Innovators and Game-Changers: Historical Market Disruptions

One of the most iconic quotes of the Digital Age business is surely Mark Zuckerberg’s Facebook ethos to “Move fast and break things.” Few statements capture the idea of modern market disruption quite as clearly as this, with its emphasis on breaking old business, social, and technological paradigms and replacing them with new ones in order to dominate the newly emergent market. But while the term ‘market disruption’ is a relatively modern one, the actual historical reality of market and technological disruption is much, much older.

Consider, for example, that the Norse people of medieval Scandinavia (often termed the Vikings) managed to transform Europe ethnically, commercially, and politically between the eighth and eleventh centuries in large part because they introduced a new form of swift transportation method into the North Sea and the great rivers of Eastern Europe: the longboat. Europe would never be the same. Here we explore some other major market and technological disruptions.

ht seem quite different from modern market disruptions, but the first great example of ‘Moving fast and breaking things’ was the development of bronze. Bronze is a metal alloy, one which is made by mixing tin into copper in a ratio of about one part tin to seven parts copper. Prior to the third millennium BCE, most developed societies in places like Mesopotamia, Greece, Anatolia, Egypt, and the Levant (the main centers of Eurasian civilization at the time) made their tools, be they farm implements, weapons or household utensils, out of stone or copper, leading archaeologists to term this era the Chalcolithic Age.

Then, beginning around 3000 BCE and continuing down to 2000 BCE, these societies began mixing tin into copper and smelting it to produce the more malleable and durable bronze. This market disruption transformed these civilizations. By the middle of the second millennium BCE, they were trading far and wide between different cultures and producing some of the great early texts of human civilization, as bronze weapons and chariots allowed complex societies to control more and more land, with scribes and scholars employed by these more powerful governments.

It might not have been a ‘fast’ market disruption, nor one that Zuckerberg and his acolytes would identify as a form of market disruption, but the manner in which bronze superseded copper was one of the defining episodes of early human history. And just a few hundred years later a very similar market disruption began when iron began to replace bronze as the metal of choice in the Mediterranean world. As this occurred, old civilizations like those of Egypt, the Babylonians, and the Hittites were soon overthrown by the Greeks and others to the west.

All of this also required a huge reorientation of trade routes and power groups, notably during the Bronze Age as regions where surface-level deposits of tin were found became highly sought after. Consider that as late as the first century CE, the Romans decided to conquer Britain in large part because of the tin mines they knew existed in the southwest of the island in Cornwall and other parts of the West Country.

Moving forward to relatively more recent times, one of the most tangible and significant market disruptions of all time was the printing revolution. Conversely, the technological breakthrough involved in this was not as seismic as is often appreciated and highlights the manner in which enormous market disruptions can come about by tweaking existing technology. Printing had been invented hundreds of years before the printing revolution began.

For instance, ‘block-printing’, where a person carves out the full text of a page on a wood block, then presses the block onto ink before pressing the new inked block onto a page, had been devised as early as the seventh century. What was revolutionary in the 1450s, when Johan Gutenberg and his business partners in the German city of Mainz developed the first modern printed book, was the idea of using ‘movable type’. This involved using a frame into which a person loaded individual letter pieces forged out of metal in different combinations to make up the text of a page. These were then changed out into a new combination to form another page of text after the first page had been printed off several hundred times.

So Gutenberg and his co-workers did not invent ‘printing’ per se. Instead, they developed a much more cost-effective and less time-consuming method of printing using ‘movable type’. The results in terms of market disruption were extraordinary. The printing revolution that followed changed the world, with the ownership of books now becoming a middle-class aspiration and cheap pamphlets and newsletters leading to an expanded public sphere in Europe which in turn created the conditions for the Protestant Reformation of the sixteenth century and the Scientific Revolution of the seventeenth century.

Yet even Gutenberg’s invention was not enough by itself to achieve overnight success. Instead, it took decades for companies like the Plantin Press in Antwerp and the Aldine Press in Venice to work out what the market was willing to pay for books and what ones would sell. Economies of scale needed to be created, before anyone ever knew what that concept was. Hence, the printing revolution highlights how market disruption is often brought about by minor changes to existing technology, but also has to go hand in hand with other market developments.

If someone had invented ‘moveable type’ printing in the ninth century, for instance, it simply wouldn’t have caught on because there wasn’t the same European middle class at that earlier time to be able to buy books, pamphlets, and newsletters being produced by Europe’s burgeoning printing industry. The same applies to today. Imagine a world without a middle class. It’s hard to visualize the iPhone becoming as successful as it did without the market to buy it.

The eighteenth century marked the transition from the ‘early modern’ to the ‘modern’ world in historical periodization. One of the key elements of this transition was the advent of the Industrial Revolution in Britain in the 1770s and the development of the first modern steam engines. Cumulatively these constituted one of the greatest market disruptions in history. Long before the 1770s England and Wales had been two of the foremost countries for the production of cotton and wool.

Typically though, English merchants acquired the raw product and then transported it to the Low Countries where it was spun into refined textiles in workshops in cities like Amsterdam, Antwerp, Bruges, and Rotterdam. Already in the seventeenth century, English merchants and industrialists had been trying to set up textile production facilities at home in England to try to maximize their profits and cut out the middleman. This was revolutionized in the late 1760s, 1770s, and 1780s, as individuals developed new machines to spin cotton and wool into refined textiles much faster.

They then established the first ‘factories’ custom-built to carry out this activity on a much larger scale than previously attempted. Finally, in order to create maximum efficiency they began using steam engines to power their burgeoning factories. The first efficient modern steam engine was built in the early 1710s by the Englishman Thomas Newcomen. Hence, the Industrial Revolution was born, largely confined to England and textile production between the 1770s and the 1790s.

So what kind of market disruption did this create? For starters, the new efficiencies and the wealth that they generated made England into the world’s richest nation before too long, a remarkable feat given that in global geographical terms, Britain is a small, provincial backwater on the edge of Europe. It was so successful in this regard that it soon inspired imitators and by the 1790s and 1800s nations like France, Russia, Prussia, and Austria were seeking to copy the English model. The knock-on market effects were mind-boggling.

The advent of industrialization and steam engines soon led to the development of new industries, notably coal mining to power the new factories. Thus, places like Sheffield, Manchester, and Newcastle which had been provincial towns in northern England in the seventeenth century, became huge cities by the middle of the nineteenth century. Conversely, towns like Antwerp and Bruges which had been the center of the European textile trade in early modern times, declined as the English re-routed their textile industry to be based entirely in England. Soon these regions began to respond by mimicking the English model and Belgium was the first part of continental Europe to adopt the Industrial Revolution.

Another feature of this market disruption that is worth noting is how it emphasizes the manner in which people have to be ready for an innovation in order for it to succeed. It is rarely spoken of today, but the first steam engine was actually designed and made by a Greco-Roman scientist by the name of Hero of Alexandria in the early first century CE, 2,000 years ago. There is even evidence to suggest that the Romans subsequently employed small steam engines as ceremonial devices in their temples, but they never entered mass use or production. Why? Because the Roman Empire was fuelled by slave labor. The Romans simply did not see the applicability of using steam engines en masse when they had millions of slaves to carry out hard labor for them.

Thus, it would be another 1700 years before Newcomen’s steam engine disrupted markets permanently. It has even been speculated that one of the unexpected consequences of the Industrial Revolution was that it led to the abolition of slavery in the British Empire and worldwide. The exploitation of bonded human labor was simply no longer the best way to make a profit from the late eighteenth century onwards. Coal-fired steam engines operating in large numbers to power machines inside factories was now the best approach.

Arguably the greatest market disruption in human history was the invention of the steamship in the 1830s and 1840s. We have seen that the steam engines became central to European economic activity from the 1770s onwards. It wasn’t long before people began considering putting one of them on board a ship and using it to voyage across the world’s oceans faster. The first trans-Atlantic steamships arrived in the late 1830s and within a decade steamships were drastically reducing the amount of time which long-range naval travel took.

For instance, where it could take four weeks to travel from Western Europe to North America in the eighteenth century, depending on the wind and other factors, with a steam engine a ship could traverse the Atlantic Ocean in approximately 10 days. This transformed world markets. All of a sudden it became feasible to transport something like Brazilian bananas or Costa Rican pineapples to Britain, where previously the voyage took too long and the fruit would be spoiled before it reached Europe.

This market disruption then created a domino effect of market impacts in Europe itself, as apple farmers and raspberry growers had to contend with a changing market. Hundreds of other commodities were involved. Moreover, there was a maze of other market impacts. Suddenly it became much more plausible and economical for people to leave Europe, where the population was swelling owing to medical advances, and head to places like the United States, Brazil, and Argentina. There they moved into thinly populated regions like the Dakotas and began mass-producing grain and other cereal crops, all of which drove up supply globally and changed the market forever.

Yet we also have to be wary here of attaching too much importance exclusively to the steamships. Other technologies that began to emerge around this time, such as refrigeration and new methods of plowing large tracts of land, complemented it. To stick with our earlier iPhone analogy, an iPhone can only disrupt the market if it has things like Apps and a good battery and charger system to complement it. Similarly, steamships could only interrupt global food markets if there were attendant technologies like refrigeration being developed at the same time.

It is not possible to understate exactly how transformative the advent of steamships was for the world. It not only changed how business was carried out, but these ships altered the demographic landscape of the world and its biology beyond all measure. Consider that the potato blight that impacted Europe in the 1840s and 1850s only occurred because the mold that causes the blight could now survive the short trip across the Atlantic from North America (where potatoes had immunity to it) to Europe (where potatoes most certainly did not have immunity to it). The impact not only killed millions of people as famine set in but led to a re-orientation of European agriculture thereafter.

Similarly, the phylloxera aphid arrived in Europe from North America in the 1850s on the steamships and was now able to survive the much reduced crossing time. Over the next thirty years, it literally destroyed Europe’s vineyards, obliterating the Old World’s wine industry for a quarter of a century before an effective way of combating the grape disease was found. The knock-on market implications of this were that overseas producers of wine like Australia, New Zealand, Argentina, and Chile, which had been minnows in the global wine trade up to that time, suddenly emerged as major market players in the 1870s, 1880s, and 1890s.

Thus, the development of the steamships in the 1840s didn’t just disrupt the transportation market in the middle of the nineteenth century, its knock-on effects were disrupting all kinds of other markets even decades later in the same way that the opening up of the Chinese economy has transformed the global economy over the last thirty years.

Not all market disruptions and technological innovations are about making a more sophisticated or technologically advanced product. This has certainly been the case in times gone by when bronze represented an advance on copper or moveable text represented a step forward from block printing. But in modern times market disruption has just as often been about simplification alongside innovation and development. Take the example of one of the world’s most successful companies of the Digital Revolution: Google, also known these days as Alphabet.

Larry Page and Sergei Brin didn’t invent the search engine. That particular credit can be claimed by Alan Emtage, who devised Archie, the first web search engine, at McGill University in Montreal in 1990. Nor did Page and Brin develop a more sophisticated search engine than all their competitors in 1998. Instead, they hugely disrupted the market and then conquered it simply by simplifying the search engine market. Where Yahoo, AltaVista, and other rivals with greater market share at the time had busy home pages full of news headlines, weather details, and other icons, Brin and Page presented a simple screen with a search bar in the middle and pretty much nothing else.

Google has risen since to consistently control more than 90% of the search engine market. They didn’t do it by innovating or complicating matters, they simply engaged in extreme simplification. So, it turns out that after thousands of years of technological development and human societal advancement sometimes market disruption can be as simple as realizing that less is more.

• ‘The Current War’ between Edison and Westinghouse.
• The revolution in groceries. In the seventeenth and eighteenth centuries, Europeans expanded all over the world. Why? Because of the market demand in Europe for a very small number of goods which they called ‘groceries’: tea, coffee, sugar, tobacco, spices. The middle classes were born in Europe out of the desire to acquire these goods and the market booms they caused.
• How the development of the machine gun in the nineteenth century transformed the world.
• The development of the washing machine – people really do not appreciate how lucky they are to have these and how laborious staying clean was prior to the 1850s.
• Jeans! – They started as practical and durable workmen’s pants that they could wear in the mines and factories of the nineteenth century, but disrupted the market so much that they are everywhere today.