The Myths of Technology and Innovation

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Your editor is an avid reader…and a slow reader.

That’s a problem. It means we tend to buy more books than we’re ever likely to read.

We have close to 30 books on the bookshelf at home and stacked on the bedside table. We can’t hope to read them anytime soon — not when on a whim we buy more books to add to the collection.

One of our favourite books from recent years is The Medici Effect: Breakthrough Insights at the Intersection of Ideas, Concepts, and Cultures.

It was written in 2004 by Frans Johansson. We first read it three years ago.

It’s a cracking read, and it came to mind after reading a fascinating news story about Apple Inc. [NASDAQ:AAPL] last week…

Here’s the story we’re talking about, from the Financial Times:

Apple has approached McLaren Technology Group, the British supercar engineer and Formula One team owner, about a potential acquisition, in the clearest sign yet that the iPhone maker is seeking to transform the automotive industry.

First comment? How about, what a ridiculous idea. Who would ever think that a consumer electronics company should buy a marginal carmaker?

But wait, perhaps it’s not as crazy an idea as it first appears. Here’s why…

The intersection of multiple ideas

This is why we mentioned the book, The Medici Effect.

One of the myths of innovation (by the way, another good book on this subject is actually titled The Myths of Innovation, by Scott Berkun), is that innovators act alone, locked in a room, scribbling notes and diagrams until they ‘find’ their invention.

That can happen. But some of the most important innovations aren’t made by ‘lone wolf’ inventors and innovators.

Some of the most important innovations are collaborations. Even more commonly, they are a mish-mash of ideas formed by fusing together existing ideas.

This is what Johansson calls the ‘intersection of ideas’.

An example? Let’s stick with Apple for this.

The Apple iPhone didn’t emerge from nowhere. Arguably, the idea for a smartphone could have come over a century ago. It just needed someone to have the idea for a combined portable phone, camera, entertainment, gaming, video, and data device.

But that didn’t happen.

The idea for a smartphone only really emerged as technology and innovation in other industries evolved and improved.

Just prior to the launch of smartphones, mobile phones had gone through the process of getting smaller. From the big ‘brick’ mobile phones of the 1980s, through to the tiny credit-card sized phones of the early 2000s.

The camera industry was moving fast towards digital photos. However, while digital photos were popular, the practice of sharing those photos was still awkward. The quality wasn’t great compared to film photos either.

As mobile phones were getting smaller, TVs were getting bigger. The old 4:3 aspect ratio TVs got bigger. Then TV companies developed 16:9 aspect and widescreen TVs. Not to mention the ridiculous and bulky rear projection TVs.

Finally, plasma and LCD TVs entered the market, and TVs became even bigger. Who doesn’t have a 60 inch widescreen TV today!

In that context, with TVs getting bigger, why would anyone want to watch something on a tiny mobile phone? They wouldn’t.

That’s why, while it may seem like a no-brainer move in hindsight, at the time Apple was taking a big risk with the first generations of iPhone. It was introducing a phone that was the biggest on the market, with a low quality camera (compared to SLR cameras), that gave you the chance to watch videos on a 3.5 inch screen.

Who would buy that? The answer: Millions of people.

The greatest innovation known to man?

At first glance, Apple’s foray into the car industry appears silly.

And there’s a chance it will be a failure. History shows that it’s rare for a company to have more than one innovative idea.

For all its success, Apple has only really innovated twice: the iPhone and the iPad. Its other innovation, the Apple Watch, has been stunning for its failure rather than its success.

But even if Apple fails in this, it may not be because it’s a bad idea for a consumer electronics company to buy a car company.

Innovations and progress happen at the intersection of ideas. It seems crazy today. (The Apple MacLaren, anyone!) But 10 years from now it’s just possible that the intersection of electronics company and car company could have produced the biggest leap in innovation known to man.

The only unknown today is, what will that innovation be?

Cheers,

Kris Sayce,
For The Daily Reckoning

PS: Scouring the market for innovations and breakthrough ideas is what Sam Volkering does every day of the week. He’s doing it right now, with tremendous success. To find out what, where, and how, go here.

Editor’s Note: This article was originally published in Money Morning.

Kris Sayce
Kris Sayce, dubbed the ‘Jeremy Clarkson of Australian finance’, began as a London finance broker specialising in small-cap stock analysis on London’s Alternative Investment Market (AIM). Kris then spent several years at one of Australia's leading wealth management firms. A fully accredited advisor in shares, options, warrants and foreign-exchange investments, Kris was instrumental in helping to establish the Australian version of the Daily Reckoning e-newsletter in 2005. He is currently the Publisher, Investment Director and Editor in Chief of Australia's most outspoken financial news service — Money Morning.
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