The rate of technological change is accelerating.
Yes, I know. It's been said before, but it bears repeating. The reason is that we tend to assume that progress will continue as an upward sloping straight line. It won't, in fact, it will be much more rapid ― even exponential at times.
Think about the changes in computer technology we've seen in the last few years. Computers have been getting cheaper and faster in relatively predictable ways for a while now.
Don't be lulled.
The electronics and computing industries are getting primed for a massive transformation in the years ahead. Quantum technologies that were only theories in scientific journals just a few years ago are being prototyped in labs now. These new components will change the way we live forever. They will also create transformational profit opportunities. If you missed the chance to buy into the computer industry when it was young, this is a second shot.
Currently, the mainstream electronics industry processes data by moving bunches of electrons about in huge batches. Think of the components in your PC as electrical plumbing. Data are usually stored as batches of electrons. Imagine your computer's hard drive as a bunch of very small buckets, some full of water, some not. This will change.
Improved materials technologies from emerging nanosciences are allowing us to replace batches of electrons with the smallest individual unit: the electron. As a result, computers will work at far higher speeds. Additionally, far less electricity will be required to do the same amount of work.
Much of this exciting news is being ignored by the market. It's an unfortunate truth that investors often lose sight of long-term opportunities to create wealth because they get distracted by the short-term noise and news in the markets. When it comes to big transformational technologies, don't worry about timing. The returns that disruptive technologies yield justify getting in early.
Quantum Superposition
One important quantum effect that will be used in future generations of computer technology is "quantum superposition." In a nutshell, this means that a quantum particle can exist in multiple states and everything in between at the same time. This is because a quantum particle, such as an electron, behaves as both a particle and a wave.
Have you heard of the particle wave theory? In practical terms, it means that bizarre and counterintuitive effects occur on very small scales, and they can be harnessed.
This "quantum superposition" effect will, for example, utterly transform how we do "computer math." Currently, nearly everything done by computers is done in binary. The smallest piece of information a computer handles, the bit, is either one or zero, something or nothing. A quantum computer, though, would be able to store and work with number systems other than binary.
This means computers would become exponentially more powerful because each "quantum bit" (qubit) could store a much greater range of numbers than the two that binary math restricts us to. Imagine a laptop with the computing power of the world's 10 most powerful supercomputers. Then you begin to grasp the potential of quantum computing.
Decoding Quantum Encryption
Quantum computing also offers the means of making our communications and business transactions far more secure than they are today. Quantum cryptography exploits several remarkable effects of "quantum entanglement." One is the ability to generate pairs of utterly unique and unbreakable keys. Basically, two random but identical particle keys can be created using entanglement. Since reading a quantum particle alters it, any effort to eavesdrop on communication is detected and that communication is either disrupted or ended.
Using this technology, we can create completely secure communications networks. Recently, Toshiba's R&D labs announced the successful testing of quantum cryptography over fiber-optic networks. Austrians were able to send entangled photons between two Spanish islands nearly 90 miles apart.
Spintronics
One of the likeliest quantum technologies to go mainstream is the field of spintronics. This is the exploitation of different electron states. The only property of the electron that we use in electronics now is charge. Electrons, however, have another property called "spin." Because we can change and read this spin, it can be used to compute. Already, the tech giants are investing in this technology. And there's a reason.
I've written a lot about HP's work on memristor technology. Memristors are going to provide the next great leap in computer technology. HP has been making rapid and well publicized advances. It could, in fact, have product on the market next year. This initially concerned me because HP is too big to get us anything close to a memristor pure play.
Fortunately, memristors can be built using techniques other than HP's. My associate Ray Blanco has been poring through patents and tech journals. What he's found is enormously exciting.
Basically, a number of other groups have made similar memristor advances using different technologies. One is based on spintronics. The big question now, however, is not which of these technologies will emerge as the best solution. The question we're looking at today is who will build these new components. Who, in effect, will be the Intel of the future?
Patrick Cox will be making his first appearance on the Whiskey Bar panel this year at our annual Agora Financial Investment Symposium. He'll be there along with our other regular Whiskey contributors like Byron King and James Howard Kunstler.
This year is extra special, Shooters, because we're celebrating Ten Years of Reckoning. It's the tenth anniversary of our flagship newsletter The Daily Reckoning (and of the symposium itself) and we mean to make the occasion special.
A Shooter sends this:
Gary,
Keep up the excellent work. A quick question about the 10-year anniversary gala… Unfortunately, I won't be able to make it (bummer!). Are you planning on making any of the sessions accessible via the internet (can we watch/listen in over Webex)? Send in questions via email? In short, for those of us unable to travel to Vancouver, is there any way to participate?
Thanks for the kind word. Short answer: NO!
Sadly, in order to get all the good stuff ― stock picks, recommendations, analysis and ideas, networking opportunities, and the ineffable joy that is Agora in Vancouver ― you have to be with us in Vancouver.
BUT we will be doing daily email updates and we're considering some real time updates from your roving Whiskey Bar manager via Twitter. We may also post some video clips on YouTube, but if you want to participate, you simply have to be there.
I don't care how you get there. Just get there if you can.
In other news…
Baltimore got edged out of the number one spot.
That's right. Among cities with over 500,000 residents Detroit just barely eked out a victory over Charm City with 37.4 homicides per hundred thousand residents. Baltimore managed only 36.9. We'll get 'em next year!
Traditionally, young black males have been the group most represented in that impressively high murder rate, but that may be changing in Baltimore…
Gangs of black teenagers have taken to attacking white residents and tourists at random in Baltimore's moneyed neighborhoods. A couple of particularly vicious attacks took place just a couple of blocks from your editor's heavily fortified domicile.
I may or may not be inoculated from harm by my race. Hard to call it. This is why I normally only leave the Whiskey bunker to forage for food.
I'll do my best to stay alive and intact over the weekend so we can meet again on Monday.
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