In Austin, like many cities, the AM radio dial is eking out an existence based on sports talk, conservative talk radio, foreign language music (chicano and conjunto Tejano here), and the occasional oldies rock and roll. I'm a classic rock guy along with sports talk, NPR, and a little classical music when I need quiet and clear thinking; but occasionally I'll listen to several of the phalanx of AM conservative talk radio here in town in order to get their "take" on things.
The title theme above comes from commentary on the Sean Hannity program a year or two ago, during which he and a guest (his name long forgotten to me now) were just railing away on the U.S. government's decision to end production of incandescent light bulbs in place of the new CFL and LED technology. They went on and on about the abject stupidity of the decision, and were speculating that they might buy up all the remaining incandescent bulbs, inventory them until none were available, and sell them at a huge mark-up, yet still be much less expensive than the crazy new stuff.
Politics aside, neither had any knowledge of the experience curve. Most people don't. The seminal book on the matter, "Perspectives on Experience, was published by The Boston Consulting Group in 1968, and I have the good fortune to have a copy from 1973, designated "Assigned to J.K. George and property of Motorola Semiconductor Products Division." Hopefully good old Motorola, or what is left of it, won't come after it.
In 1973 Motorola Semiconductors still was a small but rapidly growing business. This book was influential in my career, and I just might have been the only person at Motorola to read it. Based on the mathematical models, Bud Broeker and I made $500 million decisions on memory chip industry prices, and fortunately never made an inaccurate one.
A new technology, one fundamentally disruptive to the established way of producing a product, is more expensive than the older method at first. Initially it is used by "early adopters," users who understand the value and features and are willing to pay for them. As volumes increase, the cumulative "learning" or understanding based on more and more experience drives efficiency such that overall cost of ownership is equal and then less. At some point, the general user base converts to the new product; the transition is rapid, and the older product becomes inefficient to manufacture and becomes obsolete. Strategically, a supplier of the new technology must be fully committed and well-positioned at this point. The conversion or transition process can be plotted in terms of market share. The curve is known as the "S Curve" since the initial penetration is slow (early adopters, higher price) and then undergoes a fast increase, and finally slows down as the market share approaches 100% and only late adopters and the "I'm never gonna use that new-fangled thing" crowd holds back.
As a fundamental element of Experience Curve theory, the cost in constant dollars (this is critical) goes down between 20% and 30% every time the cumulative unit volume for the industry doubles. At first, the overall unit volume doubles quickly, in a half year or so, but later it takes longer. The ability to determine the actual unit to measure is key. While this is easy for an automobile tire or a TV set, it can be complex for the memory chip industry, where the number of actual "bits" in a single "chip" go up by a factor of four every year and a half. In this case, the proper "unit" is each bit of memory, not the physical number of "chips."
Our pundit, Mr. Hannity, obviously was harping on the heavy hand of government interference. Fair enough, but he did not portray a balanced picture—usually these radio talkers with their one-sided opinion machines never do. Hannity didn't mention the overall government policy to encourage transition from fragile and short-lasting energy-hogging light bulbs that emit lots of heat. This requires lots of air conditioning, which could drive electric utilities to add expensive capacity. He didn't explain that the new technology not only would come down sharply in cost but would save huge national commitments in energy generating plants with concomitant reductions in emitted air pollutants from the power plants. Apparently, he was unaware of the rapid (and inexorable) cost/price reductions of a new technology according to the Experience Curve.
At times, technology seems overwhelming as waves of new developments appear. Just as surely as bias ply tires (remember those?) were replaced by radial tires, as analog TVs were replaced by digital TVs, as cell phones transitioned from analog to digital to smart phones based on Internet connectivity, we can be certain that new forms of lighting, probably LED based but possibly other new forms (see organic LEDs), will become standard in our homes and offices. One of the biggest transitions in our lives, the conversion from petroleum-based vehicles to hybrid-electrical cars and then on to full-electrical automobiles will take place within fifty years. The initial movement to electrical powered cars is underway. Every one of the automobile companies is committing to it. Some day, our kids and grand kids will look back and wonder how we ever drove those old vehicles. Change is coming.