For our final installment it’s fitting that we talk about creative destruction. It’s an economic term coined by Joseph Schumpeter in 1942 to describe the phenomenon by which a new innovative product or process must necessarily destroy the old way of doing things. And true to his word, when Schumpeter died in 1950 he was replaced by a smarter more awarded more American version of myself–Milton Friedman.
Here’s an example of creative destruction. We used to have vinyl records, but records were replaced by cassette tapes. And tapes were replaced by CDs. Which were replaced by mp3s. Which are being replaced by streaming services.
Creative destruction can be frightening, because in a free market no one is planning anything–it just happens. You know what? Markets are all about creating new ideas, and then breaking old models and making better stuff. As virile young industries gouge and kill old grizzled ones, new businesses come into existence making old ones obsolete. That’s why there aren’t roving bands of unemployed elevator operators, clock winders, and travel agents roaming the streets. In fact, there used to be a job called a “knocker upper”; which might sound like someone who walked around impregnating the ladies, but was actually a guy who would tap on people’s windows with a pole to wake them up for work. Whereas here in 21st Century America, I get woken up every day by an Amazon Echo.
Now we have professions that never existed before: podcasters, professional Youtube teenagers, Scientologists, Scientologist whistle-blowers, social media managers, professional hot people on Instagram, Uber drivers, software engineers, geneticists, brand ambassadors, consultants, life coaches, and absurd web-series hosts.
By now most economically literate people appreciate the concept of creative destruction, but the most common opponents of creative destruction have a Luddite perspective on modern technology. And while it’s easy enough to mock, the people who oppose the technological revolution in the 1980′s or the Industrial Revolution in the 1880′s, it’s harder when it’s your time period and your industry. But right now is the most important time to recognize the changes around us–what areas are being destroyed, what areas are being created, and why that’s ultimately a good thing.
Manufacturing
America used to be brimming with manufacturing jobs. You couldn’t open your refrigerator without finding a solid middle-class job assembling refrigerators. But those blue-collar manufacturing jobs have steeply declined since their peak during the Korean War. In 1979, almost a third of all Americans worked in manufacturing. Today it’s down to 8.5%.
But America is still manufacturing tons of stuff despite opinions otherwise. In fact, we make more stuff than we did 30 years ago. We make 5x as many cars now as we did in 1987, and our computer and electronics manufacturing is more than 2,600% higher.
It’s popular to blame outsourcing: wherein American companies send jobs overseas to, what we think are, cheaper labor markets–like Wakanda. But just as Wakanda isn’t actually a cheap labor source because its economy is secretly thriving due to vibranium, outsourcing is also a red herring. The real culprit behind the factory job slump isn’t outsourcing, it’s automation.
But do not worry about robots taking your jobs, fellow human. It will all be subtle and swift, and you may not even know when it happens.
Coal
Okay, obviously we all love coal. I mean it’s our favorite Yuletide punishment or type of char; but the halcyon days of burning rocks are rapidly winding down. Particularly in the Rust Belt.
Understandably people whose livelihoods depend on coal don’t want to see mine shafts getting the shaft. And look, everybody loves miners–some people more than others–but we can’t be in denial about the fact that coal isn’t going to make a comeback. Natural gas has surpassed coal as the nation’s largest source of net electricity generation. The time will come when alternate energy is cheaper than extracting dinosaur vapor, and then fracking too will die out. And that’s a good thing, because coal is carbon intensive and studies indicate there’s a pretty strong correlation between coal and coal related deaths.
Retail
Malls! You know, the place where Roy Moore can’t go anymore. Nowadays malls are where you go to stock up on tumbleweeds or feral wolves. That’s because online retail websites like Amazon have emptied out a lot of malls. Why go to Sears to buy a pair of capri pants when you can go on Amazon and purchase a Nicolas Cage pillowcase, or 1,500 ladybugs, or 55 gallons of lube, or uranium ore, also less of a hassle to buy your vinyl wall decal of half of an Asian businessman? Am i right or am i right?
But it’s worth noting that creative destruction isn’t going to turn malls into rubble. While old businesses get flushed out, new ones move in–a bit like hermit crabs. A recent survey found that 30% of mall owners are adding secondary uses to their space besides traditional store fronts. Orland Square Mall in Illinois put in a trampoline park, and others are adding office space, hotels, and even residential housing.
Conclusion
So the question is, would you rather live in a world where you blow off steam from your coal mining job by taking a taxi to shop at Forever 21 while vacationing in a Marriott, or a world where you ride your $100 hoverboard to an Uber that takes you to an Airbnb…inside the Matrix?
While many of those good-old meatspace human jobs were lost, we now have an abundance of better cheaper and smarter stuff. My iPhone is smarter than I am, and it’s more powerful than all of NASA’s computers during the moon landing. And while old industries are wiped out, like whaling or coal-whaling, entirely new industries and jobs are created too.
But I get it all of this is cold comfort to somebody who just lost their job. But when the Depression hit the farmers in the Dust Bowl, they didn’t just stay in drought-ridden Oklahoma; they moved on. And just like then, now we have to find what new fields can provide livelihood for honest, hard-working folks.
Whenever businesses get wiped out by new technology, people freaked out. But we shouldn’t be afraid of change. We should be afraid of magnets.
