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Imagine a surfer poised perfectly on the crest of a massive wave, making the impossible look effortless. The surfer can’t control the water—only ride it. This image illustrates one of the most powerful mental models in microeconomics: riding waves of innovation and change.
In our rapidly evolving economy, technological waves are continually forming, cresting, and crashing. You gain significant advantage by identifying and riding these waves. But you must also know when to surf them and when to bail.
Consider Kodak, which once employed 140,000 people and dominated photography for generations. Remarkably, Kodak invented the digital camera internally in 1975 but failed to embrace this emerging wave. By clinging to film while the digital tsunami approached, Kodak missed the next great wave and paid the price.
This pattern repeats throughout history. Buggy whip manufacturers were wiped out by automobiles. Video rental stores vanished in the rise of streaming services. Taxi medallions once worth millions became nearly worthless against ridesharing apps.
As Charlie Munger describes it in Poor Charlie’s Alamanack:
“When technology moves as fast as it does in a civilization like ours, you get a phenomenon that I call competitive destruction. You know, you have the finest buggy whip factory, and all of a sudden, in comes this little horseless carriage. And before too many years go by, your buggy whip business is dead. You either get into a different business or you’re dead—you’re destroyed. It happens again and again and again.
And when these new businesses come in, there are huge advantages for the early birds. When you’re an early bird, there’s a model that I call surfing—when a surfer gets up and catches the wave and just stays there, he can go a long, long time. But if he gets off the wave, he becomes mired in shallows.”
What makes this economic model fascinating isn’t merely the destruction of old industries but the disproportionate rewards for early wave-catchers. Those first to master new paradigms don’t merely succeed—they often dominate, wielding seemingly unfair advantages.
The core challenge isn’t just working harder at what we already know. It’s developing the vision to spot emerging waves early, the courage to paddle toward them before others recognize their potential, and the skill to stand up at precisely the right moment.
Those who miss these waves or dismount too early find themselves “mired in the shallows”—stuck watching from the sidelines as others ride momentum to extraordinary heights. The ability to surf economic waves isn’t just advantageous; it’s essential for sustained success.
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