Embracing Creative Destruction
Creative destruction (Joseph Schumpeter's phrase) occurs when innovations — new technologies or business models — demolish the capital structures of well-established industries, industries that have lost the ability to satisfy the urgent wants of consumers.
This process can happen almost over night, such as when the vinyl record industry collapsed in the wake of digital music. Or, the process can slowly run its course, similar to the decades-long crumbling of a building's foundation. Here the process is akin to the way moss attaches to surface imperfections and degrades — over decades — the strength and resilience of concrete. FULL ARTICLE
Comments (14)
"However, once some agent of the state spotted too many cars in her driveway, the hammer of zoning came crashing down.
Generally, people do not take into account the amount of traffic their business will generate, and it frequently interferes with the neighbors' ability to park their own cars. If the woman could not provide sufficient parking, then she might have considered hiring someone to deliver the goods. This would have eliminated her need to rent commercial space, and her business might have survived until such time as she was able to afford said space.
Published: November 16, 2007 8:35 AM
"However, once some agent of the state spotted too many cars in her driveway, the hammer of zoning came crashing down."
Yes, this is the only nitpick I have with the article. I understand what the author is saying, but where does her neighbor's liberty cross the line where it starts to interfere with the liberty of others?
Don't get me wrong, I agree with the article completely, but I'm nitpicking here as devil's advocate, because I know those against the free market will use that as a reason for government intervention in the market.
They'll say that we need government regulations via zoning laws so someone doesn't block the entire street. What if someone had to get out quickly to the hospital, and they can't because those cars were blocking the way?
Other than that, a great article.
Published: November 16, 2007 10:22 AM
A good read.
Published: November 16, 2007 10:40 AM
Sorry about the confusion. In my township, no cars are allowed to park in the front yard of a home business, including a front yard driveway. And, in my neighborhood, all driveways are in the front yard.
So, just one vehicle is enough to invite the hammer of zoning.
There was never any noticable traffic that I saw. And, a delivery vehicle is also a violation.
Published: November 16, 2007 10:59 AM
Good article! I took a class on regulation over 15 years ago at a relatively socialist state university and one of the main points the professor hammered home was that industry leadership usually takes over any regulatory agency. There are practical reasons for this, one being that most experts on the industry are working in the industry, so the government recruits from within the industry. But leaders in the industry also lobby for their guy to get appointed to the regulatory agency overseeing their industry. All a company has to do is contribute to the campaigns of several congressmen and it can get its guy appointed. The end result is that the foxes end up guarding the chicken coop! They use their power to create senseless regs that punish small or start-up competitors.
The really odd thing to me is that socialists complain of this very thing. But instead of recommending doing away with these worthless federal agencies, they recommend more government oversight or doing away with corporations!
Anyone read Rod Dreher's book on crunchy conservatives? He has the typical socialist view on government regulation: give us much more regulation but get rid of the corporations.
Published: November 16, 2007 12:43 PM
Some of the comments here put me in mind of Mises' point that one intervention produces another. Home businesses often produce traffic, clogging up the road and creating parking difficulties. To some, this is supposed to justify regulation of home businesses and zoning regulations. But, why does the problem exist? Because the unthinking road owner never took into account the possibility of a business opening in a house, something which is known to happen, and did not build in sufficient capacity for it to happen. Who is the road owner? The government, of course. So the poor job done designed roads and parking spots is used to justify further regulation. This further regulation will naturally produce undesired effects, such as higher prices once competition is decreased, which will be dealt with by, most likely, further regulations, allowing the cycle to continue.
Published: November 16, 2007 1:05 PM
So if there were too many cars in the driveway, why didn't the neighbours go and talk to or complain to the baker? Hey, they might have even offered to let their driveways be used... for a fee!
Published: November 16, 2007 2:46 PM
I for one do not believe that government needs to regulate everything; but it's been my experience that most people prefer to have the government regulate their lives rather than take responsibility for their own behaviors. In other words, the State as parent.
For example, in the suburbs people fight more about parking than they do anything else. At one point in time our block had 27 cars for 7 houses. A family that subscribed to the "what's mine is mine and what's yours is mine" theory had 8 cars, and would park those cars in front of everyone else's homes (at times partially blocking driveways). Meanwhile, their driveway and the curb along the front of their house would be empty.
If you suggested that they not block your driveway and ask that they please park in front of their own home and use their driveway, they would curse you out.
Most people are not raised to effectively negotiate situations like this and, therefore, turn to the State to deal with it.
My question is, "How do we encourage people to take personal responsibility for their own actions, so that we don't end up with government intervention for something as simple as parking?"
Published: November 16, 2007 3:54 PM
Interesting comments about the aeration business. I did the exact same thing after graduating Univesity. I wanted to take the summer off before entering the workforce full time. I mowed lawns using my own equipment 1 or 2 days a week, about 6 hours a day. I wasn't living the high life, but it was more than enough to pay my bills for 5 months. It was amazing how easily I brought in business. I had to turn it down to maintain my liesurely lifestyle.
Published: November 16, 2007 5:29 PM
IMHO, that is probably true. The ultimate way for the State to establish itself is to ultimately make those it imposes itself on need it, so that they think existence without it is inconceivable, to the extent that it becomes paternalistic.
Published: November 16, 2007 6:51 PM
What struck me about this story is that it contains a living counterexample to Marx's theory of the immiserization of the masses. According to it, going broke is like water going through a foot valve: you can go one way (from not-broke to broke) but not the other (from broke to non-broke.) This theory is the linchpin of his doctrine of the inevitable transition from capitalism to socialism: it implies that the number of capitalists always shrinks but never grows.
And yet, here are a couple of guys, with jobs, who have put together a profit-making business on the side with no capital. According to Marx, this feat is impossible.
As long as such a feat is possible, though, then it cannot be logically proven that the amount of capitalist must shrink. Others can emerge from the ranks of the proles.
A nimble Marxist could argue that this counterexample, and others like it, fail because laissez-faire no longer prevails; Marx's model only works under laissez-faire conditions. Once he or she has done so, though, he or she has conceded that capitalism can change into something other than socialism.
I can't say that this point will win any Marxist over, because the convinced Marxist might very well end up arguing that the bourgeois regulatory State is heading towards the bankruptcy many of us expect! Odd that the "great debate" might end up with a handshake of that sort.
Published: November 16, 2007 11:25 PM
I am not sure laissez-faire prevailed even when Marx lived, although the 19th century is often painted as such. Of course, I am not sure how this argument helps a Marxist, at all, given that the State is what hinders competition...
Published: November 17, 2007 8:31 AM
Daniel: "I can't say that this point will win any Marxist over..."
I doubt that rational argument will win over many Marxists. Look at how they admire Castro and Cuba. He's a murderer who has turned Cubans into some of the poorest people in the world. What could a rational person possibly admire about him or Cuba? But they do. For Marxists, equality is not only everything, it's the only thing, and extreme poverty and mass murder are small prices to pay if that's what it takes to destroy capitalists and capitalism. Michael Moore's film about health care in Cuba is a perfect example.
Don't be fooled by the rationalizations Marxists offer up. If you could prove every one of them wrong, it wouldn't change their minds. They have chosen Marxism for emotional reasons, not rational ones, and they'll simply invent more ridiculous rationalizations.
Published: November 17, 2007 9:17 AM
Another good example of creative destruction-Polaroid.In 1981 they won a massive lawsuit against Kodak for patent violation.They then went into relax mode.They failed to notice a new technology emerging that would make their cameras
into museum pieces, next to the Olivetti typewriters and Carter carbuerators.
Published: November 17, 2007 11:37 AM