I first heard of AutoCatalysis being used as a business tool from reading Charlie Munger.
AutoCatalysis originates in chemistry, a subject I did poorly in in high school, so I’ll give this definition from The Focus Investing Series Part 3: The Munger Network of Mental Models:
“In the autocatalysis process, properties, events or products serve as their own catalysts and are “self-breeding. For example the self-stimulated increase in the demand for air conditioning, hence the self-stimulated increase in the demand for air conditioners.”
Disney’s content is another example of autocatalysis, as Munger points out in Poor Charlie’s Almanack:
“Disney is an amazing example of autocatalysis…they had all those movies in the can. They owned the copyright. …when the videocassette was invented, Disney didn’t have to invent anything or do anything except take the thing out of the can and stick it on the cassette.”
Note: I’m a content guy and many of us refer to the reusability of Disney content as an example of “evergreen” content — as in you have a product that can keep growing on its own every year (like an evergreen plant that keeps growing during all four seasons). But Munger is smarter than me so let’s call it “Auto-Catalysis”.
Munger also describes Coke as an example of auto-catalysis in that, for example, when refrigeration came along, that was another catalyst for Coke to sell more soda without having to invent anything new. The same could be said for when aluminum cans or plastic bottles came along and Coke could sell through those new catalysts.
Munger also used AutoCatalysis to explain why we needed bank bailouts around 2010, according to the Fool.com notes of Munger’s comments from the Wesco annual meeting that year:
“There have been bank problems in the past. Why did we need bailouts this time? This time was far worse than any other time in modern history. It was like autocatalysis in chemistry. It just started feeding on itself like pins going down … boom boom boom. The government’s reaction was a credit to democracy and capitalism. We had wonderful leadership, and I’m quite grateful. The problem was just god-awful. It was out of control.”
This article on AutoCatalysis continues my quest to list out the Top 100 Mental Models Needed to Succeed in Business.