Want to know what scares tech executives? It’s not competition from China, WannaCry ransomware attacks, or being coded out of existence by Mark Zuckerberg clones. It’s radial tires.
Until around 1970, almost all cars and trucks rolled on bias-ply tires. Under the rubber treads, nylon belts ran diagonally, at 30 or 45 degrees, forming a crosshatch. This allowed for stronger sidewalls and cheaper manufacturing. The problem was that bias-ply tires needed to be changed every 12,000 miles.
Then along came radial tires. Introduced in 1949 by Michelin, radials have steel belts inside that run across the tread at a 90-degree angle. They are wider, better at dissipating heat, and safer. Although radials cost a little more to manufacture, they last at least 40,000 miles.
The first American car that came with radials was the 1970 Lincoln Continental. Four years later, Goodyear was making only radial tires. Other companies missed out and paid dearly. By the end of the decade, radials effectively had 100% market share for cars.
Which brings us back to Silicon Valley. In the 1980s and ’90s, technology was changing so fast that a new computer was almost disposable. You upgraded every few years. But as innovation slowed, they lasted longer, which meant fewer people buying computers.
Bill Gates was worried about this all the way back in 1991. “When radial tires were invented,” he said in an interview, “people didn’t start driving their cars a lot more, and so that means the need for production capacity went way down, and things got all messed up. The tire industry is still messed up.”
During the dot-com boom, Mr. Gates invoked the analogy again. “Every time I read about optic fibers or wireless, I say to myself, ‘Wow, that sounds like radial tires,’ ” he said. “When they got radial tires did people drive four times as much just because the tires lasted longer? No, the industry shrank.”
That fear has come true. When was the last time you upgraded your PC? Exactly. They run and run. Sales of personal computers peaked in 2011 at 365 million. Five years later, only 260 million shipped, down almost 30%. Tech companies continue to post relentless performance increases and cost improvements, except they show up elsewhere—in cloud computing, artificial intelligence and speech recognition.
It’s true that tablet computers caused some of the PC’s decline, but they’ve peaked, too. Steve Jobs introduced the iPad in 2010. Sixty-eight million were sold in 2014. Last year Apple moved barely 45 million, down a third. The company is on pace to sell even fewer this year. These tablets don’t wear out, and the new ones don’t have enough additional features or applications to entice users to upgrade. It’s a radial tire.
Smartphones are the same story. The iPhone turned heads in 2007. Here was a piece of glass with a computer behind it that you could tap and flip and pinch. Think different indeed. Since then Apple has added bigger screens, better graphics, polycarbonate housing, fingerprint sensors, front-facing cameras, pressure-sensitive displays and Siri. By last July, it had cumulatively sold a billion, often to the same customers who upgraded early and often.
Yet sales essentially have flatlined since 2015. Are smartphones so good that they now last three or four years instead of two? What would it take to make you upgrade? You’ve probably heard about the 10th-anniversary refresh, the iPhone 8, to be announced this fall. By all accounts it will be incredible. Industry wags suggest it will include the cool features of today’s Samsung Galaxy S8—such as edge-to-edge displays. But note the S8 sold only five million in its first month, against 10 million for the Galaxy S4 in 2014.
Maybe the iPhone 8 will have killer new features. The website MacRumors has floated wireless charging and a camera with three-dimensional infrared sensors to measure location and depth, allowing facial recognition, iris scanning and augmented reality. Will it be enough to meet sky-high expectations? Rumors also suggest an iPhone 8 could run $1,000. For many, that iPhone 7 may look like a gently used radial tire.
As with PCs, technology gains continue, but they show up elsewhere. At the pace voice platforms are improving—whether it’s the Amazon Echo, Google Home, or Apple’s new stand-alone Siri device due to market soon—maybe we don’t even need smartphones. Maybe screens are dead—in which case that old Motorola flip phone will make a comeback. After all, flying cars don’t need tires, radial or otherwise.