Tony Seba in 8 technologies 3 disruptions explains and calls out the faster horse fallacy – experts get it wrong when failing to recognise phase change disruption. People are often reluctant to adopt new and disruptive technologies because they are too focused on incremental improvements to existing technologies, rather than imagining entirely new possibilities.
He explains that experts expect a 1:1 substitution such as the change from horses to cars in 1903 through to 1918. Many assumed the new cars were simply faster horses. However, while cars did replace on a 1:1 basis so in 1905 the market size of $130m. By 2025 horses fell to $19m but cars went to $5.3 billion. It was not just a “faster horse”. If you look at the number of horses and the number of cars, the numbers were similar. But cars could carry 10 times more than a horse. Cars could go 10 times faster. They built roads and then build cities around cars. We still have geopolitical wars due to oil. So phase change disruption is much more than 1:1.
Cost Curves are Like Gravity
The cost down for solar has been 22% per year. For batteries 14%. For a decade the cost seems high. But like gravity and a skydiver. the price is falling. Seems just a speck in the sky. Then the skydiver is large and lands. So with phase change disruption.
Faster Horse Fallacy Examples
Kodak failed to see the impact of digital photography. Film was replaced with digital images. Digital images do not need processing, and photographers could take hundreds of photos. Why did Kodak fail to see the opportunity, even though they were pioneers?
The smart phone is not a flip phone. It was a camera, a dating device, a transportation organiser. The value of services in the Apple App store is an indication where the value of the other services is orders of magnitude from mobile phone sales.
Sales from App store Apple generated over $205 billion revenue from iPhone sales in 2022, which accounted for over 52% of its net sales—followed by services revenues at over $78 billion, wearables and accessories at over $41 billion, The profit from the services was greater than the profit from phones themselves.
The typewriter vs. the computer: When computers were first introduced, some people dismissed them as nothing more than a faster typewriter. They failed to see the potential for computers to revolutionize the way we work, communicate, and live our lives.
The traditional power grid vs. renewable energy: Some people continue to believe that traditional power grids fueled by coal and other non-renewable sources of energy are the only way to reliably power our homes and businesses. However, it is an example where the disruption is changing control from corporations to individuals.
Mobile phones have completely disrupted existing communication technologies, such as landline phones and even email. The mobile phone is an example of the faster horse fallacy. It was a disruptive innovation that has led to a profound impact on our daily lives. Mckinnsey Consulting advised AT&T that the demand for number of mobile phones would be 100,000. Actual numbers? Over 120 million. Mckinsey was out than 100 times.
Example from Automotive industry
Sandy Munro example about changing from 12 volt car system to 48 volt. In this YouTube video from Autoline there is this commentary about why manufacturers have not changed.
Changing the engineering perspective. Oh no we have always done it this way. We didn’t think about that. Sandy says – Why do we have this? Well, we have always done it this way. Execute that man says Sandy. That’s the problem, they did not think. Need to get these people out of the way.