Baffled by the theory of relativity? Even stumped by
Murphy's Law? Then hang on tight, because you need to
understand Nathan Myhrvold's theory of the exponential economy.
Formerly chief technology officer at Microsoft, Myhrvold, 42, is
now CEO of Intellectual Ventures, a private entrepreneurial
partnership in Bellevue, Washington.
Could you explain the exponential
economy--slowly?
Nathan Myhrvold:Today,
important technology-based commodities are going through enormous
improvements in their price-performance ratio. [In English: As
these things dramatically improve, you're paying less.] And I
mean at a factor of a million or a billion, which is really
unprecedented.
Content Continues Below
For instance, the first trains ran at about 10 miles per hour.
Soon, they got up to 20 miles per hour. Today, trains go about 50
miles an hour, and a few go 250. Well, [25 times faster] is not a
big factor change in all of train history. Looking forward, the
economy of the 21st century is going to be all about these giant
exponential changes.
How can a technology-rooted business
put this knowledge to use?
Myhrvold:You need to figure
out which areas of your industry are going through exponential
change. Not every technology changes dramatically. For instance,
hard disks have gone through exponential changes, but floppy discs
[haven't].
Some people can't comprehend the power of the industry. I
remember in 1990 predicting that in 2000, there would be computers
operating in gigahertz. Even people at Microsoft were saying,
"What could we possibly use a gigahertz processor for? And who
would want it?" You have to have vision and the courage to
believe it. And that's not easy, because many of these
innovations create pretty nonsensical predictions.
At the same time, not every pie-in-the-sky prediction will come
true. You have to sort through the crazy answers that seem right
vs. the crazy answers that are just crazy.
And entrepreneurs who aren't
involved in an exponential economy-are they destined to become
museum pieces?
Myhrvold: Restaurants and
other economies that aren't exponential aren't going
anywhere, but as exponential economies become more and more
relevant, it's going to be harder for [nonexponential]
entrepreneurs to ignore them. If you look ahead 10 or 20 years, the
Internet and PCs will be as important to Coca-Cola's marketing
strategies as television is and has been. You've got to be
aware of these issues, no matter what business you're in.