The Technology Everyone Got Right

The Technology Everyone Got Right 

By Kirsten Boldarin, Amplifi Group CEO

The Technology Everyone Got Right (but it didn’t necessarily make them rich)

There have been many comparisons between the dotcom/telecoms bubble and today’s AI hype and capital expenditures. There are certainly parallels, but one which we believe is a much better fit is the advent of electricity. Electricity was a true GPT – general purpose technology. It had a transformative impact on society and industries and took years to fully come to fruition. The history of electricity and specifically with an investment lens, its outcomes are worth considering when we consider the transformative outcomes that AI is likely to bring.  

Initial promise…then extrapolation

In 1882, Thomas Edison’s Pearl Street Station opened in Lower Manhattan. It launched with just 400 lamps serving 82 customers, and by 1884 was supplying electricity to 10,000 lamps[1]. It was a small start, but an undeniable proof-point: electric lighting worked. Then, markets did what they always do—they extrapolated.

And, the market was not wrong. Electricity demand and its usages did grow exponentially. But investors priced in that end-state almost immediately.

Within 18 months of Pearl Street opening, dozens of electric-light companies were listed across the US and UK[2]. Competition for engineering talent intensified rapidly.

• Charles Brush attempted to poach Edison’s entire team—offering double salaries, stock options, autonomy, and patent royalties[3].
• George Westinghouse hired William Stanley (father of the modern transformer) by giving him his own lab, guaranteed R&D funding, the ability to hire his own staff, and the freedom to publish[4].
• Demand for “line men” surged; between 1882–85 they were among the highest-paid skilled workers in several US cities[5].

And yet, by 1888, roughly 80–90% of the companies formed during the 1881–83 boom had disappeared[6]. Edison’s operations were eventually folded into Edison & Swan United and later into General Electric (GE). None of the 1882/83 pure plays remained independent by 1900. Only two meaningful firms—GE and Westinghouse—survived as industry leaders.

Why did so few endure when the promise of electrification was so great?

Because in the initial build-out from 1880–1900, uncertainty met over-optimism. Financing was speculative, regulation was embryonic, and many firms under-estimated the capital required to achieve scale or to defend their technologies. Reality failed to match the exuberance.

The productivity promise – and the productivity reality

Electricity ultimately reshaped the global economy. But the route from initial technology to full scale adoption was not smooth.

Pre-electrification factories were designed around steam. Steam engines were large, centralised, and transmitted power through line shafts. This created structural rigidity: fixed rows of machines, layouts optimised for power transmission rather than workflow, and limited scope for redesign[7].

Early adopters did not immediately see productivity improvements. Many simply replaced their steam engine with a central electric motor—a cost substitution, not a transformation.

The real step-change came with unit drive: individual motors powering individual machines. This enabled:

• more flexible machine placement,
• longer production lines,
• continuous-flow systems,
• multi-storey consolidation, and
• decentralised maintenance[8]

But unit drive took decades to diffuse. Firms had to close plants, rebuild floors, retrain workers, redesign workflows, and finance new machinery. Many simply lacked the capital.

Ford’s Highland Park plant was one of the first greenfield factories designed entirely around electricity. Productivity gains exceeded 200% - not from electricity itself, but from workflow re-engineering[9]. The biggest winners were the firms that rebuilt from scratch. Large incumbents, especially textile manufacturers, struggled. Mills that adopted electric motors without redesigning their layouts often saw minimal gains. Only those rebuilding after fires or bankruptcy realised substantial productivity improvements.

In effect, electricity’s productivity boom arrived 30–40 years after Pearl Street, once factories reorganised and once household electrification unlocked a brand-new consumer durables sector (washing machines, fridges, vacuum cleaners) that grew rapidly through the 1920s–1960s[10].Other later-cycle winners included chemical companies (DuPont, Dow), where electricity enabled temperature-sensitive processes, and national retailers (Sears, JCPenney), where electrified warehouses and refrigerated logistics supported scale expansion.

What lessons can we draw from the past?

1. You can be right, and still lose money.
Electricity changed the world, but most early electric-light companies failed.
Technological inevitability is not revenue inevitability.

2. Every major phase of electrification produced more investment than could be profitably absorbed.
The industry repeatedly overbuilt generation capacity, wiring networks, and equipment manufacturing. This was eventually absorbed, but not smoothly, see point 3.

3. Much early capex turned out to be obsolete.
Edison’s DC networks were redundant within a decade. Westinghouse’s early AC lines needed redesign after transformer advances.

4. Regulation lags - but when it arrives, it reshapes returns.
The electricity sector was chaotic until the 1920s–30s. Once regulation arrived, it consolidated the industry, entrenched incumbents, and stabilised returns. Eventually, utilities became boring.

5. Productivity eventually absorbs excess capacity—but only after organisational change.
The productivity gains came not from the invention of electricity but its integration into workflows. This often required significant organisational and structural change in order for it to be maximally beneficial.

6. The survivors had deep balance sheets, integration, and diversification.
GE and Westinghouse did not win because they were first. They won because they:

• controlled systems,
• invested heavily in R&D,
• had access to global markets,
• and, most importantly, survived every capital cycle. It frequently looked like they would not make it!
  We can certainly empathise with how investors must have felt in the late 1800’s – so much promise and so little insight into the future. When it comes to a transformative technology, it would seem that overinvestment is an inevitability.
  
  

While we may not have lived through the investment cycles of the late 1800’s, we all know that a few core tenets of investing wisdom prevail. They may be boring, but they seem to hold true in all circumstances – diversification, avoiding excessive levels of leverage and always ensuring you have some liquidity to draw upon. With that in place, it may well be a white-knuckle ride at times, but you will still be standing on the other side to reap the benefits when they come.  

References 
[1] Jonnes, 2003; Hughes, 1983
[2] Killick, 1988
[3] Hughes, 1983
[4] Jonnes, 2003
[5] Hausman et al., 2008
[6] Killick, 1988
[7] David & Wright, 2006
[8] David, 1990
[9] Gordon, 2016
[10] Gordon, 2016