Order Of Magnitude: A 10x Change Can Revolutionize Your Business
An “order of magnitude” means a 10x difference. One inch to 10 inches is an order of magnitude, 10 miles per hour to 100 miles per hour, six minutes versus an hour.
Here’s another way to look at it.
The number of U.S. soldiers who died in the Civil War is an order of magnitude more than the number of U.S. soldiers who died in the Vietnam War, which is again an order of magnitude more than the U.S. soldiers who died in the Gulf wars.
Software engineers, including those I work with, toss around the phrase “order of magnitude” without fully explaining its potential ground-shaking, business-transforming difference. They might say something like, “Oh yeah, it’s ten times faster.” But I’ve come to conclude this engineering conversational shorthand is not appreciated by “civilians.”
Imagine your 60-minute commute to work becomes just six minutes.
Your life would change. You’d think nothing of going home for a quick dinner with your family and then putting your kids to bed or popping back over to the office if you left something important on your desk. In essence, it would change your whole life.
In a business context, an order of magnitude can be just as revolutionary. Your data system can weather sudden market changes or boost your ad revenue to unexpected heights. If you ignored its potential, you would lose an opportunity to beat your competitors.
When you hear your engineering staff talking about “an order of magnitude,” prick up your ears.
Order of magnitude is a big deal.
In the financial sector, for instance, there are going to be moments when a brokerage has to buy or sell shares slightly before transactions have been completed. That’s known as counterparty risk. If the brokerage takes on too much risk and the market becomes liquid, they can be dangerously exposed.
Has that happened to anyone?
Well, fortunately not since 2008. Entire brokerage houses went out of business because they extended too much risk too quickly. When the market turned liquid, they didn’t have enough money to cover it and went bankrupt. Thus, the Great Recession was born.
But today’s digital brokerage firms are performing risk calculations that once took 24 hours in just two minutes. They re-evaluate risk every two minutes, and that means there’s less of a chance of the market will catch them off guard. Instead, they can carefully and cautiously head off accounts that are engaging in hyper-risky behavior.
Quick — what’s 24 hours to two minutes? Three orders of magnitude. Would you like to get to a second? Some enterprises do broad-based fraud detection at the millisecond basis, like a credit card processor reacting during a 750-millisecond card swipe, with 99.99% accuracy. Two minutes to a second is another two orders of magnitude and puts you within human real-time scale.
What about the amount of data involved in a calculation — from a terabyte of a DRAM-based technology to 100 terabytes in a Flash-based datastore? What level of accuracy would you gain, what level of customer understanding, if you retained an entire year of a customer’s detailed actions, instead of a few weeks (a single order of magnitude)?
It’s hard to grasp the impact of an order of magnitude until you think through the ripples of implications to your business.
There are some sea changes so massive it’s hard to predict what sort of impact they’ll have on our lives.
Even the best architects and data scientists underestimate this sort of change. It isn’t incremental, it’s revolutionary. But you can’t fully reap the benefits of an order of magnitude transformation until you understand it — and often, that doesn’t happen until you see it in practice.
In 2014, John Krystynak, co-founder of our customer AppLovin, spoke to us about how his mobile marketing company reached the point of managing up to 15 billion ad requests a day. In the initial stages, the company was no different than any other startup. Their goal was to put something out there quickly, get feedback, learn from that feedback, and improve.
Along the way, they analyzed the usual suspects for different data layer technologies and found one promising an order of magnitude in lower latency and also hardware cost. Krystynak stressed that if you’re going to make a technological switch, you have to make sure you’re getting a serious upgrade — at least a 10X improvement.
Their team chose what was at the time an up-and-coming database technology, but he later claimed it opened entirely new business horizons that he considered entirely impractical. It paid off. Today, they handle up to 500,000 transactions per second, and were valued at over $1.6 billion during their acquisition. That’s what happens when you improve by an order of magnitude in data storage — the business opportunities available to you increase exponentially, as well.
In the end, no one can predict exactly how an order of magnitude will change things for your business. I can’t, your tech team can’t, and neither can you. But rest assured it will.