Exponential Trends - Investing into Fast Exponential Growth

Aktualisiert: 14. März 2021

Are we at the cusp of a gigantic transfer of money between industries? Will there be a catastrophic failure of whole industrial sectors and explosive growth of new sectors?

As sources for this article I used and recommend: Dave Lee ARK Invest Casgains Academy (Source of all pictures, when not explicitely cited)


A small warning: I will be wrong with many of my statements. Please make your own research and decisions. This will be much more educational than to follow me into every cul de sac of my thinking 😉. But, if you find evidence that my reasoning is wrong, please share with me! 😊

I will present some exponential drivers of change, describe the S-curve of industrial revolutions, discuss industries caught in the ‘Valley of Death’ and as a conclusion give some hints how to invest safely and profitable during the next years.

Exponential Drivers

Looking at the global industrial landscape I cluster Investment into 5 exponentially growing platforms. The order of these platforms in the list below is intentional - I think the scaling pressure of this platforms will impact the economy in a staggered way.

In this article I will investigate these economic drivers and propose some assumptions regarding timing of investment, because the platforms are not fully synchronized regarding the start of their fast growth phase. During this process whole industries will go bankrupt or at least be diminished to a minor role.

Drivers of economic transformation:

1. Energy production, storage, usage & ClimateChange

2. Artificial Intelligence

3. Robotics

4. FinTech & BlockChain

5. Genome analysis and editing

Three of the 5 exponential drivers will disrupt industries.

  • Sustainable energy production, storage and usage will disrupt fossil fuel-based industries, transport industries like railway, utilities like current electricity providers.

  • FinTech companies are disrupting and will disrupt banking as we know it

  • Our capability to change the human genome will disrupt the pharma and health care industry.

Two of the five drivers are enablers, capabilities. Artificial intelligence and robotics will impact nearly all industries. The theme will be: “Use it or go out of business”.

The S-Curve of industrial revolutions

Last time such a synchronicity between several significant economic drivers was observed around 1900. Electricity as a medium to transport and use energy was on the rise, the internal combustion engine transformed transport, and communication around the globe was transformed by the telephone network. Typical for such a phase is that the effectivity of investment and operating expenses and throughput measured in 'things' produced for significant industries sky-rocket. Share price is a completely different story and mostly misleading especially at the start of such a cycle. Companies contributing to this cycle are identified by fast and exponential growing throughput.

Such a cycle may last 30 years from initial slow growth to the ‘Fast Growth’ stage and later maturity and subsequent replacement by another wave of disruption.

You may say: This story I have heard in 1999 and then the dot com bubble burst. Big promises, no viable products!

But there are significant differences regarding the current situation. Looking at such cycles in detail you will find indications if the phase of slow growth is already in progress or if a more stable phase between two such disruptive events will last some (or many) years longer.

The question is: Are we chasing dreams or are the 'new' companies producing real products?

Artificial intelligence had economic false starts since the 1950ies. Currently AI is incorporated in many tools we are using daily. In word processors, in internet searches, in logistics, in cars, in bio chemistry, in games, … Yes, this is ‘weak’ AI, not general-purpose AI, but in many small areas AI starts to deliver better results than average humans. This was not the case 20 years ago.

The human genome was finally declared as deciphered in 2003. Huge hype, no products. Now, nearly 20 years later, CRISPR allows to edit genes at our command. First clinical trials are in progress. Several genetically caused illnesses were cured by changing the genome of the patients. It cost 8 billion dollars to decipher our genome. Today, the company InVitae offers a personal genome scan for 250$. Three years ago only approximately one thousand human genomes where scanned. In 2020 alone about two and a half million. These are small numbers, but exponential growth of real delivery has started.

Twenty years ago only software and internet usage drove change. We waited for a productivity breakthrough but it did not come. At that time communication using computers was the domain of an (large) IT literate minority. This all changed with the smartphone. Now my family has regular video chats with grandma (85).

This time capabilities like software development & artificial intelligence, robotics, and genome related tools drive separately and together nearly all industrial sectors in synchronicity.

This looks like an inflection point. The exponential curve turns upwards. We are currently at the launch point of a golden age, but at the same time we stand before a precipice, a black hole, for many big and currently dominating companies.

The Valley of Death

Currently industries dependent on fossil fuels and other mature industries make up a significant part of the world’s share indexes and therefore of invested capital. This capital will shift within the next ten years to companies which developed their exponential capabilities early on.

Only a few of the dominating car and fossil fuel driven companies will survive. Most of these currently big companies will merge and/or go out of business. An excellent report from RethinkX on the miscalculation used for conventional energy generation using LCOE = Levalized Cost Of Electricity. This miscalculation has lead and is leading to gigantic wrong investments, which may have to be paid for by consumers or tax payers. Several trillion $ are at stake.

Conventional forcasts are wrong. Starting being wrong decades ago.

Such forcasts start at the last data point and extrapolate wishful thinking of an industry into the future. Being wrong again coming next year.

Look at usage of coal. Coal follows the negative S-Curve of a dying industry.

But coal industry, forcasters and many politicians don't see the writing on the wall. (Source: RethinkX )

On the other hand. Energy production from solar. The forcasters think in linear trends, which are wrong every year.

Energyproduction from solar is growing exponetially following the S-Curve of disrupting industries and is already far cheaper than coal, oil, gas in more and more countries on earth. (Source: RethinkX )

One driver vor green energy is fast decreasing battery cost. Batteries allow South Australia to rely completely on renewable energy without using peaker plants (usually expensive gas powered plats to deliver peak energy, when needed. Batteries deliver needed energy in milliseconds. No black-out anymore in South Australia. Battery cost and energy density of batteries approach the level to economically power aircrafts. Battery costs will be not much above 2 % of 2010 prices in 2030. (Source: RethinkX )