One of the features of our age is the idea that business suffers from a unique level of technological disruption, an attitude that I call Techno-Egotism. Businesspeople are told routinely that they operate in an era of “unprecedented” technological change; as a result, they feel very Modern (and rather sorry for themselves). They also, however, end up lacking perspective, and that can be a strategic liability.
I believe that if posterity registers our age’s Techno-Egotism at all, they will find it rather quaint. This thought struck me with great force last week as I drove across the George Washington Bridge, from New York to New Jersey, specifically in order to spit legally into a tube, and then mail that tube.
Before I explain this (rather off-putting) detour and its relevance to contemporary business, let me offer a bit of background. I teach an advanced strategy course called “Business, Government and Society” to MBAs at IE. One of my primary aims in this course is to help students see beyond the present, in both directions: forward to the future of business and backwards to its past. I believe that this holistic perspective is crucial to learning real strategy (rather than business tactics).
Before I explain my trip, let’s begin in the present. The relentless forward march of IT, in keeping with Moore’s Law, is a touchstone of Techno-Egotism, and our feeling of an unprecedented rate of change. Moore’s insight is treated as if it was widely accepted when proposed, inevitable, and unparalleled in any other sphere. In some ways, the progress in IT of our era is unique, but the degree of change to the business landscape that result are not unprecedented, and their advent certainly was not obvious to everyone as soon as Moore published his idea. As proof of this idea, look at the cartoon that accompanied the 1965 Electronics Magazine article in which Gordon Moore made his original prediction.
Clearly, though Moore’s article leader said “With unit cost falling as the number of components per circuit rises, by 1975 economics may dictate squeezing as many as 65,000 components on a single silicon chip”, some members of the magazine’s staff were skeptical of his ideas. In 1965, they felt that the idea of “Handy Home Computers” was a bit of a joke, and they expected many readers to do so as well. In other words, even in the recent past, if you’d read this key article, the future was not so obvious.
According to the excellent book The Tentacles of Progress, in the eighteenth century lumbering East Indiamen commonly took 5 to 8 months to travel between London and Calcutta. Thanks to improvements in the technology of sailing ships and better charts, by the early 19th century that journey was being made under sail in as little as two months. Then came steamships, which cut the journey to a month in the 1830s, and to two weeks by the outbreak of World War I. That’s about a 90% improvement in journey time over five human generations. Such progress in transport sounds both easy and inevitable to us, but I doubt that businesspeople of the period were as sanguine.
Let’s explore this change a bit more. Just as “Moore’s Law” depends on innovations both in the microchip and adjacent technologies, so too these radical improvements in sea transport were made possible by key technical innovations. These innovations included iron and then steel hulls, the steam engine and the screw propeller; these were then followed by refinements like the the surface condenser and the compound engine, and even the Suez Canal.
If those improvements sound abstruse, consider these changes through the modern lens of fuel-efficiency: in the 1830s, steamships required 4 to 5 kilograms of coal per horsepower hour. This fuel consumption meant that steamships were so expensive that they only transported the mail, expensive cargo, and very wealthy passengers. Only fifty years later, in 1881, Napier’s Aberdeen (see picture below) burned only 650 grams of coal per horsepower hour. If you don’t look at the Aberdeen’s picture and think “disruptive technology”, let me put her fuel efficiency in perspective: her engines could move one ton of cargo over a kilometer using the energy released by burning the equivalent of a single sheet of paper.
Were these changes disruptive to business at the time? Apart from constantly dropping journey times, consider the impact on shipyards and workforces as they transitioned from wood to iron to steel hulls, or as the hulls grew: in the 1850s a 200-ton freighter was considered large; by the 1900, many freighters measured 7,500 tons. Freight costs were also continuously falling, disrupting supply chains as different regions’ comparative advantages took hold, as new industries sprung up, and as consumer tastes changed. These maritime developments also had huge geopolitical impacts that altered financial and business equations.
In fact, improvement in the world of shipping continues to impact business: the strategic logic of Warren Buffet’s purchase for Berkshire Hathaway of Burlington Northern Santa Fe Railway, for example, was driven in large part by changes in the the US port and rail system due to the widening of the Panama Canal and the end of the Panamax Era.
These technological changes were so radical that many businesses and most governments failed to keep up. Over thirty years elapsed between the launching of the first iron steamer in 1821 until insurance brokers Lloyd’s of London accepted iron ships as equal to wood. Or consider this: it took almost two decades for the British Post Office to allow the mail to stay aboard ships transiting the Suez Canal. From its opening in 1869 until 1887, the Royal Mail had to be unloaded, travel by train across Egypt, and then get reloaded on a different ship to continue its journey.
Which brings me to my expedition across the Hudson last week. To gauge better the future impact of genetic advances on business, government and society, I recently signed up with the genetic testing service 23andMe. After registering, customers are sent a kit that looks like this:
Note that the “kit” is just a tube to spit in (thus capturing your DNA), which you seal and mail back. Along with competitors like Navigenics, 23andMe processes your sample and uses genetic testing to offers insight into everything from a customer’s propensity to baldness, to the likelihood of certain diseases, to the effectiveness of medicines like statins. It’s a subscription-based service, so as new things are discovered about the human genome, 23andMe customers are updated about their profile.
What does this kit have to do with a special trip across the George Washington Bridge? No one can say for sure just how disruptive genetic testing will be, but it was certainly disruptive to my day. New York State’s legislators have preemptively “protected” me from genetic testing firms: I am not allowed either to spit into the tube provided by 23andme or to mail my DNA sample back from within the confines of New York state. In fact, in addition to lots of standard privacy forms and consent documents, 23andMe required me to sign a separate declaration stating that though I have a New York address, I would neither provide nor mail my DNA from New York. Hence my special trip to New Jersey.
I started this exploration of genetic testing feeling a variant of Techno-Egotism. As I crossed the Hudson to embark on my journey into the future of gene-based business, however, I felt quaint. In fact, I wondered if, like the Royal Mail in the 1870s, my spit would be allowed to transit the Suez Canal. As gene-based business advances, we may look back on the relative certainties of change emanating from Moore’s Law with nostalgia, with the business landscape as unruffled as the transition to the steam age now appears.
I’ll be addressing the rest of my 23andMe experience, and discussing the future impact of genetic and other advancing technologies, in future posts.
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I just heard from the people at 23andMe, whom I had emailed about this blog. They filled me in on New York’s problem:
“While we are authorized to ship kits to the state of New York, 23andMe is currently unable to process saliva samples collected in or mailed from the state of New York. The New York Department of Health considers our Personal Genome Service a test requiring a lab license and direct physician involvement.” In short, NY State legislators apparently need trained professionals to help them spit into tubes, and think that you do, too.
Alternatively – say it isn’t so – a certain amount of protectionism by the medical lab industry is at work.
To follow up on 23andme: last week, I got an email saying that my spit had been received by the laboratory and is “pending analysis”; apparently, the process usually takes 6-8 weeks. They noted that “Due to several factors (volume of sample provided, amount of DNA extracted from sample, basic biological variability) sample processing times vary. Some samples may require additional steps to be processed successfully. This may extend the processing time by up to two weeks.”
I hope that mine is easy to process!
If you’re interested in the legal issues surrounding databases containing DNA, the Federation of American Scientists has made available the Congressional Research Service report “DNA Databanking: Selected Fourth Amendment Issues and Analysis”. It’s available here: http://www.fas.org/sgp/crs/misc/R41847.pdf
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A thought-provoking article, “How many singularities are near and how will they disrupt human history?” includes a survey of recent concepts about accelerating change and its potential societal impact. It was published in the journal Technological Forecasting & Social Change, and is available free here: http://web.mit.edu/cmagee/www/documents/29-singularitysdarticle.pdf
“These technological changes were so radical that many businesses and most governments failed to keep up. Over thirty years elapsed between the launching of the first iron steamer in 1821 until insurance brokers Lloyd’s of London accepted iron ships as equal to wood.”
In what way is this an example of Lloyd’s failing to keep up? There was no way, in 1821, that the actuaries at Lloyd’s could have known what sort of survival statistics to expect from iron steamers; the things had never existed before. After thirty years, there is a history that they can measure and study, and from which they can make statistically reliable predictions. Gathering that data takes time, but it is also part of Lloyd’s job– maybe the most important part. I remember during the dot-com boom, everybody was wondering why Warren Buffet was sitting it out. He explained that he didn’t invest in these new companies because he didn’t know how to value them. In retrospect, that was a smart move. His behavior was no different from Lloyd’s. If Lloyd’s had started insuring iron just as it did wood right off the bat, and if it had then it turned out that iron had some unforeseen fatal flaw (like, for example, high-altitude jet liners did when they first appeared: http://en.wikipedia.org/wiki/South_African_Airways_Flight_201), then you’d be writing a post about how dumb Lloyd’s was to not take a wait-and-see approach to iron.
Change takes time. So long as mass possesses inertia, change will always take time.
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