In March to April this year, I read Matt Ridley’s How Innovation Works,(which I highly recommend: Matt Ridley’s perspectives as a biologist on innovation & evolution are very worthwhile reading, though I am not sure I fully agree with his views on genetic modification & the nuclear industry being stifled by regulation).
The book introduced a concept I had never heard before, called Amara’s Law. Amara’s Law was coined by Roy Amara, an American researcher at the Stanford Research Institute, and states:
We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.
I read it and thought, “why the heck haven’t I thought of that?”
And I think it is the most important tech law, because it is true, and it can be useful.
A prime example of Amara’s Law is the first internet bubble burst and the rise of web 2.0. Post 2000, I still remember people talking about the “nonsense” of the first internet bubble e.g. Pets.com. People started pooh-poohing that the internet is actually anything concrete: who would watch movies over the internet? who would buy groceries or food over the internet?? The sentiment then was that, “the internet is dead“.
Then Google came. And then other web 2.0 companies rose. Fast forward to today, Netflix has entered the social lexicon (“Netflix & chill”), Amazon Go, DoorDash and groceries are commonly delivered over the internet. Many of these web2.0 giants were created in the post-2000s apocalypse, when “the internet was dead”.
If you had Amara’s law in your mind, you would have been wary of buying into web 2.0 in the height of the internet bubble, but you would know it’s a good time to jump in post-crash.
I think the same thing applies nowadays to a few tech areas. So, for instance, people talking about the death of crypto, or crypto winter are talking about the near-term effects of crypto, which were a ridiculous bull run in the last few years. Now the bubble’s burst, and we are seeing its after effects.
Does this mean that there is nothing real going there?
No, in fact, this reminds me of the post Dot.com era. And if we apply Amara’s Law, then maybe there is something there.
Thing is, you see the SAME phenomenon of Amara’s Law in the history of innovation, which Matt Ridley described in his book. You also see Amara’s Law repeating itself through Vaclav Smil’s histories of technology (which are dryer than sawdust mixed with Sahara sand, I believe), whether about the steam engine or railtracks or others: first the invention, then the hype, then the die-off, before the technology encounters a “killer application” and takes off.
So we can probably use Amara’s Law as a rule of thumb to gauge whether we should start exploring or investing into a technology domain. Metaverse? Yup, probably going through a post-bubble-burst, but if you want to build a career or portfolio in it in the longer-term, maybe a good time to enter now (but do hedge your bets please). Ditto for blockchain and crypto.