Creative destruction

By Jay Jamison

Creative destruction is a dynamic where an unforeseen new approach or invention disrupts longstanding companies and institutions, bringing about a new era. In the 1870’s John D. Rockefeller and his partners were nearing monopoly control of just about all the oil refining in North America. Their principle product, sold at retail, was kerosene for illumination. Homes across the nation were supplied with kerosene used in lamps instead of traditional candles and other known flame producing illuminants like coal gas. Things were looking pretty good for Rockefeller and company, until a guy named Edison, with no connection to the illuminating oil business invented the electric lightbulb. The future no longer looked bright for kerosene refiners. Fortunately for Rockefeller another disrupter was waiting in the wings—Henry Ford. With a few adjustments, Rockefeller’s refineries could supply gasoline for the rapidly expanding automobile industry, however, the future did not look promising for livery stables and buggy whip makers. What we don’t read about in these historical tales, is what happened to the workers who made deliveries of kerosene to all those homes across the country, made buggy whips and ran livery stables? That’s the destruction part of creative destruction. We have some silent monuments to this dynamic right here in Jacksonville, including the old GTE building on Beecher Street, where numerous operators seated at long banks of switchboards, made telephone connections. Computers, then cell phones ended the practice of connecting calls by hand. New technology ended the era dominated by telephone operators. The funny TV sketches performed by Lilly Tomlin as the switchboard operator Ernestine, on Rowen & Martin’s Laugh-in in the late 1960s may not be as funny today for people who had never used a rotary dial phone and had never contacted a telephone operator. That part of Lilly Tomlin’s repertoire is as dead as the career potential of the telephone switching room. As promising career possibilities, telephone operators have gone the way of the milk man, the ice man, and the blacksmith. New innovations are disrupting, which explains why authoritarian governments often discourage such departures from orthodoxy. While American culture has historically encouraged innovation, with all the collateral pain that comes in its wake, other countries, like China, do not. Former Federal Reserve Chairman Alan Greenspan puts it this way, in his book, “The map and the Territory”, “… Innovation is, by definition, outside of conventional thinking and is therefore a potential threat to political control by the Communist Party.” Largely disallowing such creative destruction from within their economy, the Chinese have secured high tech products by other means, which, in part, explains the current tariffs placed on their exports, produced with technology they did not grow. We have both the creative and the destructive elements of innovation in our economy, and the Chinese grab the fruits of Western innovation, while minimizing the societal disruptions that entrepreneurial innovation necessarily creates. Unlike the Standard Oil Trust, or the landline Bell telephone system, the great monopolies of today are largely concentrated in the high-tech information transfer business; Facebook, Amazon, Netflix, and Google, chief among them. These companies threaten the old order. In addition to the basic services they provide, they also accumulate enormous amounts of data about their customers, and then have been accused of selling that information to corporate clients. New threats to normalcy have emerged, including identity theft, a mind-boggling concept for anyone trapped in the era of Lilly Tomlin’s “one ringy-dingy” operator.

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