Black Swan Technologies

by: Professor Vinod Khosla

      Think back to the world sixteen years ago. Google had just gotten started; Facebook and Twitter didn't exist. There were no smartphones; no one had remotely conceived of the possibility of the hundred thousand iPhone apps that exist today. The few large impact technologies (versus slightly incremental advances in technologies) that have occurred in the past ten years are black-swan technologies. In his book The Black Swan, Nassim Taleb defines a black swan as an event of low probability, extreme impact, and only retrospective predictability. Black swans can be positive or negative in their effects and are found in every sector. Still, the most pressing reason I believe black-swan technology to be a con- ceptual tool that should be in everybody's cognitive toolkit is simply that the challenges of climate change and energy production we face are too big to be tackled by known solutions and safe bets. 

        I recall twenty years ago, when we were starting Juniper networks, that there was absolutely no interest in replacing traditional telecommunications infrastructure (ATM was the mantra) with Internet protocols. After all, there were hundreds of billions with dollars invested in the legacy infrastructure, and it looked as immovable as today's energy infrastructure. Conventional wisdom recommend incremental improvements to maximize potential of the existing infrastructure. The fundamental flaw in  conventional wisdom is the failure to acknowledge the possibility of a  black swan. The likely future is not a traditional econometric forecast but rather one of today's improbable becoming tomorrow's conventional wisdom. Who would be crazy enough to have forecast in 2000 that by 2010 almost twice as many people in India would have access to cell phones as to latrines? Wireless phones were once only for the very rich. With a black-swan technology shot, you need not be constrained by the limits of the current infrastructure, projections, or market. You simply change the assumptions. 

      Many people argue that since we already have some alternative energy technology, we should quickly deploy it. They fail to see the potential of black-swan technology possibilities; they discount them because they mistake "improbable" for "unimportant" and cannot imagine the art of the possible that technology enables this alone runs the risk of spending vast amounts of money on outdated conventional wisdom. Even more important, it won't solve the problems we face. Focusing on short-term, incremental solutions will only distract us from working on producing the home runs that could change the assumptions regarding energy and society's resources. While there is no shortage of existing technology providing incremental improvements today (be it thin-film solar cells, wind turbines, or lithium-ion batteries), even summed they are simply irrelevant to the scale of our problems. They may make for interesting and sometimes large businesses but will affect the prevailing energy and resource issues at scale. For that, we must look for and invest in quantum jumps in technology with low probability of success; we must create black-swan technologies. We must enable the multiplication of resources that only technology can create. 

       So, what are these next-generation technologies, these black swan technologies of energy ? They are risky investment stand a high chance of failure but enable larger technological leaps that promise earth-shaking impact if successful: making  solar power cheaper than coal, or viable without subsidies; economically making lighting and air conditioning 80 percent more efficient. Consider 100-percent-more-efficient vehicle engines, ultra-cheap powe storage, and countless other technological leaps we can't yet imagine. It's unlikely that any single shot works, of course. But even ten Google-like disruptions out of ten thousand shots will upend conventional wisdom, econometric forecasts, and, most important, our energy future. 

        To do so, we must reinvent the infrastructure of society by harnessing and motivating bright minds with a whole new set of future assumptions, asking "What could possibly be ?" rather than "What is ?" We need to create a dynamic environment of creative contention and collective brilliance that will yield innovative ideas from across disciplines to allow innovation to triumph. We must encourage a social ecosystem that encourages taking risks on innovation. Popularization of the concept of black-swan technology is essential to incorporate the right mind-set into entrepreneurs, policy makers, investors, and the public: that anything (maybe even everything) is posible. If we harness and motivate these bright new minds with the right market signals and encouragement, a whole new set of future assumptions, unimaginable today, will be tomorrow's conventional wisdom.