Creative destruction …

Innovation creates new opportunities. But it also often destroys whatever it replaces. 

This happens all the time in technology. 

DVDs made VHS tapes and players obsolete. Apple iTunes and music sharing changed how music is sold.  Online video streaming now threatens on-demand cable-TV services.  More homes are getting rid of their landlines for phone service, opting instead for Internet-based VoIP or cell phone service.

Since the rise of personal computers we’ve gone from file storage on tape cassettes (C64), to hard drives, to floppy disks, to Zip disks, to CDs, to DVDs, to USB thumb drives, and now to the cloud.  Each transition has left some manufacturers in the dust. Each transition also dramatically lowered the cost per MB stored for consumers.  

It also happens outside technology, although technology can accelerate trends.  

Newspapers took a hit from radio and then TV and now the Web. Local newspapers’ influence and profitability have waned as their circulation dropped dramatically and advertisers fled. Local print newspapers are becoming a curious anachronism, and most of their owners have yet to figure out how to make money in a digital world where most content is free.  As a result, print journalists are losing their jobs, as are pressmen, circulation managers and others tied to a business model that has failed to adapt to a changing world.

Walmart’s use of supply-chain technology allowed it to buy market share through consistently lower prices. In turn, Walmart’s lower prices and one-stop-shopping convenience have driven many small-town mom & pop stores out of business.  So, for a while, did big-box retailers.  Now online-only retailers such as Amazon are taking an increasing share of every retail sales dollar. Brick and mortar stores – including Walmart and the big-box chains – that long relied on location and low prices alone, are trying to catch up with their own hybrids of physical and online selling. 

The winners of all these changes are usually consumers. The losers are the less adaptable. 

The free market is a marvelous driver of this creative destruction. There always seems to be someone working on a new way to do something better, faster and cheaper. When they succeed consumers usually benefit, but someone else may suffer. 

It’s the purest form of economic Darwinism. It’s not the survival of the fittest, but the survival of the most adaptable to change. 

That’s not to say all creative destruction is immediately a zero-sum game. Yet in the longer term it usually is.  Someone wins; someone ultimately loses.

If you are a business on the losing end, it sucks.  If you’re a business on the winning end, it’s great – for a while, because sooner or later someone else will have the next great idea to replace the one you’re hitched to. When that next big idea hits pay dirt, you and your employees better have a backup plan or you’re all toast. You’ll be the last blacksmith in a town with no horses.   

Remember Blockbuster? CDNow? Dial-up modems?  FAX software? 8-track tapes?  Bag phones? Sony Walkman? Cassette-tape holders and CD/DVD racks?     

All gone.  All replaced with something better, faster and cheaper, or made unnecessary. 

And with their demise came job losses.

So creative destruction cuts both ways.  But it can’t be stopped. Change is inevitable, and change is often accelerated by competitive pressure and the rising cost of labor, resulting in the increased use of automation and robotics by manufacturers to cut costs, for example. 

Other times creative destruction fundamentally changes an entire industry.  In some cases, it eliminates whole classes of workers whose skills are no longer required.

Years ago there was an entire industry of highly skilled workers who manually manipulated images and artwork through such techniques as airbrushing and dot etching.  There was another industry of typesetters.  Yet another industry existed to produce “proofs” shown to a client for approval before pieces were printed.

They are all gone for the most part, replaced by graphic-design desktop software that allows designers to electronically adjust images, pour in and manipulate type, generate color PDFs for clients to approve in real time, and to produce final, print-ready files for printing.  Also gone are the people who once created “mechanicals,” drew “comps,” and operated stat cameras, as well.   

Now the same graphic-design software is cutting into the income for agencies and freelancers as more companies set up their own in-house design groups.  Change happens.   

On a separate front, the rise of the Internet and related tools means fewer commercial printers are still in business because more brochures and magazines are purely electronic as PDFs or web pages. That means fewer press operators, fewer bindery workers, and fewer print sales jobs, too. Businesses save by not printing; printers and their employees lose.   

It’s unfortunate when creative destruction costs jobs. But what’s the alternative?

Do workers have a right to jobs for which there is no longer a need?  Do businesses have an obligation to maintain workers who are not required?  Should government intervene to prevent creative destruction from harming workers? 

Progressives on the left – like Bernie Sanders and Elizabeth Warren – would say yes to all three of those questions.  After all, it’s not the workers’ fault their jobs disappeared.

But is “fault” even a relevant factor on issues like these?  Is the bigger issue not preparing for inevitable change? Whistling past the graveyard, in other words …

As much as creative destruction from innovation can be dramatically disruptive to the status quo, it rarely occurs with no warning. There are always pretty clear signs change is coming.

Amazon didn’t appear suddenly out of nowhere. Nor did Walmart.  Nor did personal computers.  Nor did online news media, desktop graphic-design software or digital printing.   Nor did FedEx, e-mail or any number of other innovations. 

There were always clues these would eventually change the way we work. 

Creative destruction only sneaks up on those who choose to ignore the signs, or think somehow they won’t be affected. 

And those who ignore its inevitability are destined to suffer the consequences.