Innovation Physics: Part 1

This post is dedicated to Harry R. Weller. We worked together in framing it and writing it for over two-and-a-half years. The contents are largely his vision, which informed his investment decisions for over a decade. I learned an immeasurable amount from him through the countless discussions and iterations leading to this post; though our conversations were always winding, those who knew Harry knew that he could always see around corners.

Innovation physics is a narrative of tools and abilities.

Tools, at their most fundamental level, are implements of technology that enable human beings to extend their natural abilities. Tools are the instruments, abilities the music.

From prehistoric hominid hand implements to the contemporary digital age, tools have progressively enabled humankind to satisfy needs and extend abilities. Anthropologists define tools as a form of prosthesis — that is, tools are an artificial extension of the natural self.

Researchers have not definitively identified the oldest tool created by hominids. However, there is archaeological evidence to suggest it was a hand axe: a triangular piece of stone used to smash and cut objects. The oldest known hand axes were found in Ethiopia and date back 2.5 million years. Anthropologists posit that key early uses for this tool included extracting marrow from bone, unearthing root vegetables, and breaking open nuts and tubers. These abilities all would have unlocked entirely new, nutrient-rich food sources for early hominids. Their use would have simultaneously promoted the development of improved grip, spatial dexterity, and causal reasoning.

This example neatly encapsulates the narrative of tools and abilities: with the advent of this new tool, hominids garnered new abilities. By unlocking access to valuable nutrients unavailable to other members of the food chain, the hand axe granted our early ancestors precious extra calories and time, which could be put toward other higher-order pursuits — like drawing, writing, and planning for the future — igniting a self-reinforcing cycle of innovation and development.

Tools in the contemporary digital age follow the same broad narrative of extending human abilities, therein unlocking new frontiers. In the 1990’s, Steve Jobs likened the computer to a “bicycle for the mind.” Just as a bicycle extends the human ability to self-transport, dramatically reducing both the calories and time expended per kilometer traveled, much of modern digital technology is dedicated to extending the abilities of the human mind.

This article does not focus on a narrow topic or attempt to prove specific claims with data. Instead, it examines global macro trends in technological development, outlines their downstream effects, and leaves much to the interpretation of the reader. It is not possible to understand all of the forces driving technological innovation or all of the downstream implications of these advancements. It is possible, however, to create a framework which more intuitively characterizes and analyzes patterns of technological innovation and helps predict possible outcomes. The framework we chose to construct is that of tools and abilities.

Innovation Physics is a discussion of trends underlying the creation of new technology, the states and trajectories of key contemporary tools, and the forces that govern the emergent abilities these tools unlock.

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The Tools

The rise of the digitally-connected age was enabled by advances in four key areas: (i) computing — raw computing power and the ability to manufacture it cheaply, (ii) consumption — the advancement of the human-machine interface, (iii) connectivity — computer-to-computer networking, and (iv) componentization — the ability to componentize and re-use each bit of technology we create. At New Enterprise Associates (NEA), we refer to these four enabling factors collectively as the four C’s: computing, consumption, connectivity, and componentization.

A dramatic wave of development in each of these arenas occurred in the late 1980’s and early 1990’s, immediately precipitating the rise of the mainstream Internet. The world sits at a similar juncture today, with new leaps occurring simultaneously in each area.

1. Computing — Moore’s Law, named after Gordon E. Moore, a co-founder of both Fairchild Semiconductor and Intel, is the observation that the number of transistors in a dense integrated circuit (aka computer chip) doubles approximately every two years, thereby roughly doubling its computing capacity. This prescient prediction has proved roughly accurate since it was posited in 1965.

To put this level of progress in perspective, the increase in the density of transistors over 50 years of Moore’s Law is roughly equivalent to shrinking an object the size of an aircraft carrier down to the size of a pin point. Today, while many experts believe we are reaching the end of Moore’s Law due to intractable physical limitations, we are actually on the brink of realizing several dramatically improved computer architectures.

In particular, quantum computing would radically redefine and expand humanity’s ability to process information. Theoretically, a quantum computer would be able to process a volume of calculations in one minute that would take today’s most powerful classical computers billions of years. This potential innovation has massive implications globally, not all of which have been prognosticated.

One area of unparalleled importance is in the realm of cybersecurity. A quantum computer, should one be successfully constructed, would be powerful enough to break all presently known encryption. Some argue that quantum computing would be of equivalent significance to the intelligence community as the advent of nuclear weapons was to the (kinetic) military. In short, computing power has become dramatically more powerful and dramatically cheaper over the last 50 years, and there are many avenues for this trend to continue and even accelerate.

2. Consumption — We use the word consumption to describe the human-machine interface — the ability of humans to consume information through a technological medium. Intuitive graphical user interfaces have opened up the use of computers to the masses. Computing devices are permeating every aspect of modern life. Consumption is no longer about suspending reality in order to interface with a machine. Today, consumption occurs in a continuum from the immersive to the injected.

Immersive consumption immerses the user into a digital reality. It does this through high fidelity sensory experiences requiring one’s time and direct attention (like watching a movie on a large 4k screen, playing modern high-resolution video games, or experiencing virtual reality).

Injected consumption is injected into the user’s everyday reality and does not require continuous time or direct attention (like an iWatch, Fitbit, smart thermostat, smart lock, or, more generally, the Internet of Things). It is designed to be minimally invasive.

This bifurcation in consumption — to either immersive or injected — is a recent departure from the historical evolution of computing interfaces. Mainframes, terminals, client-server, and desktop PCs all essentially required a user to interact with a computing device in the same way: to sit in front of a screen and pay attention to a non-realistic interface. It is a distinctly new phenomenon that computing devices are being designed to be either (a) so high fidelity in their integration with the human senses that they immerse users in an alternate reality, or (b) so minimally invasive that they are injected into users’ everyday lives without being noticed.

3. Connectivity — Internet connectivity, and in particular mobile internet, is becoming an essential and near-ubiquitous utility for an increasing proportion of people globally. According to US government and Pew research, 2016 was the year that humanity crossed the 50% mark in terms of global population connecting to the internet on a regular basis.

Undergirding this massive transformation are cheap and mobile internet-connected consumer devices (including smartphones that retail for less than $5 US dollars), as well as scalable networking infrastructure, increasing global rollout of wireless networks, and new economic models enabling internet access for populations around the globe. Throughout much of the developed world, digital technology is now a primary mode of human interaction and is a pre-requisite for developing and maintaining personal and professional relationships.

4. Componentization — Componentization takes a technological advancement and packages it for reuse. While likely the most difficult to conceptualize of the four technological forces, componentization might actually be the most important. Every time a technological advancement is componentized, it becomes part of the foundation upon which the next advancements are built.

A good metaphor for a component is a Lego block. In this case, the block is a discrete unit of technology (e.g., a hardware component, a piece of software code, or even a whole software application). Central to componentization is the notion that the block can be used in multiple systems, potentially ones that are increasingly large and complex. Furthermore, a new system composed of components can itself become a component — a larger Lego block for use in building other systems. The terms modularity and modular design are often used to refer to this process.

More abstractly, componentization is the tool that enables recursive technological advancement. Components developed to perform a certain function can be recalled, replicated, and reused — including for building larger systems and functions — which can themselves be componentized in turn for use in still larger systems, etc. Because of componentization, the rate of technological progress can have positive second- and third-order derivatives.

An organic comparison would be DNA and various other subcellular molecules, which are the components that together form subcellular apparatuses. These apparatuses, in turn, become the components which form the basic unit of life: the cell. The cell, in turn, becomes a component in an organism, which in turn becomes a component in a population, which in turn becomes a component in an ecosystem. Following the same trajectory, technological componentization can lead to immense scale, complexity, and capacity.

To use a more concrete example, the computer you’re using to view these words is running millions of individual software components (everything from tiny programs that tell the computer what letter corresponds to a given keystroke, to your operating system, to your web browser and other applications). On the hardware side, your computer is also assembled from billions of components. If your PC is relatively new, your CPU likely has over a billion transistors. The vast majority of these hardware and software components were not designed with your specific computer in mind. They are generalizable, like Lego blocks, and can be used and reused for many different purposes. Furthermore, today’s computers were designed with the aid of yesterday’s computers. And because they are better than yesterday’s computers, they can help us design even better computers in the future.

In summary, a virtuous cycle of progress and development in computing, consumption, connectivity, and componentization spawned the information age, which now constitutes the medium in which many facets of human life — business, entertainment, relationships — take place. This phenomenon is called many things — ubiquitous computing, pervasive computing, ambient intelligence — and is often thought of as the third generation of computing after mainframe and personal. The implications of ubiquitous computing are sweeping: as the ambient level of digital technology increases, humanity finds itself increasingly surrounded by a new and unfamiliar medium, one that permeates all all facets of life and amplifies our cognitive and communicative abilities in profound and unpredictable ways.

Note: This is Part 1 of a two-part series. Innovation physics is a narrative of tools and abilities; Part 1 focuses on the tools themselves and Part 2 focuses on the abilities these tools unlock. Part 2 can be found here.