Creative destruction

I am not exaggerating.

Now, let's talk about creative destruction.

So creative destruction is the process by which one new paradigm or technology replaces the old, wholesale.

So, you know, cars replacing horses, that's a good one.

You know, streaming replacing cable, that's another example.

So what we're seeing right now is the government getting fully aligned with the idea of creative destruction.

This is actually a really big reason why I'm glad that the DNC is not in power right now.

Even though I am a progressive, I'm not a liberal, I'm a progressive.

These were businesses that would have likely collapsed earlier without the support they received, which has now mostly been withdrawn.

The failure of bad business models is just part of the creative destruction of the capitalist system and is necessary for a healthy economy.

The paper defines zombie firms as firms that are risky, unproductive and unviable, but that manage to avoid immediate default, often thanks to banks, investors or government support, in light of misaligned incentives.

Their research shows that the share of zombie firms, both listed and private, has steadily grown over the last 20 years, initially growing in the wake of the global financial crisis.

They find that healthy firms who find themselves competing with zombie firms are less able to access credit and that non-zombie firms in industries heavily populated with zombie firms tend to exit the market at a faster rate than average.

and that new competitor entry rates in those industries are significantly lower.

The paper argues that the policies that led to zombification, while well-meaning, might delay an important creative destruction in the global economy, harm healthy firms and have negative consequences for long-term productivity growth.

No one wants to see firms going out of business, especially startups which are often the most exciting and innovative firms.

So let's dive into some bangers.

So at a high level with a table context, the book just flows, he kind of explains how money printing works, how economy works, then creative destruction, entrepreneurs goes into technology, goes into the future of energy intelligence, and then knocks you out of the park with like, why governments create us versus them, and then the call to action.

So this is kind of the flow of the book.

So the first banger on page 12.

9,000 stores with the attendant costs became a disadvantage almost overnight.

So this is the neat thing he kind of pushes, that this big system, 84,000 employees, 9,000 stores, overnight with digital delivery, first through CDs and then through online downstreaming, It flipped him from being the 800-pound gorilla, the big powerful, to like the weakest thing in the world that's not going to last at all.

And I think that's an example he's showing of the disruptive technology and what he calls, I think it's Joseph Schumpeter is the economist that says creative destruction.

Yeah, that's interesting.

Well, I want to add something to it.

I would say that at this moment today, the industry might be a little worse because we're experiencing what the capitalists call creative destruction.

Yeah.

But I would also say our industry was fat, and this is thinning it out.

I'm just talking about everything.

Like they just trimmed the fat, the things that really weren't having an impact and weren't making a difference out of necessity got thrown by the wayside and companies and teams just got a lot more focused and a lot stronger.

Yeah, and I mean, if you think about the creative destruction that's happening right now, again, like we record this and then we release later.

But, you know, recently in the last week, the reverse engineer anything open source project came out.

I was like, these poor people who have spent decades and decades of building themselves up to be their leading expert in their industry.

It's creative destruction.

And that just gets flattened, and it's just like they get deflated.

And I'm like, sorry,

So we work with some of the world's largest enterprises and many of the world's most successful startups.

And I think the common thing is being willing to do creative destruction, being willing from the top of an organization to tear down and completely rebuild parts of yourself with this technology, which gets harder the bigger the organization gets.

So you use this phrase, creative destruction.

Yes.

He nearly had a heart attack when you said it as a central banker.

So this is very interesting to dissect.

One is

the most obvious phrase here on creative destruction.

And for that, it meant a lot to me.

We also checked in with one of last year's recipients, Peter Howard at Brown University, who won for his work in creative destruction, the process by which new technologies, products, and markets replace old ones.

It's considered one of the primary drivers of economic growth, but it also generates losses through obsolescence.

It's wonderful that this very different approach to the theory of economic growth has been recognized for a long time.