The past 50 years have seen rapid technological change that has fundamentally shifted the boundaries of human possibility, enabling radical improvements in productivity, new scientific advances, and the advent of both new communities and new divisions within society. These changes have forced a rapid transformation of both the operational structure and the core tenets of competitiveness for every industry, creating a host of new challenges and opportunities for businesses, their customers, and the policymakers responsible for governing them.
The following chapter will consider the rapid increase in the capacity and accessibility of computational power, data, and networks of digital connectivity, as well as the implications of the confluence of these three forces.
1.1 Increasing Computational Power
In 1965, Intel co-founder Gordon E. Moore made a radical prediction. He argued that the number of transistors in an integrated circuit would double every two years. These circuits are crucial to any electronic device; made of a network of transistors and other components, they perform the complex calculations that keep a device running and completing tasks. As the number of transistors on every integrated circuit goes up, computing power increases in step.
Moore’s prediction proved correct and forms the basis for what is now called Moore’s law in his honor. This increase in computational power has been the primary driver of the rapid advancement in technology that we have seen over the past 50 years. At the same time, the cost of computational power has fallen spectacularly: between 1980 and 2010, the number of transactions per second purchasable for a single US dollar has increased 10 millionfold.1
The result is a world in which the average person has in their pocket a device whose computational power is millions of times more powerful than the combined computing power used by NASA to complete the Apollo 11 mission to the Moon.2 In fact, it is the reason that almost every device used in your life today, from your toaster to your electric toothbrush, likely contains several microchips.
But Moore’s law cannot persist forever. There are fundamental physical limits to how small a transistor can be and we are already pushing those boundaries. For example, Intel’s advanced ‘Skylake’ transistor is only 100 atoms across. Pushing up against these boundaries increases both the cost and the complexity of the development of new chips, suggesting that sooner or later new approaches will need to be found if computational power is to continue increasing exponentially.3
One frontier of exploration that has captured the attention and imagination of many is an entirely different approach to computing called quantum computing that relies on insights from a complex branch of physics called quantum mechanics. A quantum computer would radically shift the boundaries of what a machine can do, potentially allowing us to encrypt data with near-perfect security as well as predict changes to complex systems such as the climate.4
Box 1.1 What Is Quantum Computing?
Experimentation in the field of quantum computing seeks to deliver new computational capabilities by harnessing the complex, and often counterintuitive world of properties of subatomic particles, through a branch of physics called ‘quantum mechanics’. These subatomic particles don’t behave in the same way as physical objects in our daily activities, which have well-defined positions and characteristics. Instead, subatomic particles exhibit a property called ‘super-position’ where they can effectively exist in multiple places at the same time.
This property turns out to be important for computing. Traditional computers, from the most basic calculator to the most powerful supercomputer, all perform calculations using something called ‘binary code’ where all data is encoded as a series of ones or zeros called bits. A quantum computer also uses ones and zeros, but through ‘super-position’, a quantum bit, or qubit, can in some sense be one and zero at the same time.5
If that doesn’t make any sense, don’t worry. Physicist Richard Feynman, who won a Nobel prize for his contributions to the field, once quipped that ‘nobody understands quantum mechanics’.6 What matters is that a quantum computer would enable us to quickly solve problems that are extremely difficult for conventional computing systems.
For example, take the classic challenge of the ‘traveling salesperson problem’ where a sales agent who needs to visit a dozen cities on a trip wishes to chart the most efficient route. Because of the enormous number of permutations of possible trips, this turns out to be an extremely difficult problem to solve for conventional computers and proves impossible to fully optimize at the level of a shipping company like FedEx. However, using a quantum computing system, such calculations could be completed much more quickly.7
A range of potential applications for quantum computing exists in financial services, most notably the optimizing of large investment portfolios and the identification of arbitrage opportunities. They may also be able to accelerate the process of deep learning in financial services and more broadly.8
However, these new...