The Law of Accelerating Returns in the Shipping Industry

In his book The Singularity is Near, Ray Kurzweil coins the term “The Law of Accelerating Returns”. This author, computer scientist, futurist, and Google advisor discusses how technological change is exponential and not linear. Kurzweil notes, “we won’t experience 100 years of progress in the 21st century — it will be more like 20,000 years of progress (at today’s rate).” He comes to that conclusion after studying technological progress throughout history and uses many technological examples to back- up his claims. And while Kurzweil never discusses the shipping industry directly, his theories can be applied to this industry as well.

So before we get into why the shipping industry has exponential growth, I’ll discuss an example from Kurzweil to illustrate the theory.

The Acceleration of Technology

A very digestible example is the rate at which technology has accelerated. In the 19th century, more technological changes erupted than in the past nine centuries. And in the first 20 years of the 20th century, we saw more advancements than in all of the 19th century. This rate of technological advancement only quickened with time.

The rate of technological progress is now doubling every decade, increasing at an exponential, rather than linear, rate. The human brain typically thinks linearly when it comes to growth, and we underestimate technological future advancements. Technological growth, however, is exponential, and this theory applies to the shipping industry as well.

Though we were cautiously optimistic when testing Kurzweil’s theories in our industry, he was proven right, yet again.

Exponential Growth in the Shipping Industry

There are three standout cases where we’ve seen exponential growth in the shipping industry.

1. Vessel Capacity Growth in TEU

This chart, which only goes back to 1940, shows how much vessel capacity has grown in terms of TEUs. As vessel capacity continues to grow, those who work in the shipping industry must prepare for exponential instead of linear growth.


2. Historical Sea Trade

On September 7th, 2010, Dr. Martin Stopford addressed the "Global Maritime Environmental Congress" speaking on “How shipping has changed the world & the social impact of shipping." He explains how fossil fuels drove over 2000 years of exponential sea trade growth. Fossil fuels coupled with technological advancements sparked the uptick. What will be the next technological discovery that will have a massive impact on our industry?


3. The Future of Sea Trade

Stopford also maps the future of trade, where we see the drastic increase, which can potentially be detrimental to the industry, unless we begin to prepare. If projected trade continues at this rate, sea trade’s carbon footprint will increase by 300%. Economic and regulatory challenges will only complicate this trend and could prove to be problematic.


What Exponential Growth Means for Businesses

Now that we understand the What and How, let's dive into what really matters: the Why. More specifically, why this trend matters to your port.

1. We Need to Think Ahead

We need to force our organizations to begin thinking exponentially when it comes to where we will be in five to ten years. We recommend that port professionals stay abreast of technology’s progress, including automation, artificial intelligence, and autonomous vehicles. A good technique to help us think ahead is to read science-fiction novels. Neal Stephenson, a speculative fiction writer, has incredible ideas for future technologies. For example, he wrote about the concept of a crypto-currency before Bitcoin was actually created and might have been the inspiration behind the digital currency.

2. We Need to Create Organizations that Adapt Quickly

We need to understand that we will probably be wrong about these future predictions because technological progress is hard for us to grasp. It’s extremely important to prepare businesses to be agile and react quickly to changes.

For example, the recent SOLAS Verified Gross Mass requirement forced changes across the shipping industry. Organizations that were not able to quickly meet these requirements fell behind. Octopi’s TOS, however, was ready to send VERMAS 1.0 messages on the same day that the 1.0 standards were released. The successful organizations of tomorrow are going to be the ones that can quickly pivot in different directions when necessary.

What to Do Now: Cloud Computing Can Help You Be More Agile

We always recommend our clients move to the cloud in preparation for exponential growth. Would you travel to Europe on a ship from America today? I hope not. It would take way too long and a flight can get you there quicker. However, many companies are still reluctant to adopt cloud computing even though you can launch a new server in seconds these days. Instead, they opt to buy and provision servers, which can take weeks (if not months) to implement, while also being more expensive and often less secure than cloud-based alternatives.

The speed at which your business can adapt and execute is going to become more and more critical as the Law Of Accelerating Returns goes into full-speed. Don’t make the mistake of being caught off guard like the 52% of Fortune 500 companies that went out of business in the last 10 to 15 years.

Be agile and ready to move quickly… and full steam ahead, it’s about to accelerate very fast!