Leapfrog Law and Zero Sums of Attention

This one was tough to write and took way too long but here we go.

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Over the past few weeks, I have been looking into the numbers around the adoption of different kinds of technology across the world and have realized that two very interesting ideas stood out to me which I wanted to document here.

First is what I call the Leapfrog Law

Technology is never uniformly adopted and the lack of adoption of a technology in any market allows for leapfrogging in technological advancement in that market.

Given that the total amount of time to spend on technology is bound by the upper limit of number of hours in a day, the race for offline + online attention is always a zero sum game.

The most fascinating of these markets is China right now. Since China has a closed economy and the internet, it is the controlled lab environment of internet experiments which influence how these experiments will work out in the real world chaotic settings(India and Africa).

Let’s explore two aspects of China which make it so unique as far as its technological environment is concerned. Firstly, China has made itself closed to foreign firms to enter and thrive allowing Chinese firms to successfully close their overseas competitors and prosper off it. While this allows for Chinese firms like Tencent and JD to build a diverse array of products, it still begs the question of what makes the average Chinese consumer use all of these products and spends a ridiculous amount of time on it. This is where the second aspect comes in. China has missed out on a lot of technology and infrastructure that the West today takes for granted. This has had a huge impact on how the Chinese consumers behave and what interests them, which is exactly what companies like Tencent and JD have been able to capitalize on.

The recently released Bernstein Report on the Chinese Internet had some interesting information regarding this behavior, especially the ones concerned with videos, transactions, and e-commerce.

An average American today goes to the movies at least 4 times a year compared to their Chinese counterpart that goes to movies 0.26 times a year. The primary reason has been the lack of access to cinemas for the Chinese consumer. This has resulted in the average Chinese consuming online videos at 6 hours per day on average compared to 70 minutes per day spent by American.

The average American today owns 2.6 credit cards and this average number goes up to 3.7 if you remove the users that do not own credit cards at all. Comparing this with the 0.05 number of credit cards owned per user in China explain how there is a huge difference in adoption of wallets in China compared to the West.

Interestingly still, it’s the numbers for e-commerce that stand out the most. America has one mall for approximately 9000 American, which means an average American would usually have more than one mall to choose from at any given time. On the other hand, in China, there exists a mall for every 1.2 million Chinese. This is a huge disparity and is compensated by the online e-commerce behavior. Taobao, Alibaba’s mobile e-commerce app, has an average of 7 sessions per user per day. This is unimaginable behavior. An average Chinese consumer logs into an e-commerce mobile app 7 times a day. This is that users equivalent of window shopping enabled by the lack of access to a mall.

While malls, cinemas, and credit cards are not the same kind of technologies has the AI/ML based technologies that we traditionally count, those are still very relevant ecosystems that showed up and impacted our social dynamics. Hence, it is really fascinating to see how missing those trends or at least lacking in adopting those trends have affected the behavior of an entire consumer base and set the stage for the possibility of leapfrogging.

This is why certain markets leapfrog in their adoption of new technologies while some other don’t. Eg. whatever comes as a successor to wallets in financial transactions would be much more widely adopted in the West compared to China.

Another interesting implication of the above numbers is that how the availability of one ecosystem affects the usage of the other i.e the zero sum of attention. There is a limit to the number of hours an average user can spend on any service regardless of whether it is offline or online and this depends largely on convenience. Since the number of hours has an upper limit, the competition between offline and online services becomes a zero sum game. One of the biggest examples of this today is the Walmart vs Amazon competition. While one is predominantly offline and the other is predominantly online, they understand that both compete with each other on the users time and mind share causing each to invade the other’s territory with Walmart making acquisitions such as Jet.com and Amazon acquiring Whole Foods.

These two ideas are really interesting and insightful in trying to understand the implications of new technologies in any given markets and help drive hypothesis on how they might perform. While these are clearly not the sole frameworks guiding how technologies perform in any market they still are profoundly useful in developing a mental model around assessing markets and the technologies itself and help reverse engineer the technological needs of any given market.

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I enjoy learning about human behavior and how we interact with our surroundings and ourselves, and especially with technology.

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