Nonlinear Forecasting
Economists shy away from nonlinear forecasting because it is risky. A lot of the telecom bubble can be described as a forecast for Internet growth of 10x per year when in fact it was closer to 3x per year. If you build capacity for three years ahead using the 10x model, you will multiply capacity by 1000x, when the 3x reality means that demand only increases by 27x.
Nonlinear forecasts can be wildly wrong in the quantity dimension without being far off in the time dimension. Even at 3x growth, demand will catch up to capacity within a few years. The telecom industry’s mistake was not so much the amount of capacity that they built as the high-leverage way in which it was financed.
In The Age of Spiritual Machines, Ray Kurzwei focused on the economic implications of Moore’s Law. Imagine that we add up the total intelligence on earth by summing up the amount provided by human beings and the amount provided by computers. Today, the proportion supplied by computers might be much less than 1%. Yet Kurzweil would be confident that the proportion supplied by computers will be 99% by the end of the century. That is because the capability of a typical computer is doubling about every two years, while the capability of the typical human grows more slowly.
Kurzweil might project that a computer will have the same mental capacity as a human in the year 2030. If the computer only has 1/8 the capacity of a human at that date, you might think that he is spectacularly wrong. However, if computer intelligence doubles every two years, then the computer will catch up six years later — and once it catches up, it will zoom past.
Longevity has been increasing for the past hundred years, from about 45 years at the beginning of the 20th century to close to 77 years at the beginning of the 21st. However, if we reach the point where longevity increases at a rate greater than one year per year, then from that point on people will live forever.
Suppose that when you reach the age of 80 the “war on aging” has progressed to the point where longevity is 100. At that point, scientists have another twenty years to come up with new ways to extend life. This might take you to the age of 130, which gives scientists another thirty years — and you live forever.
As with all new technologies, the best anti-aging techniques will likely go through a period during which they are unproven and expensive. That there could be a relatively short window — five to ten years — such that people who die before the start of that window just miss out on immortality, people who naturally live just after the end of the window will all be immortal. During this “window,” longevity will go from, say, 85, to infinity. That is nonlinear!
[...] http://www.progressdaily.com/2006/08/25/nonlinear-forecasting/ [...]