Chapter 17: The Universal Curve

1. Literally thousands of studies have shown that organizational learning occurs in every industry. Organizations and industries, like intelligent organisms and species, learn to become more efficient as they gain experience in solving problems.

2. The first careful observations of organizational learning were made in 1922 by Theodore P. Wright. He discovered that the assembly labor declined 20 percent with each doubling of production experience.

3. The learning curve languished in obscurity until 1966, when the Boston Consulting Group (BCG) found that, after adjusting for inflation, the unit costs of integrated circuits were dropping 25% with each doubling of experience.

4. The data revealed that all of the client's cost components declined with the accumulation of production experience. To distinguish this across-the-board cost erosion from the notion that learning only applied to labor, BCG rechristened the learning curve the "experience curve."

5. Despite the studies proving its universality, the learning curve has been shunned by most economists. Neither learning nor experience appears in the index of the leading history of economic thought.

6. Perhaps, if the learning curve lent factual support to the core concepts of Western equilibrium economics, a way would have been found to unify fact and theory. But the entire edifice of classical economics rests on the assumption that technology does not change.

7. By ignoring the learning curve, orthodox economics negates the very thing that is unique about human economics - the capacity to respond to experience with intelligence and creativity.

8. Compelling evidence of the learning curve's universality has been available for nearly 20 years, but neither the Left or the Right has recognized the learning curve for what it really is, proof the "law of diminishing returns" is wrong.

9. A firm's efficiency is constrained only by its technology, and its technology is limited only by its members' ability to work together as an intelligent, creative organization.

10. Wherever one looks, the same basic pattern of economic progress reappears. Throughout history, the syncopated rhythm of economic progress reflects a succession of linked learning curves.