The digital-physical merger

The next big thing isn’t AI itself, but the interplay of intelligence, data, networks/computing and energy.

Innovation has many different layers. Sometimes, we arrive at almost magic milestones, when suddenly everything falls into place. Seemingly unrelated pieces fit together like a puzzle, opening the door to a new paradigm. That’s what’s happening right now. This time, it’s about both bits and atoms, about the digital and physical worlds merging. At NEXT23, David Mattin coined a new term for this merger: the unified digital-physical field.

To get to this point, we need four key ingredients:

  • data
  • energy
  • computing/networks/the cloud
  • artificial intelligence

Not one of them is the magic potion. It’s the interplay and the resulting flywheel that do the trick.

  • Data fuels artificial intelligence, as training data. At the same time, we’re putting increasing numbers of sensors into the physical world, generating even more data. Thus, the world becomes programmable in new, unseen ways.
  • Energy is key, because both the digital and the physical world need huge amounts of it. And the merger of both will only increase our energy needs. At the same time, we’re heading into a world of almost abundant, cheap renewable energy – a world that will need data, computing, and AI to manage the power grids.
  • Computing, networks, and the cloud are perhaps the most boring and underestimated parts of the equation. However, this is the basic digital infrastructure we’ve been building over the past decades – the prerequisite for everything we’re talking about here.
  • Artificial intelligence has been in the making for decades as well, alongside the other ingredients. Only now, it seems to fall into place. Only in combination with data, energy, and the cloud, can we leverage its full potential.

Of these four ingredients, energy is probably the one we’ve spent the least amount of attention on. It’s a key issue now, and not only from the perspective of climate change, or geopolitics. Energy can fuel new waves of tech innovation on both the demand and the supply side.

The green energy transition will spur tech innovation to manage our future energy systems, and green energy itself will fuel the tech ecosystem and its energy needs.

All these trends don’t move in a linear fashion. Over the decades, we’ve seen several periods of AI winter. The recent tech winter wasn’t the first of its kind. Currently, we’re deep in metaverse winter. But what’s crucial here is the long-term perspective. In the long run, the different seasons don’t matter very much.

All these four ingredients follow long-term trends that are surprisingly stable. For tactical reasons, we often focus on short-term ups and downs, to ensure survival. But strategically, we need to make sure that we don’t lose sight of the long-term trends. And we need to draw the right strategic conclusions.

The merger of digital and physical – data, energy, computing/networks and AI – will lead to a new super-trend with many implications we can hardly think of today. Moore’s Law largely governed the digital trends for decades. Turns out that Moore’s Law seems to be just a special case of Wright’s Law, which isn’t restricted to one special technology (transistors, in this case).

Wright’s Law states that technology gets cheaper as we make more of it, because we learn how to make it better and cheaper. The result is called the learning curve. For solar energy, this amounts to a trend similar to Moore’s Law: it will be insanely cheap. Other renewables follow the same trajectory.

Missing: market design

It’s hard to imagine a world of abundant, cheap renewable energy. Some of the basic assumptions about our energy systems no longer apply. For example, if energy is abundant, we don’t need to save energy, we need to make smarter use of it. The smarter use of energy requires intelligence, data, and networks. That’s the idea of a smart grid which has been around for decades.

Nowadays, we also have the technology. What’s missing is a market design that caters to the new energy future. Unlike fossil or nuclear, renewable energy is generated intermittently. This means we have either too much or too little at any given time. Therefore, demand-side management should smooth out the imbalance between supply and demand.

The intermittent nature of renewables creates incentives to build new capacity to be on the safe side. The cheaper it gets, the more it will get built, leading to excess capacity. Some of the oversupply will be stored for times of shortage, but the remainder can and should be used intelligently. We will need and find new use cases for energy, just as we have throughout history, since the invention of fire.

A prime example of a digital-physical merger

We can and should see the green energy transition and the artificial intelligence revolution as two sides of the same coin. Both can serve as use cases and tools for each other. It’s a prime example of a digital-physical merger: artificial intelligence (digital) and new energy (physical), forming a new, integrated system.

The internet has given us a glimpse of technology with economies of scale of unprecedented magnitude. Let’s imagine an energy system with similar characteristics. Today’s energy systems are big, but not smart. This needs to change, and it can change.

Here at NEXT, we’ve always been concerned with what’s next, or the next big thing. The unified digital-physical field, to stick with David’s term, could well be a thing as big as the internet, or even bigger. It could fuel innovation for decades. The next big thing isn’t AI itself, but the interplay of intelligence, data, networks/computing and energy.