Morgan Housel writing for Collaborative Fund:
Things that are instantly adored are usually just slight variations over existing products. We love them because they’re familiar. The most innovative products – the ones that truly change the world – are almost never understood at first, even by really smart people.
It happened with the telephone. Alexander Graham Bell tried to sell his invention to Western Union, which quickly replied:
This `telephone’ has too many shortcomings to be seriously considered as a practical form of communication. The device is inherently of no value to us. What use could this company make of an electrical toy?
It happened with the car. Twenty years before Henry Ford convinced the world he was onto something, Congress published a memo, warning:
Horseless carriages propelled by gasoline might attain speeds of 14 or even 20 miles per hour. The menace to our people of vehicles of this type hurtling through our streets and along our roads and poisoning the atmosphere would call for prompt legislative action. The cost of producing gasoline is far beyond the financial capacity of private industry… In addition the development of this new power may displace the use of horses, which would wreck our agriculture.
It happened with the index fund – easily the most important financial innovation of the last half-century. John Bogle launched the first index fund in 1975. No one paid much attention to for next two decades. It started to gain popularity, an inch at a time, in the 1990s. Then, three decades after inception, the idea spread like wildfire.
A worthwhile reminder for an industry that conflates the innovative and the incremental.