Whatever happened to the New England whaling industry? At one time, whaling was the 5th biggest industry in the US, but 50 years after reaching its peak, the whaling industry was dead. And it wasn’t just the whaling industry that was affected by this collapse. Ship building, rope making, pine tar production, the lumber industry, and more were also affected, because no major industry exists in a vacuum. Like a living organism, any stress put on one of its parts can affect the health of the whole, and the faltering health of the whole organism puts stress on its parts. And the whaling industry was stressed from multiple directions.
First there was the discovery of an oil seep in Pennsylvania in 1859. This, coupled with the perfection of the kerosene making process by a Polish chemist in the early 1850s, sunk the first, and most deadly, harpoon into the whaling industry’s flank. This is because the whaling industry primarily existed to provide whale oil for illumination. Kerosene ended the dependence on whale oil. Although the wound caused by the appearance of kerosene did not kill the industry outright, it put the industry in a vulnerable position which allowed other developments to further weaken it.
When the whaling industry was thriving, workers and craftsmen associated with it, realizing the importance of their trades to the industry, began demanding higher wages. This higher financial strain was not helped by the Civil War which erupted in the 1860s and which put the brakes on whaling for almost a decade. Then, nature played its hand in destroying 33 ships in the great Arctic whaling disaster of 1871. The ships had been in the Arctic because the industry was forced to send ships on longer and longer voyages due to the declining numbers of near-shore whales. Thus, whaling missions became more and more expensive and risky. At the same time, other nations tried to cash in on the lucrative whale industry and competition around the world increased. Then, in the 1870s, Norwegian, Svend Foyn, came along with new technology which mechanized whaling, increased catches with smaller crews, and made it impossible for Yankee whalers to compete. Although most historians concur that it was this last development that dealt the final deathblow to the industry, the truth was that it was a variety of elements working together that pushed the industry into a corner from which it was never able to escape.
With the collapse of the whaling industry and the end of the use of whale oil for lamps, kerosene producers ruled the roost and confidently expected to continue doing so far into the future. However, they did not expect the pesky research of one Thomas Edison and, by 1909, the kerosene industry had slipped into a subsidiary lighting role behind the electric light. Such has been the fate of numerous industries which followed a similar path of complacency when attaining a dominant market position. This problem of maintaining success is compounded for modern enterprises by the rapidly evolving complexity of market forces, most of which cannot be foreseen through any reasonable analysis.
As an example of this, take a look at a modern industry which was flying high only 20 years ago but that is now under serious pressure; the paper industry. Like many US industries, when high worker wages began to reduce profits, the industry turned to automation which was implemented from logging, to milling, to production. This kept the industry afloat for a while, But what they did not expect was a new development that came out of nowhere. Something called, ‘the internet’. No one could have guessed that the internet would kill the newspaper industry which would, then, impact paper mills. But it was not just the internet. Environmentalists had, for years, put pressure on logging operations. Books turned to ebooks. Printing turned to digital publishing. And just like the wounded whaling industry learned a century before, foreign competition turned deadly. China, Brazil, Finland, and even Canada were able to offer consumers cheaper wood products. The following graph only shows the decline in employment in the paper industry in Oregon, but it represents the state of the industry throughout North America. Unemployment is always the final outcome of an industry’s decline.
Notice the parallels between the paper industry and the whaling industry.
- Both industries, when riding high, expected to continue in perpetuity.
- Both industries were blindsided by technologies they did not foresee.
- Both were hurt by foreign competition.
- Both were hurt by unexpected events. For the paper industry, it was the pressure of environmentalists. For the whaling industry, it was the Civil War and the loss of ships through an act of nature.
It is important to point out that the decline in the paper industry was more precipitous than the decline in the whaling industry. In my opinion, the accelerated decline of an industry’s collapse parallels the accelerated increase in technological complexity. The following graph shows just how rapidly technology has developed.
There is no way a traditional company can survive in an environment that changes so rapidly and unpredictably. They simply can’t physically and financially manage to change their infrastructure fast enough to keep up with important technological changes. They may prolong the collapse scenario, but if they do survive, it is only by pure luck.
The situation may be even worse for digitally-based companies. In such an environment of accelerated change, many digitally-based companies can be expected to rise and fall rapidly. Take a look at Netscape, for example. Netscape was the first commercial browser to appear on the market, being released in December of 1994. One year later, it had captured over 90% of the market, and it looked like it would thrive for years to come. A little more than 4 years later, Netscape was bought by AOL for $10 billion. Its market share had already fallen to less than 50%. Two years after the purchase, Netscape’s market share fell below 10% and effectively reached 0% two years after that. It took only 7 years for the company to rise and fall. What happened? Probably the main reason for Netscape’s collapse was the introduction of Windows Internet Explorer in mid-1995. Netscape did not anticipate that Microsoft would bundle its Windows 95 operating system with a browser. It, therefore, not only had to compete with the browser, but with the heavily used Windows operating system itself. It did not have the financial resources that Microsoft had to improve the fine points of its browser, nor did it have the company’s marketing power. The introduction of the Mozilla browser, complete with tabbed browsing, in 2001, finished Netscape off entirely.
It seems that the effect of progress on pre-existing industries can be divided into roughly three categories. I am intentionally using basic technological terminologies here.
- Analog replaces analog
- Digital replaces analog
- Digital replaces digital
Remember that, though the underlying causes of replacement remain the same in each category, the time frame for the replacement accelerates for each level. I would also suggest that the process is irreversible. That is, you would be hard-pressed to give an example of analog replacing digital. I mean, can anyone truly expect typewriters to replace word processors? Sure on a limited basis, analog may have its adherents, as in people who prefer vinyl over digital recordings, but, overall, reversing the process levels seems unlikely.
Within this paradigm, the biggest challenge for any enterprise is coping with pervasive rapid change. This week, the British government announced that they would be spending $2.3 billion on cybersecurity over the next 5 years. On the surface, that may sound like a good move, but here is how it will work in practice. There will be meetings between cybersecurity experts and politicians. Each will have an agenda and possible connections to various companies that they want to exploit if possible. Finally, some solution will be agreed upon. Committees and research groups will be set up and eventually they will be ready to implement their new plan. The problem is that during all of this time, technology and cyber criminal know-how has also increased. The new plan will be outdated before it can be implemented. In other words, analog problem solving cannot compete with digital progress. If no one can really foresee what the digital landscape will look like 5 years from now, then it is simply impossible to prepare for it.
We should all be suspicious that the story of technology will end with digital. There are many high tech companies riding high right now and it seems, from our current, blinded perspective, that they will continue in perpetuity. Hmm, that sounds familiar. It is hard to see your own denial when you are denying it. In other words, someday, we are bound to be reading about the rise and fall of Google, Apple, and Amazon. You can bet your life on that. As the above diagram shows, these companies could only be out-competed by other digital companies or by some post-digital technology. But what could that technology be?
The only technology that I could see disrupting current digital technology would be quantum-based technology. You could think of quantum technology as Digital 2.0 because it has one more dimension to use in its digitalization. An action could not only be represented by ones and zeroes but by ones, zeroes, and both ones and zeroes occurring at the same time, which is pretty hard to grasp through normal Newtonian thinking. Yet, the first digital computers are already being developed. The writing is on the wall, but we just can’t read it.