<Much of the content is inspired by Ajay Shah’s ideas in his podcast Everything is Everything>
As a child and teenager, we believed that the speed of growth of technology was linear. Every year something improved slightly. But this was wrong, and different industries and different aspects of technology and economy respond to different models of growth. Here are some models of growth and the kind of situations where they are relevant
1. Moore’s Law: Moore’s Law is not a law of nature, but a prediction based on observation. The Moore’s law states that the number of transistors in an integrated circuit. But Moore’s Law can be applied to any economic or technological metric where the progress (y axis) is exponential with respect to time (x axis). It is generally represented as a semi log graph where the log of the y axis and vs x is linear, as represented in the following image from Wikipedia. This is not only true for technology, but also for economics. For example, 15 years ago our incredibly fast internet connection was around 512 Kbps, and now it’s 200 Mbps for roughly the same cost accounting for inflation.
2. Wright’s Law: The efficiency of the system goes up linearly as the number of units produced go up exponentially. This could apply to companies that manufacture goods, and also to professionals with skills, such as pianists, carpenters, sportspersons etc.
3. Goddard’s Law: Efficiency goes up linearly as the volume of production goes up exponentially. This in effect says that production will go up with the rate of production, not the total production. This again could apply to manufacturers — as they increase their capacity the efficiency goes up, and also to individuals for activities that depend on fitness rather than skill — such as jogging — the more I jog every year, the faster I will be.
4. Discreet Jumps: Efficiency goes up in discrete jumps due to technological innovation, till it hits a ceiling. For example, candles (9% efficiency) lead to bulbs to LED which have a 90% efficiency.
These laws are not in contrast with each other. Some scenarios will apply to all 3. There are organisations where all 3 apply at the same time, and some where a different law applies at different stages.
For example, cab ordering and online grocery had innovation in discrete jumps, but saw exponential growth. They were contingent on the fact that the smart phone that is available to a few people today will exponentially become available to everyone (Moore’s Law). But they also followed Wright’s Law (efficiency goes up as total volumes produced go up), and also Goddard’s Law (the cost of logistics goes down as a factor of daily volume).
