Exponential

His theory was that for every doubling in units produced, costs would fall by a constant percentage. The exact nature of the decline would depend on the engineering in question. In the case of the aircraft Wright studied, it was a 15 per cent improvement for every doubling of production. This 15 per cent improvement is known as the ‘learning rate’.

Previously, the S-curve of demand tapered off when a market reached saturation. Today, that point of market saturation is much more distant – because global markets are so much larger. And this means that the process explained by Wright’s Law can continue for much longer, and the exponential gains can continue to mount up.

Exponential technologies are being driven by three mutually reinforcing factors – the power of learning by doing, the increasing interaction and combination of new technologies, and the emergence of new networks of information and trade.

In sociological terms, institutions are all the lasting norms that define how we live. For our purposes, I consider an institution to be any kind of arrangement between groups of actors in a society that helps them relate to each other. These institutions are what give stability to the coming-and-goings that make up our lives.

For the people and companies who understand this shift, the exponential gap creates a huge opportunity. Those who harness the power of exponentiality will do much better than those who don’t.

Our rules and norms are shaped by the technologies of the time – those who design essential technologies get a chance to shape how we all live. And these people are in the minority. We are witnessing the emergence of a two-tier society – between those who have harnessed the power of new technology, and those who haven’t.

Exponential processes take time to marinate.

The difficult-to-automate nature of many jobs is captured in a maxim known as ‘Moravec’s paradox’ – first outlined by Hans Moravec, a professor renowned for his work on robotics and AI at Carnegie Mellon University in the 1980s. As he wrote in 1988: ‘It is comparatively easy to make computers exhibit adult level performance on intelligence tests or playing checkers, and difficult or impossible to give them the skills of a one-year-old when it comes to perception and mobility.’

How can this be so? It goes against the folksy economic belief that there is only so much work to go around, and that upsetting the equilibrium of the labour force – by increasing female labour participation, or allowing immigration, or using robots – will reduce the available work for workers. But this belief is nonsense. It’s a form of zero-sum thinking that has largely been dispensed with by economic theory and historical evidence. Economists call it the ‘lump of labour fallacy’.

The historical record is unambiguous. Technologies have created more jobs than they have destroyed, but the short-term damage can be profound.

Between 1790 and 1840, wages of workers rose by a modest 12 per cent, while GDP per worker increased by more than half. It was not until the 1860s that ordinary people’s wages caught up with the gains of technology; and not until 1900 that they levelled up entirely. There was a century where workers lagged behind the gains; an uncomfortable century, even if it worked out in the end.

The most solar-rich nation, Azerbaijan, only gets four times more sunlight per square mile of land than the most impoverished, Norway. That may sound significant, but it is a relatively minor variance. The equivalent density between the haves and have-nots for oil is more than a million to one.

The exponential world is disordered. More actors have more methods with which to strike larger attack surfaces. In this world, war is cheap – in financial and human terms.

The political economist Elinor Ostrom won a Nobel Prize in 2009 for her work demonstrating that the commons – our shared resources – can be well-stewarded without the need to privatise them, or, indeed, nationalise them. In Ostrom’s view, the commons are vibrant and self-governing, a complex system that can thrive because it is governed by a patchwork of formal and informal norms. In real commons, such as grazing lands, shepherds would talk to each other to ensure fields were not overgrazed. The commons, it turns out, represent a way of organising and managing resources for the benefit of the people who use them.