Embrace uncertainty

Reading Time: 4 minutes

OK, here's a quiz

I was going to write some whizzy code for this, but then I thought: be agile. What's the quickest, cheapest thing you could do to test this idea?

So I'm going to trust you.

All I'm asking is that you read the question and answer it without thinking too hard about it … your gut instinct is what I'm after.

Take no more than 10 seconds to reach a conclusion.

Otherwise, I may have to write some whizzy code to stop you from cheating …

Question

You have £100 to invest. You decide to invest it in a bank account that pays 1% interest per day.

After 1 year, how much money will you have? Scribble it down. Right now. Doesn't have to be on a post-it.

(And it would be great if you could tell us your estimate in the comments at the end of the article.)

Done that?

OK, we can continue. You need to scroll down a bit.

 

 

 

 

 

 

 

 

 

 

 

… and a wee bit more …

 

 

 

 

 

 

 

 

 

 

 

 

 

Answer

Everyone I have done this exercise with has guessed at a figure of £200-£400.

They were all clever people.

None of them came close. The actual value of a £100 investment attracting 1% interest a day after 365 iterations is £3,740.93.

Here's the maths.

image

I posed this question to illustrate something. As a species, we are really poor at estimating exponential change. We expect change to be incremental and linear, as it has been in our evolutionary history. The next graph illustrates this.

image-2

The red line is linear – how we comprehend change. One thing at a time. The blue line is exponential change: one thing on top of another.

Interestingly, there's not much difference for a while, but when these lines do diverge they do so dramatically. Add another year to the timeline and the blue line will not just be off the graph, it will be off the planet: after 2 years your £100 investment would be worth £130,530.05

Rhinoceros
The charging rhino of change

Exponential change doesn't add up. It multiplies, and that's what messes us up. In our experience, a charging rhino doesn't double its speed every second. Or at least not for long. It reaches a limit then stops getting any faster.

Exponential change doesn't work like that. Its rate of change keeps accelerating, because every innovation enables 2 or more others.

On the shoulders of giants

We built the internet. So we could connect servers in different continents on that. We could also send emails that enabled near instant communication, with a bit of room left over for the world wide web once Tim Berners-Lee got round to inventing that.

We invented CSS and javascript and a bunch of other technologies that made it easier to design experiences that were actually suited to human needs.

Then we made mobile devices (they are very far from 'phones' now – the 'phone' on your phone is software) and a mobile data network that connected to the internet and the www …. and suddenly there were billions of devices on the network, not just tens or hundreds of millions.

There are more mobile phones  on the planet now than there are toothbrushes.

Each of those changes, and hundreds, thousands, of others, created platforms for new innovations.

Increased bandwidth on the internet made YouTube possible.

The connection of the internet and phone networks made twitter possible.

It all adds up, except it doesn't; it multiplies up, and the network effect takes over. Everyone's on Facebook because that's where everyone else is.

So here's the point

So, the point I think is this.

We worry a lot about risk.

This is not a bad thing. We spend taxpayers' money. It is absolutely right that we are accountable for that.

But … and this is the big but.

We're an economic development agency. That means we can't operate without risk.

We operate at the mercy of the Scottish economy, the UK economy, the European economy, the global economy.

We operate at the mercy of the weather.

We also operate at the mercy (or otherwise) of change in the digital environment.

These are all huge, unknowable uncertainties. We've a pretty good idea of what the weather will be like for the next few hours but after that the picture becomes much fuzzier. In 3 months' time, anything could be happening, because our climate is complex edging towards chaotic.

The economy is no less difficult to predict. And what the next digital innovation will be is similarly opaque. Web RTC is coming over the hill, Meteor looks like a promising platform, Google+ is dissolving … who knows where any of this will go?

We simply don't know what will happen next.

So we have a choice, We can continue with an increasingly doomed approach which tries to nail risk down before we start on something.

Or we can accept that what we try may fail, and we won't know if it will until we try it.

We need survivable experiments. Paddle first, then wade, then attempt a swim.

If the water's still warm enough …

But we need to do so understanding that the uncertainty is the opportunity. Because the fact that we don't know what will happen if we act in a particular way opens up the possibility that we can change the future.

If we pretend that we know the future, we close that possibility off.

This is a deeply profound shift in thinking.

But it can be expressed in fewer than 140 characters.

Hey, you got this far – use the comments to tell us what you estimated your £100 investment would be worth in a year.

Rhino image by Ian Turk, reused under a Creative Commons licence.

One Reply to “Embrace uncertainty”

  1. One consequence of this is that we have to become imagineers. We will engineer and design the future by re-imagining it constantly.

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