Books that shook the business world: Exponential by Azeem Azhar

I originally got introduced to Azeem Azhar, the English journalist, startup founder and investor, through his podcast and newsletter, Exponential View. My research and teaching are around the same intersection of emerging technologies, business and society, and his newsletter soon became an essential weekly briefing on the space.

This made me very keen to read his first book, Exponential: Order and Chaos in an Age of Accelerating Technology, which was published in 2021 to great acclaim, including being listed as one of the Financial Times’s best tech books of the year. I got through it in a matter of days, and was even compelled to design a new course around its core ideas for my master’s students in entrepreneurship and innovation.

When Azhar talks about exponential growth, he means that technologies such as computer chips, renewable energy, artificial intelligence (AI) and gene editing are getting cheaper, more powerful, and being adopted at faster and faster rates. This, he says, has transformed society, business and politics, though not always for the better.

Welcome to our new series on key titles that have helped shape business and the economy – as suggested by Conversation writers. We have avoided the Marxes and Smiths, since you’ll know plenty about them already. The series covers everything from demographics to cutting-edge tech, so stand by for some ideal holiday reading.

Part of the problem is that technology is seen as being somehow independent of humanity, both by the makers and the rest of us. This explains how, for example, the politicians behind the Brexit trade deal of 2020 were happy for it to refer to Netscape Communicator as a “modern email software package”, even though the service went defunct in 1997.

One consequence of this cultural divide is that the two sides struggle to engage in a dialogue around making the most of new technologies while minimising the downsides.

It creates what Azhar calls the “exponential gap”, which he depicts in this simple graph, plotting the rate of technological development (black hockey-stick line) against the rate at which institutions such as governments and businesses adapt (dashed straight line).

From a business perspective, this gap creates challenges because companies built around many of these technologies will tend to become much larger than traditional companies. Once established, it becomes extremely difficult to overturn them.

This happens because of network effects, which is the idea that businesses that build a network of users become exponentially more valuable for every person in the network. A classic example is a telecoms network, which becomes more and more useful to customers as more and more sign up, because they can each call a larger number of people.

Something analogous happened with Google’s search engine as it became the most popular of its kind. This made it increasingly useful to advertisers for reaching large numbers of consumers. Google then used its vast search data to drive home this advantage by offering better search results to users, and more sophisticated customer-targeting for advertisers.

Network effects have been vital to many modern tech giants, including LinkedIn for business users, Instagram for pictures, and Apple’s AppStore/Google Play for smartphone apps. Regulators are suddenly faced with huge monopolies, and often find their antitrust rules inadequate to deal with them.

As I teach my master’s students, many entrepreneurs can also get left behind by the speed of these changes. I emphasise that network effects create a winner-takes-all culture where it’s often far better to piggyback on the winners than to back a challenger.

Azhar also points to important geopolitical implications to exponential technologies. For instance, they will accelerate the move away from globalisation to re-localisation through the likes of 3D printing, which will make it much cheaper to manufacture goods locally.

Similarly, wars will change as new technologies get progressively cheaper. Since Azhar’s book came out, we have already seen drones and also online disinformation playing an important role in the Ukraine war.

Finally, there are societal effects to exponential technologies. The most obvious is around data, where the boundaries of privacy and private data now have a new meaning as our personal details are bought and sold online. Equally, we are seeing national conversations taking place on huge platforms like X (formerly Twitter) that are privately owned.

Navigating these effects

Azhar offers four suggestions for overcoming the challenges involved in these technologies. The first, which relates particularly to online platforms, demands greater transparency about how tech giants make decisions so that the effects can be better evaluated. Platforms like Facebook and X have already had to answer many questions from regulators and politicians about their decision-making in recent years, but their processes are still far from transparent.

Azhar also wants more emphasis on interoperability. One good example is taking off in India in relation to e-commerce. The Open Network for Digital Commerce (ONDC) has created a system where shoppers can browse and buy across different online stores without having to be on any single platform. This aims to level the playing field between vendors, driving down the sales commissions they have to pay to platforms. Since launching in 2021, the ONDC has handled millions of sales transactions.

Azhar calls for a digital bill of rights to give people legal protection from the arbitrary will both of corporations and governments. Indeed, some countries such as South Korea are already leading the way here.

Finally, Azhar argues for “digital commons” in which data can be pooled in a single public place, and managed by volunteers working in a similar capacity to editors on Wikipedia. For instance, the UK has a biobank in which millions of data points on genes are collated every year, allowing researchers to better understand and prevent diseases.

Since Azhar’s book came out, the exponential gap has only widened, thanks to the advances of technologies like AI. As Exponential makes clear, governments urgently need to take concerted action to change where we are heading. That way, we can become co-creators along with technologists in a more inclusive hi-tech society.