Law of Accelerating Returns

What Is the Law of Accelerating Returns?

The Law of Accelerating Returns states that the growth rate of exponentially advancing technologies is itself accelerating over time.

This principle is similar to compound interest, where growth builds upon itself, leading to increasingly rapid advancements.

As a result, there will come a point where the pace of technological change becomes so rapid that it becomes difficult to predict future developments based on current trends.

The Law of Accelerating Returns

According to the Law of Accelerating Returns, technological progress occurs in waves or stages.

Each wave is characterized by exponential growth, followed by slower growth or stagnation periods, akin to non-returnable investment bubbles.

However, a new paradigm shift occurs eventually, propelling the next wave of rapid advancement.

Historical Waves of Technological Progress

Historically, the first wave began with the invention of fire and ended with the establishment of cities.

The second wave commenced with the invention of writing and concluded with the printing press.

The ongoing third wave initiated with the advent of computers and biotechnology, and it continues to experience exponential growth.

Kurzweil predicts that this third wave will culminate around 2045, when humans will merge with machines.

The Law of Accelerating Returns

The Law of Accelerating Returns is considered a corollary to Moore’s Law, which posits that computer power roughly doubles every two years.

It suggests that we are immersed in a process of exponential change.

This understanding carries significant implications for economic policy, social organization, education, and various other domains of human endeavor.

Many futurists believe that we are on the verge of another paradigm shift that will usher in computational power surpassing our current capabilities.

The Feedback Loop of Innovation and Investment

Presently, we are witnessing substantial evidence supporting the validity of this law.

Exponential growth curves observed in technology are the outcome of a feedback loop between innovation and investment.

Investing more money into technology enhances the capacity for developing new and more powerful technologies.

Each new innovation facilitates further breakthroughs with even more significant payoffs.

This concept can be examined by considering three key components: empowering technologies, human capital, and investment capital.