Creative destruction is a term coined by the economist Joseph Schumpeter to indicate that, while temporarily painful to those affected, technological innovation that causes job losses in certain sectors of industries ultimately creates wealth and prosperity for everyone (including those affected). Cars displaced horse carriage manufacturers… a significant advantage for everyone and the modern world, we can all agree. This doesn’t mean there are no horse carriage manufacturers, just a few niche ones left, which are actually profitable. There doesn’t need to be a thousand horse carriage manufacturers anymore… it just doesn’t make any economic sense.
Who today can deny that current companies and technologies like Uber, Airbnb, and the smartphone itself (which soon will be in the hands of everyone in the world, including the 3rd world due to falling prices, giving everyone instant access to information and education) are adding significant value to users and consumers, and thus increasing the overall wealth of everyone in the world?
Creative destruction is hard. But it means that people in the old industries must to adapt, which they can… and history validates this. Economics states that resources should flow to where they are most valued. If this is to be the case, some changes have to occur every now and then. Change, after all, is a fundamental force of life.
If change is fundamental, and innovation is a good thing for society, why do we continue to see claims that innovative companies today are causing harm? This is observed most recently in the remarks by Hillary Clinton and Bernie Sanders that Uber needs to be regulated and that in general the technology poses a threat to consumers. But these claims aren’t just limited to the Democrats, or left-leaning parties… they aren’t even limited to politicians. Lobbyist from taxi companies and hotel companies lash out against Uber and Airbnb, respectively. They aren’t even limited to lobbyists, some managers of companies are quick to defend their existing technology, as opposed to changing and innovating with the times, and thus ultimately end up bankrupt.
A closer look into history reveals that this isn’t new. According to an excerpt by Richard Foster in “Innovation: The Attackers Advantage”, this fear is ~700 years old:
Why, as an advancing society, do we continue to harness this fear of innovation today?