29: The Experience Curve – How to Plan Your Career Better

Future Skills

Stop thinking linearly. Start thinking exponentially.

Everyone who has read economics knows about scale effects. Like economies of scale or economies of scope. But a lot of people don’t know about the scale effects of experience and learning...

The Experience Curve states that things become cheaper and more effective to produce over time as you get better at it. The experience curve explains why specialization works so well.

This is originally a concept from management consulting, invented by Bruce Henderson, the man who founded Boston Consulting Group.

"[UNIT] Costs characteristically decline by 20-30% in real terms each time accumulated experience doubles."

—Bruce D. Henderson, 1968

The reason The Experience Curve is important is that it’s a general principle that applies to you as an individual as well. And you can use this to plan ahead better in your own career. Once you specialize, you shouldn’t assume a linear progress, but rather, an exponential effect.

How to make use of this idea

• Investing: Equity research, investment
• Work: Identifying promising industries or companies to work at
• Improvement: Focusing on the lowest hanging fruit for improvement

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