Trim Size: 8.5in x 10.87in k DeBrouwer - 08/26/2020 1:14pm Page 3 ♣ 1 ♣ The Big Picture with Kondratiev and Kardashev You have certainly heard the words: “data is the new oil,” and you probably wondered “are we indeedonthevergeofaneweraofinnovationandwealthcreationor...isthisjusthypeandwill it blow over soon enough?” Since our ancestors left the trees about 6 million years ago, we roamed the African steppes and we evolved a more upright position and limbs better suited for walking than climbing. However, for about 4 million years physiological changes did not include a larger brain. It is only in the last million years that we gradually evolved a more potent frontal lobe capable of abstract and logical thinking. The first good evidence of abstract thinking is the Makapansgat pebble, a jasperite cobble– k k roughly 260 g and 5 by 8 cm – that by geological tear and wear shows a few holes and lines that vaguely resemble (to us) a human face. About 2.5 million years ago one of our australopithecine ancestors not only realized this resemblance but also deemed it interesting enough to pick up the pebble, keep it, and finally leave it in a cave miles from the river where it was found. This development of abstract thinking that goes beyond vague resemblance was a major mile- stone. As history unfolded, it became clear that this was only the first of many steps that would lead us to the era of data and knowledge that we live in today. Many more steps towards more abstract thinking complex and abstract thinking, gene mutations and innovation would be needed. Soon we developed language. With language we were able to transform learning from an indi- vidual level to a collective level. Now, experiences could be passed on to the next generation or peers much more efficiently, it became possible to prepare someone for something that heorshe did not yet encounter and to accumulate more knowledge with every generation. More than ever before this abstract thinking and accumulation of collective experiences lead to a “knowledge advantage” and smartnessCOPYRIGHTED became an attractive trait in a MATERIAL mate. This allowed our brain to develop further and great innovations such as the wheel, scripture, bronze, agriculture, iron, specialisation of labour soon started to transform not only our societal coherence but also the world around us. Without those innovations, we would not be where we are now. While it is discussable to classify these inventions as the fruit of scientific work, it is equally hard to deny that some kind of scientific approach was necessary. For example, realizing the patterns in the movements of the sun, we could predict seasons and weather changes to come and this allowed us to put the grains on the right moment in the ground. This was based on observations and experience. The Big R-Book: From Data Science to Learning Machines and Big Data, First Edition. Philippe J.S. De Brouwer. © 2021 John Wiley & Sons, Inc. Published 2021 by John Wiley & Sons, Inc. Companion Website: www.wiley.com/go/De Brouwer/The Big R-Book k Trim Size: 8.5in x 10.87in k DeBrouwer - 08/26/2020 1:14pm Page 4 4 1 The Big Picture with Kondratiev and Kardashev Science and progress flourished, but the fall of the Western European empire made Europe sink in the dark medieval period where thinking was dominated by religious fear and superstition and hence scientific progress came to grinding halt, and it is wake improvements in medical care, food production and technology. The Arab world continued the legacy of Aristotle (384–322 BCE, Greece) and Alhazen (Ibn al-Haytham, 965–1039 Iraq), who by many is considered as the father of the modern scientific scientific method method.1 It was this modern scientific method that became a catalyst for scientific and techno- logical development. A class of people that accumulated wealth through smart choices emerged. This was made possible by private enterprise and an efficient way of sharing risks and investments. In 1602, the East Indies Company became the first common stock company and in 1601 the Amsterdam Stock Exchange created a platform where innovative, exploratory and trade ideas could find the neces- sary capital to flourish. In 1775, James Watt’s improvement of the steam engine allowed to leverage on the progress made around the joint stock company and the stock exchange. This combination powered the capitalism raise of a new societal organization, capitalism and fueled the first industrial wave based on automation (mainly in the textile industry). While this first industrial wave brought much misery and social injustice, as a species wewere preparing for the next stage. It created wealth as never before on a scale never seen before. From England, the industrialization, spread fast over Europe and the young state in North America. It all ended in “the Panic of 1873,” that brought the “Long Depression” to Europe and the United States of America. This depression was so deep that it would indirectly give rise to a the invention of an new economic order: communism. The same steam engine, however, had another trick up its sleeve: after industrialisation it k k was able to provide mass transport by the railway. This fuelled a new wave of wealth creation and lasted till the 1900s, where that wave of wealth creation ended in the “Panic of 1901” and the “Panic of 1907” – the first stock market crashes to start in the United States of America. The internal combustion engine, electricity and magnetism became the cornerstones of an new wave of exponential growth based on innovation. The “Wall Street Crash of 1929” ended this wave and started the “Great Depression.” It was about 1935 when Kondratiev noticed these long term waves of exponential growth and devastating market crashes and published his findings in Kondratieff and Stolper (1935) – Kondratiev republished in Kondratieff (1979). The work became prophetic as the automobile industry and chemistry fuelled a new wave of development that gave us individual mobility and lasted till 1973– 1974 stock market crash. IT The scenario repeated itself as clockwork when it was the turn of the electronic computer and information technology information technology (IT) to fuel exponential growth till the crashes of 2002–2008. Now, momentum is gathering pace with a few strong contenders to pull a new wave of eco- nomic development and wealth creation, a new phase of exponential growth. These contenders include in our opinion: • quantum computing (if we will manage to get them work, that is), • nanotechnology and development in medical treatments, • machine learning, artificial intelligence and big data. 1With “scientific method” we refer to the empirical method of acquiring knowledge based on observations, scep- ticism and scrutiny from peers, reproducibility of results. The idea is to formulate a hypothesis, based on logical induction based on observations, then allowing peers to review and publish the results, so that other can falsify of conform the results. k Trim Size: 8.5in x 10.87in k DeBrouwer - 08/26/2020 1:14pm Page 5 1 The Big Picture with Kondratiev and Kardashev 5 This book is about the last group: machine learning (statistical learning) and data, and if you are reading it then you are certainly playing a significant role in designing the newest wave of exponential growth. If regulators will listen to scientists2 and stop using incoherent risk measures in legislation (such as the Basel agreement and UCITS IV), then it might even be the first phase of exponential growth that does not end in a dramatic crash of financial markets. Working with data is helping a new Kondratiev wave of wealth creation to take off. The Kon- dratiev waves of development seem to bring us step by step closer to a Type I civilisation, as described by Nikolai Kardashev – (see Kardashev, 1964). Nikolai Kardashev describes a com- Kardashev pelling model of how intelligent societies could develop. He recognizes three stages of develop- ment. The stages are: 1. Type 0 society is the tribal organization form that we know today and has lasted since the dawn of the Homo genus. 2. A Type I society unites all people of a planet in one community and wields technology to influence weather and harvest energy of that planet. 3. A Type II society has colonized more than one planet of one solar system, is able to capture the energy of a star, and in some sense rules its solar system. 4. A Type III society has a galaxy in its control, is able to harvest energy from multiple stars, maybe even feeds stars into black holes to generate energy, etc. 5. There is no type Type IV society described in Kondratiev, though logically one can expect that the next step would be to spread over the local cluster of galaxies.3 However, we would k argue that more probably we will by then have found that our own species, survival is a k legacy problem and that in order to satisfy the deepest self-actualization there is no need for enormous amounts of energy – where Kardashev seems to focus on. Therefore, we argue that the fourth stage would be very different. While both Kondratiev’s and Kardashev’s theories are stylised idioms of a much more complex underlying reality, they paint a picture that is recognizable and allows us to realize how important scientific progress is. Indeed, if we do not make sure that we have alternatives to this planet, then our species is doomed to extinction rather soon. A Yellowstone explosion, an asteroid the size of an small country, a rogue planet, a travelling black hole, a nearby supernova explosion and so many more things can make our earth disappear or at least render it unsuitable to sustain life as we have known it for many thousands of years or – in the very best case – trigger a severe mass extinction.4 Only science will be able to help us to transcend the limitation of the thin crust of this earth.