Innovation, Black Swans & Disruption

Innovation, Black Swans
&
Disruption

Craig Dobson
September, 2008

As progress is exponential, in the next 100 years we will
experience 20 000 years of progress at today’s rate.
– Raymond Kurzweil

Myth: Innovation in and of itself is valuable.
– Geoffrey Moore

2008 © Taylor Warwick Consulting Limited Craig Dobson 1

Perspective

Agenda
• Perspective
• Black Swans
• Innovation
• Emerging
Technology
• Views of the
Future

Blanket Mountain & Glacier

Perspective is more important than IQ – Negroponte.


Exponentials
Exponentials are deceptive.
– David Suzuki’s smart bug analogy: Say you have a colony of smart bugs living in a jar with a
population that doubles every second and that in one minute, they will fill the jar and perish
due to a lack of room and resources. Several smart bugs realize this and try to warn the
others. Finally, once the jar is 12.5% full, others start to listen. It is too late, however, as this
doesn’t occur until they have only 3 seconds left.
Linear Plot Logarithmic Plot
1013
1012
1011 18
18
month
month 1010
doubling
doubling 109 period
period 108
107
7 year
7 year 106 doubling
doubling
105 period
period
104
103
102
10
1

– Don’t mistake a clear view for a short distance
– We tend to overestimate technology’s impact in the short term and underestimate it in the
long term


History of the Universe

Sources: Kurzweil, The Singularity is Near, 2005


Observations
• Progress is both exponential and accelerating, and has been since long before the
Internet
– Builds on itself, via increasing knowledge, improved tools, etc.
– As our rate of progress is currently doubling every decade, the next 100 years will see
20 000 years of progress at today’s rate.
• if you think it will take ~50 years for nanotechnology to mature, it will likely take less than 20
– We currently generate the information equivalent of the Library of Congress every 15
minutes (~ 40 EB (1019B) of unique new information each year).
• The amount of new technical information is doubling every 2 years.
• The top 10 in-demand jobs in 2010 won’t have existed in 2004 [Richard Riley]. Hence:
– We are currently preparing students for jobs that don’t yet exist
– Using technologies that haven’t been invented
– In order to solve problems we yet don’t know exist.

• Progress by disruption – which makes it tough to project forward
• Increasing order – decreasing entropy
– wisdom of crowds/businesses
– power of collaboration
– instead of the watercooler with diversity limited by whose in the office, we’re increasingly
forming our own tribes, groups bound together more by affinity and shared interests than by
default broadcast schedules
• Increasing complexity – decreased stability


History of Civilization
• Real revolutions replace institutions as well as technologies
• Toffler’s argue that the impact of the IT technology revolution is much deeper than
commonly appreciated as it underlies a change in our system of wealth
– Specifically, the world is in the process of transitioning to the 3rd wealth system ever
• Agarian (based on land/agriculture) to Industrial (based on machines) to Knowledge (based on ideas)
• Wealth is an accumulation of possibilities and no wealth system can sustain itself
without a host society and culture.
Hunter – Gatherer – Both the host and culture themselves are shaken up as two or more
wealth systems collide
• This transition is affecting three deep fundamentals: time, space, &
knowledge

Agrarian Industrial Knowledge

Sources: Tofflers, Revolutionary Wealth; 2006


Deep Fundamentals
• Time – synchronization industry: development
of JIT and ERP systems together with
significant desynchronization friction.
– “Faced with a twenty-year threat,” an editor of
Armed Forces Journal International once wrote,
“government responds with a fifteen-year
program in a five-year defense plan, managed by
three-year personnel funded with single-year
appropriations.”
– Though globalization may be interrupted,
globalization of key institutions is very necessary.
• Space – wealth mobility
– Wealth maps of the world are changing; moving
to ‘region-states’
– “Ponder the world of 2050,” Robert Manning of the Council on Foreign Relations has suggested, “an Asia with more than half the
world’s population; perhaps 40% of the global economy; more than half the world’s information technology industry; and world
class high-tech military capabilities.”
• Knowledge – tomorrow’s oil
– As the knowledge components of wealth creation – marketing, finance, research, management, communication, IT, vendor and
distributor relations, regulatory compliance, legal affairs, and other nontangibles – all grow in complexity and importance, workers,
like the work itself, become less interchangeable and the required skill sets more temporary.
• What we’re seeing is less a race to the bottom and more of a race to the top.
– Is a serious threat to capitalism as it’s properties are very unlike those valued in previous wealth systems, i.e., it is inherently non-
rival
• The more we use, the more we create
• Is more portable than any other product and it spreads
• Divides into what’s inside our brain and what’s not
• We can’t learn fast enough, and every chunk of knowledge has a limited shelf life
• As we move from an industrial to a knowledge-based society, we fundamentally enable the acceleration of
change.



Observations
• Institutions
– Many of our key institutions are imploding - health, education, pension, legal, political, etc. – systemic
breakdown
– The life and death of corporations is now based on innovation, and that means a huge growth in intangibles.
– Baruch Lev
• Innovation is contagious
– Mass education designed for the industrial age meets the needs of neither the pre-industrial village nor the
post-industrial future
• Values
– As both the money economy and its non-money counterpart shift from muscles and metal-bending toward
knowledge-based wealth creation and the intangibility it brings, we see yet another historic change: The
resurrection of values as a central concern.
– There is a direct link between the implosion of institutions and the implosion of yesterday’s value system
• Economics
– Economics studies aren’t providing us with much direction today as conventional economics is becoming
increasingly irrelevant
• growth of “network industries”
• non-rival, undepleteable characteristics of knowledge products
• de-massification and the rapid growth in product customization
• global portability of capital
• Capitalism
– We’ve already changed who provides capital, how it is allocated, the way it is packaged, the speed with
which it flows, the places it goes, the amounts and kinds of information and misinformation about it and the
ratio of tangibility to intangibility in the property from which capital is derived.
• Capitalism may not be forever - due to changes in property, capital, markets, and money
– Poverty is rapidly being reduced via upgrades to 2nd and 3rd wave economies



History of Technology
• Each revolution takes 40-60 years to spread across the world and reach maturity
• Is this cycle is accelerating?

A sequence of S-curves

The ages of GNR (genomics,
nanotechnology, and robotics)
may be here sooner than you
think.

Source: Carlota Perez, Cisco CUD Conference, 080221


Anthropocene
• Each revolution has increased man’s impact on the planet
– Man is now a physical force on the scale of nature itself, disrupting the deepest processes of natural
systems like Earth’s climate and massively changing global cycles of carbon, nitrogen, phosphorous, and
sulfur
• this is the ‘real’ globalization
• Global economy will grow 4-times over the next 50 years, developing economies, 6 times
– Need tremendous amounts of energy and it must be clean
– Need to double world food production from 5.5 to 11 G-tons
• Dystopia vs Utopia – the choice is ours

Sources: Homer-Dixon, Upside of Down, 2006


Stability
• Should local, regional, and global environmental damage combine to leave untold numbers of poor people around
the world squeezed between a degraded environment that doesn’t provide an adequate living and failed
economies that don’t supply other livelihoods, there will ensue immense social dislocation and bitter frustration,
anger, and resentment that could result in a very real threat to the social and political stability of nations and,
ultimately, to world order

• Where we are winning
– Life expectancy
– Infant mortality
– Literacy
– GDP/cap
– Conflict
– Internet users
• Where we are losing
– CO2 emissions
– Terrorism
– Corruption
– Global warming
– Voting population
– Unemployment

• Multipliers
– Speed and connectivity from our activities, technology, and societies
– Escalating power of small groups to destroy things and people
• When several stresses come together at the same time, they can produce a far greater impact than their
individual impacts alone

Sources: Millennium Project of WFUNA, 2007; Homer-Dixon, Upside of Down, 2006


Broadband, ICT, and Sustainability
ICT’s Impact on CO2 Reduction is 10x’s More It Consumes

Direct Result • Energy consumption
+4.73 MT -48.4 MT

of Electricity • Greenhouse gas emissions
TODAY Consumption • Use of non-renewable resources
(Increases CO2) • E-waste & hazardous material

Impact of • E-government, e-business
NEXT Applications • Transportation optimization
(Lowers CO2) • Energy optimization
• Building optimization

Long-Term, • Work/ life patterns
FUTURE Socio-economic • Social inclusion, education & health
Changes • Economic development
(Lowers CO2) • Urban design & development

• Perspectives:
– the current US power grid is capable of supporting ~84% of the 220 M cars in the US should they be
exchanged for hybrid electric models like the Prius [SNS]
– if we could mimic plants and convert CO2 to energy, we’d have enough energy for ever

Gartner Group, April 2007; “Saving the Climate at the Speed of Light,” WWF and ETNO, 2007


Cycles within Cycles
• Each technological revolution propagates in two different periods
– The first half sets up the infrastructure and lets the markets pick the winners
– The second half reaps the full economic and social potential
– Whereas the first half is driven by market capital, the second is driven by production capital
• With the bust in 2001, the golden age of ICT has just begun
• As the roles shift to enable deployment, collective interests become part of the
guiding mechanisms
– To ensure widest possible societal benefit, government involvement is required

IT SURVEY – ECON: 030508

Source: Carlota Perez: Cisco CUD Conference, 080221 & Economist, 030508


The ICT Wave

Installation Deployment

Sources: Forrester: 2004 08 24


Policy Makes a Difference

Bandwidth

Cost

• Government belief in market
forces has led to a defacto
market failure in fibre
infrastructure deployment

Source: San Jose Mercury News


Broadband?

True / Big
WiFi / WiMax Broadband
(per subscriber)

64 kb/s
Phone Line

600 kb/s
3 Mb/s

20 Mb/s 100 Mb/s 1 Gb/s

3.7 Mb/s
1.544 Mb/s:
(T1)
128 kb/s
(ISDN)

Copper
(to VDSL 2)

Coax
(to Docsis 3)

Fibre


Broadband – Application Thresholds
As order of magnitude drops in price of communications often destroys the economic basis of the
organizations that depended on them, the impact of 100 Mb/s distribution will be significant.
Each move from 10 to 100 to 1000 Mb/s enables a new service paradigm and a plethora of new
service possibilities.

xDSL ~15 Mb/s, asymmetric Ethernet ~100 Mb/s Optical Ethernet ~1 Gb/s

Computer Backplane PC-Style Industry
HDTV Streaming
Effects Growth
• .NFL on HDTV • True end-to-end real-time • Everything, but better
• enable content providers to communications including VoIP, • Increased option value. The value
circumvent the cableco distribution plus IM plus file sharing plus video in the car is not in its applications
structure plus work-together plus… (going to the shopping centre,
driving to work), it is in the option
• Video conferencing to the home so • 3D virtual home/office
value it creates – the option to do
that the grandparents can see their (conferencing/porn) whatever, whenever.
grandkids • Peer-to-Peer applications for voice, • May ignite unprecedented growth
• Do what we do now, but better - music, storage, and video within the ICT sector. Should
e.g., attach audio narrations to • Distributed computing services, enable a sustained and
PowerPoint presentations utility computing, Planetweb. This predictable growth trajectory in
leads to Forrester’s Organic IT networking leading to the
• With high quality audio/video as the development of multi-level value
favoured mode of communicating, Concept of virtualized IT
chains, much the way Moore’s
web sites would be transformed - infrastructure Law has contributed to a virtuous
they’d take on a new ‘personality’ • Computer services to remote thin development circle with respect to
clients PC h/w, s/w, and applications


Bandwidth Matters!

5 – 10 Mb/s 10 – 100 Mb/s 100 – 1000 Mb/s
• Telecommuting (converged services) • Telemedicine • HD Telemedicine
• File Sharing (large) • Educational Services • Multiple Educational Services
• IPTV-SD (multiple channels) • Broadcast Video SD & some HD • Broadcast Video - full HD
• Switched Digital Video • IPTV-HD • Full IPTV Channel Support
• Video on Demand - SD • Gaming (complex) • Video on Demand - HD
• Broadcast SD Video • Telecommuting (high quality video) • Gaming (immersion)
• Video Streaming (2-3 Channels) • High Quality Telepresence • Telecommuting (high quality)
• HD Video Downloading • HD Surveillance • Remote Server Services for
• Low Definition Telepresence • Smart/Intelligent Building Control Telecommuting
• Gaming
• Medical File Sharing (basic)
1 – 10 Gb/s
• Remote Diagnosis (basic)
• Remote Education • Research Applications
• Building Control and Mgmt • Telepresence with HD Streams
• Live Event Digital Cinema Streaming
• Telemedicine remote control of scientific/medical
instruments
• Interactive Remote Visualization and Virtual Reality
• Movement of Terabyte Datasets
• Remote Supercommuting


Phone Calls Just Aren’t the Same

Source: Ironman, Cisco CUD Program


History of Intelligence

Electromechanical Vacuum
Tube • 3D Computing
• Quantum
Computing
• Spin Electronics
• Nanotube
Technology
• DNA Computing

The Sony
Integrated Circuit Playstation 3 has in
excess of 3 TIPS
processing power.
Relay Transistor Moore’s Law



Observations
• Again, progress is accelerating
• Moore’s Law is simply a small part of a longer term trend
– May run out of steam ~2020, but other technologies are coming on the scene
• Increasingly powerful inexpensive computing power will yield $1000 computers with
the processing equivalent of the human mind by ~2030
• Key issue is software development and the potential for strong AI
– If successful, then we’ll see a singularity
– Once one machine is our equal, we will be vastly surpassed the next day
– Kurzweil has defined the singularity as the point when non-biological intelligence is a billion
times more capable than all human intelligence today – and puts the date at 2045
– See IEEE Spectrum, 2008 06
• Will this solve our problems?
– We won’t make much social progress - and it’s this that we need to solve our problems
Technology cha nge

ou? Busine ss cha nge

A race to the
finish
• This level of progress is also being
Applications GG achieved in other areas…
Solutions
Problems

Alternate
Technologies


Telecom Industry Customer Buying
r Power

Other Exponentials

Magnetic Data Storage
(bits/$)

Nanotechnology - Decrease in Size
(Diameter in mm)

DNA Sequencing Cost Wireless Data Devices
(per finished base pair) (b/s/$)



Additional Perspective

The world does not operate the way we assume it does.


Black Swans
• In each progress chart presented – from the History of the Universe to the History of Intelligence –
significant progress (or change) is always via disruption, or, in Nassim Taleb’s view, via Black
Swans
• Black Swans are characterized by:
– rarity
– extreme impact
– retrospective predictability
• For a few examples, consider:
– Financial
• S&P500: half the gains in the over the past 50 years were made in 10 days
– Geopolitical
• terrorist attacks of 9/11
• the collapse of the USSR
• the American Revolution
• the birth of the nation-state at the conclusion of Europe’s Thirty Year War
– The Casino (undisclosed): took extreme measures to manage their exposure to risk, including
sophisticated surveillance systems to catch card counters and the like:
• lost $100M when performer in their main show was maimed by his lion
• caught a disgruntled contracter attempting to dynamite the foundations
• became liable for huge fines and almost lost their gambling license when for several years an employee hid the casino’s
internal revenue forms instead of filing them
• owner illegally used gambling funds to pay a ransom demand for his kidnapped daughter
The dollar value of these Black Swans swamped the on-model risks by over a 1000:1
– Rome: Between the end of the first century CE and the end of the 6th century, Rome was devastated by
fire 6 times; hit by nine major earthquakes and ten disastrous floods; ravaged by plague in the 2nd century,
3 times more in the 3rd, and yet again in the sixth; and sacked in 410, 455, 472, and 546

Sources: Taleb, The Black Swan; 2007


Observations
• Black Swan statistics are governed by Power Laws: whereas extreme events have essentially
zero probability under Bell curve distributions, they are the essence of the Power Law distribution
– due to the lack of a characteristic ‘node’, power law distributions are scale-free

Moving Fields
Stationary Fields stockbrokers
livestock judges clinical psychologist
astronomers psychiatrists,
test pilots college admissions officers
soil judges court judges
chess masters councilors
physicists personnel selectors
mathematicians intelligence analysts
accountants economists
grain inspectors financial forecasters
photo interpreters finance professors
insurance analysts political scientists
‘risk experts’
financial advisors, etc.

• Example
– at random, take two US people with a joint income of $1M/yr – what is the likely breakdown of their
incomes?
• Bell curve: $0.5M each
• Power law: $50k and $950k
• While we plan and manage risk around Bell curve statistics, much of real world operates on a
power law basis
– In a Power Law world, what you don’t know is far more relevant than what you do know
• so the more newspapers you read, the worse off you’ll be
• It’s not how often you’re right, it’s your cumulative error that counts

Sources: Taleb, The Black Swan; 2007; Barabasi, Linked, 2003


Prediction
Forecasting Hall of Shame
– The telephone has too many shortcomings to be seriously considered as a means of
communication. The device is inherently of no value to us. – Western Union internal memo,
1876
– Heavier-than-air flying machines are impossible. – Lord Kelvin, president, Royal Society,
1895
– Everything that can be invented has been invented. – Charles H. Duell, commissioner, US
Office of Patents, 1899
– Who the hell wants to hear actors talk? – Harry M. Warner, Warner Brothers, 1927
– I think there is a world market for maybe five computers. – Thomas Watson, chairman of
IBM, 1943
• Serendipity – engineers build toys, some will change the world

The Data The Projection The Real Function

Sources: Canton, Extreme Future, 2006; Taleb, The Black Swan; 2007


Innovation

The Disruptive Technology Challenge –
Play Poker Not Chess


Sustaining vs Disruptive

Sustaining innovations are how
established companies move
along established improvement
trajectories - improvements along
dimensions historically valued by
customers. Such innovations
typically improve existing
products – making PCs faster,
planes safer, and so on.
Disruptive innovations introduce a
new value proposition and either
create new markets or reshape
existing ones.

Sources: HBR, 0208


Disruptive Innovation
• The disruptive innovation framework from Clayton Christensen enables potential disruptive
innovations to be evaluated with respect to their potential impact on industry structure and the
incumbents. There are two types:
– Low-end disruptive – occur when existing
products and services are ‘too good’
relative to the dotted customer
demand/expectations curve; they are
overpriced relative to the value existing
customers can use. ionvat o
Inno t
me ntal oducts in
Incre better pr arkets
Performance

m
Bring ablished
Difference Performance Measure

est

cal
radi
Semi- tomers
-end t cus model
Low vershoo ess
et o usin Discount retailing
Targ er-cost b Steel minimills
low
with

dical – New-market disruptive – create new
et Ra ption
New -Mark onsum
Telephone growth by making it easier for people to do
ainst nonc Personal computers
ete ag Photocopiers something that historically required deep
Comp
expertise or great wealth. It brings
s consumption to ‘non-consumers’ or non-
er
u m ng
ns mi Company improvement trajectory
consuming contexts. The Bell telephone,
co nsu s
n
No nco tex
t
Customer demand trajectory
Sony transistor radio, and the Apple PC
o n were all new market disruptive innovations.
N co

Sources: Christensen, et al, HBR, 2000 11 & Seeing What’s Next, 2004 10


The Disruptive Advantage

Founder-led Businesses

In the disruptive arena, the
advantage goes to the upstart!

Corporate Led Disruption

Sources: Christensen & Raynor, Innovator’s Solution, 2003


Innovation Matrix
• Innovation potential remains dormant unless coupled with a business system that unleashes its disruptive energy
– Without an associated business model, innovative ideas (and IP) cannot be valued
• Balanced innovation programs utilize both business model and technological innovation
• In as much as the universities solely focus on technological innovation, their programs are inherently limited with
respect to commercialization potential

Product and
Technology Innovation

Services
Technology

New Semi-Radical Radical
Process
Technologies
Near to the
Enabling Existing Incremental Semi-Radical
Technologies
Near to the New
Existing
Business Model
Value Supply Target
Proposition Chain Customers
Business Model Innovation

• Given that ‘The probability of success in technology push is estimated to be less than 0.3% of the probability of
success in market pull’, tight program linkages to customer and business requirements is essential

Sources: Davilla, et al, Making Innovation Work, 2005


Targeting Disruption
• The Medici Effect
– Directional versus Intersectional Ideas
• biggest breakthroughs, intellectually and financially, occur when two or more
breakthroughs converge or are plugged together
– Disciplinary science has died – Alan Leshner, CEO, AAAS
• Target component ecosystems
Systems Innovation Component Innovation

• Which leads to the concept of modularity…
Sources: F. Johansson, The Medici Effect, 2004; Waclawsky, BCR, 2005 03


Value Chain Evolution
According to the Disruptive Innovation theory, sustaining innovation results in the
evolution of an incumbent’s value chain from a position where competitive advantage
lies in integration to a commoditized environment in which value results from speed,
responsiveness and convenience.

• Put simply, firms Product Architectures and Integration
dealing with
performance gaps
should integrate, Flat scale: low
while those faced with differentiability.
a performance Ability to make
surplus should money migrates to
subsystems and
commoditize. the back end.

Steep scale; highly
differentiable.
Design /assembly
makes the money.

• From voice to bit
transport, this issue
currently pervades the
ICT industry.

Sources: Christensen & Raynor, The Innovator’s Solution: 2003 10


Swarm Innovation

• It is now generally recognized that the Western World’s lack of ‘collaboration for the
common good’ relative to that evident in the Far East puts us at a significant
disadvantage, particularly with respect to innovation.
• Swarm innovation networks are similar to Open Source Networks in which once a
reference implementation is put forward, a swarm of development arises around it –
producing superb code (in the open source case) in record time.
– in the Far East, such networks result in coordinated innovation amongst swarms of
companies – examples include original design manufacturers (ODMs) in electronics and Li &
Fung in clothing
– with reduced transaction costs, horizontal markets now develop early in the innovation cycle
– as opposed to waiting for standards and interfaces to mature
• Countering such networks, requires companies and universities to utilize process
networks, performance fabrics, and social software.
• While neither Western Canada nor our universities can match the scale and scope of
these networks, we can collaborate to facilitate and leverage ICT innovation across
the region, embed it within a global context, and effect an impact disproportionate to
our size
• The Emerging Technology Forum is a step in this direction


Emerging Technology

Emerging
Technology
Arena

• Emerging technology refers to potentially disruptive technology in the earliest stages of adoption, i.e., technologies
with the potential to marginalize existing technology or their associated business models
– Information technology is an example of a technology which has already proven disruptive, whereas artificial intelligence is a
subset information technology with the potential of becoming disruptive in its own right
• Many lists of emerging technologies are available so will be up for discussion in the Emerging Technology Forum.
– Example possibilities include conductive polymers, composite materials, energy, medicine, microfluidics, cloning, supramolecular
chemistry, optics, memory research, nanotechnology, and scores of others.
– Opportunity areas include hyper-agriculture, neurostimulation, customized health care, nanoceuticals, bizarre new energy
sources, streaming payment systems, smart transportation, flash markets, new forms of education, non-lethal weapons, desktop
manufacturing, programmable money, risk management, privacy-invasion sensors that tell us when we’re being observed –
indeed, sensors of all kinds – plus a bewildering array of other goods, services, and experiences

Sources: Wikipedia; Tofflers, Revolutionary Wealth, 2006


Views of the Future – Networks?
• Netness – Sheldon Renan
– Netness is a term describing a state of deep connectedness which is enabled and intensified by the evolving
ubiquity of connectivity. Netness defines a new kind of connectivity in which computational services will
increasingly be implicit, autonomous, pervasive and continuous. Users will experience netness as an
environment and a state of being rather than as a specific technology or service. The most powerful effect of
netness will be the seamless way in which it will support interaction of the physical world and digital
capabilities.
– If there is a law of netness, it observes:
• All things want to be connected.
• The more things are connected, the greater the opportunity created.
• As netness becomes pervasive, networks and systems will begin to function like fields.
• Netness opens the door to a Post-Network world.

• Bandwidth Ocean – Nico Baken
– Massive liquid bandwidth from a quot;bandwidth
oceanquot; (the fixed Telecom-mycelium that will
grow with FTTH) will be evaporated by radio
into services for the end user and vice versa
the data of the end user or any
communicating entity will be condensed in to
the fixed wells/fountains.
• All kind of street furniture can serve as basis for
these wells/fountains, e.g. streetlights of which in
the Netherlands alone we have some 4.000.000
of them like mushrooms on the mycelium.
quot;Netness emerges to entanglequot; Sheldon Renan
would say.

Sources: Cook, Arch Econ Discussions, 2007; Baken, TCN Conference, 2007 05 16


Science
• With the four factors that underlie Science and
Technology revolutions in place, i.e.:
– Scientific anomalies – 22 % of matter has yet to be
identified; 74% of energy hasn’t been
– New instrumentation – e.g., the large Hadron Collider,
Utility computing, e-Science
– Effective communication – Internet as an ongoing,
non-disruptive, perpetual collaboration
– Supportive Political and Cultural Environment
it’s time for some breakthroughs
• Three types of breakthroughs:
– Those based on developments that are underway –
Moore’s Law: speech recognition, flexible displays,
retinal scanners, …
– Those at the forefront: NBIC
– Those we’ve no clue about: dark matter, dark energy,
structure of the universe, …

After spending trillions of research dollars to disassemble the
universe [we now realize that] we’ve no clue how to put it
back together. – A-L Barabasi

The difficult problems lie in architecture, component synthesis,
and system-level engineering [not in the component
technologies themselves]. – M. Satyanarayanan Antonio Santucci’s Armillary Sphere

Sources: Schwarz, Inevitable Surprises, 2003


The Free Lunch
• Prosuming
– The invisible economy is likely as large as the visible (money-based) one, i.e., some ~50T$/yr
• it is therefore huge, it encompases some of the most important things we do, and
• it is largely ignored by economists
– Is about to explode – there is indeed a free lunch
• think of biology, nanotools, desktop factories, fantastic new materials, and so on, that will permit all of us to do things for our
selves that we could never have imagined
– In health, hospitals have become huge bureaucratic institutions, linked to even more bureaucratic
government agencies, insurance companies, and pharmaceutical giants
• do nothing to protect us from cross-border transmission of diseases, not to mention global pandemics
• medical knowledge is exploding and availability of the knowledge is growing
• so we’re doing more ourselves and for our families
• Knowledge
– Opensource is making s/w largely free
– Skype provides free telephony
– Joost provides free cable
– Google’s initiative to take computing cycles off the table
– With carbon credits, power companies might provide free broadband (Bill St. Arnaud)
– Peer production
• Coase theorem and business horizontalization
– As the costs of manufacturing , marketing, and distribution go to zero, you can exploit long tail business
models – this leads to the economics of abundance (the web has unified the SCM elements that’s been
brewing for decades)
• the web enables the formation of a reservoir of proto-Googles waiting in the background
• it also promotes the inverse Google, i.e., it allows people with a technical speciality to find a small, stable, audience

Sources: Tofflers, Revolutionary Wealth; 2006; Chris Anderson


Views of the Future
• Community
– When social communication media grow in capability, pace, scope, or scale, people use these media to
construct more complex social arrangements—that is, they use communication tools and techniques to
increase their capacity to cooperate at larger and larger scales. Human history is a story of the co-evolution
of tools and social practices to support ever more complex forms of cooperative society.
– Technologies of cooperation create opportunities for new relationships with property that go beyond public
versus private; these relationships create new ways to generate both public and private wealth and suggest
principles for protecting and growing common-pool resources.
– Blogging moves power from extremists to the moderates, who will take back control and fix things
• Health
– Ultra-fast telemedicine and telecommuting can save money and improve quality of life (in the US, over half a
trillion dollars by 2031) – Robert Litan
– The public is coming to recognize that health is the product of more than simple cause-and-effect disease
relationships, and results from complex interactions between a whole spectrum of environmental factors.
This evolving ecological perspective is supported by scientific evidence that is beginning to demonstrate that
where and how we live our lives can have as great an impact on health as genetics, behavior, or exposure
to specific risks.
– For the first time in history, our children will be less healthy and live shorter lives than ourselves
– Relationship with animals (except dogs) will diminish – as pop increases, so does density & if we continue to
harbour animals for food, the probability of infectious, virulent microbes increases and we’re already losing
as our current generation of antibiotics/vaccines are failing
– Medicine needs to be pre-emptive, predictive, personalized, and participatory
– Medical care for all
– Will cure cancer with therapeutic viruses and bacteria

Sources: Institute for the Future; Wallace, Ed., 50 Years From Today, 2008


Views of the Future, 2
• Commerce
– Due to decreasing transaction costs, the boundaries between industries and firms are breaking down leading to complex arrays of
horizontal networks of players
– With the pervasive availability of information, firms can no longer realize a sustained value proposition by finding and protecting a
defensible position, but rather by developing a business system that is quicker and better at using information and by adapting the
system as the industry evolves – The Only Sustainable Edge
– Innovation is key to developing such a business system and will supplant cost reduction and M&As as the competitive
battleground over the coming decade
• Technology
– Cultural demands on ICT will emphasize persistence, contextual awareness, and communication rather than content delivery
– Advances in RF-ID tags, organic displays, GPS, and sensors will bring cyberspace into the physical world and in so doing, will
enable a plethora of new services and place significantly new demands on network capabilities
– Wind farms, electric/Hydrogen cars, -- oil will only used to make plastic
• Sustainability
– Global infrastructure is rapidly shifting to networks of smaller, smarter, more independent components. Such systems can be
organized in more efficient, more flexible, and more secure ways than the capital-intensive, centrally planned and managed
networks of the last century. As these lightweight infrastructures come online, they may be able to boost emerging economies,
mitigate the environmental impacts of rapid global urbanization, and offer alternate paths to economies of scale.
– Busy shorelines - floating and anchored habitats, wind power stations, tidal current generators, artifical islands
• Geopolitical
– Need people centred security to take over from nation state security
• freedom from want and fear
– Nationalism will disappear – world without borders, where humanity comes first
– Almost total urbanization
– No war – truly flat world - multiracial and integrated

Sources: Institute for the Future; Wallace, Ed., 50 Years From Today, 2008


Remember When?
• Cyberspace was restricted to our computer terminals
• Active displays were limited to computer monitors
• We had phone listings instead of web pages
• TV schedules, channels, and network content dominated
• Computer output was limited to paper and keyboards were common
• Books and newspapers were made of paper that had to be recycled
• Privacy was real and people could actually get lost
• Data resided mostly in databases that required huge staffs to maintain and
keep relevant wrt the real world
• A understanding of the dynamics of most processes eluded us
• We went out to socialize, work, and conduct commerce
• We had to buy items as is
• Genetic diseases were common
• We sterilized things since we couldn’t tell the ‘good’ microbes from the ‘bad’
…

Sources: Sterling, Tomorrow Now, 2002


Conclusion
• Progress is dominated by exponentials, disruption,
and power laws, not linear progressions and bell
curves
• In a world of Black Swans, what we don’t know
matters more than what we do
• To manage risk, a bar bell strategy is key – hedge
80% on the safest path possible and bet 20% on
items with the potential for disruption
• The Disruptive Technology Challenge is TRLabs’ way of:
– leveraging your expertise and that of your peers to determine where it’s disruptive
allocation ($100 000) should be placed
– encouraging interdisciplinary academic/industry collaboration, and
– establishing synergy between the unversities
• The Emerging Technology Forum will support the DTC activities and provide an
ongoing academic-industry forum in which we can jointly pool our expertise and
diverse perspectives to explore and evaluate the opportunities and technologies
that we think may change the world.
• There is a free-lunch.


Questions and Follow-up

Disruptive Technology Challenge
http://www.trlabs.ca/trlabs/research/dtc
dtc@trlabs.ca

Emerging Technology Forum
http://www.trlabs.ca/trlabs/research/etf
etf@trlabs.ca

Craig Dobson
cdobson@taylorwarwick.ca
780-669-1605
Rainer Irashko
iraschko@cal.trlabs.ca
403-338-6385


Innovation, Black Swans & Disruption

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