As Costs of New Technologies Fall, Adoption Rates Accelerate

Innovation is key to a thriving economy. In today’s globalized world, innovation differentiates winners from losers. Technological innovation is especially important since technology drives the most successful economies. For example, Alphabet(GOOG), Apple(AAPL), Facebook(FB), Amazon(AMZN), Netflix(NFLX), etc. are all highly respected and successful tech powerhouses. One thing that is common to these firms is constant innovation. With that said, new technologies are initially expensive and customers have a low rate of adoption. As prices plummet over the years, the adoption rate by households soars. History is full of many examples proving this theory. Commercial airline travel was very expensive when it was invented. Nowadays it is cheap and most people can easily travel to long distances with discount air fares.

Recently I came across an interesting article on innovation at Aberdeen Standard. From the article:

As Figure 2 highlights, production costs for some key new technologies have reduced significantly over the past 50 years. Note the relatively flat lines for autos and traditional sources of energy, as compared to the sharp reductions in technological components and DNA sequencing. The outcome as the subsequent chart shows, has been that adoption rates of new technologies have accelerated over the past 120 years.

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Source: An era of exponential innovation, Aberdeen Standard Investments

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