The Singularity Conversation

What is “the Singularity”? According to Wikipedia: “The technological singularity is the hypothesis that accelerating progress in technologies will cause a runaway effect wherein artificial intelligence will exceed human intellectual capacity and control, thus radically changing civilization in an event called the Singularity. Because the capabilities of such an intelligence may be impossible for a human to comprehend, the technological singularity is an occurrence beyond which events may become unpredictable, unfavorable or even unfathomable.”

Why does it matter to your clients? Because the future they are preparing for is likely to be very different than the one being envisioned when you are working with them to create their plan. Most significantly, they are unlikely to die when they think they are; therefore, all of the projections for how much money they need are wrong. Way wrong.

Why does it matter to you? Because you care about your clients, it’s your job to help them make the decisions today to prepare for a better future. And your future, professionally and personally, is likely to be very different than you think. Since you are just as unlikely to die when you thought you were, you are going to need a lot more money than you planned. You will likely work much longer than you intended in a world changing so rapidly that you may not feel equipped to handle it.

What’s driving this progress? It almost seems trite to mention Moore’s law, but in case you have been living under a rock for the last 30 years, again from Wikipedia: “In 1965, Gordon E. Moore was working as the director of research and development (R&D) at Fairchild Semiconductor. He was asked by Electronics magazine to predict what was going to happen in the semiconductor components industry over the next 10 years. In an article published on April 19, 1965, Moore observed that the number of components (transistors, resistors, diodes or capacitors) in a dense integrated circuit had doubled approximately every year, and speculated that it would continue to do so for at least the next 10 years. In 1975, he revised the forecast rate to approximately every two years.”

That’s why you own a mobile device with more computing power than was used to put a man on the moon in 1969. The Singularity is to technology what compound interest is to money. Compound interest is an accelerating return. The Singularity is accelerating technology. Accelerating, or exponential, technologies are disrupting everything.

All rookie financial advisors had to learn the power of compound interest. It can be a hard concept to grasp because human beings think linearly and not exponentially. Compound interest is exponential. To understand this phenomenon, ask yourself a simple question, “Would you prefer to have $1 million in cash right now or a penny that doubles every day for 30 days?” We know there is a catch in that, but we don’t understand what it was. It’s hard to grasp that a penny doubling every day could be worth $1 million in our lifetime, let alone in just 30 days.

For the first 27 days, the million bucks cash looks like the better choice. And then BAM! … on the 28th day, the doubling penny eclipses the million. By the 30th day, it’s over $5.3 million!

That’s the power of compound interest. But wait, there’s more! Suppose the first 30 days of the doubling penny is an analogy for how far technology has come since the 1960s. At first, it’s not impressive. The second day, the doubling penny is worth 2 cents; the next day, 4 cents; the day after, 8 cents. Big whoop, right? Then on the 28th day it’s more than a million bucks. Now we’re talking real money and the doubling from here on is astounding. That’s what’s been happening with technology.

The analogy really gets interesting when you consider what happens to the doubling penny in the second 30 days. The growth is accelerating, so day 31 starts at $10,737,418.24. It’s no longer a doubling penny … it’s doubling millions, then doubling billions, and then doubling trillions. It’s why the rich get richer. Here’s how it turns out.

That’s 5 quadrillion, 764 trillion, 607 billion, 523 million, 34 thousand and 235 dollars. For perspective, one quadrillion is a thousand trillion, ten thousand billion, and one hundred thousand million. We’re talking real money now!