Creative Destruction Mental Work Out
Wired Article on Creative Destruction work out
Found quite straight article on Creative Destruction and done some Mental Work out on it …
Schumpeter argued that capitalism exists in the state of ferment he dubbed “creative destruction,” with spurts of innovation destroying established enterprises and yielding new ones. This view seems far more current than Smith’s Newtonian notion of an “invisible hand” generating stability in the marketplace.
Question is that possible in requeired speed to tackle current global issues such as unemployment, inequality, warming, wars, hunger ?
“It’s not difficult to be for Adam Smith and Joseph Schumpeter at the same time,” maintains House majority leader Dick Armey. “The market must clean itself out by taking resources away from the losers, so it creatively destroys the losing companies and reallocates resources to the winning companies. That’s really what’s going on.”
What is the price of such a cleaning process ? When US drop atom bomb on Japan that was also cleaning of loosers in way. And the I think we have to separate companies from people, analysing the difference with new companies created and new workplaces created.
There he argued that it’s entrepreneurs who drive economies, generating growth and, through successes and failures, setting business cycles in motion — a provocative claim in the ‘30s, when capitalism seemed bankrupt.
Definitely SMB sector is the way to go. But who helped them when recession in 2009 hit ? Bank and Big companies get support, while SMB have to fill bankruptcy.
Even after publishing his landmark Capitalism, Socialism, and Democracy in 1942, Schumpeter was overshadowed by John Maynard Keynes, who preached government spending as a way out of the Depression. “Schumpeter probably was right all along,” says Michael Powell, “but it’s only now, at Moore’s law speed, that you can actually observe it.”
Its cool to spend, but even more cool is to measure effect on that spending with higher resolution then GDP.
In a paper presented at a recent Fed retreat, former treasury secretary Lawrence Summers and his ex-deputy Bradford DeLong observed that “the economy of the future is likely to be ‘Schumpeterian,’” with creative destruction the norm and innovation the main driver of wealth.
What is wealth is the question ? http://sergejlugovic.tumblr.com/post/63906922987/weath-of-nation
And what type of innovation we are looking for ? Open or Patent based.
http://sergejlugovic.tumblr.com/post/80340334901/are-we-morons-music-tesla-and-cars-same-story-new
Products based on ideas — music, software, pharmaceuticals — require an enormous investment to develop but very little to keep making. And they’re often subject to network effects, which reward those that achieve critical mass. Together, these factors — high cost to create, minimal cost to produce, and a winner-take-all environment — tend to generate natural monopolies, at least until the next innovation comes along. How regulators should respond is debatable, but clearly the rules that governed manufacturing economies don’t apply.
Question right to the point. Maybe Brian Arthur could help.
Yet creative destruction is only half of Schumpeter’s message. Far less in vogue is his projection that entrepreneurs will disappear as innovation becomes mechanized in corporate labs — as it has today in Japan — and that ultimately the very success of capitalism will beget socialism. Will creative destruction give way to central planning?
Will capital survive ? Or maybe we could look how it mutate. And are we talking about capitalism as a system, or we are talking about one of the factors of production along land and labour ? And what value such a production generate, and how its distributed. What will happend if somehow owners of the TOP 500 companies in the world decided to become non profit organizations ? Its hardly to happen, but …. And Egyptians had a pyramids.
Not necessarily, says Harvard’s Clayton Christensen. “What happened in Japan is exactly what Schumpeter envisioned,” he argues. “But here, folks just leave — they pick up venture capital on the way out, and they start new disruptive corporations.” So as long as Washington encourages an infrastructure that supports entrepreneurship, creative destruction can continue after all.
It opens up question is VC finacial or economy discipline ? If economy is dealing with limited resources, and money is not limited any more (no gold standard), then VC is not economy. They are investing money, generated by access to “magic money generation machine”, and such machines is unlimited in terms of output. Limit is in terms of access.
“The stock exchange is a poor substitute for the Holy Grail.”
―Joseph Schumpeter
Frank Rose, Mar 2002, Wired, http://archive.wired.com/wired/archive/10.03/schumpeter.html
