I’ve talked about the proverbial hockey stick growth in years past, as well as the challenges of predicting the future, but what I’ve yet to mention is the tendency to expect future growth to be linear rather than exponential.
Above are four graphs of four technology products, three of which which have seen exponential growth in the last few years: Solar panels (PV), Electric cars (EV), Batter storage, and heat pumps.
What surprises most people is how quickly exponential growth changes from “it’s happening, but slowly” to “oh my, it seems to be everywhere”. The same even happens with experts, who take the last few years of growth, average the growth rate, and make predictions from there. Or worse, experts who think the novelty will quickly wear off, with future demand only equaling recent demand.
For example, I found the graph on the right on Twitter. It repeats the above PV growth in a more exaggerated form, but more importantly, it shows how far off the global experts have been in predicting the global PV market.
Year after year the experts predicted growth would end, and year after year the growth not only continued, but the growth rate grew as well.
The same behavior can be seen in every Central Bank, where predictions of inflation are low, when inflation is already low, or predicted to return to low, when inflation is high, with those predictions like those on the PV graph, unrelated to reality.
The lesson is to be careful when growth looks to be exponential, as, by definition, it can take off beyond your highest expecations.
And not shown is the other end of the growth, in that every exponential curve is really just the early days of an S-curve.
