Ray Kurzweil is an inventor and futurist. He's founded nine companies, which work on everything from speech recognition to artificial intelligence. In Inc. magazine's "26 Most Fascinating Entrepreneurs" feature in April 2005, we ranked him #8 and called him, "Edison's rightful heir." Inc.com spoke with Kurzweil recently about his businesses, his predictions, and his latest book, The Singularity is Near, just released by Viking.

Q: Could you briefly explain the concept of the book?

A: I've been tracking technology trends for several decades. And this has to do with entrepreneurship because I realized for projects to succeed the timing was the most important thing. We get a lot of business plans now and it is quite clear to me these groups will build what they say if given the funding. But 95% of those projects will fail from a business perspective because the timing is wrong. Not all of the enabling factors will be in place when they need it. So I began to track technology trends and build mathematical models and collect data about key features of technology. And this began taking on a life of its own, because I began to realize with these models we could anticipate, not just two, three years out, but ten, twenty years out.

The overall measures of the power of information technology -- things like price-performance, capacity, bandwith -- are very predictable. And one of the things we observed is that these measures are growing exponentially.

Q: Where does the term "Singularity" come from?

A: The whole word "singularity" is a metaphor taken from physics, which in turn took it from math. The analogy to it is a black hole. You can't see inside a black hole because you can't see beyond the event horizon. However, we can use our rational thinking to make intelligent comments about what takes place in a black hole. Similarly, we can make intelligent comments about what life will be like after the singularity. It's also important to point out we're not taking this one giant leap from today's world into this future, mysterious world. We'll actually get there one benign, minor step at a time. There will be millions, thousands of millions, of these little steps. You put them all together and add a few decades of this kind of increasingly rapid transformation and you get a profound transformation of human civilization.

Q: How do you think this progression will change business?

A: Boom-bust cycles are harbingers of true evolutions that preceded many major transformations. We saw it in the railroads in the 19th century. There was an artificial intelligence bust cycle in the 1980s. We saw it more recently with e-commerce and telecommunications. The investment community looked at the Internet and said, "Oh, this is going to change every business model and turn it on its head." So a tremendous value was ascribed to all these Internet companies and 18 months later when every business model wasn't turned up on its head overnight the investment community said, "Hmm, I guess I was wrong." And everything went in the other direction. You had spectacular failures of really poorly thought out business models. But not only did the technology smoothly march along, growing exponentially, doubling in power every year, so did the adoption rates of e-commerce. It's now over a trillion dollars.

It terms of business impact, we have near at hand the biotechnology revolution. Biology wasn't really an information technology up until recently. Drugs were created through drug discovery, meaning we would just find something that happened to lower blood pressure with no idea why it worked. We are now actually building detailed models of the information processes underlying biology, and how the genes, which are little software programs, express themselves through enzymes. So now we can do rational drug discovery where we can build something that precisely intervenes at a particular stage and cuts off the disease process and then actually simulate it before we test it on animals and people. And these tools will be much more sharply effective, and have much fewer side effects. The golden age of biotechnology will be ten or fifteen years from now.

Q: What lessons should entrepreneurs take away from The Singularity is Here?

A: One important lesson, which the whole book makes, is to really understand these models of technology and plan for the period of time when your project is finished. When you finish your R&D, you're really just starting the marketing. The whole business plan, invariably, looks out six, seven years. At the pace of change we have now, six or seven years is a tremendously long period of time. It's really important to understand where things will be. Build your business plans around these models. That's what I do. And that's the original reason I got into this forecasting process.

Q: Do you think a kind of Darwinism will occur across the business landscape, leaving behind those not making use of these changes?

A: Absolutely. Every business, as well as human institutions from schools, religion, government, have to redefine themselves. And not just once, it will be a continuous process. Bill Gates, for example, is very well aware of this. You can't just sit on your laurels, not matter how successful you are. You're only as good as your last product, and your last product has to fit into a continuously changing reality. In terms of advice to entrepreneurs, for somebody that really wants to start a new enterprise, the first thing that's important is to really have a passion for what you're doing, not just, "Oh, I want to start a business." But to really have a passion for some mission. There's no contradiction between wanting to help the world, and wanting to start a successful business.

Q: Was that your approach?

A: In our first business, we built a reading machine for the blind, and everybody believed very strongly in the project. And that helped us to weather the invariable challenges. Entrepreneurship is not a simple formula you can follow and success comes easily. You've got to rise to the challenge.

Q: What business factor will change the most over the next decade?

A: Protection of intellectual property is going to become more and more an issue. If everything is becoming information we need to find ways of protecting intellectual property. Look at a recent, very highly-publicized instance of that issue with the recording industry. The recording industry was very recalcitrant and unwilling to lead the way toward new business models that would reflect the new technologies. They just stuck for much too long to the business model that was the reigning model when my father was a child: buying an album, whether it was vinyl or CD based, for $15 to $20. It's been around that price, adjusted for inflation, for many decades. Had they really led the way with new business models, the culture of illegal downloading would've never taken place.

Q: How are you going to utilize the ideas of "Singularity" in your own businesses?

A: I very much am using the forecasting ideas. One business I have now is FATKAT--Financial Accelerating Transactions from Kurzweil Adaptive Technologies. It's applying my field, which is pattern recognition, to find subtle patterns in the stock market. I mentioned earlier that you can't predict what individual companies will do. And you can't make 100% reliable predictions. But we can predict the short-term movement of stocks substantially better than chance, because of these patterns in the market. That puts us in position of being like the house in the casino. So we can place lots of bets and more will win than lose. The system has been making very good returns with real cash test-funds for a couple of years. And we are launching a hedge fund in January. Mike Brown, he was the chief financial officer at Microsoft, he's on our board; he was also the chairman of the NASDAQ.

Q: Any parting thoughts on how an entrepreneur can avoid being tripped up by the coming Singularity?

A: Try to use your imagination to think. First learn the basic capabilities in terms of computation, communication, the power of biological technology, the power of technology in all these different fields will be at different points in time. And then really try to harness your imagination to think about how these things can be used, what the needs of people will be with these new capabilities. And then target something that will meet that need three or four years out. And be just a little bit early. You don't want to be ten years too early, but you don't want to be late. Google was in the right place, at the right time, with the right solution. And the timing makes all the difference in the world. But you have to harness what really cool applications will be needed as the world turns towards these new technologies.

Kevin Ohannessian is an Editorial Assistant for Inc.com.