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Overcapacity breeds innovation

I’ve been reading about this in multiple places- and since is a very interesting concept, wanted to collate it all in one place. This business observation states that excessive capacity in a given industry is often the much needed precursor to subsequent innovation. Examples are (still working on some of these):

  • Railroad expansion in 1800’s – led to the increase in trade
  • Industrial revolution led to large number of factories and overcapacity – ?
  • Massive fiber-optic cables laid down in dot com era lead to cheap connectivity
  • Surplus silicon and wafer cutting technologies after the semiconductor industry slowed down after dot com bust were picked up by a fast-growing solar energy industry
  • The downtime created by the collapse of the Internet bubble gave people spare cycles to think up of new applications that we now collectively know as Web 2.0

Lesson 6: Pursue the unconventional

This may not work for everyone, but for those who look forward to exploring new things, it’s an important takeaway. Many of the successful ideas and businesses are garnered from the periphery. Our world is forever expanding because some people are constantly expanding the frontier of possibilities in it.

Lesson 5: Expect Change

Nothing stays constant. Expecting change helps you embrace it. If you dont change, you risk getting left behind and being alone. I see a lot of senior doctors struggling with this, especially for technological change- one that would actually immensly help them if they accepted and embraced it.

Lesson 4: Take risks

Don’t be afraid to take calculated risks. So if you are trying to assess the market for a potential startup idea you have, dont hold back on the 100$ magazine subscription that can help you understand the industry better. Or buy yet another domain name for a future idea.

Lesson 3: New ideas attract negative reactions

If you have an entrepreneurial mindset, you probably know this. Anytime you talk about your idea to someone, most of the feedback is around how it will not work. It took me a while to get used to this and not loose conversation time in being defensive.

Lesson 2: Culture is key

All else equal, what makes a group successful is the culture. That applies to companies, organizations, teams, families… everything. Examples- Southwest, Goretex (overused in business schools).