An invention isn't an innovation until it changes behavior. The horsepower was invented as a marketing unit so customers could calculate value in familiar terms, and Watt and Boulton pioneered a pricing model — supply the engine for free, take a third of coal savings — that was literally hardware-as-a-service in 1775.

So one of my one of my great contentions is that when we look at great entrepreneurs or great inventors, Jobs, you know, if you say uh Edison, Ford, what Bolton, they tend to be written up as historians as inventors. And my argument is that an invention isn't an innovation until it changes behavior. I think it's Stuart Butterfield of Slack who says something very similar. No, the only real measure of the effect you're having on innovation is the extent to which you change behavior. And you can invent anything you like, but if you can't get anybody to adopt it, it's an invention, but it's not an innovation. And what was selling steam engines to mine owners? And the purpose of the steam engine was to replace the horses they used to walk round and round in circles draining the mines so that miners could go in and effectively mine coal slate coal whatever without drowning. What he realized is that you could you as an engineer you could talk around you know the calorific capacity of the boiler or the length of the piston stroke or whatever and these people didn't want to know. So Watson and Bolton amongst themselves said, 'Well, what do these people really want to know before they're prepared to buy a steam engine?' They said, 'They want to know how many horses they no longer need to feed if they buy a steam engine. How many horses can I get rid of if I buy the steam engine?' So what went out and invented a unit we still use today, which is called the horsepower. And the reason it's not named after a famous scientist like the M or the Newton or the Koulom or the Watt for that matter or Celsius or anything of that kind is because it's a marketing unit. It was invented for marketing purposes because he could then go and say if you buy 25 horsepower steam engine you can actually get rid of 75 horses cuz I think the horses worked in shift. So it does the work of 25 horses but it does it 24 hours a day. So you can now get rid of of 75 horses. And these people would go scribble, scribble, scribble, scribble, scribble. Cost of horses, cost of feeding horses, cost of looking after horses. And you know, on the back of an envelope, they could then go, we'll have two of those. By the way, it went even further than that. I mean, the industrial revolution was a marketing revolution every bit as much as it was an industrial revolution because there was no point in being able to produce things in abundance if you couldn't create corresponding demand. So, you know, one of the things about the 18th and 19th century in England was it was an absolutely pioneering period in terms of how people marketed things and that included the steam engine where what and Bolton would go to a mine owner. Now, let me get this right. Some people were already using Nukeman engines which were less efficient steam engines than the Watt engine. and Watt and Bolton would go along to the people who are already using these inefficient steam engines and this is how they priced their their own steam engine. They said, 'We'll supply it for free. You pay us a third of the money you save on coal.' So it was literally hardware as a service. Bear in mind this was 1775. I mean years later Rolls-Royce started charging airlines for jet engines in the same way. Effectively, you pay us for every hour the engine is in service. Now what was ingenious about that was of course it aligned the interests of the people selling the steam engines and the people owning the mines because the people in the country where coal was most expensive most needed to make m to save money on coal that was Cornwall t where there were tin mines quite a long way away from any available coal field. So coal was more expensive there. And so the first Watt engines tended to be installed in places where coal was most expensive which meant the mine owners saved more money and Watt and Bolton made more money. So they were actually capturing the upside. Whereas if all you done is said, 'Yep, it's 100 guineies for a steam engine.' You wouldn't been capturing any of the upside. I mean this was you know I have to say this this was pretty smart stuff. I mean what one of the worst mistakes you can make is thinking that people 500 years ago, 300 years ago, 200 years ago were thick.

verbatim transcript · starts at 1:54