In 1989 I answered my first mobile phone call on Oxford Street using a brick-sized Motorola borrowed from work. Several people shouted abuse at me from passing cars.
Back then, it was also rare to make a mobile-to-mobile call. If you did, it was the main topic of conversation for the first few minutes: ‘Where are you?’ ‘On a boat.’ ‘Wow, I’m on a train going through Leighton Buzzard.’ And you’d laugh at the absurdity of the whole thing.
Now let’s imagine that, owing to a technological limitation, early cellphones hadn’t offered interconnectivity with the fixed-line network. Adoption might have been delayed by ten years or more. In 1989 people would have known too few cellphone users to make it worthwhile. The same effect did stall the spread of the fax machine. Until hitting critical mass in the mid-1980s, it was underused for decades. It pays to read Douglas McWilliams to understand such network effects: valuable technologies often languish for years beneath the threshold of widespread adoption.
This same friction applies in reverse. Once they reach scale, network goods persist for too long through sheer ubiquity. There is a group of scientists who believe hydrogen should be the future of clean transportation. But they also fear that once hydrogen power has reached its potential, electric charging infrastructure will be so deeply entrenched, it will be impossible to unseat.
Typically, study of such effects has focused on technology and utilities — asking whether online search, say, is a natural monopoly. Mainstream thinkers have historically seen markets through the lens of ‘methodological individualism’, assuming that individual preferences neatly aggregate into collective behaviour. I think this is an error. The entire fashion industry, after all, operates on network effects. There is a tiny minority of people (notably Kate Moss) who can make something cool simply by wearing it; 99.9999 per cent of people simply can’t. My attempts to bring back the cravat (‘Appropriate neckwear for anything from an orgy to a funeral’) have met with failure for 30 years.
Or let’s take the world’s most ludicrous object: the stemmed wine glass. Nobody briefed to design a receptacle from scratch would say: ‘Let’s give it a high centre of gravity for maximum instability, with a base so small and a stem so long that one misjudged gesticulation will catapult the contents into the lap of someone three feet away. We’ll also make sure it doesn’t fit in the dishwasher.’ So why does this idiotic item persist? Because restaurants already own hundreds of the things. And most homes contain six or more. While these do break, tragically they rarely break simultaneously. And so, when you break one stemmed glass, you replace it with another to maintain the set. The whole hideous business becomes self-perpetuating. (The martini glass is even worse — a magnificent drink served in a vessel that, with the death of Sean Connery, no living person can use without looking like a total prat.)
This is what makes a pandemic interesting. Metaphorically, all our stemmed glasses have broken at once. Was business travel a kind of fashion? Is video-calling like the fax machine in the 1980s? We’ll soon find out.
There is a predictably crappy joke told by economists. Two economists see a banknote on the pavement. ‘Is that a $20 bill?’ says one. The other answers: ‘No, it can’t be: someone would already have picked it up.’ But as my friend the entrepreneur Jag Bhalla points out, potential wealth isn’t like that any more. It’s like a 500lb gold ingot: it takes many people acting simultaneously to lift it off the ground.
Perhaps the world doesn’t need more supply. It needs better orchestrated demand.
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