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Of course, it's not just Kodak. Anything that becomes digitized (biology, medicine, manufacturing, and so forth) hops on Moore's law of increasing computational power.
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Thus the first of our Ds is
digitalization
, for the simple reason that once a process or product transitions from physical to digital, it becomes exponentially empowered.

Deception.
What follows digitalization is deception, a period during which exponential growth goes mostly unnoticed. This happens because the doubling of small numbers often produces results so minuscule they are often mistaken for the plodder's progress of linear growth. Imagine Kodak's first digital camera with 0.01 megapixels doubling to 0.02, 0.02 to 0.04, 0.04 to 0.08. To the casual observer, these numbers all look like zero. Yet big change is on the horizon. Once these doublings break the whole-number barrier (become 1, 2, 4, 8, etc.), they are only twenty doublings away from a millionfold improvement, and only thirty doublings away from a billionfold improvement. It is at this stage that exponential growth, initially deceptive, starts becoming visibly disruptive.

Disruption.
In simple terms, a disruptive technology is any innovation that creates a new market and disrupts an existing one. Unfortunately, as disruption always follows deception, the original technological threat often seems laughably insignificant. Take the first digital camera. Kodak took great pride in things like convenience and image fidelity. Neither were present in Sasson's original offering. His camera took twenty-three seconds to snap and store a 0.01 megapixel, black-and-white photograph. Well, no threat there.

In the eyes of the Kodak brass, Sasson's innovation would remain more toy than tool for many years to come. With their focus on the
quarterly profits of their chemicals and paper business, they didn't understand the disruption soon to be wrought by exponentials. If Kodak had done the math, their executives would have realized that the desire to not compete against themselves was actually a decision to put themselves out of business.

And out of business is where the company went. By the time Kodak realized its error, it was unable to keep pace with the digitalization of the industry. Kodak began to struggle in the nineties and stopped turning a profit by 2007, then filed for Chapter 11 in January of 2012.
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Because it forgot its mission and failed to do the math, a gargantuan hundred-plus-year-old industry foundered and became yet another cautionary tale about the disruptive nature of exponential growth.

We live in an exponential era. This kind of disruption is a constant. For anyone running a business—and this goes for both start-ups and legacy companies—the options are few: Either disrupt yourself or be disrupted by someone else.

Digitalization, deception, and disruption have radically reshaped our world, but the chain reaction we're tracking is cumulative. Thus the three Ds that follow—demonetization, dematerialization, and democratization—are far more potent than their predecessors.

Demonetization.
This means the removal of money from the equation. Consider Kodak. Their legacy business evaporated when people stopped buying film. Who needs film when there are megapixels? Suddenly one of Kodak's once-unassailable revenue streams came free of charge with any digital camera.

In one sense, this transformation is the downstream version of what former
Wired
editor-in-chief Chris Anderson meant in his book
Free
. In
Free
, Anderson argues that in today's economy one of the easiest ways to make money is to give stuff away.
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Here's how he explains it:

I'm typing these words on a $250 “netbook” computer, which is the fastest growing new category of laptop. The operating system happens to be a version of free Linux, although it doesn't matter since I don't run any programs but the free Firefox Web browser. I'm not using Microsoft Word, but rather free Google Docs, which has the advantage of making drafts available to me wherever I am, and I don't have to worry about backing them up since Google takes care of that for me. Everything else I do on this computer is free, from my email to my Twitter feeds. Even the wireless access is free, thanks to the coffee shop I'm sitting in.

And yet Google is one of the most profitable companies in America, the Linux ecosystem is a $30 billion industry, and the coffee shop seems to be selling $3 lattes as fast as they can make them.

Billions and billions in goods and services, as Anderson pointed out, are now changing hands sans cost. Now, sure, there is
loss-leader free
—as with Google's giving away their browser but making a killing off the information they gather along the way—and there's open-source efforts like Wikipedia, Linux, and all the rest, which are
actually free
. Either way, it's a shadow economy, yet happening in plain sight. Literally. At the time Anderson wrote
Free
, beyond a few extremely obscure papers, economists had not studied the idea of free in the marketplace. It was a blank spot on the map. In other words, even people who make their living studying economic trends were fooled. Once demonetization arrived, they didn't know what hit them.

Nor is it just economists or, for that matter, Kodak executives. Skype demonetized long-distance telephony; Craigslist demonetized classified advertising; Napster demonetized the music industry. This list goes on and on. More critically, because demonetization is also deceptive, almost no one within those industries was prepared for such radical change.

Dematerialization.
While demonetization describes the vanishing of the money once paid for goods and services, dematerialization is about
the vanishing of the goods and services themselves. In Kodak's case, their woes didn't end with the vanishing of film. Following the invention of the digital camera came the invention of the smartphone—which soon came standard with a high-quality, multi-megapixel camera. Poof! Now you see it; now you don't. Once those smartphones hit the market, the digital camera itself dematerialized. Not only did it come free with most phones, consumers expected it to come free with most phones. In 1976, Kodak controlled 85 percent of the camera business. By 2008—one year after the introduction of the first iPhone (the first smart phone with a high-quality digital camera)—that market no longer existed.

The decline of print and explosion of digital photography

Source:
http://digital-photography-school.com/history-photography

What makes this story even stranger is that Kodak knew this change was coming. Moore's law was well established at that point, already driving the ceaseless expansion of memory storage capacity, the process that would lead to the demonetization of photography. Kodak's engineers surely knew this. They arguably also knew about Hendy's law—which states that the number of pixels per dollar found in digital cameras doubles every year—as the term was coined by an employee of Kodak Australia, Barry Hendy. The writing wasn't just on the wall for Kodak—they had put it there themselves. Yet Kodak still failed to stay ahead of this curve.

Take a look at the chart below.

>$900,000 worth of applications in a smart phone today

^*
Year of Launch

The roughly $900,000 worth of applications in a smart phone today

Source:
Abundance: The Future Is Better Than You Think,
page 289

^*
Manufacturer's Suggested Retail Price

It shows all the 1980s luxury technologies that have dematerialized and now come standard with your average smartphone. An HD video camera, two-way video conferencing (via Skype), GPS, libraries of books, your record collection, a flashlight, an EKG, a full videogame arcade, a tape recorder, maps, a calculator, a clock . . . just to name a few. Thirty years ago the devices in this collection would have cost hundreds of thousands of dollars; today they come free or as apps on your phone. And smartphones are the fastest-spreading technology in humanity's history.

Democratization.
Obviously, this chain of vanishing returns has to end somewhere. Sure, film and cameras now come free with smartphones, but there are still the hard costs of the phone with which to contend. Democratization is what happens when those hard costs drop so low they becomes available and affordable to just about everyone. To put this in perspective, let's return to Kodak.

The company didn't just make money selling cameras and selling
film, they also sold everything on the back end of the process: they developed the film, manufactured the paper the photographs were printed on, and manufactured the chemicals used to develop that film. Why was this such a good business? First, when you snapped your photos, you had no idea which of them would actually turn out to be any good, so you printed them all. Remember those rolls of film where nothing was in focus? You still paid. Second, snapping photos was only part of the fun; printing extra copies and sharing those photos was the real treat.

Two decades back, the only people who could snap and share at will were those wealthy enough to afford the considerable paper, printing, and processing costs associated with several thousand photographs. But with the digital camera, you gained the benefit of knowing in advance which shots are actually worth printing, and with the creation of photo-sharing websites like Flickr, you could avoid printing altogether. The sharing of images became free, fast, and completely democratized.

Democratization is the end of our exponential chain reaction, the logical result of demonetization and dematerialization. It is what happens when physical objects are turned into bits and then hosted on a digital platform in such high volume that their price approaches zero. Such is the case with today's smartphones and tablets. In fact, it's also the case with wireless connectivity, which is what allows these devices to communicate with the Internet. Right now, Google and Facebook are in an arms race, with plans to spend billions to launch drones, balloons, and satellites capable of providing free or ultra-low-cost Internet access to every human on Earth.
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