The faster horse syndrome—and phase change disruptions

“Why do smart people at smart organizations consistently fail to anticipate or lead technology disruption?” This question is posed in an illuminating hour-long presentation by Tony Seba, the Stanford lecturer, global disruption theorist, and patient two-time Q&A subject of yours truly [here in 2020 and here in 2017]. With regards to the question above—why do incumbents fail?—Seba proposes that it’s all about “the faster horse syndrome.”  As Seba puts it, humans tend to think linearly. One hundred years ago, most people believed that cars were ultimately just faster horses—hence the “faster horse syndrome.”  The truth, of course, was much more complex.

Cars weren’t just faster horses—the automotive era sparked a phase change disruption that enabled entirely new business models to emerge (think of everything from the global demand for oil to how roadway infrastructure shifted our economic and cultural existence). Seba’s presentation dives into several new phase changes we are experiencing today, and how a convergence of technologies—from autonomous vehicles to renewable energies to new food sciences— could create radically new business models shifts, potentially faster than many market participants anticipate.

“When a big opportunity space opens up, [incumbents] just don’t see it. Because they’re looking through a straw. It’s a linear mindset. One of the big mistakes that they make is the idea of what I call the ‘faster horse syndrome,’ which is that folks [a century ago] thought cars were a faster horse and so it was a one-to-one substitution… But phase change disruptions enable transformations into new systems. So back to the car and the horse, the car essentially went from nothing to 95% penetration within 20 years. It wiped out the horse transportation industry… The car was 10 times cheaper, it could go 10 times further in a day or in an hour… So when we look forward to the transformations that I’m going to talk about, they’re going to all be facing phase change disruptions where the new market is going to be substantially bigger—with ripple effects.”


Finding your personal product-market fit

My friend Tom Morgan, who writes “The Attention Span” newsletter at The KCP Group, made a sharp observation in a recent podcast he did with Frederik Gieschen. The whole conversation—which ranges from investing to existential spirituality—is worth the listen, but it was this point that I found particularly resonant: “It’s about what you can do plus what the world needs,” Tom says. “You can’t neglect either of those things because it’s a conversation, right? Your flow with the world, you have to be open to feedback from the world.”

“And that is the biggest conceptualization that I think is missing from Western culture is that it requires vulnerability and an openness to feedback, but also an awareness to the synchronicities and coincidences that are going to show you that you’re going in the right direction… That’s the way that I see my niche, which is still evolving. And I don’t think I’ve mastered it, but it is sort of finding perennial concepts and relating them back to investing, you know, building this Trojan horse from rationality to spirituality.”

A few more links I enjoyed: 

“I can’t say I don’t like Wall Street people. I love some of them. But I think the system is perpetually screwed up, and I don’t quite understand why, except that people get themselves in positions of influence and they’re able to make money from a screwed up system. I think of it as morally neutral. If they’re incentivized properly, they tend to do things that are more or less in the interest of everybody else. And if they’re incentivized badly, they don’t.”
“The revolution in energy grid and battery technology is happening at lightning speed — though you wouldn’t guess it by the recent reaction of the stock market. January’s sell-off in growth stocks hit much of the battery sector hard. But the markets are fundamentally short term by nature and the revolution is taking place before our eyes. You’ll see it, of course, in the growing number of electric cars on the road. Who would now buy a hybrid, I wonder?”
“James Douma—AI Expert, all-around software guru, and incredibly intelligent and generous person—and I take a deep dive into what makes Tesla such a unique company. From investing, to Full Self Driving (FSD), to Artificial General Intelligence (AGI), to time vs. distance based Neural Network stacks, to Proximal Policy Optimization, to best data curating and processing practices, to self awareness and consciousness, we cover a LOT of ground, and get really nerdy about it too.”

This information should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the investments or strategies referenced were or will be profitable, or that investment recommendations or decisions we make in the future will be profitable. This article contains links to 3rd party websites and is used for informational purposes only. This does not constitute as an endorsement of any kind. While Nightview uses sources it considers to be reliable, no guarantee is made regarding the accuracy of information or data provided by third-party sources. Nightview Capital Management, LLC (Nightview Capital) is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about Nightview Capital including our investment strategies and objectives can be found in our ADV Part 2, which is available upon request.