Law of Accelerating Returns

November 21, 2023 - Around 3 mins mins to read

Understanding the Law of Accelerating Returns

The concept of the Law of Accelerating Returns can be compared to compound interest. It suggests that the rate of growth of any technology that grows exponentially is itself accelerating over time. Eventually, this growth will become so rapid that it will be impossible to predict based on current trends.

Ray Kurzweil, a well-known advocate of the technological singularity, has associated this concept with his vision of the future. He describes the singularity as a period in which technological change will happen at such a fast pace that it will permanently transform human life.

According to the law, technological progress happens in waves, with each wave characterized by rapid and exponential growth. These waves are followed by periods of slower growth or stagnation, similar to non-returnable investment bubbles, until a new paradigm shift occurs.

The first wave started with the discovery of fire and ended with the establishment of cities. The second wave began with the invention of writing and ended with the printing press. The third wave, which we are currently experiencing, started with the development of computers and biotechnology and continues to grow exponentially. Kurzweil predicts that this third wave will reach its peak around 2045, when humans will merge with machines.

The law of accelerating returns is closely connected to Moore’s Law, which predicts that computer power will double approximately every two years. It suggests that we are in the middle of a process of exponential change. This understanding has significant implications for various aspects of human life, including economic policy, social organization, and education. Many futurists believe that we are on the verge of another paradigm shift that will bring about computational power far beyond our current capabilities.

Kurzweil envisions that the 21st century will see a speeding up of technological progress. By 2045, he predicts that we will be able to follow a “linear” trend line as far into the future as we can project it.

Currently, we are seeing the validation of this law to a large extent.

The exponential growth curves observed in technology are a result of a feedback loop between innovation and investment. As we invest more money into technology, our technology becomes more capable of creating new and more powerful innovations. Each new innovation then enables us to make further advancements with even greater rewards. This concept can be understood by examining three key components: empowering technologies, human capital, and investment capital.