorrow. 

Finding Earth-like Planets Will Soon be Possible

First, the Earth (whether flat or spherical) was considered to be the center of the universe.  Then, the Sun was considered to be center of the universe.  Eventually, mankind came to realize that the Sun is just one of 200 to 400 billion stars within the Milky Way galaxy, which itself is just one among hundreds of billions of galaxies in the known universe, and there may even be other universes.

Astronomers have long believed that many stars would have planets around them, including some Earth-like planets.  Carl Sagan wrote and spoke extensively about this in the 1970s and 80s, but we did not have the technology to detect such planets at the time, so the discussions remained theoretical.  There were no datapoints by which to estimate what percentage of stars had what number of planets, of which what fraction were Earth-like. 

The first confirmed extrasolar planet was discovered in 1995.  Since then, continually improving technology has yielded discovery of more than one per month, for a grand total of about 176 to date.  So far, most known extrasolar planets have been Jupiter-sized or larger, with the detection of Earth-sized planets beyond our current technology. 

But the Impact of Computing is finding its way here as well, and new instruments will continue to deliver an exponentially growing ability to detect smaller and more distant planets.  Mere projection of the rate of discovery since 1995 predicts that thousands of planets, some of them Earth-sized, will be discovered by 2015.  To comfortably expect this, we just need to examine whether advances in astronomical observation are keeping up with this trend.  Let's take a detailed look at the chart below from a Jet Propulsion Laboratory publication, which has a lot of information.

The bottom horizontal axis is the distance from the star, and the top horizontal axis is the orbital period (the top and bottom can contradict each other for stars of different mass, but let's put that aside for now).  The right vertical axis is the mass as a multiple of the Earth's mass.  The left vertical axis is the same thing, merely in Jupiter masses (318 times that of the Earth). 

Current detection capability represents the area above the purple and first two blue lines, and the blue, red, and yellow dots represent known extrasolar planets.  Planets less massive than Saturn have been detected only when they are very close to their stars.  The green band represents the zone on the chart where an Earth-like planet, with similar mass and distance from its star as our Earth, would reside.  Such a planet would be a candidate for life. 

The Kepler Space Observatory will launch in mid-2008, and by 2010-11 will be able to detect planets in the green zone around stars as far as 1000 light years away.  It is set to examine 100,000 different stars, so it would be very surprising if the KSO didn't find dozens of planets in the green-zone. 

After 2015, instruments up to 1000 times more advanced than those today, such as the Overwhelmingly Large Telescope and others, will enable us to conduct more detailed observations of the hundreds of green-zone planets that will be identified by then.  We will begin to get an idea of their color (and thus the presence of oceans) and atmospheric composition.  From there, we will have a distinct list of candidate planets that could support Earth-like life. 

This will be a fun one to watch over the next decade.  Wait for the first headline of 'Earth-like planet discovered' in 2010 or 2011.

Are You Prepared to Live to 100? - Part I

There is a lot of speculation about whether new medical science will allow not just newborn babies to live until 100, but even people who are up to 40 years old today.  But how much of it is realistic?

At first glance, human life expectancy appears to have risen greatly from ancient times :

Neolithic Era : 22

Roman Era : 28

Medieval Europe : 33

England, 1800 : 38

USA, 1900 : 48

USA, 2005 : 78

But upon further examination, the low life expectancies in earlier times (and poorer countries today) are weighed down by a high infant mortality rate.  If we take a comparison only of people who have reached adulthood, life expectancy may have risen from 45 to 80 in the last 2000 years.  This does not appear to be as impressive of a gain rate.

But, if you index life expectancy against Per Capita GDP, then the slow progress appears differently.  Life expectancy began to make rapid progress as wealth rose and funded more research and better healthcare, and since Economic Growth is Accelerating, an argument can be made that if lifespans jumped from 50 to 80 in the 20th century, they might jump to 100 by the 2020s.

But that still seems to be too much to expect.

We hear that if cancer and cardiovascular disease were cured, average lifespans in America would rise into the 90s.  We acknowledge that medical knowledge is doubling every 8 years or so.  We see in the news that a gene that switches off aging has been found in mice.  We even know that the market demand for such biotechnology would be so great - most people would gladly pay half of their net worth to get 20 more healthy, active years of life - that it will attract the best and brightest minds. 

Yet something within us is doubtful.....

(stay tuned tomorrow for Part II)

The Impact of Computing : 78% More Each Year

This article was updated on April 20, 2009, linked here. 

Anyone who follows technology is familar with Moore's Law and its many variations, and has come to expect the price of computing power to halve every 18 months.  But many people don't see the true long-term impact of this beyond the need to upgrade their computer every three or four years.  To not internalize this more deeply is to miss investment opportunities, grossly mispredict the future, and be utterly unprepared for massive, sweeping changes to human society.

Today, we will introduce another layer to the concept of Moore's Law-type exponential improvement.  Consider that on top of the 18-month doubling times of both computational power and storage capacity (an annual improvement rate of 59%), both of these industries have grown by an average of approximately 15% a year for the last fifty years.  Individual years have ranged between +30% and -12%, but let's say these industries have grown large enough that their growth rate slows down to an average of 12% a year for the next couple of decades.

So, we can crudely conclude that a dollar gets 59% more power each year, and 12% more dollars are absorbed by such exponentially growing technology each year.  If we combine the two growth rates to estimate the rate of technology diffusion simultaneously with exponential improvement, we get (1.59)(1.12) = 1.78. 

The Impact of Computing grows at a screaming rate of 78% a year.

Sure, this is a very imperfect method of measuring technology diffusion, but many visible examples of this surging wave present themselves.  Consider the most popular television shows of the 1970s, such as The Brady Bunch or The Jeffersons, where the characters had virtually all the household furnishings and electrical appliances that are common today, except for anything with computational capacity.  Yet, economic growth has averaged 3.5% a year since that time, nearly doubling the standard of living in the United States since 1970.  It is obvious what has changed during this period, to induce the economic gains. 

In the 1970s, there was virtually no household product with a semiconductor component.  Even digital calculators were not affordable to the average household until very late in the decade. 

In the 1980s, many people bought basic game consoles like the Atari 2600, had digital calculators, and purchased their first VCR, but only a fraction of the VCR's internals, maybe 20%, comprised of exponentially deflating semiconductors, so VCR prices did not drop that much per year.

In the early 1990s, many people began to have home PCs.  For the first time, a major, essential home device was pegged to the curve of 18-month halvings in cost per unit of power.

In the late 1990s, the PC was joined by the Internet connection and the DVD player, bringing the number of household devices on the Moore's Law-type curve to three. 

Today, many homes also have a wireless router, a cellular phone, an iPod, a flat-panel TV, a digital camera, and a couple more PCs.  In 2006, a typical home may have as many as 8 or 9 devices which are expected to have descendants that are twice as powerful for the same price, in just the next 12 to 24 months. 

To summarize, the number of devices in an average home that are on this curve, by decade :

1960s and earlier : 0

1970s : 0

1980s : 1-2

1990s : 3-4

2000s : 6-12

If this doesn't persuade people of the exponentially accelerating penetration of information technology, then nothing can.

One extraordinary product provides a useful example, the iPod :

First Generation iPod, released October 2001, 5 GB capacity for $399

Fifth Generation iPod, released October 2005, 60 GB capacity for $399, or 12X more capacity in four years, for the same price. 

Total iPods sold in 2002 : 381,000

Total iPods sold in 2005 : 22,497,000, or 59 times more than 2002.

12X the capacity, yet 59X the units, so (12 x 59) = 708 times the impact in just three years.  The rate of iPod sales growth will moderate, of course, but another product will simply take up the baton, and have a similar growth in impact. 

Now, we have a trend to project into the near future.  It is a safe prediction that by 2015, the average home will contain 25-30 such computationally advanced devices, including sophisiticated safety and navigation systems in cars, multiple thin HDTVs greater than 60 inches wide diagonally, networked storage that can house over 1000 HD movies in a tiny volume, virtual-reality ready goggles and gloves for advanced gaming, microchips and sensors embedded into several articles of clothing, and a few robots to perform simple household chores. 

Not only does Moore's Law ensure that these devices are over 100 times more advanced than their predecessors today, but there are many more of them in number.  This is the true vision of the Impact of Computing, and the shocking, accelerating pace at which our world is being reshaped. 

I will expand on this topic greatly in the near future.  In the meantime, some food for thought :

Visualizing Moore's Law is easy when viewing the history of video games.

The Law of Accelerating Returns is the most important thing a person could read.

How semiconductors are becoming a larger share of the total economy.

Economic Growth is Exponential and Accelerating, primarily due to information technology becoming all-encompassing. 

The Stock Market is Exponentially Accelerating too

Many still have significant doubts about my article on how economic growth is growing at an accelerating pace.  To this, I offer the basic evidence that the world economy comfortably grows at more than 4% per year, and this rate was unheard of in any part of human history prior to the second half of the 20th century, because if such growth existed from, say, the Roman Era, then the compounding over 2000 years would make everyone alive today a billionaire.

Another place in which to judge the rate of exponential growth is the stock market.  Below is a chart of the S&P500 index from 1950 to today.  I have added the red trendline to show how the market is moving in quite a predictable, exponential trajectory.  The economic malaise of the 1970s, the bubble of the late 1990s, and the bust of 2001-02 all negated each other to invariably move back to the trendline.

If we see the same image on a logarithmic scale, the exponential trend (which now is a straight line) is clear, and timing the long-term future milestones of the market are semi-predictable.

This also shows that current levels are certainly not overvalued, and are in fact almost exactly where the trendline would expect them to be.

And for those who insist that the Nasdaq should be shown instead, I would point out that a) the Nasdaq has been around for a shorter time, and b) the Nasdaq is less a representation of the broader market than the S&P500, as it is technology-heavy.  Nonetheless, a logarithmic Nasdaq chart also shows a similar trendline, and the late 1990s boom and bust revert back to the trendline.

Part of the reason we don't see an increase in the rate of increase in this logarithmic chart (which would make even this line curve upwards gently) is because some of the surplus growth is occuring in overseas markets.  A composite chart of the full world's stock markets over the last 55 years would be interesting.  If I find a good one, I will add it. 

Economic Growth is Exponential and Accelerating -Part II

The first part of this article discusses how economic growth has been on a smoothly accelerating trendline, from the start of human civilization through the present.  Now, in the second part, we will envision the future.

The first chart, also shown in Part I, displays global per capita GGP (Gross Global Product), starting from the year 2000 and going backwards on a logarithmic scale.  It is apparent how the economic gains of the 20th century dwarf those of all prior millenia of human civilization.  Put another way, world GGP growth of 4% a year seems normal today, but was under 1% in the 18th century.

                                      Historical World Per Capita GGP until 2000

Now, it gets interesting.  As this growth is not just exponential, but exponential even in the second derivative i.e. the rate of increase also increases at ever-faster rates, the best way to extrapolate the future would be to change the x-axis to take, say, 2050 as a starting point, and see what a trendline plot of the same approximate shape would amount to in per capita GGP on the y-axis.

This gets us what we have in the chart below. 

                                      Historical World Per Capita GGP until 2050

This method predicts that the GGP per capita in 2050 will be $36,000 per year in today's dollars, or about 6 times what it was in 2000. The gains made from 1950 to 2000 are dwarfed by the gains made from 2000 to 2050..

Imagine, for a moment, what this means for society. All the glorious technological innovations discussed in other articles here will allow the costs of health care, education, transportation, energy, and entertainment to plummet and allow poorer nations to rapidly creep up the ladder of prosperity and Maslow's hierarchy. If we project even further into the future, the exponential curve continues to steepen and the wealth that awaits is so vast that perhaps even the grandest visions of science fictions might be quite economically feasible.

Additionally, this makes economic dimension of the Technological Singularity quite tantalizing to speculate.

Exponential, Accelerating Growth in Transportation Speed

In the modern world, few people truly understand that the world is progressing at an exponential and accelerating rate.  This is the most critical and fundamental aspect of making any attempt to understand and predict the future.  Without a deep appreciation for this, no predictions of the intermediate and distant future are credible.

Read Ray Kurzweil's essay on this topic for an introduction.

Among the many examples of accelerating progress, one of the easiest to historically track and grasp is the rate of advancement in transportation technology.  Consider the chart below :

For thousands of years, humans could move at no more than the pace of a horse.  Then, the knee of the curve occurred, with the invention of the steam engine locomotive in the early 19th century, enabling sustained speeds of 60 mph or more.  After that came the automobile, airplane, and supersonic jet.  By 1957, humans had launched an unmanned vehicle into space, achieving escape velocity of 25,000 mph.  In 1977, the Voyager 1 and 2 spacecraft were launched on an interplanetary mission, reaching peak speeds of 55,000 mph.  However, in the 29 years since, we have not launched a vehicle that has exceeded this speed. 

Given these datapoints, what trajectory of progress can we extrapolate for the future?  Will we ever reach the speed of light, and if so, under what circumstances?

Depending on how you project the trendline, the speed of light may be reached by Earth-derived life-forms anywhere between 2075 and 2500.  How would this be possible?

Certainly, achieving the speed of light would be extremely difficult, just like a journey to the Moon might have appeared extremely difficult to the Wright brothers.  However, after the 1000-fold increase in maximum speed achieved during the 20th century, a mere repeat of the same magnitude of improvement would get us there.

But what of various limits on the human body, Einstein's Theory of Relativity, the amount of energy needed to propel a vehicle at this speed, or a host of other unforseen problems that could arise if we get closer to light-speed transportation?  Well, why assume that the trip will be made by humans in their current form at all?

Many top futurists believe that the accelerating rate of change will become human-surpassing by the mid-21st century, in an event known as the Singularity.  Among other things, this predicts a merger between biology and technology, to the extent that a human's 'software' can be downloaded and backed up outside of his 'hardware'. 

Such a human mind could be stored in a tiny computer that would not require air or water, and might be smaller than a grain of sand.  This would remove many of the perceived limitations on light-speed travel, and may in fact be precisely the path we are on. 

I will explain this in much more detail in the near future.  In the meantime, read more about why this is possible.

Economic Growth is Exponential and Accelerating - Part I

(Please see Version 2.0 of this article here).

It never ceases to amaze me how so few people truly understand that the world is progressing at an exponential and accelerating rate.  This is the most critical and fundamental aspect of making any attempt to understand and predict the future.  Without a deep appreciation for this, no predictions of the intermediate and distant future are credible.

Read Ray Kurzweil's essay on this topic for an introduction.

One dimension of accelerating, exponential progress can be seen in the economy.  Today, the US economy grows at a median rate of 3.5% per year, and the world economy at around 4.5% per year.  This is a growth rate that we have come to take for granted and expect.

But such annual growth rates were unheard of in the 19th century, or the 18th century (when the world economy grew less than 1% per year).  Things changed very little over the span of 10 or 20 years.  People expected their children to have the same living standards, and be surrounded by the same technology, as they were. 

Let's look at a graph of per-capita GGP (Gross Global Product), when viewed from the year 2000, looking backwards. 

                                                   

                                            Historical World Per Capita GGP

The accelerating rate of economic growth is apparent from the chart.  Thousands of years of human civilization before the 20th century produced modest wealth compared to what was produced in th emuch shorter interval of the 20th century.  Even with the 20th century, growth was more in the latter half than in the first 50 years. 

Now, in 2006, 4% a year is assumed, and taken for granted.  In fact, 3 billion people in the world are living in economies growing at greater than 6% a year (China, India, Russia, Vietnam, Pakistan, Thailand, Malaysia, and others).   

This would have been considered amazing, at any other time in history.  But is this just an aberration, or has the trendline itself shifted into higher gear, and can we expect this to continue, or even accelerate, in the future?  Continue on to Part II for the answer..

The Technological Progression of Video Games

As several streams of technological progress, such as semiconductors, storage, and Internet bandwidth continue to grow exponentially, doubling every 12 to 24 months, one subset of this exponential progress that offers a compelling visual narrative is the evolution of video games.

Video games evolve in graphical sophistication as a direct consequence of Moore's Law.  A doubling in the number of graphical polygons per square inch every 18 months would translate to an improvement of 100X after 10 years, 10,000X after 20 years, and 1,000,000X after 30 years, both in resolution and in number of possible colors.

Sometimes, pictures are worth thousands of words :

1976 :

1986 :

1996 :

2006 :

Now, extrapolating this trajectory of exponential progress, what will games bring us in 2010?  or 2016?

I actually predict that video games will become so realistic and immersive that they will displace other forms of entertainment, such as television.  Details on this to follow.

The future will be fun...

Related : The Next Big Thing in Entertainment

Why do the biggest technological changes take almost everyone by surprise?

The Internet was born as early as 1969, but no later than 1983, depending on what you consider to be the event most analogous to a 'birth'.  However, only a tiny fraction of the world's people were aware of the Internet even in the early 1990s.  Then, by 1994-95, the graphical browser from Netscape seemingly emerged from nowhere, opening up a wonderland that appeared to have the sum total of human knowledge instantly available to anyone with a computer. 

This 'World Wide Web' was predicted by almost no one in the late 1980s and was absent from the vast majority of science fiction work depicting the late 1990s onwards, just five years before it happened (with the notable exception of Ray Kurzweil in his book "The Age of Intelligent Machines").  So many supposed 'great thinkers' missed it.  How?

Because, while they could easily extrapolate exponential trends such as Moore's Law and the dropping cost of telephone calls/data transfer, almost no one thought about the bigger vision - combining the two. 

1)  By the late 1980s, personal computers were starting to make their way to the mass market.  That most of the population might have bought their first PC by 1995 was an easy prediction.

2)  Long-distance telephone rates were dropping through the full 20-year period from 1970 to 1990.  That this would continue until costs would be virtually zero was an easy prediction. Plus, people already had modems and where exchanging data between computers in the 1980s.  

But combining the two, for the grand vision of hundreds of millions of PCs collectively accessing and contributing to the growing World Wide Web of information, was the missing layer of analysis that almost every great thinker missed.

Notice how the number of internet hosts was already growing exponentially in the early 1990s, but the apparent 'knee of the curve' occurred after 1996.

So, the next question becomes : How do we make additional predictions by noticing multiple, steady exponential trends, and knowing which ones will combine into something explosive, at what time?

That is, of course, the $64 trillion question.  I will venture a few, however, in the coming weeks.  Stay tuned..........

Related : Mili, Micro, Nano, Pico

Related : The Next Big Thing in Entertainment