Trial DataTrek Morning Briefings for Free

Thousands of investors and financial journalists rely on Nick and Jessica’s newsletter every day for their thought-provoking work on markets, data and disruption. See why for yourself by starting a 2-week FREE trial below.


90 Years of Tech Adoption Rates

By admin_45 in Blog 90 Years of Tech Adoption Rates

If you Google the phrase “tech adoption rates” most of the first-page results will feature a chart that shows what percent of US households had everything from a landline telephone or a car (back to 1900) all the way to a smartphone and a social media account (up to 2016). The commentary around the data looks something like this:

  • Adoption rates for new tech-enabled goods and services are much faster now than in the 20th century.
  • For example, it took just over 40 years for automobile/home vacuum ownership to breach 50%.
  • Compare that to just 6 years for social media usage and 5 years for smartphone ownership.
  • The explanation: technology today leverages pre-existing infrastructure like electricity and cellular networks, making adoption cycles run faster than before.

While we agree with that premise, we also think it misses several important factors. For example:

#1. Cyclicality can impact adoption rates, especially for discretionary purchases or those requiring large infrastructure upgrades.

  • The percent of US homes with electricity stopped growing in 1929 at 68% after seeing quick adoption rates the prior 3 decades (10% in 1903). It took FDR creating the Tennessee Valley Authority in 1933 and several years of further government investment before adoption rates started to rise again.
  • Household ownership of automobiles peaked in 1930 at 59% and dropped to 50% in 1933 as the Great Depression took its toll. It would not see a new high until 1951 as the nation’s industrial output returned to civilian products after World War II.
  • Likewise, the ownership of vacuum cleaners stagnated at 49-50% from 1933 to 1947.

The lesson for today: technology that is expensive and/or competes with cheaper substitute goods can see adoption rates stagnate during economic downturns. We thought about that a lot as we read the Uber and Lyft prospectuses; demand for private car transportation is clearly cyclical and often has cheaper alternatives like public transportation.

#2: The most notable exception to that rule is media and entertainment, and radio/cable TV are an excellent case study.

  • A quick scan through 1930s print advertisements for home radios shows prices of $23 for a simple table-top set to $139 for an elegant console unit. The later was available for just $5 down (some things never change…).
  • Inflation adjusted, that would be $350 - $2,115 today – real money for 99% of households, in other words.
  • Home radio adoption rates were 10% in 1925 and 80% in 1940, with no year in between seeing a drop.
  • The same holds true for cable TV adoption rates in the 1970s-1980s. The 1973/1974 recession saw adoption rates stagnate at 16%, but after that they rose consistently through the recessions of the late 1970s/early 1980s and again in 1990.

The lesson for today: now you know why Disney and Apple are fine spending billions of dollars to compete with Netflix in the steaming video market. A hundred years of history says the demand will be there if the content is good enough.

#3: Large-scale social trends can also affect adoption rates, as was the case with American women entering the workforce in the decades after World War II.

  • From 1950 to 1990, US labor force participation for women went from 33.5% to 57.9%, an increase of 73%.
  • Social norms of the time meant many women still needed to take care of household chores on top of their work-outside-the-home duties.
  • In 1950, only 18% of American homes had washing machines and dishwashers were a true rarity at 2% adoption. Vacuums were more common, at just over half of households (57%).
  • In 1970, washing machine ownership was 59%, dishwashers were in 24% of homes, and vacuums were nearly ubiquitous (92%).

The lesson for today: technology that enables personal productivity is always a “killer app”, especially when a large population has new demands on their time.

One final thought: we think tech adoption rates are faster now because of globalized supply and demand.

  • Smartphones, for example, went from nowhere in 2007 to everywhere in 2019 because of low cost Chinese manufacturing and worldwide demand.
  • This allowed the technology to move quickly down the cost curve as it scaled, increasing its available market.
  • And, to our prior points, smartphones came of age in a period of economic recovery, provided a new form of entertainment, and allowed for greater personal productivity.

Source:
See the full tech adoption rate graph here: https://www.visualcapitalist.com/rising-speed-technological-adoption/

Trial DataTrek Morning Briefings for Free

Thousands of investors and financial journalists rely on Nick and Jessica’s newsletter every day for their thought-provoking work on markets, data and disruption. See why for yourself by starting a 2-week FREE trial below.