I can’t pretend this is a new phenomenon, but I also can’t pretend it’s not becoming a pet peeve of mine.
If you’ve been following me for any amount of time, you’ll know I love the future, and I love random statistics. If I’m not talking about AI or entrepreneurship, it’s generally because I’m sharing some interesting chart or statistic.
At the intersection of my two loves comes a pretty severe issue ...
Bullshit statistics.
Futurists can’t help themselves. If you repeat something enough times, it begins to feel true. This is a key part of the reality distortion field that surrounds charismatic leaders. Their “functional fiction” becomes useful - not because it’s grounded in fact, but because it enables us to envision what’s possible and work to make it real.
In their defense, nobody minds if you talk about the future broadly. However, a problem arises when directional belief masquerades as fact or science. For example, if someone has thought about something many times, there is a tendency to confidently discuss or project exponential growth with specific timelines and metrics (rather than broadly discussing what will eventually come).
This tendency can make intelligent people seem delusional (or at least out of touch).
Elon Musk is a great example. While he has undeniably been a significant force for innovation and progress in the world, here are a few of the outlandish claims he’s made recently.
- “I think by 2040, probably there are more humanoid robots than there are people.”
- “I feel comfortable saying that AI is getting 10 times better each year.”
- Or, his 70% chance of moving to Mars, and his expectation of colonization starting in 2029.
Some of those may be true, and all of them might turn out to be right ... but they are still wild-ass guesses.
Elon is by no means the only one doing this.
I routinely make up statistics to help me simplify or understand things better. The key is to acknowledge these “shortcuts” are still essentially educated guesses. Here’s an example. When I imagine how advanced AI will become by the end of my lifetime, I have to consider my current age (and expected lifespan) and how rapidly AI is improving. If I assign the number “100” to how good AI will be at the end of my life, what value would I assign to it now? Turns out, I’d give it a value of three. Of course, there’s always the possibility I could get hit by a bus tomorrow. I’m not a scientist. I haven’t done detailed research about chips or when we move to quantum computing. Realistically, I don’t have to. The precise numbers aren’t what matters here. I don’t take that statistic literally. It’s directional, and it gives a sense of the rate of change and the velocity of invention. In that sense, even though it isn’t factual, it’s useful.
I’d say any serious scientist knows that you can’t reliably predict the future with that level of precision – but it doesn’t take a scientist to know that.
First, the statistic or shortcut has to pass a simple “sniff” test. Then, you have to account for likely bottlenecks or constraints. Too many of these crazy estimates assume almost infinitely scaling results with no setbacks or limitations in materials or energy.
Don’t underestimate the value of a good rule-of-thumb or mental model. Moore’s Law is a great example of that. It stemmed from an observation and prediction about the semiconductor industry made by Intel co-founder Gordon Moore in 1965. A grossly simplified version is that computing power doubles every two years. That has held true for more than 50 years.
I have two Gaping Void illustrations that express fundamental truths about this: “First, Bring Order to Chaos” and “Wisdom Comes from Finer Distinctions.”
Here’s the reality. The future is exciting ... and it’s coming fast. In many ways, it will likely be bigger and cooler than you could have imagined. In other ways, it will radically underperform your expectations.
I can say that not because I know any more than you, but because I’m focused on what doesn’t change. We’ve had many periods of innovation ... each bigger than the last. It’s likely there will be aspects of the next 20 years no one can predict. But, we know what innovation looks like.
We’ve been here before.
As a reminder, if it sounds too good to be true ... there’s a good chance it is. Yet, to pretend there’s not a chance outlandish claims will come true would be to make too precise a claim again.
In many ways, predicting how your business or product will change is much easier than how the world will change.
The best way to predict the future is to create it - and the most effective way to create it is to focus on the elements within your control.
While it’s important to play an exponential game ... you can start “locally”.
Food for thought!
The World Is In $100 Trillion Dollars of Debt ...
The world is swimming in debt ... well, to be more specific ... the world's governments are swimming in debt — $100 Trillion of it.
via Barrons
To put that in perspective, here's an illustration to give you a sense of the enormity of that number.
via Barrons
The U.S. accounts for just over 34% of that number. Meanwhile, I remember writing about the Republican National Convention marking the moment our national debt crossed the $16 Trillion level in 2012.
To put the current number in context, if our national debt were divided among individuals, we'd each owe more than $100K ... and if the ten wealthiest people donated their entire fortunes, we'd only have covered about 5%.
The concept of "Debt" can be confusing to a layman. Most people understand what it means when they take on debt with a local bank, but it can be harder to understand the role debt plays in global economics.
Compounding the confusion, the implications of debt change on a macro level.
Many worry that our "excessive" government debt levels impact economic stability, the strength of our currency, and unemployment. The national debt can only be reduced through five mechanisms: increased taxation, reduced spending, debt restructuring, monetization of the debt, or default.
The idea behind our current global debt structure is that if two nations are mutually obligated and dependent on each other, they are less likely to go to war. And that has held relatively true so far. Of course, it's not a perfect system (and it could break down), but it's working better than previous systems (such as the balance of power).
In some ways, it's fake money, so our debts don't seem insurmountable or fatal. Our economy is so reliable that we're allowed to continue borrowing. Debt is an integral part of the economic machine - it can be argued that we wouldn't have money without debt.
Ray Dalio created a simple (but not simplistic) and relatively easy-to-follow 30-minute animated video that answers the question, "How does the economy really work?" Click to watch.
via Ray Dalio
The global economy has grown enormously during the last 50 years as developing nations prosper. The average global GDP per capita has gone from ~$1000 to over $10,000 in my lifetime.
So, it makes sense that the amount of debt is also increasing with the size of the money supply required to conduct all the transactions in the global economy.
But, even though you may not need to be immediately worried about that number, I still think it's worth trying to put it in context.
Humans are notoriously bad at large numbers. It's hard to wrap our minds around something of that scale. We're wired to think locally and linearly, not exponentially (it's one of the reasons I love AI so much). Here are a couple of ways to help you understand a trillion dollars.
First, let's look at spending over time. If you were to spend a dollar every second for an entire day, you would spend $86,400 per day. If you have a million dollars, you can do that for approximately twelve days. With a billion dollars, you can do that for over 31 years. With a trillion dollars, you can do that for 31,000+ years. That means it would take over 300 thousand years to spend the global public debt at that rate.
I'm sure many of you make over six figures a year. But, it would still take you 10 million years - if you spent none of it - to make $1 trillion, let alone $100 trillion.
Let's try explaining it through time. Fifty thousand seconds is just under 14 hours. A million seconds was 11 days ago. A billion seconds ago from today? 1992. One trillion seconds is slightly over 31,688 years. That would have been around 29,679 B.C., which is roughly 24,000 years before the earliest civilizations began to take shape. Pretty crazy.
Here's a video from the 1970s that helps you understand scale through the power of tens and an exploration of our universe.
Eames Office via BetterExplained
Hopefully, that was disturbing and helpful!
Posted at 07:28 PM in Business, Current Affairs, Ideas, Just for Fun, Market Commentary, Science, Trading, Trading Tools | Permalink | Comments (0)
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