Two Kinds of Technology Change



Many of the examples in this post are drawn from Volume I of Fernand Braudel’s “Civilization and Capitalism: 15th-18th Century”, which I strongly recommend for anyone interested in a quantitative approach to history.

You may have heard that Gutenberg revolutionized the intellectual world with his invention of moving type in the mid-1400’s.

Here’s the thing, though: Gutenberg was not the first to try movable type. The Chinese were using basic printing presses in the ninth century; Pi Cheng introduced movable characters between 1040 and 1050. So why didn’t it catch on then? And even setting that aside, surely some tired monk must have thought of the idea sooner.

Turns out, prior to the 14th century, books were primarily printed on parchment — created from sheep skins. A single 150-page book required the skins of 12 sheep to make the parchment. That much parchment wasn’t cheap — the parchment on which a book was written cost far more than the actual writing. With that much cost sunk in the materials, it’s no wonder that book-buyers wanted beautiful, handwritten script — it added relatively little to the cost.

It was paper which changed all that. European paper production didn’t get properly underway until the 1300’s. Once it did, book prices plummeted, writing became the primary expense of book production, and printing presses with movable type followed a century later.

The printing press offers a clear example of a technology change whose arrival was limited, not by the genius of the inventor, but by economic viability. The limiting factor wasn’t insight, it was prices.

Once you go looking for it, there’s a lot of technology shifts like this. Newcomen’s steam engine (and Heron’s, long before). Schwenteer’s telegraph. Bushnell’s submarine. Babbage and Lovelace had all the key ideas for the modern computer in the 1820’s, but it wasn’t until the 1890 census that somebody wanted to pay for such a thing. And of course, Moore’s Law led to all sorts of ideas going from unprofitable to ubiquitous in the span of a decade or two.

In all these cases, the pattern is the same: the idea for an invention long predates the price shifts which make it marketable.

On the other hand, this isn’t the case for all technological progress. There are some technologies for which demand preceded capability. After some insight or breakthrough made the technology possible, adoption followed rapidly. Consider the Wright brothers’ flyer, or Edison’s lightbulb. Both had badly inferior predecessors, which didn’t really solve the problem: gliders and hot-air balloons for the Wright brothers, arc lights for Edison. Both built fast iteration platforms, tested a large possibility space, and eventually found a design which worked. And both saw rapid adoption once the invention was made.

One notable feature of these breakthrough-type technologies: the economic incentive for flight or the lightbulb was in place long before the invention, so of course many people tried to solve the problems. Both Edison and the Wright brothers were preceded by many others who tried and failed.

Here’s a simple model: technology determines the limits of what’s possible, the constraints on economic activity. We can think of these constraints as planes in some high-dimensional space of economic production. Economic incentives push us as far as we can go along some direction, until we run in to one of these constraints — and the technology we use depends on what constraint we hit.

Following the incentive gradient in the diagram above, we end up at the smiley face — using a mix of technologies A and B. This point is insensitive to small changes in the incentive gradient — the prices can shift a bit one way or the other, shifting the incentive gradient slightly, and the smiley-face point will still be optimal.

However, if prices shift enough, then we can see a sudden change.

Once the incentive gradient moves “down” sufficiently, we suddenly jump from the A-B intersection being optimal to the B-C intersection being optimal. A new set of constraints kicks in; we switch from technology A to technology C. That’s the printing press: inventing C doesn’t matter until the prices shift.

On the other hand, we can also change technologies by relaxing a constraint. Suppose some new-and-improved version of technology A comes along:

Technology A’ allows us to ignore the old A constraint, and move further along that direction. If we were using A before, then we’ll definitely want to switch to A’ right away. That’s Edison’s lightbulb.

In order for a technology to go from not-used to used, one of these two situations must hold: either the technology was unprofitable before and a price shift makes it profitable, or else it was profitable before, and many people tried to figure it out but couldn’t. If you yourself want to market some kind of technology, then you should consider which of these two situations applies. Has a recent price shift made it profitable? Have you made some sort of breakthrough which others have tried and failed to find? If the answer to both of those questions is no, then the technology will probably remain unused. If the answer to at least one of those questions is yes, then you may be on to something.