I quite like this model. Autocatalysis is a model from chemistry, which occurs when a reaction speeds up on its own. Essentially one reaction creates another, which creates another, so on and so forth until at some point it tapers out. In business, it’s wonderful when this happens. You get a huge boost in your business, which carries on for some time. All of a sudden you have A, which is now creating B, so you get A + B + C until it tapers out. Charles Munger talks about a good example of Autocatalysis in regards to our favorite company with a mouse mascot.
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Disney is an amazing example of autocatalysis… They had all those movies in the can. They owned the copyright. And just as Coke could prosper when refrigeration came, when the videocassette was invented, Disney didn’t have to invent anything or do anything except take the thing out of the can and stick in on the cassette.
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It’s useful to imagine how products and features can lead to additional reactions from customers. Amazon’s recommended purchases is a good example. If I buy a book on how to raise a child, they’ll recommend a crib. This is a brilliant feature that builds on itself, creating positive effects for the business simply by being there. In Africa, there’s lots of hidden multiplier effects outs there because the infrastructure isn’t here yet. Which companies will benefit when Tanzania has a robust road network and electrical grid? Uber just has to wait for roads to be built for them to be successful. Which African companies will be most successful? It’s widely recognized that Africa has already leapfrogged lots of infrastructure through the mobile phone. Africa will never have a land line network, because they don’t need one. When the infrastructure is finally put down, what exciting new companies will we see from the mother continent?