Zeitgeist

Zeit·geist = spirit, essence of a particular time

A collection of food-for-thought posts and articles on technology, business, leadership and management. 

The Second Arms Race: Artificial Intelligence

The second arms race is actually the third. The first one was the naval race during World War I, followed by the Cold War between United States and the Soviet Union, scaling up nuclear weaponry right after the end of World War II. 
 
The human race has been able to manage the prisoner's dilemma inherent to these competitions so far, and now faces a new test with the advent of a new technology breakthrough: Artificial Intelligence.
 
This is a series of articles on the topic providing a vision toward an artificial intelligence explosion in the context of current economic changes supporting a shift in our economy toward an altruistic model. 

The Intelligence Explosion & the Singularity: 

The Arms Race in Artificial Intelligence & The 4th Sector of the Economy

Ed Fernandez @Efernandez Palo Alto. California.

Introduction:


  • Technological singularity seems plausible and recent advancements in machine learning and AI suggest the ‘intelligent explosion’ event is within reach in this century.

 

  • A n arms race of narrow AI entities will happen in the framework of today’s traditional economy. Strong intelligence or AGI will eventually emerge followed by an explosion of intelligence.

 

  • New globalization processes driven by technology are fueling the sharing economy, as well as the 4th sector where public, non-profit, social and mission oriented enterprises are converging.

  • The 4th sector is poised to grow and thrive enabled by the sharing and collaborative economy; mission driven enterprises will have more resources enabling them to play a key role shaping the right path for AI evolution.

  • The AI arms race will provide ‘good’ and ‘bad’ entities in the context of existing and new economy environments (traditional and altruistic economies)

 

  • We, humans, as a species, can succeed managing the risks of a superintelligence event as we did in the past overcoming other technology threats (i.e nuclear)

We have the capacity to anticipate the future with a certain degree of precision.  Our prediction accuracy is lower as we increase the time horizon we aim at.

It’s pretty straight forward for us to predict short term events, those more likely to impact our survival chances; mechanical or physical, like anticipating when a car is going to cross at the juncture we are on, or, more long term and qualitative, anything related to replicating our gene pool, for instance the chances to date a specific person of the opposed sex.

However, when we look further ahead in time, and, because of our brainpower limitations and the effort required we struggle to foresee all potential possibilities and combinations.

Our brains, during evolution, developed a pattern-based approach to efficiently solve this problem. Identifying patterns allow us to see the big picture of a possible future, although we remain unable to predict the smaller details within (stacking up to conform to the pattern).

The Singularity, as defined by Ray Kurzweil, arguably the biggest ambassador of this concept in our times, is a period of time in future where technological advances will evolve so rapidly (exponentially) that humanity will not be able to keep up with them.

This definition needs to be broad because is a concept coined after careful analysis of the evolution of many technologies. It looks into historical data and speed of change rather than specific events themselves (although Singularity is mostly associated to the dawn of a super-intelligence entity capable of self-improvement).

We say can’t see the forest for the trees referring to short term events clouding our ability to see the big picture. The opposite is true for forward-looking statements.

With sufficient historical data we can develop patterns (and see the forest) but we will remain clueless about details (trees).

To state the analogy, let’s have a look at a practical example, a piece of technology we are all very familiar with, our phones.

 

Wireless phones (smartphones) have undoubtedly been the protagonists of the technology revolution in recent times.

 

The way smartphone technology has been adopted is well described by the diffusion of innovations theory (Everett Rogers - 1962), expressed graphically by an S curve (logistic function) or the widely popular bell curve (derivative of the S curve).

The process is well documented using available data from smartphone manufacturers (sales of devices over time) to the point we can track and predict with a certain degree of accuracy what the future will be for this particular technology.

The graph for US smartphone adoption, now above 70% penetration (Horace Dediu – Asymco), follows accurately the bell curve pattern to the point we can predict overall sales volumes in the years to come (this would be the forest in our analogy), but we are unable to predict which manufacturer will get the greater share in the same way we couldn’t predict Apple’s iPhone explosive growth since 2007 (those are the trees).

Thus, in a competitive and evolutionary environment as the current economy creates, with sufficient historical data, these well known patterns allow us to anticipate how technology breakthroughs will penetrate the markets and impact the population as a social group.

Details (trees) remain hidden though. We can’t predict which species (corporations) will be winners or losers; however, the scope and length of the ‘race’, market size and time span can be forecasted with fair accuracy.

The social aspects of technology adoption, with increasing mobile computing and ubiquitous Internet, are shrinking adoption cycles.

The number of new technology breakthroughs is also increasing over time. The intuitive idea of a singular future with unlimited wonders driven by technology makes more sense than ever.

This vision has fuelled Sci Fi literature and movies since the 50ies. The concept of Singularity, a future time where technology outwits human capabilities, may be now perceived as stating the obvious, a self-fulfilling prophecy.

The question is when.

 

But, not so fast…. First, let’s ‘take a selfie’ of the present and look at today’s status quo.

 

@efernandez

 

Next: An End to Moore's Law [...]

The demise of the smartphone is inevitable, and necessary

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 A shorter, edited & curated version of this article, published by CNBC.com on the 20th of May, 2015, is available here.

Big thanks to Eric Rosenbaum, CNBC strategic content editor, whose edits (and a notorious headline) made this article one of the top stories at CNBC.com and a social media hit the day of publishing (ranked among top 5 CNBC stories driving engagement)

The War is Over

Smartphones coupled with mobile services and apps (mobile ecosystems) have been the protagonists of the latest disruption tide for well over a decade. Horace Dediu is probably among the best analysts who have covered the phenomenon.

The Smartphone industry is a monumental business accounting for more than $380 Billions last year, on more than 1,2 Billion devices sold, according to IDC.

Furthermore, IDC is forecasting just under Half a Trillion dollars in revenues by 2018 ($451 Bn to be precise).

Despite these extraordinary numbersthis market has reached maturity and YoY growth is declining gradually, with manufacturers working with cut-throat margins and one single player monopolizing gainsseizing an estimated 93% of industry profits according to Cannacord.

No need to guess, just look around you, most likely you have one or more Apple devices on your desk or in your pockets.

Despite there are an estimated 8 Bn smartphones still to go into the market in the next 5 years, this industry is technically over.

...even in China.

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Applying the diffusion of innovations theory (a.k.a the diffusion of technologies bell curve), when a technology goes over 50% penetration, the remaining audience is composed of a  late majority of followers and laggards.

In other words, with smartphone penetration well over 70% in more developed countries like US, the saturation point has been exceeded long time ago, and the 8 Bn shipments to happen in next 5 years are driven by emerging markets, less penetrated (hence rising star Xiaomi) and shorter product lifecycles with little incremental innovation (hence commoditization, profits diminishing for all manufacturers, hence Apple & others moving quickly into wearables).

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History repeating

The Smartphone war is over. I’ve been myself involved in the mobile industry for nearly two decades (with Nokia and BlackBerry). I started when there weren’t yet internet capable phones and GSM was just a promising standard in Europe.

This is what happened:

From a software perspective, Operating Systems turned competition into a mobile ecosystems war (a.k.a mobile apps & services war) which ended in a duopoly with Android capturing majority of volumes and iOS taking a lion share of the profits.

Before that, devices didn’t have enough computing power nor couldn’t deliver the user experience to drive adoption of content, apps and services (but, for the record, back to the future 15 years ago there was a world of app stores, mobile services and everything we have seen exploding in the smartphone era, and all of it was already working, it was simply not adopted or diffused widely)

Google’s android and Apple iOS disruptions were enabled by asymmetric business modelsApple profiting from HW margins (while investing heavily on an ever growing iOS ecosystem & apps), Google making money out of their services rendered through a myriad of devices running android (commoditizing the OS by giving Android AOSP for free).

Apple case is ironic, as hardware sales and iphone in particular is piggybacking on carriers and the telco services industry (an estimated 80% of iphone market relies on carrier subsidies). Telco (carriers) is a several trillions industry providing the underlying infrastructure and data connectivity over which both hardware (smartphones) and software (Apps & services) have grown explosively (a.k.a OTT services).

Services have been actually the disruptor element driving adoption, ultimately dragging sales of hardware with them (Apple is today’s example, BlackBerry was a pioneer with this asymmetric model).

In its early beginnings BlackBerry didn’t even have intentions to get into the hardware business, their offering was originally focused on the service side only. BlackBerry’s messaging proposition evolved into the incredibly popular mobile push email which Wall Street embraced. Utterly 'forcing' users to buy anti-fashion qwerty devices as a necessary 'accident' to have real time email. This was back in 2001-2005.

This asymmetric offering turned into a phenomenal hardware business for BlackBerry, fostered by carrier driven sales of push email services embedded in their data plans.

Same pattern follows Apple, building an incredible ecosystem of apps & services which in turn make users desire and buy the hardware devices, and it’s in hardware where the margins and profits lie.

Ok, we’re done with smartphones, what’s next?

 

In any industry, once maturity has been reached, it’s poised to disruption, typically even before arriving to the tipping point of the adoption bell curve. Clay Christensen innovation dilemma explains this.

In essence the reason why it is so difficult for existing firms to capitalize on disruptive innovations is that their processes and their business model that make them good at the existing business actually make them bad at competing for the disruption.

But, how is this disruption going to happen in the case of smartphones?

Think of smartphones as the entry point to the online world. Now, wouldn’t it be better, easier and more convenient to access your digital world without the constraints of a small screen?

Everything outside the realm of your smartphone’s touchscreen form the domain of disruption for this industry.

To put it bluntly, our heads can’t continue down staring to our screens. Something must be done to fix this, and, the basic technologies to do it are already there.

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The post-smartphone era is beautifully described by Horace Dediu in this post (a piece of poetry for analysts). 

The writing is in the wall

Early signs of what´s to come can be seen even embedded in our devices in certain ways already.

Siri, Cortana, Google Now are voice portals replacing screen access and typing. These are actually NLP (Natural Language Processing) and AI technologies combined in the cloud.

Smartphones have started talking and displaying information to TVs, projectors and now to smartwatches and wearables.

Furthermore, we have now smart-glasses and head mounted displays capable of displaying virtual images (AR/VR) blended with our natural view of the physical world (MS Hololens, Magic Leap, Oculus Rift). These devices can also understand gestures.

All indicates we will be using our voice instead of typing, and we will be interacting with images well outside the limitations of today’s smartphone screens.

Now, let’s recap what the smartphone wars taught us over the last decade, and, let’s couple it with the early signs of what’s to come:

  • Services are the enabler and differentiator driving hardware sales. (the interface and point of entry for the user is king, think search box or voice recognition)

  • The majority of profits come from Hardware sales (think iphone revenues, hence Apple smartwatch)

  • Smartphone industry is mature and poised to disruption (market is ready to accept new propositions)

  • The new disruption wave of services will be driven by virtual assistants operated by voice and gestures combined with virtual reality (digital images outside phone screens) running on new smart wearable/apparel hardware (again, think voice enabled interfaces, Siri, Cortana, Google Now as disruptors at interface level)

  

We can discern how new disruption devices will be. At the intersection of some sort of smart – eyeware with powerful Augmented Reality display and an advanced voice recognition capabilities, coupled with wireless earbuds, as well as with other wearable apparel equipped with sensors all over our body.

But more important than any of these pieces of hardware, (remember, services drive hardware adoption not the other way around), services in this new smart-wearable context will be delivered through the new access points, voice and gestures.

Access determines hardware but, the key element gluing all together and managing how humans interact with this new mobile computing platform is Artificial Intelligence.

Artificial Intelligence in the form of a guardian angel (yes, the movie Her is an excellent representation of this concept, otherwise refer to HAL the ill computer in 2001 Space Odissey).

If you google ‘virtual assistant’ you’ll get around 18M entries, and you’ll struggle browsing results endlessly to find even the first reference to a truly artificial virtual assistant. It means we are still far from a practical ‘HER’ like experience and for the time being, we are hiring human assistants by the hour to do the tasks, offshore.

Most likely, we will be flooded by wearables, smart glasses, apparel and all kind of fragmented technologies while the new AI powered, cloud based operating system, takes over control of human interaction with the world.

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Whoever gets that AI guardian angel operating system to work seamlessly with humans, will disrupt the disruptors and will take control over the wearable hardware, which ultimately will need to bend to its (proprietary) specifications or be left out of the service proposition.

Jay Samit, author of Disrupt Yourself, said

“Disruption causes vast sums of money to flow from existing businesses and business models to new entrants”.

Let’s do a quick & dirty math, in the scenario we have pictured here, considering the smartphone industry represents an average of $350 Mn per year in revenues, there is potential to disrupt $1,750 Bn over the course of the next 5 years.

Big time for venture capitalists.

Fascinating times ahead, welcome to a brave new world of double back-flip disruption.

Dedicated to Graciela, my better half & lifelong soulmate, without whom I would be lost.

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