1 00:00:17,560 --> 00:00:21,960 Speaker 1: Pushkin too quick. No, it's perfect, Pushkin stop, you got it. 2 00:00:24,040 --> 00:00:37,760 Speaker 1: This episode is presented by Odu Jacob. 3 00:00:37,800 --> 00:00:42,159 Speaker 2: Today is episode number three in our series on American 4 00:00:42,680 --> 00:00:45,760 Speaker 2: genius writers that change the way we do business in 5 00:00:45,800 --> 00:00:50,120 Speaker 2: this country. We had Benjamin Franklin, who created hustle culture 6 00:00:50,320 --> 00:00:53,680 Speaker 2: in the mid seventeen hundreds, right. I did Tarbell, the 7 00:00:53,720 --> 00:00:58,240 Speaker 2: reporter who gave businesses a conscience early nineteen hundreds. And 8 00:00:58,280 --> 00:01:07,119 Speaker 2: today Clayton M. Christensen Kristensen Christensen, Okay, not a household name, 9 00:01:07,560 --> 00:01:09,999 Speaker 2: but you've probably seen his book for sale in airports 10 00:01:10,039 --> 00:01:15,160 Speaker 2: all around the country, The Inner Dilemma. Now, Clayton, after 11 00:01:15,200 --> 00:01:16,919 Speaker 2: he wrote this, he didn't get his face on the money. 12 00:01:16,920 --> 00:01:19,920 Speaker 2: There are no statues of him, and frankly, I think 13 00:01:19,959 --> 00:01:21,680 Speaker 2: he would be embarrassed to be on this list of 14 00:01:21,720 --> 00:01:26,399 Speaker 2: American geniuses. He was a humble business school professor, if 15 00:01:26,400 --> 00:01:30,040 Speaker 2: such a thing exists. And yet we live today in 16 00:01:30,080 --> 00:01:33,679 Speaker 2: Clayton M. Christensen's world because he was the one who 17 00:01:33,720 --> 00:01:38,480 Speaker 2: popularized the word disruption. Everybody wants to be a disruptor. 18 00:01:38,520 --> 00:01:38,720 Speaker 1: Now. 19 00:01:39,120 --> 00:01:42,039 Speaker 2: The book Innovator's Dilemma influenced Steve Jobs. 20 00:01:42,240 --> 00:01:43,040 Speaker 1: He recommended it. 21 00:01:43,319 --> 00:01:46,560 Speaker 2: Jeff Bezos encouraged his managers to read it. Michael Bloomberg, 22 00:01:46,600 --> 00:01:49,320 Speaker 2: Mark Cuban, It's on all of their reading lists. But 23 00:01:49,440 --> 00:01:55,360 Speaker 2: beyond popularizing the word disruption, clay Christensen developed a theory 24 00:01:55,480 --> 00:01:59,600 Speaker 2: of disruption. Why business history is strewn with the carcasses 25 00:01:59,640 --> 00:02:02,400 Speaker 2: of failed businesses, businesses that used to be on top 26 00:02:02,880 --> 00:02:05,560 Speaker 2: and then were disrupted into oblivion. We've done them here 27 00:02:05,600 --> 00:02:08,880 Speaker 2: on the show Sears exactly, Sears number. 28 00:02:08,560 --> 00:02:11,200 Speaker 1: One, biggest building in the world. Where are they today? 29 00:02:11,360 --> 00:02:14,040 Speaker 2: And there's this question you ask that we probably asked, 30 00:02:14,079 --> 00:02:16,560 Speaker 2: how did Sears not see the challenge of Walmart or 31 00:02:16,560 --> 00:02:19,399 Speaker 2: online shopping? You know where they stupid? Had they lost 32 00:02:19,480 --> 00:02:24,000 Speaker 2: their touch? Clayton says no. In The Innovator's Dilemma, he 33 00:02:24,160 --> 00:02:27,120 Speaker 2: argues they were not stupid. There is something in the 34 00:02:27,240 --> 00:02:31,639 Speaker 2: nature of technological change that makes it nearly impossible for 35 00:02:31,680 --> 00:02:35,519 Speaker 2: big companies like Seers to adapt. They fail not because 36 00:02:35,520 --> 00:02:39,440 Speaker 2: they're bad at business. They fail because they are too 37 00:02:39,560 --> 00:02:42,799 Speaker 2: good at business, too good at the game, and then 38 00:02:42,840 --> 00:02:46,160 Speaker 2: the game changes. I'm Jacob Goldstein, I'm Robert Smith, and 39 00:02:46,200 --> 00:02:49,520 Speaker 2: this is business history. I show about this story business. 40 00:02:49,960 --> 00:02:53,400 Speaker 2: The Innovator's Dilemma isn't about how big companies can't innovate 41 00:02:53,400 --> 00:02:56,280 Speaker 2: because they totally can. They have money, they have personnel, 42 00:02:56,760 --> 00:02:59,160 Speaker 2: they have the means to do it. They just choose 43 00:02:59,720 --> 00:03:01,040 Speaker 2: not to do it or to do it in a 44 00:03:01,080 --> 00:03:05,160 Speaker 2: different way for very smart and sensible economic reasons, and 45 00:03:05,200 --> 00:03:09,360 Speaker 2: then those companies die. That's the dilemma. That is the 46 00:03:09,400 --> 00:03:13,160 Speaker 2: dilemma which we will illustrate today by reading a children's book. 47 00:03:13,760 --> 00:03:16,400 Speaker 2: I'm going to be the LeVar Burton of business history 48 00:03:16,520 --> 00:03:22,639 Speaker 2: reading Rainbow. We love to start the show with a 49 00:03:22,720 --> 00:03:28,240 Speaker 2: swashbuckling profile of an entrepreneur or thinker, and unfortunately, Clayton 50 00:03:28,720 --> 00:03:33,959 Speaker 2: Magilby Christensen did not ride the rails with hoboes. 51 00:03:34,000 --> 00:03:36,560 Speaker 1: Did he work as a telegraph operator at age thirteen? 52 00:03:36,760 --> 00:03:39,640 Speaker 1: Did not. He didn't get kidnapped by pirate. No time 53 00:03:39,680 --> 00:03:41,680 Speaker 1: on a ship, No time on a ship. 54 00:03:42,000 --> 00:03:46,120 Speaker 2: Clayton Christensen had the most basic business school life trajectory 55 00:03:46,120 --> 00:03:48,160 Speaker 2: I've ever seen. He was born in Salt Lake City, 56 00:03:48,600 --> 00:03:52,480 Speaker 2: second of eight children. Went to Brigham Young University, Rhodes Scholar, 57 00:03:52,680 --> 00:03:56,560 Speaker 2: Harvard Business School, Boston Consulting Group. It's kind of like 58 00:03:56,600 --> 00:03:57,560 Speaker 2: going to see with pirates. 59 00:03:58,600 --> 00:04:02,400 Speaker 1: He was he was a literal or in pirates. He 60 00:04:02,440 --> 00:04:06,120 Speaker 1: was a literal techis I bet he was an eagle scout. 61 00:04:06,240 --> 00:04:08,520 Speaker 2: He was an eagle scout, and then he spent twenty 62 00:04:08,520 --> 00:04:11,400 Speaker 2: five years as a scout master, den leader, troop chairman, 63 00:04:11,480 --> 00:04:15,280 Speaker 2: I mean, true boy scout. And even his foray into 64 00:04:15,320 --> 00:04:19,360 Speaker 2: business was weirdly undramatic. He teamed up with a bunch 65 00:04:19,400 --> 00:04:21,960 Speaker 2: of professors at MIT when he was at Harvard, and 66 00:04:22,000 --> 00:04:26,320 Speaker 2: he helped start Ceramics Process Systems Corporation. 67 00:04:27,480 --> 00:04:30,640 Speaker 1: That's a lot of boring words together. I feel like, 68 00:04:31,200 --> 00:04:33,440 Speaker 1: do you need process and systems? 69 00:04:33,600 --> 00:04:35,240 Speaker 2: I don't know if they made the process of the 70 00:04:35,240 --> 00:04:40,279 Speaker 2: ceramics or the systems. But something happened with this company 71 00:04:40,320 --> 00:04:46,880 Speaker 2: that gave Clayton pause, and that was his tiny company succeeded. 72 00:04:47,200 --> 00:04:48,680 Speaker 1: It succeeded wildly. 73 00:04:49,120 --> 00:04:53,680 Speaker 2: Ceramics Process Systems was competing with some of the biggest, 74 00:04:53,839 --> 00:04:58,640 Speaker 2: smartest companies in the world DuPont Alcoa, and Clayton's company 75 00:04:58,760 --> 00:05:03,880 Speaker 2: beat them all. Now, a less humble professor would have said, well, 76 00:05:03,880 --> 00:05:07,400 Speaker 2: of course, now I'm a genius went to Harvard Business School. 77 00:05:07,800 --> 00:05:09,880 Speaker 2: But then he thinks, you know, is that really it? 78 00:05:10,080 --> 00:05:13,440 Speaker 2: Like DuPont and Alcoa have people from Harvard Business School, 79 00:05:13,600 --> 00:05:17,640 Speaker 2: hundreds of them they have mit scientists. There must be 80 00:05:17,720 --> 00:05:21,520 Speaker 2: another money. They know their markets, they should win, they 81 00:05:21,560 --> 00:05:22,120 Speaker 2: should win. 82 00:05:22,800 --> 00:05:26,240 Speaker 1: This is very admirable that he rethinks this right. 83 00:05:26,360 --> 00:05:28,000 Speaker 2: Well, this is the moment I sort of fell in 84 00:05:28,040 --> 00:05:31,800 Speaker 2: love with Clayton because he decided to actually devote a 85 00:05:31,839 --> 00:05:36,840 Speaker 2: research project to study why he and a startup company 86 00:05:36,880 --> 00:05:40,400 Speaker 2: were not special. We're not extraordinary. There must be something 87 00:05:40,839 --> 00:05:44,279 Speaker 2: in the water of business that makes this happen. 88 00:05:44,560 --> 00:05:48,240 Speaker 1: And when this is like what mid nineties, Yes, you 89 00:05:48,279 --> 00:05:51,400 Speaker 1: know now it is less surprising to us when some 90 00:05:51,560 --> 00:05:53,840 Speaker 1: new company comes along in topples in a company, because 91 00:05:53,880 --> 00:05:55,840 Speaker 1: this is the world we're living in. But I think 92 00:05:55,880 --> 00:05:58,680 Speaker 1: back to the General Motor Show where I looked at 93 00:05:58,680 --> 00:06:01,760 Speaker 1: the biggest companies in America in the mid nineties, and 94 00:06:01,800 --> 00:06:04,359 Speaker 1: they were all one hundred years old. It was at 95 00:06:04,480 --> 00:06:08,039 Speaker 1: and T and Philip Morris, and this idea that a 96 00:06:08,120 --> 00:06:10,400 Speaker 1: little company could beat a big company was not in 97 00:06:10,440 --> 00:06:11,720 Speaker 1: the air the way it is now. And this is 98 00:06:11,760 --> 00:06:14,120 Speaker 1: part of the world that sort of Clayton Christensen is 99 00:06:14,160 --> 00:06:15,960 Speaker 1: helping to bring about, right Yeah. 100 00:06:15,960 --> 00:06:19,839 Speaker 2: And his hypothesis was that this David and Goliath dynamic 101 00:06:19,960 --> 00:06:23,120 Speaker 2: effects all sorts of industries. As he later wrote, why 102 00:06:23,120 --> 00:06:24,279 Speaker 2: don't you give me this quote here. 103 00:06:24,480 --> 00:06:28,200 Speaker 1: There's something about the way decisions get made in successful 104 00:06:28,320 --> 00:06:33,480 Speaker 1: organizations that sows the seeds of eventual failure. Just sort 105 00:06:33,520 --> 00:06:35,400 Speaker 1: of say that again. It's a little bit wordy, right, 106 00:06:35,440 --> 00:06:40,200 Speaker 1: but what he's saying is the way successful organizations make 107 00:06:40,360 --> 00:06:44,840 Speaker 1: decisions is what screws them exactly. It doesn't sound right 108 00:06:45,000 --> 00:06:48,000 Speaker 1: on its face, right, because presumably they're successful because they 109 00:06:48,000 --> 00:06:50,520 Speaker 1: have made good decisions and they'll continue to be successful. 110 00:06:50,640 --> 00:06:54,760 Speaker 2: And Clayton comes up with this idea with actual data. 111 00:06:55,320 --> 00:06:58,720 Speaker 2: He studies the disk drive industry for computers. 112 00:06:59,400 --> 00:07:02,200 Speaker 1: Now, I feel like our audience members disc drige. Okay, 113 00:07:02,720 --> 00:07:05,400 Speaker 1: I remember the big actual floppy ones and the little 114 00:07:05,480 --> 00:07:06,799 Speaker 1: hard ones that were still called flop. 115 00:07:06,839 --> 00:07:10,440 Speaker 2: Well, there was this whole competition then for putting more 116 00:07:10,440 --> 00:07:13,200 Speaker 2: and more information on your disk drive. Obviously in computers 117 00:07:13,200 --> 00:07:16,000 Speaker 2: you wanted more and more memory, but at the same 118 00:07:16,040 --> 00:07:19,600 Speaker 2: time computers were getting smaller from the big mainframe ones, 119 00:07:19,600 --> 00:07:22,520 Speaker 2: so you wanted your disk drive to get smaller and smaller. 120 00:07:23,080 --> 00:07:26,160 Speaker 2: And he had a specific reason Clayton did for studying 121 00:07:26,360 --> 00:07:30,840 Speaker 2: disk drives. He wrote about how biologists study fruit flies 122 00:07:31,640 --> 00:07:34,800 Speaker 2: because they're born, reproduce, and die within a single day. 123 00:07:34,920 --> 00:07:37,120 Speaker 1: Ah, so you get a lot of evolution in a 124 00:07:37,160 --> 00:07:38,000 Speaker 1: small amount of time. 125 00:07:38,160 --> 00:07:42,040 Speaker 2: Exactly, Jacob, give us this light reading from clay If 126 00:07:42,040 --> 00:07:45,040 Speaker 2: you want to understand why something happens in business, study 127 00:07:45,080 --> 00:07:48,360 Speaker 2: the disk drive industry. Those companies are the closest things 128 00:07:48,400 --> 00:07:51,960 Speaker 2: to fruitflies that the business world will ever see. Because 129 00:07:52,000 --> 00:07:54,800 Speaker 2: the technology was evolving so fast in the nineteen eighties 130 00:07:54,800 --> 00:07:57,960 Speaker 2: and nineteen nineties that companies could launch in one year, 131 00:07:58,680 --> 00:08:00,480 Speaker 2: be top of the charts in the next year, and 132 00:08:00,520 --> 00:08:03,440 Speaker 2: then be gone in the year after that. So Clayton 133 00:08:03,480 --> 00:08:06,080 Speaker 2: starts collecting all the data for the industry. And when 134 00:08:06,120 --> 00:08:09,040 Speaker 2: I say all the data such an eagle scout, I 135 00:08:09,080 --> 00:08:14,200 Speaker 2: mean all of the data month by month, sales, new products, 136 00:08:14,400 --> 00:08:17,360 Speaker 2: year after year after year. And he sort of maps 137 00:08:17,440 --> 00:08:20,480 Speaker 2: the genome, if you will, of the disk drive industry. 138 00:08:20,960 --> 00:08:25,600 Speaker 2: And there are so many technological innovations. He finds that 139 00:08:26,200 --> 00:08:30,239 Speaker 2: sometimes the innovations make everyone better. He can see how 140 00:08:30,280 --> 00:08:33,760 Speaker 2: all the companies adopt a new technology, and you know, 141 00:08:33,800 --> 00:08:35,760 Speaker 2: they can put more information on the disk drive. 142 00:08:35,839 --> 00:08:38,560 Speaker 1: Sure, so this is not sort of IP protected. For 143 00:08:38,600 --> 00:08:41,679 Speaker 1: whatever reason, some professor figures something out. Everybody can do 144 00:08:41,720 --> 00:08:43,280 Speaker 1: something at the same time, more or less. 145 00:08:43,360 --> 00:08:45,600 Speaker 2: Yeah, it's all one small industry. They're learning from each other. 146 00:08:46,120 --> 00:08:50,320 Speaker 2: But then sometimes an innovation comes along and boom, the 147 00:08:50,360 --> 00:08:54,079 Speaker 2: whole market changes. Companies flourish out of this or they 148 00:08:54,080 --> 00:08:57,200 Speaker 2: go out of business. And so Christensen asks himself, like, 149 00:08:57,360 --> 00:09:02,040 Speaker 2: what is happening here? And this is his thesis. 150 00:09:02,080 --> 00:09:03,640 Speaker 1: This is the thesis of the whole. 151 00:09:03,559 --> 00:09:06,120 Speaker 2: Innovator's dilemma is about to write, and that is that 152 00:09:06,160 --> 00:09:09,600 Speaker 2: there are two kinds of technological innovation. There's two ways 153 00:09:09,640 --> 00:09:14,720 Speaker 2: to leap forward. Number one is what he calls sustaining technologies. 154 00:09:14,920 --> 00:09:18,240 Speaker 2: Sustaining technologies are the things that companies do all the 155 00:09:18,240 --> 00:09:20,600 Speaker 2: time to get better. Every company gets better all the time. 156 00:09:20,880 --> 00:09:24,040 Speaker 2: You know maybe who have different magnetic film that holds 157 00:09:24,040 --> 00:09:27,600 Speaker 2: more information. Everyone shares this information, every company gets better. 158 00:09:27,760 --> 00:09:31,120 Speaker 2: The big companies stay big, small companies stay small. So 159 00:09:31,360 --> 00:09:35,760 Speaker 2: that's sustaining technologies. But the second kind of technology Christensen 160 00:09:35,840 --> 00:09:40,960 Speaker 2: calls disruptive technology. Here it is which sounds cooler and 161 00:09:41,320 --> 00:09:44,920 Speaker 2: is cooler, and it works in this much wonkier way. 162 00:09:45,320 --> 00:09:48,720 Speaker 2: So every year, some new company will come up with 163 00:09:48,760 --> 00:09:52,880 Speaker 2: a disk drive that is smaller and simpler and frankly 164 00:09:52,960 --> 00:09:55,400 Speaker 2: worse than the old disk drives. Huh, doesn't hold as 165 00:09:55,440 --> 00:09:58,760 Speaker 2: much information, but it's smaller, right, And the old disk 166 00:09:58,840 --> 00:10:02,200 Speaker 2: drive companies will ignore it. They'll just be like, that's 167 00:10:02,200 --> 00:10:03,000 Speaker 2: not going to be the thing. 168 00:10:03,080 --> 00:10:05,600 Speaker 1: It's a worse product. It's supposed to hold information and 169 00:10:05,640 --> 00:10:06,960 Speaker 1: it holds less information. 170 00:10:07,720 --> 00:10:11,120 Speaker 2: And then woosh, next thing you know, the small company 171 00:10:11,280 --> 00:10:14,600 Speaker 2: is anyway Mark could share from the big disk drive manufacture, 172 00:10:15,000 --> 00:10:16,960 Speaker 2: and all of a sudden someone else is on top 173 00:10:17,040 --> 00:10:19,319 Speaker 2: again and again in the dis drive industry. 174 00:10:19,640 --> 00:10:23,000 Speaker 1: This is surprising, right, This is his fundamental insight, and 175 00:10:23,000 --> 00:10:24,920 Speaker 1: we'll unpack it more. But I just want to underline 176 00:10:24,960 --> 00:10:28,400 Speaker 1: the surprise here, which is the company making what in 177 00:10:28,440 --> 00:10:32,040 Speaker 1: many ways is a worse product. Is the disruptor. I 178 00:10:32,040 --> 00:10:34,360 Speaker 1: would tend to think naively, oh, somebody in a garage 179 00:10:34,400 --> 00:10:37,000 Speaker 1: figures out a better way to do something, But Clayton 180 00:10:37,080 --> 00:10:39,720 Speaker 1: Kristensen is saying, no, it's not that. Weirdly, it's somebody 181 00:10:39,760 --> 00:10:42,800 Speaker 1: doing something worse but cheaper. And we will go through 182 00:10:42,800 --> 00:10:43,360 Speaker 1: this in detail. 183 00:10:43,400 --> 00:10:46,600 Speaker 2: I'll explain how this works, but not about disk drives, 184 00:10:46,640 --> 00:10:50,320 Speaker 2: because I read Clayton's research on disk drives and it's 185 00:10:50,360 --> 00:10:52,599 Speaker 2: so dense and there's a lot of like five and 186 00:10:52,640 --> 00:10:54,640 Speaker 2: a half it's eight and eight. It's three and a half. 187 00:10:54,800 --> 00:10:59,360 Speaker 2: It's really hard to figure out what's happening. But luckily 188 00:10:59,920 --> 00:11:02,000 Speaker 2: he wrote about something that's a little bit more in 189 00:11:02,040 --> 00:11:06,480 Speaker 2: our wheelhouse for business history. He wrote about brains, steam shovels. 190 00:11:06,640 --> 00:11:07,920 Speaker 1: Steam shovels very good. 191 00:11:08,360 --> 00:11:10,840 Speaker 2: And I have to admit I was like, oh, steam shovels. 192 00:11:10,840 --> 00:11:12,200 Speaker 2: And I didn't know why I was so excited. And 193 00:11:12,200 --> 00:11:15,600 Speaker 2: then I thought there was a children's book I had 194 00:11:15,640 --> 00:11:18,200 Speaker 2: when I was a kid called I have it here, 195 00:11:19,040 --> 00:11:21,720 Speaker 2: Mike Mulligan and the Steam Shovel. 196 00:11:22,120 --> 00:11:24,840 Speaker 1: How old are you revered? Very old? 197 00:11:25,240 --> 00:11:27,760 Speaker 2: This was even after steam shovels had gone away. But 198 00:11:27,800 --> 00:11:30,080 Speaker 2: here I want you to read some of Mike Mulligan 199 00:11:30,240 --> 00:11:31,480 Speaker 2: and the Steam Shovel. 200 00:11:32,000 --> 00:11:35,880 Speaker 1: Mike Mulligan had a steam shovel, a beautiful red steam shovel. 201 00:11:36,240 --> 00:11:40,400 Speaker 1: Her name was Mary Anne. Yes, do I keep going? Yeah? Okay, 202 00:11:40,679 --> 00:11:43,240 Speaker 1: it was Mike Mulligan and Maryanne and some others who 203 00:11:43,320 --> 00:11:45,880 Speaker 1: dug the Great Canals. You didn't tell me that we're 204 00:11:45,880 --> 00:11:48,000 Speaker 1: going to be canals. We got to do a canal 205 00:11:48,080 --> 00:11:51,280 Speaker 1: show for the big boats to sail through. Yes, do 206 00:11:51,360 --> 00:11:53,600 Speaker 1: I keep going? Yeah? You're gonna like this one? And 207 00:11:53,760 --> 00:11:56,680 Speaker 1: it was Mike Mulligan and Marianne and some others who 208 00:11:56,760 --> 00:11:59,560 Speaker 1: dug the deep holes for the deep cellars of the 209 00:11:59,640 --> 00:12:01,719 Speaker 1: tall skyscrapers in the Big. 210 00:12:01,480 --> 00:12:04,640 Speaker 2: Cities Classic children's Running Beautiful. 211 00:12:05,320 --> 00:12:08,080 Speaker 1: Then along came the new gasoline shovels, and the new 212 00:12:08,120 --> 00:12:12,439 Speaker 1: electric shovels, and the new diesel motor shovels, disruptive innovation 213 00:12:13,000 --> 00:12:16,160 Speaker 1: and took all the jobs away from the steam shovels. 214 00:12:16,880 --> 00:12:20,520 Speaker 1: Mike Mulligan and Mary Anne were very sad. 215 00:12:20,720 --> 00:12:23,840 Speaker 2: I'm going to interrupt you here, Cliffhanger on the steam 216 00:12:23,840 --> 00:12:27,960 Speaker 2: shovel but I wanted to explain the technological innovation in 217 00:12:28,040 --> 00:12:29,960 Speaker 2: this book. Did not know it as a child. I 218 00:12:30,000 --> 00:12:30,480 Speaker 2: know it now. 219 00:12:30,559 --> 00:12:32,160 Speaker 1: So now we're pivoting away from the book to the 220 00:12:32,240 --> 00:12:36,200 Speaker 1: actual history of steam shovels as described by American genius 221 00:12:36,240 --> 00:12:38,040 Speaker 1: Clay Christensen. That's exactly right. 222 00:12:38,080 --> 00:12:41,320 Speaker 2: Okay, So steam shovels used to have a single steam 223 00:12:41,320 --> 00:12:42,839 Speaker 2: engine that pulled cables. 224 00:12:43,120 --> 00:12:45,800 Speaker 1: You may have seen your kids steam shovels. 225 00:12:45,840 --> 00:12:48,959 Speaker 2: So they pulled cables to make the giant claw pick 226 00:12:49,080 --> 00:12:52,320 Speaker 2: up dirt. Okay, and then along kid the gasoline shovels. 227 00:12:52,400 --> 00:12:55,360 Speaker 2: The gas engine, but they used the same cables. They 228 00:12:55,400 --> 00:12:59,040 Speaker 2: just installed a different engine. They had cases sustaining innovation. Yeah, 229 00:12:59,080 --> 00:13:01,400 Speaker 2: my tracking correctly. The children's book doesn't tell you this, 230 00:13:01,600 --> 00:13:04,800 Speaker 2: but it was actually fine for the steam shovel companies. 231 00:13:04,800 --> 00:13:08,080 Speaker 2: Bad from Marianne, fine for the company's Twenty three of 232 00:13:08,120 --> 00:13:12,160 Speaker 2: the twenty five largest steam shovel companies survived this, you know. 233 00:13:12,200 --> 00:13:14,200 Speaker 1: So they just switch over. Everybody switches over. 234 00:13:14,320 --> 00:13:16,400 Speaker 2: Yeah, and then everybody has a gas engine, but the 235 00:13:16,440 --> 00:13:18,000 Speaker 2: same companies are on top. 236 00:13:18,880 --> 00:13:20,319 Speaker 1: Now the twist. 237 00:13:20,000 --> 00:13:22,000 Speaker 2: In the story, they don't get into it in the 238 00:13:22,040 --> 00:13:25,680 Speaker 2: children's book, this is we should we should write that version, 239 00:13:25,880 --> 00:13:27,880 Speaker 2: the disruptive one of Mike Mulligan. 240 00:13:27,960 --> 00:13:28,120 Speaker 1: Yeah. 241 00:13:28,160 --> 00:13:34,439 Speaker 2: Absolutely, And that was hydraulic excavators in the late nineteen forties. Now, 242 00:13:34,679 --> 00:13:37,640 Speaker 2: if you see an excavator today, you'll see there's little 243 00:13:37,679 --> 00:13:41,000 Speaker 2: pistons at each of the joints. That's what makes the 244 00:13:41,080 --> 00:13:44,840 Speaker 2: claw move. Okay, But this was a new technology, and 245 00:13:45,559 --> 00:13:48,280 Speaker 2: this would turn out to be the disruptive one because 246 00:13:48,960 --> 00:13:52,479 Speaker 2: the hydraulic technology kind of sucked. 247 00:13:52,520 --> 00:13:55,760 Speaker 1: Like it was weaker, slower, or what they were smaller. 248 00:13:55,800 --> 00:14:00,840 Speaker 2: You just couldn't run a giant Marianne sized digger. You 249 00:14:00,880 --> 00:14:04,160 Speaker 2: had a tiny digger and the big earth moving companies 250 00:14:04,160 --> 00:14:06,760 Speaker 2: they knew about this technology and they looked into it 251 00:14:07,400 --> 00:14:09,920 Speaker 2: and they talked to their customers, and the customers were like, 252 00:14:10,960 --> 00:14:14,280 Speaker 2: we're digging the big canals and the deep holes for 253 00:14:14,360 --> 00:14:18,200 Speaker 2: the cellars of the tall skyscrapers. We need a really 254 00:14:18,360 --> 00:14:23,280 Speaker 2: big steam or gasoline engine. This hydraulic thing would take forever. 255 00:14:23,760 --> 00:14:26,880 Speaker 2: And so the big companies who care about their customers. 256 00:14:26,800 --> 00:14:28,280 Speaker 1: They're doing what they're supposed to do. They're close to 257 00:14:28,280 --> 00:14:30,320 Speaker 1: the customer, they're listening to what the customers want, they're 258 00:14:30,360 --> 00:14:31,080 Speaker 1: serving the customer. 259 00:14:31,080 --> 00:14:34,320 Speaker 2: There is no market for this, and so there were 260 00:14:34,320 --> 00:14:38,560 Speaker 2: a few companies j C. Bamford, Henry Company, they started 261 00:14:38,560 --> 00:14:42,040 Speaker 2: to make hydraulic versions of this and they sold it 262 00:14:42,040 --> 00:14:46,920 Speaker 2: to a different set of people like farmers, landscapers. 263 00:14:46,560 --> 00:14:48,920 Speaker 1: Speople are basically people doing smaller projects. 264 00:14:48,960 --> 00:14:50,800 Speaker 2: Yeah, because if you think about it, if you had 265 00:14:50,840 --> 00:14:53,240 Speaker 2: to dig an outhouse, you're not going to like bring 266 00:14:53,280 --> 00:14:57,480 Speaker 2: in Marianne the giant steam shovel. But this all of 267 00:14:57,480 --> 00:14:59,480 Speaker 2: a sudden gave you a chance to you know, move 268 00:14:59,520 --> 00:15:03,040 Speaker 2: a little tree or bury a cable, and it was 269 00:15:03,080 --> 00:15:06,680 Speaker 2: good enough for the job, right, But then the hydraulics 270 00:15:06,760 --> 00:15:10,920 Speaker 2: got better. So this is the twist, yes, and then 271 00:15:10,960 --> 00:15:13,880 Speaker 2: eventually the new new technology could move as much as 272 00:15:13,920 --> 00:15:18,280 Speaker 2: dirt as the old technology. And then people realized, oh, 273 00:15:18,400 --> 00:15:21,520 Speaker 2: they're actually more reliable and they're safer because there's not 274 00:15:21,560 --> 00:15:24,480 Speaker 2: a big cable going through it. And then suddenly those 275 00:15:24,520 --> 00:15:28,200 Speaker 2: tiny companies making the hydraulic shovels were on top. 276 00:15:28,440 --> 00:15:28,960 Speaker 1: Huh. 277 00:15:29,000 --> 00:15:32,040 Speaker 2: They became the big companies. Everyone moved over to hydraulics, 278 00:15:32,040 --> 00:15:34,640 Speaker 2: and that's what you see to this day. Here Klay 279 00:15:34,720 --> 00:15:36,280 Speaker 2: Christensen wrote about these companies. 280 00:15:36,640 --> 00:15:40,280 Speaker 1: These companies did not fail because the technology wasn't available. 281 00:15:40,920 --> 00:15:44,400 Speaker 1: They did not fail because they lacked information about hydraulics 282 00:15:44,440 --> 00:15:46,520 Speaker 1: or how to use it. They did not fail because 283 00:15:46,600 --> 00:15:51,880 Speaker 1: management was sleepy or arrogant. They failed because hydraulics didn't 284 00:15:51,920 --> 00:15:54,400 Speaker 1: make sense until it was too late. 285 00:15:54,880 --> 00:15:58,280 Speaker 2: I love that you assume that management made a mistake. 286 00:15:58,800 --> 00:16:01,400 Speaker 2: But in this case, the goal of a business is 287 00:16:01,440 --> 00:16:05,160 Speaker 2: to serve its customers, and you can't abandon them to 288 00:16:05,280 --> 00:16:07,440 Speaker 2: try a new market that you don't even know if 289 00:16:07,480 --> 00:16:09,160 Speaker 2: it exists, like you would be fired. 290 00:16:09,320 --> 00:16:12,840 Speaker 1: You know. I like this because it's more interesting in 291 00:16:12,920 --> 00:16:16,360 Speaker 1: the world when everybody is kind of smart, like, oh, 292 00:16:16,520 --> 00:16:18,960 Speaker 1: dumb people make dumb decisions. And they lose, and smart 293 00:16:18,960 --> 00:16:21,280 Speaker 1: people make smart decisions and they win. Isn't a very 294 00:16:21,440 --> 00:16:24,560 Speaker 1: interesting theory of the world, but a theory of the 295 00:16:24,560 --> 00:16:28,240 Speaker 1: world that takes into account sort of complex dynamics and 296 00:16:28,240 --> 00:16:31,200 Speaker 1: what's going on at different institutions and looks at all 297 00:16:31,200 --> 00:16:34,440 Speaker 1: these people. Like everybody is acting rationally in their own context, 298 00:16:34,600 --> 00:16:37,240 Speaker 1: but in some of these instances, acting rationally or what 299 00:16:37,280 --> 00:16:41,800 Speaker 1: seems to be rationally leads you to destroy your business. 300 00:16:41,920 --> 00:16:46,239 Speaker 1: Give me a Klay Christensen quote. Okay, successful companies routinely 301 00:16:46,320 --> 00:16:50,280 Speaker 1: give their customers more and better versions of what they 302 00:16:50,360 --> 00:16:53,800 Speaker 1: the customers say they want, but products that do not 303 00:16:54,000 --> 00:16:58,560 Speaker 1: appear to be useful today may squarely address their needs tomorrow. 304 00:16:59,080 --> 00:17:01,680 Speaker 1: Don't ask your customers what they want. They don't know, 305 00:17:01,800 --> 00:17:03,960 Speaker 1: is what he's saying here. And even if you could 306 00:17:03,960 --> 00:17:06,840 Speaker 1: tell customers you're wrong, you're going to want this in 307 00:17:06,880 --> 00:17:11,080 Speaker 1: the future. There's another big force holding incumbent companies back, 308 00:17:11,560 --> 00:17:39,720 Speaker 1: and that is money and investors. After the book, and 309 00:17:39,840 --> 00:17:43,440 Speaker 1: we're back, Clay Christensen took all his research on disk 310 00:17:43,560 --> 00:17:46,200 Speaker 1: drives and steam shovels and he put them into book 311 00:17:46,240 --> 00:17:49,960 Speaker 1: form in nineteen ninety seven. Was it a children's book, No, 312 00:17:50,119 --> 00:17:52,880 Speaker 1: it was the Innovator's Dilemma. It sold over a million copies, 313 00:17:52,880 --> 00:17:54,880 Speaker 1: as the sticker I'm sure said on the front of it, 314 00:17:55,359 --> 00:17:58,359 Speaker 1: and it won all the Big Business Book awards. And 315 00:17:58,440 --> 00:18:01,560 Speaker 1: the timing was really perfect nineteen ninety seven because it 316 00:18:01,600 --> 00:18:04,280 Speaker 1: came during the rise of the Internet, the dot com bubble, 317 00:18:04,560 --> 00:18:06,960 Speaker 1: and the dot com crash. Like all of a sudden, 318 00:18:06,960 --> 00:18:11,320 Speaker 1: it seemed like disruptive innovation was everywhere. It was picking 319 00:18:11,359 --> 00:18:15,000 Speaker 1: up at fruitfl speed. Big companies were vulnerable. Everyone wanted 320 00:18:15,000 --> 00:18:17,879 Speaker 1: to be the flashy and you start up. After reading 321 00:18:17,880 --> 00:18:21,359 Speaker 1: the book, Jeff Bezos of Amazon dot Com said, if 322 00:18:21,400 --> 00:18:22,840 Speaker 1: you want to give us this com my mother in 323 00:18:22,920 --> 00:18:26,680 Speaker 1: law calls it Amazon dot Com. Jeff Bezos said, as 324 00:18:26,720 --> 00:18:29,720 Speaker 1: a company, one of our greatest cultural strengths is accepting 325 00:18:29,760 --> 00:18:33,280 Speaker 1: the fact that if you're gonna invent, you're gonna disrupt. 326 00:18:34,320 --> 00:18:37,119 Speaker 1: A lot of entrenched interests are not gonna like it. 327 00:18:37,480 --> 00:18:39,040 Speaker 1: And can I just mention I'm just gonna do a 328 00:18:39,040 --> 00:18:41,919 Speaker 1: little Jeff Bezos aside here because there is this story 329 00:18:41,960 --> 00:18:43,960 Speaker 1: of him when they created the Kindle. I'm a fan 330 00:18:44,000 --> 00:18:47,399 Speaker 1: of the Kindle. He created this Kindle group and said 331 00:18:47,440 --> 00:18:51,480 Speaker 1: to them, your job is to destroy our book Business right, 332 00:18:51,560 --> 00:18:54,760 Speaker 1: like he understood the implication and what it meant. 333 00:18:54,800 --> 00:18:57,000 Speaker 2: I feel like at this point, if you're an entrepreneur 334 00:18:57,080 --> 00:18:59,240 Speaker 2: writing any sort of press release, there's a little thing 335 00:18:59,280 --> 00:19:00,520 Speaker 2: that pops up and says, do you want to use 336 00:19:00,560 --> 00:19:01,440 Speaker 2: the word disrupt? 337 00:19:01,760 --> 00:19:02,520 Speaker 1: You should use the word. 338 00:19:02,520 --> 00:19:05,719 Speaker 2: There's a conference called disrupt, literally called disrupt. 339 00:19:05,800 --> 00:19:08,720 Speaker 1: Somebody should start a cheaper conference that everybody goes to 340 00:19:08,760 --> 00:19:10,640 Speaker 1: its stead. That's a little bit worse at the beginning. 341 00:19:10,880 --> 00:19:13,320 Speaker 2: Now that's a natural thing, But I'm more interested in 342 00:19:13,400 --> 00:19:16,800 Speaker 2: the poor middle manager of a giant company. They're in 343 00:19:16,840 --> 00:19:20,080 Speaker 2: an airport in nineteen ninety nine. They're looking through the 344 00:19:20,080 --> 00:19:23,719 Speaker 2: innovator's dilemma, and if you read the whole book, you 345 00:19:23,760 --> 00:19:26,080 Speaker 2: start to realize there is not a lot you can 346 00:19:26,160 --> 00:19:30,920 Speaker 2: do to stop disruptive innovation, to stop Jeff Bezos. The 347 00:19:30,920 --> 00:19:34,400 Speaker 2: thesis of the book is that big companies have such 348 00:19:34,400 --> 00:19:37,639 Speaker 2: a strong incentive to keep doing what they're doing. And 349 00:19:37,680 --> 00:19:40,400 Speaker 2: we talked about the pressure from customers to keep serving 350 00:19:40,480 --> 00:19:43,439 Speaker 2: the same products, you know, maybe slightly better, right, But 351 00:19:43,480 --> 00:19:48,560 Speaker 2: there's also pressure from investors. Jacob, if you're an investor 352 00:19:48,600 --> 00:19:50,760 Speaker 2: in a company, which I know you are, what do 353 00:19:50,800 --> 00:19:51,400 Speaker 2: you want it to do. 354 00:19:52,200 --> 00:19:55,280 Speaker 1: You want it to make money exactly the whole point. 355 00:19:55,480 --> 00:19:57,320 Speaker 2: If you give a dollar to a company, you want 356 00:19:57,359 --> 00:20:00,480 Speaker 2: it to spend that dollar on the thing that makes 357 00:20:00,480 --> 00:20:01,240 Speaker 2: the most profit. 358 00:20:01,520 --> 00:20:04,520 Speaker 1: Yes, profit maximizing that is the term of art. 359 00:20:04,640 --> 00:20:07,639 Speaker 2: And every business is resource constrained. So if you spend 360 00:20:07,640 --> 00:20:09,240 Speaker 2: money on one thing, it means you're not spending it 361 00:20:09,320 --> 00:20:11,959 Speaker 2: on another, And so you want the business to focus 362 00:20:12,160 --> 00:20:15,399 Speaker 2: on the thing with the highest return. Clayton argued that 363 00:20:15,520 --> 00:20:20,280 Speaker 2: disruptive technology isn't just worse than old technology, it usually 364 00:20:20,280 --> 00:20:22,920 Speaker 2: has lower profit margins at first. 365 00:20:23,320 --> 00:20:27,440 Speaker 1: Profit margins are a huge deal for businesses and investors. 366 00:20:27,480 --> 00:20:30,520 Speaker 1: Serious investors want those margins to go up, and they 367 00:20:30,520 --> 00:20:31,880 Speaker 1: certainly don't want them to go down. 368 00:20:31,960 --> 00:20:37,160 Speaker 2: Clayton illustrates this profit margin incentive with a story about 369 00:20:37,200 --> 00:20:40,679 Speaker 2: steel mills. Steel mills, Okay, that seems up your ally. 370 00:20:41,200 --> 00:20:43,000 Speaker 2: I know these are all twelve year old boy examples. 371 00:20:43,000 --> 00:20:44,200 Speaker 1: Have you been to a steel mill? 372 00:20:44,280 --> 00:20:46,440 Speaker 2: Oh, of course, I've been to a steel mill, both 373 00:20:46,520 --> 00:20:51,480 Speaker 2: abandoned and actual working steel mill. And the thing that's 374 00:20:51,480 --> 00:20:54,480 Speaker 2: amazing about them is the integrated steel mills. The big 375 00:20:54,560 --> 00:20:57,879 Speaker 2: steel mills are huge acres and acres and acres, and 376 00:20:57,880 --> 00:21:00,639 Speaker 2: they got train tracks coming in for iron ore and coal. 377 00:21:01,160 --> 00:21:04,320 Speaker 2: And you know, the buildings are enormous and there's lava 378 00:21:04,400 --> 00:21:11,160 Speaker 2: looking stuff's flowering out, so amazing, and it's also so expensive. 379 00:21:11,359 --> 00:21:14,639 Speaker 2: You know, we're fucking billions of dollars to build the plant, 380 00:21:14,680 --> 00:21:17,199 Speaker 2: billion dollars to operate it every year. This is the 381 00:21:17,280 --> 00:21:20,159 Speaker 2: classic big business. 382 00:21:20,600 --> 00:21:24,000 Speaker 1: Heavy industry. Yeah, heaviest. So if you have a. 383 00:21:24,040 --> 00:21:28,920 Speaker 2: Very expensive industry, Jacob, if you're a salesman for the 384 00:21:28,960 --> 00:21:31,359 Speaker 2: steel company, what do you want to do with your steel? 385 00:21:31,960 --> 00:21:34,200 Speaker 1: I want to sell it for as much as I can. 386 00:21:34,880 --> 00:21:37,800 Speaker 2: Yeah, so you look for the richest people you can 387 00:21:37,840 --> 00:21:41,560 Speaker 2: sell steel to. So car companies who want gleaming steel for. 388 00:21:41,520 --> 00:21:45,440 Speaker 1: Their cars, planes, absolutely, g turbine systems. 389 00:21:46,040 --> 00:21:49,439 Speaker 2: The industrial appliance maker is like that is where you 390 00:21:49,520 --> 00:21:52,880 Speaker 2: make your profit margin because it's so expensive to make steel. Now, 391 00:21:52,920 --> 00:21:56,240 Speaker 2: you know the disruptions coming here, but it's always surprising 392 00:21:56,280 --> 00:21:58,760 Speaker 2: what happens. Tell me the story, do better than tell 393 00:21:58,760 --> 00:22:01,960 Speaker 2: you the story. I found another children's nook. So it 394 00:22:02,040 --> 00:22:06,680 Speaker 2: features a unicorn on the front and a steel mill. 395 00:22:06,920 --> 00:22:07,800 Speaker 1: So what's it called. 396 00:22:08,119 --> 00:22:11,400 Speaker 2: It's called a recycling Adventure to the steel mill? 397 00:22:12,080 --> 00:22:13,080 Speaker 1: Is that a real book? 398 00:22:13,480 --> 00:22:17,120 Speaker 2: Is a real book, but this essentially tells the story 399 00:22:17,960 --> 00:22:22,679 Speaker 2: of the disruptive innovator in the steel industry and of 400 00:22:22,840 --> 00:22:23,600 Speaker 2: unicorns too. 401 00:22:23,840 --> 00:22:26,840 Speaker 1: You're saying unicorn, you don't mean a billion dollar startup, 402 00:22:27,000 --> 00:22:29,280 Speaker 1: you mean a horse with a horn on its head. 403 00:22:29,359 --> 00:22:34,840 Speaker 1: That's how you make it interesting. Yes, okay. Today you'll 404 00:22:34,840 --> 00:22:37,840 Speaker 1: see how scrap metal gets turned into brand new steel 405 00:22:38,119 --> 00:22:41,160 Speaker 1: using something called an electric arc furnace. And then there's 406 00:22:41,160 --> 00:22:44,639 Speaker 1: somebody else pointing a say, and they say, that's fairest metal. 407 00:22:44,840 --> 00:22:49,159 Speaker 1: It's magnetic because it contains iron. Yes. Yes, Should we 408 00:22:49,160 --> 00:22:52,480 Speaker 1: point out that there's a building that says Newcore on top. 409 00:22:52,560 --> 00:22:55,000 Speaker 1: That seems quite important for what I know of this. 410 00:22:55,040 --> 00:22:58,160 Speaker 2: They are one of the disruptors. Yes, and probably paid. 411 00:22:57,920 --> 00:22:59,760 Speaker 1: For this book. It has that look. Okay, do I 412 00:22:59,800 --> 00:23:02,439 Speaker 1: keep going? Yeah? One more page. First we pick up 413 00:23:02,440 --> 00:23:05,920 Speaker 1: the scrap metal with an electromagnet. Next the metal is 414 00:23:06,000 --> 00:23:09,720 Speaker 1: dropped into an electric arc furnace. Then comes the biggest 415 00:23:09,720 --> 00:23:14,440 Speaker 1: fireworks display you've ever seen. WHOA so New Core? 416 00:23:14,520 --> 00:23:17,359 Speaker 2: The company featured in the book in late nineteen six act. 417 00:23:17,600 --> 00:23:20,560 Speaker 1: Is Nucor on the cover. I know, I don't think 418 00:23:20,560 --> 00:23:22,440 Speaker 1: this book is on the up and up provert. 419 00:23:22,800 --> 00:23:26,440 Speaker 2: So before they got in the publishing industry. Newcore is 420 00:23:26,480 --> 00:23:31,400 Speaker 2: the largest steel mill and children's bookmaker in the country. 421 00:23:31,480 --> 00:23:34,720 Speaker 2: The combination. So in late nineteen six is they opened 422 00:23:35,200 --> 00:23:38,119 Speaker 2: what is called a mini mill, which is just a 423 00:23:38,240 --> 00:23:41,880 Speaker 2: kind of a tiny steel plant, and instead of using 424 00:23:42,520 --> 00:23:45,480 Speaker 2: coal to have a giant furnace, they use electricity and 425 00:23:45,800 --> 00:23:47,000 Speaker 2: no time. 426 00:23:47,000 --> 00:23:48,800 Speaker 1: They're like a startup doing this. 427 00:23:49,160 --> 00:23:52,080 Speaker 2: So no, they are a large comany that's been around 428 00:23:52,080 --> 00:23:54,240 Speaker 2: for a long time, but they have a division that's 429 00:23:54,280 --> 00:23:57,720 Speaker 2: providing steel to another. One of the divisions got it. 430 00:23:58,240 --> 00:24:01,720 Speaker 2: So they designed this thing, this minimal it's about tenth 431 00:24:01,800 --> 00:24:04,280 Speaker 2: the size of the big steel mill and a tenth 432 00:24:04,320 --> 00:24:07,600 Speaker 2: of the cost. They use the recycled steel, and they 433 00:24:07,600 --> 00:24:11,120 Speaker 2: were a classic disruptor because they were cheaper, they were smaller, 434 00:24:11,160 --> 00:24:15,600 Speaker 2: they required less labor, and they made kind of crappy steel. 435 00:24:16,359 --> 00:24:19,760 Speaker 2: It was weaker steel, it was bumpy, it was ugly, like, 436 00:24:19,840 --> 00:24:23,840 Speaker 2: no car company is going to want mini mill steel. 437 00:24:24,920 --> 00:24:29,080 Speaker 2: But Newcren these other companies knew that there was a 438 00:24:29,119 --> 00:24:34,320 Speaker 2: market that didn't care about shiny, nice looking steel, and 439 00:24:34,359 --> 00:24:35,600 Speaker 2: that was get excited. 440 00:24:36,359 --> 00:24:38,720 Speaker 1: Rebar. Oh I love rebar. Yeah. 441 00:24:38,800 --> 00:24:40,960 Speaker 2: Rebar is the stuff you put in concrete to make 442 00:24:41,000 --> 00:24:41,560 Speaker 2: it tougher. 443 00:24:41,640 --> 00:24:43,840 Speaker 1: That's like a breakthrough, right, Like when you're building a building, 444 00:24:44,000 --> 00:24:48,240 Speaker 1: that rebar concrete combo is like a huge innovation of 445 00:24:48,280 --> 00:24:50,560 Speaker 1: its own. Yeah. Fit when you go to the developing 446 00:24:50,600 --> 00:24:54,359 Speaker 1: world for whatever reason, it's like ubiquitous. Right the building 447 00:24:54,359 --> 00:24:56,520 Speaker 1: where there's like they built two stories and you can 448 00:24:56,560 --> 00:24:58,439 Speaker 1: tell they're planning on building a third because there's the 449 00:24:58,480 --> 00:25:00,040 Speaker 1: rebar sticking out the top. 450 00:25:00,880 --> 00:25:03,080 Speaker 2: And you know, if you want the rebar, you don't 451 00:25:03,119 --> 00:25:04,840 Speaker 2: really care what it looks like. You just want the 452 00:25:04,880 --> 00:25:07,760 Speaker 2: cheapest reb You're not going to see it now. This 453 00:25:07,960 --> 00:25:12,840 Speaker 2: is key. The big steel mills they had in making rebar, 454 00:25:13,520 --> 00:25:15,520 Speaker 2: but it was such a low profit margin. It's like 455 00:25:15,600 --> 00:25:19,560 Speaker 2: seven percent profit margin, much lower than selling. 456 00:25:19,240 --> 00:25:21,040 Speaker 1: Steel to geeah. 457 00:25:21,200 --> 00:25:25,520 Speaker 2: So when newcorn, these small minimals came around, the big 458 00:25:25,560 --> 00:25:28,320 Speaker 2: companies were like, thank god, we don't have to be 459 00:25:28,359 --> 00:25:31,480 Speaker 2: in this dogg eat dog commodity business anymore. 460 00:25:31,520 --> 00:25:33,960 Speaker 1: And getting out of that business presumably would mean their 461 00:25:34,000 --> 00:25:36,439 Speaker 1: margins go up, which is what they want. Right, you 462 00:25:36,480 --> 00:25:39,119 Speaker 1: get out of the low margin business, your overall margin's 463 00:25:39,160 --> 00:25:39,720 Speaker 1: going to go up. 464 00:25:39,880 --> 00:25:42,600 Speaker 2: This is exactly right. And the big steel mills they 465 00:25:42,600 --> 00:25:45,600 Speaker 2: were suffering from you know, foreign competition in the seventies 466 00:25:45,640 --> 00:25:49,440 Speaker 2: and the eighties, and they really needed this high profit 467 00:25:49,560 --> 00:25:51,879 Speaker 2: steel to look good to investors. And for a while 468 00:25:51,920 --> 00:25:57,640 Speaker 2: it worked, it worked great until until, of course Newcorn 469 00:25:57,720 --> 00:26:01,040 Speaker 2: the mini mills, they get better. Huh, they get better 470 00:26:01,080 --> 00:26:04,359 Speaker 2: at making steel, and they expand into angle iron. 471 00:26:04,640 --> 00:26:06,480 Speaker 1: Oh that's fine. I don't know it is either. 472 00:26:06,560 --> 00:26:10,840 Speaker 2: It's like iron an angle and bars. They make corrugated steel, 473 00:26:11,000 --> 00:26:14,440 Speaker 2: you know, for quantis, you know, but they're moving up 474 00:26:14,680 --> 00:26:19,280 Speaker 2: the quality linter business. Look out, and eventually they make 475 00:26:19,640 --> 00:26:23,040 Speaker 2: the massive structural beams that are that are good enough, 476 00:26:23,119 --> 00:26:27,800 Speaker 2: and then they make rolled up steel, which is the nice, 477 00:26:27,880 --> 00:26:33,720 Speaker 2: fancy steel. And Newcore has vacuumed up the customers from 478 00:26:33,720 --> 00:26:36,360 Speaker 2: the bottom up. And the next thing, you know, Newcore, 479 00:26:37,320 --> 00:26:40,720 Speaker 2: hero of our children's book, is the biggest steel company 480 00:26:40,760 --> 00:26:44,440 Speaker 2: in the United States. Huh, classic checkmate. People in business 481 00:26:45,200 --> 00:26:47,199 Speaker 2: love these stories. I kind of felt it as I 482 00:26:47,240 --> 00:26:50,600 Speaker 2: was reading Clay Christensen's books. It's like a horror film 483 00:26:50,680 --> 00:26:53,359 Speaker 2: for executives, like and the key to horror film is 484 00:26:53,400 --> 00:26:57,960 Speaker 2: you see, you see the evil thing coming. You know 485 00:26:58,000 --> 00:27:00,399 Speaker 2: it's coming somewhere, you just don't know when they're going 486 00:27:00,440 --> 00:27:01,720 Speaker 2: to jump out at you with the nine. 487 00:27:02,000 --> 00:27:05,320 Speaker 1: Also, maybe I don't want to go too far here, 488 00:27:05,320 --> 00:27:09,199 Speaker 1: but it's a little like a classical tragedy, right, like 489 00:27:09,240 --> 00:27:12,600 Speaker 1: the Greek tragedy, where like there's this tragic flow, right, 490 00:27:12,640 --> 00:27:15,320 Speaker 1: the need to be a profit maximizer, the need to 491 00:27:15,400 --> 00:27:18,240 Speaker 1: listen to your customers, and that is the sort of 492 00:27:18,320 --> 00:27:21,600 Speaker 1: inevitable undoing of the incumbent of the hero. 493 00:27:22,320 --> 00:27:25,639 Speaker 2: So I imagine the executives of these companies. They read 494 00:27:25,720 --> 00:27:31,440 Speaker 2: The Innovator's Dilemma and they're terrified. They're properly scared. And remember, 495 00:27:31,880 --> 00:27:35,919 Speaker 2: Clayton M. Christensen is a Harvard Business School professor, so 496 00:27:35,960 --> 00:27:38,800 Speaker 2: he knows what to do next. He's going to sell 497 00:27:38,840 --> 00:27:43,440 Speaker 2: the antidote to this poison. In two thousand and three, 498 00:27:43,480 --> 00:27:48,200 Speaker 2: he publishes The Innovator's Solution, Come On. In two thousand 499 00:27:48,240 --> 00:27:51,639 Speaker 2: and nine, he publishes The Innovator's Prescription. 500 00:27:51,840 --> 00:27:55,119 Speaker 1: No. In two thousand this is the horror movie. 501 00:27:55,200 --> 00:27:57,840 Speaker 2: In twenty eleven, he put out The Innovator's DNA. 502 00:27:58,240 --> 00:28:00,919 Speaker 1: No, he didn't, he did. I'm a little disappointed in 503 00:28:00,960 --> 00:28:04,240 Speaker 1: clay Christensen. Eagle scout. Oh, he had to make the money. 504 00:28:05,040 --> 00:28:08,560 Speaker 1: It's totally fair serving the customers. Chicken soup for the 505 00:28:08,600 --> 00:28:12,680 Speaker 1: CEO's soul books. 506 00:28:13,080 --> 00:28:15,080 Speaker 2: So the good news for corporations there is a way 507 00:28:15,119 --> 00:28:18,959 Speaker 2: to fight off the disruption. The bad news is you 508 00:28:19,000 --> 00:28:23,040 Speaker 2: have to start to act like a disruptor. After the break, 509 00:28:43,560 --> 00:28:44,080 Speaker 2: we're back. 510 00:28:45,200 --> 00:28:45,880 Speaker 1: Clayton M. 511 00:28:45,960 --> 00:28:49,680 Speaker 2: Christensen did pretty well for himself after the success of 512 00:28:49,720 --> 00:28:53,800 Speaker 2: his many Innovators books. He started his own consulting firm, 513 00:28:54,720 --> 00:28:57,440 Speaker 2: but he stayed a professor at Harvard for twenty eight years, 514 00:28:57,480 --> 00:29:01,200 Speaker 2: writing case study after case study on failing companies. He 515 00:29:01,240 --> 00:29:02,840 Speaker 2: was a Mormon, and he moved up the ranks of 516 00:29:02,920 --> 00:29:05,640 Speaker 2: leadership roles in the church, and near the end of 517 00:29:05,640 --> 00:29:08,080 Speaker 2: his life he started to write more books about personal 518 00:29:08,160 --> 00:29:11,600 Speaker 2: meaning and finding your way in relationships. And just like 519 00:29:11,640 --> 00:29:14,760 Speaker 2: in the His Dilemma, happiness he says is a matter 520 00:29:14,840 --> 00:29:18,480 Speaker 2: of resource allocation. I want to give you a little 521 00:29:18,840 --> 00:29:20,480 Speaker 2: little life lesson from Clayton. 522 00:29:21,160 --> 00:29:25,520 Speaker 1: The secret to happiness is having strong, loving relationships and 523 00:29:25,640 --> 00:29:30,360 Speaker 1: intentionally investing time in them. Seems reasonable. We're now Happiness podcast. 524 00:29:30,480 --> 00:29:32,920 Speaker 1: I mean, I'm not out on that. I basically agree 525 00:29:32,960 --> 00:29:34,080 Speaker 1: with that. Yeah, no, it's good. 526 00:29:34,080 --> 00:29:37,440 Speaker 2: It's so simple. But in terms of fixing your company, well, 527 00:29:37,640 --> 00:29:42,480 Speaker 2: Clayton had sort of a more complicated prescription He basically said, 528 00:29:42,520 --> 00:29:48,120 Speaker 2: there are three solutions for a big company facing disruptive innovation. 529 00:29:48,680 --> 00:29:53,480 Speaker 2: Number one a list waited out waded out. When the 530 00:29:53,520 --> 00:29:59,360 Speaker 2: new technology is mature enough and profitable enough, then you 531 00:29:59,440 --> 00:30:01,280 Speaker 2: have all the money and you can just move into 532 00:30:01,360 --> 00:30:03,000 Speaker 2: the industry and blow away the little guys. 533 00:30:03,280 --> 00:30:06,560 Speaker 1: Okay, right, so you see the disruption coming, but when 534 00:30:06,640 --> 00:30:09,240 Speaker 1: it's still really cheap and crappy, you don't get involved. 535 00:30:09,240 --> 00:30:11,880 Speaker 1: You wait till the new technology, the disruptive and A 536 00:30:12,360 --> 00:30:14,360 Speaker 1: is big enough, and then you move in. 537 00:30:14,760 --> 00:30:18,120 Speaker 2: Rarely works, he says, rarely works because at that point, 538 00:30:18,160 --> 00:30:20,840 Speaker 2: the disruptors are better at doing the thing. 539 00:30:21,280 --> 00:30:22,360 Speaker 1: Right, there's their whole business. 540 00:30:22,400 --> 00:30:24,560 Speaker 2: They've been learning it, yeah and there, and they have 541 00:30:24,680 --> 00:30:26,920 Speaker 2: different techniques and they're smaller, and then we'll nimble all 542 00:30:27,000 --> 00:30:29,840 Speaker 2: this sort of stuff. But it does happen occasionally. I 543 00:30:29,880 --> 00:30:32,880 Speaker 2: think about Apple. It used to be Apple computers. 544 00:30:32,960 --> 00:30:33,120 Speaker 1: Right. 545 00:30:33,520 --> 00:30:36,680 Speaker 2: It's hard to think about anything that Apple was first too. 546 00:30:37,760 --> 00:30:41,520 Speaker 2: There were smartphones before the iPhone, but they were pledgy, 547 00:30:41,680 --> 00:30:44,440 Speaker 2: low bandwidth, low profit. Exactly who you expect to be 548 00:30:44,560 --> 00:30:45,960 Speaker 2: the disruptor. 549 00:30:45,920 --> 00:30:50,760 Speaker 1: Was the BlackBerry? Those things? It was a BlackBerry had 550 00:30:50,800 --> 00:30:53,040 Speaker 1: a little thing. It wasn't definitely I mean, I mean 551 00:30:53,760 --> 00:30:54,600 Speaker 1: the bandwidth. 552 00:30:54,720 --> 00:30:57,240 Speaker 2: I mean I tried to navigate on a little map 553 00:30:57,600 --> 00:30:59,720 Speaker 2: on my BlackBerry and it was super hard. 554 00:30:59,760 --> 00:31:01,560 Speaker 1: It was basically for email. It was basically a good 555 00:31:01,600 --> 00:31:02,360 Speaker 1: for email. Yeah. 556 00:31:02,960 --> 00:31:05,880 Speaker 2: Apple moved in with the iPhone at just the perfect time, 557 00:31:06,320 --> 00:31:09,719 Speaker 2: just as mobile internet was getting better, getting faster, and 558 00:31:09,800 --> 00:31:11,760 Speaker 2: you know, it made the phone beautiful and intuitive. So 559 00:31:11,800 --> 00:31:14,480 Speaker 2: it pulled this off. But it's very hard to do. 560 00:31:15,480 --> 00:31:19,880 Speaker 2: So Clinton has solution number two. Buy your competitors. 561 00:31:20,360 --> 00:31:22,240 Speaker 1: That's the one they're all doing now right, that's not 562 00:31:22,400 --> 00:31:26,120 Speaker 1: all the one he compans are doing. Yeah, buying everybody. Yeah. 563 00:31:26,280 --> 00:31:30,240 Speaker 2: And you know, old steel and steamshovel companies probably didn't 564 00:31:30,320 --> 00:31:35,840 Speaker 2: have a billion dollars laying around like literally legger out 565 00:31:36,040 --> 00:31:38,720 Speaker 2: to buy their competitors, but the internet economy companies do, 566 00:31:39,560 --> 00:31:43,479 Speaker 2: and founders these days have such control that I think 567 00:31:44,000 --> 00:31:48,560 Speaker 2: that they don't care as much about their investors and 568 00:31:48,680 --> 00:31:51,760 Speaker 2: about maybe even their customers. Like they are more willing 569 00:31:51,800 --> 00:31:54,200 Speaker 2: and have more control of their company. And they've read 570 00:31:54,440 --> 00:31:55,440 Speaker 2: the invidious. 571 00:31:55,320 --> 00:31:59,280 Speaker 1: They've internalized it, right, they understand like it is more 572 00:31:59,320 --> 00:32:02,560 Speaker 1: fruitfly like now right, we are not in that nineteen 573 00:32:02,640 --> 00:32:05,160 Speaker 1: ninety five era where the biggest companies in the world 574 00:32:05,440 --> 00:32:07,360 Speaker 1: have been around for one hundred years. The biggest companies 575 00:32:07,360 --> 00:32:09,440 Speaker 1: in the world now are largely run by the people 576 00:32:09,480 --> 00:32:13,520 Speaker 1: who found them, who were themselves disruptors. They are built 577 00:32:13,680 --> 00:32:15,600 Speaker 1: to be afraid of being disrupted. 578 00:32:15,720 --> 00:32:20,560 Speaker 2: Yeah, Facebook, right, huge disruptor. But by twenty twelve, Facebook 579 00:32:20,760 --> 00:32:24,320 Speaker 2: is the big social media company. Their investors were thrilled, 580 00:32:24,360 --> 00:32:27,000 Speaker 2: their customers were thrilled. Everybody loved the Facebook, right. But 581 00:32:27,240 --> 00:32:32,480 Speaker 2: inside the company, Mark Zuckerberg was noticing more people using 582 00:32:32,520 --> 00:32:35,480 Speaker 2: mobile phones, and he knew that Facebook was big on 583 00:32:35,560 --> 00:32:38,720 Speaker 2: the desktop computer, that maybe the demographics were getting a 584 00:32:38,760 --> 00:32:41,480 Speaker 2: little bit older than he liked. And he notices a 585 00:32:41,520 --> 00:32:48,160 Speaker 2: company called Instagram, zero revenue, thirteen employees, thirty million users, 586 00:32:48,240 --> 00:32:51,680 Speaker 2: so very good. But Facebook had a billion users. And 587 00:32:51,760 --> 00:32:55,640 Speaker 2: Mark Zuckerberg, you know, sure, he read the innovator's dilemma 588 00:32:56,080 --> 00:32:58,120 Speaker 2: and he did something that seemed sort of insane at 589 00:32:58,160 --> 00:33:01,600 Speaker 2: the time, which was he bought Instagram for a billion dollars, 590 00:33:02,400 --> 00:33:06,920 Speaker 2: like a billion dollars, zero revenue, ver ten employees. Took 591 00:33:06,960 --> 00:33:09,680 Speaker 2: them three or four years to get ads on there, right, 592 00:33:10,000 --> 00:33:12,840 Speaker 2: but the disruption was averted, you know, at. 593 00:33:12,800 --> 00:33:14,760 Speaker 1: Least for Facebook. Yes, and then they did it again 594 00:33:14,800 --> 00:33:17,880 Speaker 1: with WhatsApp a few years later, right exactly. 595 00:33:17,480 --> 00:33:20,600 Speaker 2: When they saw that internationally they needed something that people 596 00:33:20,640 --> 00:33:24,920 Speaker 2: could message on. And you know, Google bought Android, Applebot, Siri, 597 00:33:25,280 --> 00:33:28,680 Speaker 2: Salesforce bought Slack. Good luck to them, but it doesn't 598 00:33:28,720 --> 00:33:33,120 Speaker 2: always work. You know, Yahoo bought Tumblr. Don't know which 599 00:33:33,160 --> 00:33:37,040 Speaker 2: one's in worse shape now, Okay, So first two ways 600 00:33:37,040 --> 00:33:40,640 Speaker 2: to avoid disruption have the timing genius of Steve Jobs 601 00:33:40,800 --> 00:33:44,360 Speaker 2: or the spare cash Mark Zuckerberg. And then there's the 602 00:33:44,400 --> 00:33:47,320 Speaker 2: third way, which I find really interesting, create a small 603 00:33:47,400 --> 00:33:50,520 Speaker 2: disruptor within your company culturally. 604 00:33:50,600 --> 00:33:52,080 Speaker 1: That one is super interesting. 605 00:33:52,560 --> 00:33:55,280 Speaker 2: Yeah, and it hard to do because you can't fake it. 606 00:33:55,320 --> 00:33:57,720 Speaker 2: You can't just put a conference room aside and say 607 00:33:57,720 --> 00:33:58,840 Speaker 2: you are the disruptors. 608 00:33:59,040 --> 00:34:01,800 Speaker 1: Because what it really means is, if it works, the 609 00:34:01,880 --> 00:34:05,040 Speaker 1: disruptors should put most of your company sort of out 610 00:34:05,040 --> 00:34:07,240 Speaker 1: of business. Right As a company, it'll still work, but 611 00:34:07,520 --> 00:34:10,680 Speaker 1: the people who've been spending their lives selling the incumbent 612 00:34:10,800 --> 00:34:15,880 Speaker 1: thing aren't going to like the disruptor. They're gonna think 613 00:34:15,880 --> 00:34:16,759 Speaker 1: it's bad. 614 00:34:17,239 --> 00:34:21,600 Speaker 2: So the companies that have succeeded at this, Hewlett Packard HP, 615 00:34:21,920 --> 00:34:25,920 Speaker 2: maker of printers and many other things, they had in 616 00:34:25,960 --> 00:34:29,160 Speaker 2: the nineteen eighties, this amazing new product called the laser 617 00:34:29,200 --> 00:34:33,160 Speaker 2: printer shoots out printed copies of things. I don't know 618 00:34:33,160 --> 00:34:34,040 Speaker 2: why I'm explaining what a. 619 00:34:34,040 --> 00:34:38,200 Speaker 1: Printer is, so you have to explain it. You're saying, 620 00:34:38,600 --> 00:34:41,120 Speaker 1: you're saying, you tie it all face of paper and 621 00:34:41,160 --> 00:34:43,960 Speaker 1: it comes out not white with symbols on it. I know, 622 00:34:44,120 --> 00:34:44,400 Speaker 1: I know. 623 00:34:45,200 --> 00:34:49,040 Speaker 2: So Heulet Packard is number one in laser printers, and 624 00:34:49,080 --> 00:34:53,480 Speaker 2: there's this new technology called inkjet printers. It's a smaller printer. 625 00:34:53,560 --> 00:34:55,719 Speaker 2: It has these little buckets of ink in there, and 626 00:34:55,760 --> 00:34:58,520 Speaker 2: it's kind of blurry and doesn't work that well. It's 627 00:34:58,560 --> 00:35:03,279 Speaker 2: slower HP. Healer Packard sees that this could disrupt their 628 00:35:03,280 --> 00:35:07,400 Speaker 2: big laser printer business, and so what they do is 629 00:35:07,800 --> 00:35:10,759 Speaker 2: their printer divisions in Boise, Idaho, they send a bunch 630 00:35:10,760 --> 00:35:14,799 Speaker 2: of people to Vancouver, Washington, whole new office, give them 631 00:35:15,120 --> 00:35:19,280 Speaker 2: their own budget, their own decision making power, and essentially 632 00:35:19,320 --> 00:35:22,200 Speaker 2: say put us out of business, like do the best 633 00:35:22,280 --> 00:35:25,080 Speaker 2: inkjet printing you can. And this is the essential thing. 634 00:35:26,239 --> 00:35:28,399 Speaker 2: You don't have to be as profitable as the rest 635 00:35:28,440 --> 00:35:29,000 Speaker 2: of the company. 636 00:35:29,440 --> 00:35:31,560 Speaker 1: The margin. They are solving the margin problem. 637 00:35:31,600 --> 00:35:34,319 Speaker 2: You just need to make enough money to make more 638 00:35:34,400 --> 00:35:38,160 Speaker 2: inkjet printers and come up with the solution, and eventually 639 00:35:38,440 --> 00:35:41,440 Speaker 2: the HP inkjet printer becomes big because everyone wants a small, 640 00:35:41,880 --> 00:35:44,719 Speaker 2: cheaper thing that they could put next to their laptop computers, 641 00:35:44,800 --> 00:35:46,960 Speaker 2: cheaper until you have to buy more inc. That's the 642 00:35:47,000 --> 00:35:49,560 Speaker 2: other thing is once they figured out that you could 643 00:35:49,640 --> 00:35:52,640 Speaker 2: make the printer that only accepts HP Inc. Then you 644 00:35:52,640 --> 00:35:53,680 Speaker 2: could sell them ink forever. 645 00:35:54,239 --> 00:35:56,200 Speaker 1: If you think about it, that one seems really hard 646 00:35:56,239 --> 00:35:59,120 Speaker 1: to do because the fundamental thing they're doing is agreeing 647 00:35:59,160 --> 00:36:02,880 Speaker 1: to lower their margins to whatever extent they're putting capital 648 00:36:02,960 --> 00:36:09,040 Speaker 1: into this little inkjet division. They're accepting that their overall 649 00:36:09,120 --> 00:36:11,920 Speaker 1: margins are going to come down, which is anti fa 650 00:36:12,000 --> 00:36:14,399 Speaker 1: me to what executives want to do. Right. That's why 651 00:36:14,400 --> 00:36:18,000 Speaker 1: that one seems hard, very hard, and few people do it. 652 00:36:18,960 --> 00:36:20,480 Speaker 2: But if you could pull it off, then you get 653 00:36:20,480 --> 00:36:23,200 Speaker 2: to be the disruptor and the incumbent company at the 654 00:36:23,200 --> 00:36:26,840 Speaker 2: same time. Woo, it didn't cost you a billion dollars. Jacob, 655 00:36:26,840 --> 00:36:29,840 Speaker 2: It's time for the to be fair, section to be fair. 656 00:36:30,560 --> 00:36:32,240 Speaker 1: None of this is true. 657 00:36:33,360 --> 00:36:37,400 Speaker 2: It's true in a business school way, which is it 658 00:36:37,480 --> 00:36:39,799 Speaker 2: is a smart and a useful theory that you see 659 00:36:39,800 --> 00:36:40,800 Speaker 2: everywhere these days. 660 00:36:41,440 --> 00:36:43,720 Speaker 1: But it's not a law of nature. 661 00:36:44,360 --> 00:36:47,560 Speaker 2: And I think Clayton admits to this too, that he 662 00:36:47,680 --> 00:36:52,080 Speaker 2: picks companies to profile that fit his thesis. There's lots 663 00:36:52,080 --> 00:36:55,840 Speaker 2: of companies that don't work this way, Like lots of 664 00:36:55,880 --> 00:36:58,800 Speaker 2: times the big company is fine, the disruptors all fail. 665 00:36:59,560 --> 00:37:02,080 Speaker 2: Pushkin's own, very own Jill Lapour. 666 00:37:01,960 --> 00:37:03,680 Speaker 1: He has this show called The Last Archive. 667 00:37:03,800 --> 00:37:05,840 Speaker 2: About a decade ago she was writing for The New Yorker. 668 00:37:06,440 --> 00:37:11,080 Speaker 2: She pointed out that Clayton often doesn't include complicating factors. 669 00:37:11,200 --> 00:37:13,919 Speaker 2: For instance, put it out the fact that the big 670 00:37:13,960 --> 00:37:17,759 Speaker 2: steel industry had unionized labor and a lot of the 671 00:37:17,800 --> 00:37:22,279 Speaker 2: mini mills did not, So it is easier for them 672 00:37:22,400 --> 00:37:24,360 Speaker 2: to be nimble and profitable if they don't have to 673 00:37:24,360 --> 00:37:28,600 Speaker 2: deal with legacy union contrasts. She also pointed out that 674 00:37:28,680 --> 00:37:32,680 Speaker 2: Clayton started an investment firm to invest in disruptors. He 675 00:37:32,719 --> 00:37:35,120 Speaker 2: had this big idea, why not make money off of it? 676 00:37:35,600 --> 00:37:37,600 Speaker 2: And it ended up losing money and he shut it 677 00:37:37,640 --> 00:37:44,000 Speaker 2: down because like, predictions harder than describing the past. But 678 00:37:44,080 --> 00:37:48,080 Speaker 2: despite all this, like I think it's fair to pick 679 00:37:48,080 --> 00:37:52,680 Speaker 2: Clayton as our third American genius because his ideas are 680 00:37:52,800 --> 00:37:56,319 Speaker 2: so core to how we think about business today, even 681 00:37:56,400 --> 00:38:00,279 Speaker 2: just psychologically, everyone wants to be a disruptor. You know, 682 00:38:00,320 --> 00:38:03,960 Speaker 2: even the largest companies on Earth call themselves disruptors. And 683 00:38:04,000 --> 00:38:06,160 Speaker 2: you can't launch a business without putting out a pressure 684 00:38:06,120 --> 00:38:11,479 Speaker 2: release saying you're disrupting something, right, So Casper Mattresses said 685 00:38:11,480 --> 00:38:14,000 Speaker 2: it was disrup rupting the sleep industry, which. 686 00:38:13,760 --> 00:38:16,480 Speaker 1: It kind of was. It was. Yeah, I'm sure the 687 00:38:16,480 --> 00:38:20,000 Speaker 1: people selling mattresses at the time said those mattresses are terrible, 688 00:38:20,080 --> 00:38:23,680 Speaker 1: Like I don't even know, but I'm sure that it happened. Right, 689 00:38:23,719 --> 00:38:25,880 Speaker 1: that's what you're setting them before they ship it to you. 690 00:38:26,160 --> 00:38:27,080 Speaker 1: Who's going to want that? 691 00:38:27,680 --> 00:38:33,520 Speaker 2: Rubicon the uber of trash what says they're disrupting waste 692 00:38:33,680 --> 00:38:40,120 Speaker 2: management for trash. The founder of nature Commode toilet company, 693 00:38:40,239 --> 00:38:44,279 Speaker 2: a composting Porta Potti says, this is a quote. We're 694 00:38:44,280 --> 00:38:47,960 Speaker 2: looking to disrupt an industry that is ripe for disruption. 695 00:38:48,320 --> 00:38:52,120 Speaker 1: Well, that's the place to disrupt. Two disruptions in one sentence. 696 00:38:52,560 --> 00:38:54,560 Speaker 1: Ripe is a good word in the toilet business. 697 00:38:55,200 --> 00:38:57,279 Speaker 2: And I've been most fascinated by what we've seen over 698 00:38:57,280 --> 00:39:01,239 Speaker 2: the past two years in the AI world. The largest corporations, 699 00:39:01,280 --> 00:39:05,560 Speaker 2: literally the largest corporations in the world are panicking and 700 00:39:05,600 --> 00:39:10,239 Speaker 2: trying to disrupt themselves by spending billions totals trillions. We 701 00:39:10,360 --> 00:39:15,200 Speaker 2: look at all the companies to innovate in the business 702 00:39:15,280 --> 00:39:19,239 Speaker 2: that they're in. So I think before Clayton Christensen, Microsoft 703 00:39:19,480 --> 00:39:23,880 Speaker 2: might have thought or Microsoft like, we're an invincible software company, 704 00:39:24,160 --> 00:39:26,799 Speaker 2: why do we need to be an AI company? Shame 705 00:39:26,840 --> 00:39:31,520 Speaker 2: with Meta x, Google, They're the top of their businesses. 706 00:39:32,440 --> 00:39:37,000 Speaker 2: Why spend this enormous amount of money on AI? Because 707 00:39:37,040 --> 00:39:41,120 Speaker 2: I think they now feel this panic that the Innovator's 708 00:39:41,120 --> 00:39:44,600 Speaker 2: dilemma put in every business person's soul. You don't read 709 00:39:44,640 --> 00:39:46,399 Speaker 2: the book and say like, yeah, it was a good 710 00:39:46,480 --> 00:39:50,120 Speaker 2: runing being an incumbent company. You look at it and say, 711 00:39:50,200 --> 00:39:52,719 Speaker 2: I want to do that. I want to not die. 712 00:39:52,960 --> 00:39:56,560 Speaker 2: I want to not die. And now if someone were 713 00:39:56,560 --> 00:39:59,520 Speaker 2: to tell you that there's a chance that anthropic, an 714 00:39:59,600 --> 00:40:02,920 Speaker 2: AI company with four thousand people could unseat the largest 715 00:40:02,920 --> 00:40:04,920 Speaker 2: corporations in the world, We're. 716 00:40:04,640 --> 00:40:07,520 Speaker 1: Like, yeah, that could totally happen. 717 00:40:07,520 --> 00:40:11,200 Speaker 2: We don't question it at all anymore. And this is 718 00:40:11,239 --> 00:40:16,120 Speaker 2: the power of the idea that Clayton unleashed. It's terrifying, 719 00:40:16,400 --> 00:40:20,280 Speaker 2: it's motivating, and no one wants to be the case 720 00:40:20,280 --> 00:40:24,600 Speaker 2: study in whatever the next sequel is. The Innovator strikes Back, 721 00:40:24,840 --> 00:40:29,000 Speaker 2: The Last Innovator, the Last Innovator, like you should write that. 722 00:40:29,800 --> 00:40:34,719 Speaker 2: Today's show was produced by Gabriel Hunter Chang, engineered by 723 00:40:34,719 --> 00:40:37,560 Speaker 2: Sarah Bruguer. Our video editor is Matt Neil Simmre on YouTube. 724 00:40:38,320 --> 00:40:41,359 Speaker 2: Our showrunner and editor and best friend in the UK 725 00:40:41,480 --> 00:40:43,680 Speaker 2: is Ryan Dilley. My name is Jaco Wiltstein. 726 00:40:43,800 --> 00:40:47,160 Speaker 1: My name is Robert Smith. Thank you for listening to 727 00:40:47,360 --> 00:40:49,600 Speaker 1: our show Business History of show about the history of business. 728 00:40:49,640 --> 00:40:52,880 Speaker 1: Email us A business history of pushkinn of him. We 729 00:40:52,960 --> 00:40:54,120 Speaker 1: read them all.