---
title: "Experience curve"
description: "Unit costs fall predictably — usually by 10–25% — with every doubling of cumulative output. The principle was formulated by Bruce Henderson and BCG in 1966, on the basis of the aviation learning curve (T. P. Wright, 1936: the fourth aircraft took 80% of the labour of the second). The difference from moat 15 is fundamental: scale economies are about current volume, spreading fixed costs, while the experience curve is about total output across all history and the knowledge that cannot be extracted from it. A competitor with the same volume today but nothing accumulated yesterday sits higher on the curve — and cannot catch up while the leader keeps moving."
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locale: en
---

# Experience curve

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- Sheet 35 / 35

## Passport

- **Rock**: Mathematics
- **Depth**: 3 · Drill rig
- **Time to dig**: 3–10 years
- **Capital**: ◉ · extreme
- **Solo**: ✗ no
- **AI**: ↑ AI-resistant
- **Rent**: ✗ not for sale

## Essence

Unit costs fall predictably — usually by 10–25% — with every doubling of cumulative output. The principle was formulated by Bruce Henderson and BCG in 1966, on the basis of the aviation learning curve (T. P. Wright, 1936: the fourth aircraft took 80% of the labour of the second). The difference from moat 15 is fundamental: scale economies are about current volume, spreading fixed costs, while the experience curve is about total output across all history and the knowledge that cannot be extracted from it. A competitor with the same volume today but nothing accumulated yesterday sits higher on the curve — and cannot catch up while the leader keeps moving.

## How it is built

### Semiconductors — yield as the sum of every wafer

Every wafer produced teaches: defects, calibrations, process windows. Where moat 19 is about that knowledge being unstealable, the experience curve is about it having a measurable price tag — yield and cost per transistor are functions of cumulative output. A late entrant is not merely less experienced; it is condemned to years of selling at a loss while passing through the same doublings.

### Boeing against Airbus against COMAC

Thousands of airliners delivered make each next one cheaper to build: the duopoly has accumulated nearly a century of cumulative output. COMAC with the C919 has to walk the curve again — with state support, patience and unprofitable first hundreds of aircraft. Without state support, entering such an industry makes no economic sense at all.

### SpaceX, and Wright's law in batteries

Launch cadence is the speed of descent along the curve: every launch teaches and makes the next one cheaper, and reusability turns a flight into a repeated lesson. A competitor flying twice a year descends physically more slowly even holding the same drawings. The same mathematics runs in Tesla and BYD batteries: the price per kilowatt-hour falls by Wright's law with cumulative production, and whoever has accumulated more is cheaper.

## How it is bypassed

### Change the curve instead of chasing it

A technological reset zeroes out what was accumulated: Chinese carmakers never chased a century-old combustion curve — they started on the electric one, where Toyota's and VW's experience in engines and transmissions barely transfers and where everyone started together on batteries. Every new S-curve is an amnesty: the leader of the old one begins the new one level with yesterday's newcomer, and carrying legacy on top.

### Buy or siphon the experience

Experience is dissolved in people, suppliers and documentation: it is bought up through M&A and the hiring of dense groups — a bridge to process power — siphoned through equipment vendors, since Applied Materials and ASML distribute accumulated industry knowledge to all their customers and level the curves, and transferred through institutional mechanisms: Chinese joint ventures were for decades a conveyor moving Western carmakers' experience to local partners.

### Move the learning into simulation

What used to be learned only on physical units is increasingly learned computationally: Waymo racks up billions of simulated miles against competitors' millions of real ones, and synthetic data and digital twins compress the cost of a repetition by orders of magnitude. The threat to the moat is asymmetric: where computation replaces physics, cumulative output stops being an advantage and the experience curve turns into a moat of compute budget — a bridge to capital.

## Verdict

The quantitative brother of process power: knowledge bought with cumulative output, at a measurable price on the curve. Bypassed by changing the curve, by buying experience and by moving the learning into simulation — which is why, in the AI era, it migrates out of physics and into compute.

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