Volatility is the “liability to change rapidly and unpredictably, especially for the worse”. We often reference it in regards to public market investing.
Volatility in a stock price makes it hard to predict what the future price will be. It means you take on more risk in buying or selling the stock. With more risk, there is opportunity for more reward.
Volatility creates opportunity.
Volatility applies to more than investing. It applies to technology. Just like volatility makes predicting stock prices hard, it makes building technology difficult. In volatile environments, those with high variability, technology problems get harder to solve. Technology works best in stable environments with predictable access to resources.
Variability = f(environment, resources)
A system can experience variability stemming from external factors and internal factors.
The environment drives external variability. Does the device have to work in the heat and cold? In the water? Does it have to move?
Internal variability comes from resource constraints or scarcity. How much processing power will it have? Does it need to connect to the internet? Will it be hard-lined or have to use WiFi and Bluetooth and 5G?
The more variance in a system, the more difficult it is to build technology that operates well. The more difficult a technology is to build or operate, the more basic its functionality.
To illustrate, consider consumer electronics made by Apple. We plot environmental v. resource variability from least to most. The devices with the most variability should have the most limited functionality, a proxy for being difficult to create.
The x-axis describes a device’s access to power. Constant access to power indicates a low variability in access to resources.
- Desktops are always plugged in.
- Devices that have consistent access to charging and big batteries come next
- On the far right are those expected to live on their own for a long time