A concept · How Incentives Run Everything · Economics
Creative Destruction
The new economy is built on the ruins of the old.
Could the film business have shrunk politely? In 1975 an engineer at Kodak built the first digital camera, a device the size of a toaster. The company owned the market for film and the chemicals that developed it, and the new device used no film. So Kodak protected the business it had, and the destruction it declined to do to itself was done by others. Why could the creation not simply have been added alongside the old business, leaving everyone whole?
What Creative Destruction means
Creative destruction is the continuous process by which new technologies, products and business models displace older ones, driving progress for the whole economy while causing concentrated ruin for the firms, trades and towns the old system supported. The new system has no material of its own: it is built from the capital, skills and customers locked inside the old one, so the release is the productive step as well as the painful one. Owning this changes what we expect from progress and whom we blame for its costs. We stop imagining that the new can be added without the old being emptied. We stop hunting for the company that destroyed an industry, because the destroying is done by customers choosing the better option one at a time. And we start asking the one question that is actually open: how the people caught at the point of release are carried to the point of absorption.
Creative Destruction examples: where it shows up
- At work: a trade that took a decade to master loses its market in three years, and the skill does not transfer at the speed the capital does.
- With money: an incumbent protects today's profits by not disturbing its own product line, and hands the whole market to an outsider instead of part of it.
- In the news: a town built around one industry is hollowed out while the national figures show growth, and both reports are describing the same event.
Where it sits
Open to walk. See where Creative Destruction sits on the sky →
Nearest on the sky
A filled dot marks a star that is already open to walk.
Consuming content is one thing.
Connecting Creative Destruction to your mental models is understanding. Apply it to your world today.
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