PREDICTIONS – 10 Years Later - Santa Fe Institute

6. A HARD FACT OF LIFE
one substitutions, one for the loser and one for the winner. They indicate
the shares, the relative positions, of the contenders. The ceiling is by
definition 100 percent, a fact that makes the determination of these
curves easier and more reliable than the ones used earlier in this book, in
which the ceiling had to be ascertained.
By looking at shares we focus on competition and demonstrate an
advantage whose origin is deeply rooted, as if it were genetic. This description
thus becomes free of external influences: economy, politics,
earthquakes, and seasonal effects such as vacations and holidays. In the
case of locomotives the popularity of trains did not affect the substitution
process. In the case of horses and cars, World War I had no impact!
Another advantage of focusing on relative positions in substitution
processes is that in a fast-growing market the natural character of the
process (the shape S) may be hidden under the absolute numbers that
are increasing for both competitors. The fact that one competitor is
growing faster and that the percentage trajectory follows a natural path
are evidence that the other competitor is phasing out. In Figure 6.2 we
see the absolute numbers of horses and cars in the United States since
1850. During the first decade of the twentieth century the number of
horses continued to increase as it had in the past. The number of cars
increased even more rapidly, however. The substitution graph of Figure
6.1 reveals an indisputable decline for the horses’ share during the decade
in question.
Playing the devil’s advocate, one may try to use this way of thinking
to prove that given any two competitors, one of them must necessarily
be phasing out. Since they are bound to grow at different rates, one will
be always “losing” relative to the other. The fallacy of this approach is
that two competitors chosen at random most probably do not constitute
a niche. A natural one-to-one substitution is expected whenever there is
direct transfer from one to the other with no third parties involved. The
niche needs to be carefully defined. For example, do the two computer
makers IBM and Compaq together constitute one niche? Should we expect
substitution of one by the other, or should they be looked at only as
two out of many members of the bigger computer market? Evidence for
such a microniche would be that the two shares follow S-shaped trajectories
over time.
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