With technology, it’s easy for investors to miss the important thing.
One reason is that new tech comes thick and fast. Most of it isn’t even that important. Every year there’s someone touting this or that new widget, with the potential to change the world and make investors rich.
Of course, most of the time the story doesn’t pan out. As a result, investors get sceptical about any technology story.
Another reason is that important new technologies are hard to wrap your head around. State of the art new technologies are by definition complicated. So business with huge potential is sometimes hiding in plain sight, because investors don’t understand what they do.
I’m thinking of companies like amazon.com or Tesla Motors here, which escaped investors’ attentions for years before they blew up.
Well, I’m here to tell you that a big story is happening right now. Let me tell you about it.
Twice a century
The point is that it’s hard to see the wood for the trees when it comes to new technologies.
To understand what’s going on you need to know about the hot new trends. But you also need perspective.
Venkatesh Rao is someone who has perspective. He’s written a giant 20,000 words essay about how technology is changing society, called “Breaking Smart”. If you’ve a couple of hours to spare it’s a good read.
There’s a good part in the essay where he puts today’s technologies into historical context.
“After written language and money, software is only the third major soft technology to appear in human civilization. Fifteen years into the age of software, we are still struggling to understand exactly what has happened. Marc Andreessen’s now-familiar line, software is eating the world, hints at the significance, but we are only just beginning to figure out how to think about the world in which we find ourselves.
Only a handful of general-purpose technologies – electricity, steam power, precision clocks, written language, token currencies, iron metallurgy and agriculture among them – have impacted our world in the sort of deeply transformative way that deserves the description eating. And only two of these, written language and money, were soft technologies: seemingly ephemeral, but capable of being embodied in a variety of specific physical forms. ”
That essay is a few years old now. But I’ve been thinking about it a lot recently as I learn about the technology of machine learning.
Machine learning is, of course, a type of software. But it’s not software in the way we’re accustomed to thinking about it. It’s qualitatively different. It’s better. It can do things that software has never been able to do. And it can be used in lots of things, from Google’s state of the art search engine to a tiny company based on an industrial estate just off the M4.
That’s what’s been reminding me about Venkatesh Rao’s essay. Machine learning is special not because it’s so complicated (though it is) or because it can do impressive things (though it can). It’s special because, as Rao put it, it’s general purpose. You can use the technique for just about anything. And lots of companies are doing just that.
That’s why, as investors, you can’t afford to not understand this. Machine learning isn’t just a chin-stroking ten minute read from the Science and Technology section of the newspaper. It’s starting to appear everywhere.
The writer Kevin Kelly puts it like this:
“The business plans of the next 10,000 startups are easy to forecast: take X and add AI”.