Stephen Witt

In fact, a pneumatic shovel was one of his first disruptive technologies.

And the canonical example he uses was the Honda motorbike.

So when Honda entered the US market in the 60s, there was no room for another car.

So they marketed a dirt bike to teenagers, basically.

Actually, the Beach Boys wrote a song about it.

And this was a low margin, small $0 billion market, basically.

But what Honda realized is that if they could kind of sell this market here, GM wouldn't come and compete with them.

It would lower GM's margins to build a dirt bike.

They're selling Cadillacs, their high margin product.

If they go and open this small dirt bike business, then investors will yell at them because their profit margins just went down.

It's hard to move from a high profit margin business into a lower one.

But if you don't do it,

then you're very vulnerable to disruption, to competition coming up from below.

And that's exactly what happened to GM, which by the way, in the 1970s, they were the Nvidia of their time.

They were the most valuable firm in the United States.

But Honda came and raided their whole market from below as they iterated upwards from the dirt bike to a compact car, to a minivan, and eventually GM has nowhere to go.

Honda and Toyota have stolen all their market share, right?

So with Jensen, he's like, and this is the secret of the innovators dilemma.

It's not actually a manual for how startups can succeed.

It's a counterinsurgency manual for how established firms that are like aging out of their market can defend their territory against these startups.