Even as they wrap their heads around AI, business leaders and organizations should be devoting some R&D resources to quantum computing. Though it's still a nascent technology, Professor Francesco Bova joined the Executive Summary to explore the huge potential economic benefits of the new form of computing, and explains why every business should be getting themselves "quantum ready" today.
Even as they wrap their heads around AI, business leaders and organizations should be devoting some R&D resources to quantum computing. Though it's still a nascent technology, Professor Francesco Bova joined the Executive Summary to explore the huge potential economic benefits of the new form of computing, and explains why every business should be getting themselves "quantum ready" today.
Show notes:
[0:00] A new technology is waiting on the sidelines; quantum computing is poised to be worth trillions.
[0:23] Meet Associate Professor Francesco Bova, who has been studying the economic potential of quantum for the past five years.
[0:45] And he believes now is the time for businesses to get themselves quantum ready.
[1:14] What is quantum, and how is it different from classical, or traditional computing?
[1:58] The real potential benefit of quantum is speed and it's ability to solve "intractable" problems - that is problems too large for a traditional computer.
[3:26] What is the quantum advantage?
[3:56] Quantum is in the noisy intermediate scale; it's not fault tolerant, must operate in very specific conditions and isn't commercially available. But it can work, and people are using it in a "hybrid" approach.
[5:00] And both public and private investment is flowing.
[6:28] A big reason is the "threat" that quantum might break the encryptions that currently underpin much of our secure digital activity, like banking or health data.
[7:25] But it may also be a boon for industry, particularly pharmaceuticals, chemicals, automotive and finance.
[8:20] It could, for example, be a way to speed up drug discovery.
[9:00] And it has a number of applications in the data-heavy finance industry.
[11:27] A number of businesses are currently playing around in this space using the hybrid approach.
[11:57] So how should businesses get "quantum ready"? Step one: identify your pain points.
[12:56] Step two: consider experimenting with the hardware or partnering with a company already in this space.
[13:48] Finally, explore a formal education or boot camp on the topic to get up to speed.
[14:00] "I would argue that in most cases, especially for larger companies, the opportunity cost of spending a bit of time doing these things is comparatively small, relative to maybe even the short-term benefit you can generate from experimenting with this hardware."
Megan Haynes: There’s a new technology poised to revolutionize business. A trillion-dollar industry waiting on the sidelines. It’s not artificial intelligence – though AI might benefit from its commercialization. It’s quantum computing – a rapidly emerging technology.
And for professor Francesco Bova, it’s a huge opportunity that everyone should be keeping an eye on. And he’d know – he’s been studying the economic impact of quantum technology for the past five years.
Francesco Bova: On top of being an associate professor here at Rotman. I'm also the academic lead for the Creative Destruction Lab and have been a lab economist for our quantum stream. And so I think we've had 120-plus quantum startups come through the stream at that time, so we’ve had an opportunity to see how companies are experimenting.
MH: In his view, you don’t need to be a physicist or mathematician to consider the value of quantum computing, and he believes it’s never too early for businesses to get themselves quantum ready.
Welcome to the Executive Summary. I’m Megan Haynes, editor of the Rotman Insights Hub
Musical interlude
MH: Let’s start with some basic terminology.
A classical computer – think your desktop, your laptop, even your cell phone – operate on bits – a binary code made up of zeroes and ones. There is no in-between. A bit is either a zero or a one.
A quantum computer on the other hand, has Qubits, which can be anything between zero and one. Without getting into the physics and math, this means it can carry twice the amount of information as a traditional bit. And, along with other quantum phenomena, which probably require a physics degree to explain, might make quantum computers faster at solving certain problems.
To understand what that means for businesses, Francesco turns to the lightbulb example.
FB: And so if you have one light switch, that light switch can be either on or off, there's two to the power of one possibilities. If you have two light switches, the possible combinations are on on, on off, off off, off on. So two to the power of two possibilities. And so we can do this on and on, if you go to three light switches, there's two to the power of three, which is eight, and so on and so forth. Classical computers, for a comparatively small number of light switches, can go through every exhaustive combination very quickly. But this is a problem that grows exponentially more challenging to solve with every light switch that we include.
MH: Imagine a situation with, say, 2,000 light switches.
FB: For any classical computer in the world, no matter how big, for it to go through every single possible combination in an efficient manner is intractable. It can't do it in any sort of timely manner.
MH: Right now, classical computers are widely available, commercialized and utilized. We literally carry them in our pockets. And they’re fast. Open up Google and you’ll get an answer within microseconds. Your spreadsheet will do calculations instantaneously.
So it might be hard for most folks to see the big potential benefit of quantum computing, which is speed. Most of what we currently do on computers day to day, is actually relatively simple.
But there are problems organizations face that are considered intractable – that is too big for a traditional computer to solve in any reasonable amount of time. This is where quantum can come in.
FB: We've got a quantum computing startup here in Toronto called Xanadu, who in the spring of 2022, were able to solve a problem in under a second, that any other classical computer in the world would have taken 9,000 years to solve.
MH: That’s the quantum advantage, when a quantum computer is capable of solving an “impossible” problem for a classical computer.
We’ll talk about who should be paying attention to quantum in a few minutes, but it’s important to set the stage of where we’re at in terms of commercial viability.
Right now, you can’t pop into a Best Buy to pick up a quantum computer, and most organizations aren’t dedicating R&D spend on creating quantum hardware.
And the big reason is that it’s not currently fault tolerant.
FB: Quantum computers need to operate in very sterile environments, in ways that classical computers don't. So quantum computers are very susceptible to noise from their external environment, some of the quantum hardware needs to be frozen to almost absolute zero to provide a sterilize environment as possible.
MH: These conditions can exist in labs, but not often in a real world. Instead, we’re in what’s called the noisy intermediate scale – that is to say quantum computers work, and people are experimenting with them, but they aren’t perfect and they aren’t always 100 per cent accurate.
In the meantime, a lot of researchers and companies are taking a hybrid approach: using quantum computers to develop more effective or optimized algorithms that can be run on a classical machine.
And there’s a lot of investment in this space, much of which is coming from governments. Some estimates peg the funds flowing into quantum at $35 and $55 billion, led largely by China and the US.
FB: $50 billion, sounds like a lot of capital flowing into this new nascent technology. But you know, Twitter, I think it was purchased by Elon Musk for like $40 billion-plus, and that's one social media company. So $50 billion, given that this is a nascent technology that could lead to like a trillion dollar market. I think it's comparatively small, given the size of the opportunity.
MH: There is private investment as well, though that’s harder to track. A 2019 article in the science journal Nature pegged private investment at around a billion dollars. But that’s likely significantly increased since then. This past year, start ups like OTI and Xanadu raised 55 and 100 million dollars respectively. In 2023, both Google and IBM separately announced 100 million dollar investments in university partnerships to explore the tech further.
FB: So the private capital is clearly following.
MH: But considering this is still a nascent technology, who actually needs to care about quantum? Well, that one is easy: everyone
Musical interlude.
MH: Let’s start with the biggest threat we should be paying attention to, and that’s encryption. A lot of our digital activity is encrypted by algorithms. It secures our banking information. It keeps our health info safe. It even protects our email. Right now, traditional computers can’t break those encryptions – they’re too big and too complicated.
Quantum computing however, might be able to crack the algorithms, putting a lot of our information at risk.
FB: So, you know, the good news is that everybody's aware of this threat. We're presumably years away from a fault-tolerant quantum computer that could break this form of encryption. the governments of the world are looking at changing algorithms and protocols that underpin, the internet to ones that are going to be quantum safe.
MH: A lot of that aforementioned $55 billion governments are investing is focused on solving this specific problem.
But there’s more than just doom and gloom – there’s a real business opportunity in quantum. Specifically, there’s a lot of opportunity for organizations that face optimization issues – like logistics companies – and for companies focused on discovery – like pharmaceuticals and health care organizations.
One McKinsey study estimates that there’s as much as $700 billion at stake for just four industries – pharmaceuticals, chemicals, automotive and finance.
And that $700 billion up for grabs really comes down to quantum’s ability to solve intractable problems.
FB: These are pervasive, I think, in every single industry. And so this goes back a little bit to our Light Switch example, right, going through every possible combination becomes more challenging as the number of light switches I include in the problem increases, right. It grows exponentially, I go from like, two possible solutions to four to eight to 16, and so on, and so forth until it becomes intractable.
MH: Take a pharma company trying to work through millions of molecular combinations to come up with the next medical discovery.
FB: If, you know, experimenting with quantum leads to quantum inspired algorithms allow us to create blockbuster drugs more quickly, that's something that impacts all of society. So instead of creating a blockbuster, you know, one every 20 years, we're doing it every 2 years, there will certainly have been a societal benefit that I think will have far outweigh the cost.
MH: McKinsey predicts that the pharmaceutical category alone will see an additional $15 to $75 billion dollars in revenue as a result of advances from quantum computing.
Or consider financial institutions that have to contend with thousands upon thousands of data points to manage investments that change in real time.
FB: So you can think of, for example, something like portfolio optimization, for quantum approach can come up with an optimal portfolio subject to a number of constraints, let's say in an hour, and it takes a classical approach a week to solve the same problem, then quantum is still very valuable there. Because markets are dynamic, right? If I'm getting my output in an hour, that's great, I can act on it quickly. If I have to wait until Friday to get the output by then the inputs to the problems have changed, right,
Even if the benefit is really incremental, let's say that I can generate like four per cent on assets with my current techniques, and like a quantum inspired approach can generate 4.25 per cent. It doesn't sound like much, except that banks have just an inordinate number of assets on the balance sheet.
MH: And imagine if your business could get to a solution a little bit faster. Or if you could adapt to a problem, just a little bit quicker? What, for example, might have happened if regulators had access to quantum computing powers while Silicon Valley Bank was collapsing?
FB: When you think about financial crises, or when you think about kind of the psychology of bank runs one of the concerns. is that the market reacts more quickly, sometimes than the regulators do. SVB became insolvent in a matter of two days.
MH: What would regulators have done differently if they’d been able to run the data through a quantum algorithm.
FB: If the answer is the same, but we can get it within an hour, as opposed to three days, just given the numerous things you have to think about in the economy, the inputs that go into trying to model what the outcome is going to be, then that would be extremely valuable again
MH: Even without a fault-tolerant computer, organizations are currently working with tech companies with a hybrid model that uses noisy quantum computers to create an algorithm, which can then be run on a classical computer, which is where Francesco sees so much immediate potential.
A bank in Spain, for example, developed an algorithm on a quantum computer that can be run on more traditional computers that allowed it to improve how it hedged against risks to its portfolio investment.
Working with Canadian company D-Wave, CaixaBank said the algorithm allowed it to complete in minutes what had historically taken it hours, which it says was a huge competitive advantage in a fast-moving, high-risk environment.
FB: By simply experimenting with that hardware, they're able to generate and create new algorithms that they can apply on classical hardware today, right. So this is simply through the act of experimenting with the hardware. I will argue that companies are utilizing this hardware and are creating value in the short term.
Musical interlude
MH: So how can businesses get quantum ready today?
First, Francesco says consider your pain points.
FB: So you've got a stakeholder in the economy, and they've got a business model. And there's a pain point, right - something that just leads them to want to pull their hair out.
MH: For example…
FB: If you're a logistics company, and fuel costs have gone up 30 per cent and fuel expenses are now the biggest cost that is impacting your profit margin.
MH: What if a quantum computing algorithm could help your business find the most fuel-efficient route, taking into consideration real-time traffic, construction notices and road closures?
In an MIT Sloane article, Francesco suggests business leaders make a list of “If we could only just…” – things you wish the business could do but don’t know how, or the issue feels too big to solve because it is resource or time intensive. If you have some in mind, maybe quantum is right for your business.
He adds that it's important not to be daunted by the costs.
FB: To the extent you've got an R&D department, consider experimenting with quantum hardware today, I think it's comparatively inexpensive to call any of the quantum hardware providers. I think it's also good for them, because they're also looking at like where can our hardware potentially be applied, so there’s a lot of synergies there.
MH: And that’s an important point: there’s a vibrant community – particularly in Canada and Toronto specifically, looking at quantum, and there are plenty of startups eager to work with corporations because that’s how they will commercialize and perfect their technology. Francesco encourages businesses to partner and talk with these organizations to see how they can work together.
FB: You can help those companies illustrate the efficacy of their tech in the real world. You can learn from the companies themselves about the state of the quantum hardware ecosystem, and how to apply technology to solve those problems.
MH: And of course, consider a more formal education on the topic to better understand the basics, such as taking a university course or an executive program, or even a quantum boot-camp.
FB: I would argue that in most cases, especially for larger companies, the opportunity cost of spending a bit of time doing these things is comparatively small, relative to maybe even the short-term benefit you can generate from experimenting with this hardware.
Musical interlude
MH: This has been Rotman Executive Summary, a podcast bringing you the latest insights and innovative thinking from Canada's leading business school.
Special thanks to Professor Francesco Bova. We’ll be back in a few weeks with Assistant Professor Cindy Chan on the science behind better gift giving.
This episode was written and produced by Megan Haynes. It was recorded by Dan Mazzotta, and edited by Avery Moore Kloss.
For more innovative thinking, head over to the Rotman Insights Hub, and subscribe to this podcast on Spotify, Apple Podcasts or Google Podcasts.
Thanks for tuning in.