“Constructive Destruction” Help Explain Inevitable Economic Recoveries
Jim Lee, Ph.D., College of Business, Texas A&M University-Corpus Christi, had some very insightful comments about the economy in APICS e-news (get subscription at www.apics.org- otherwise no link available). His “constructive destruction” concept was one:
Not all businesses are created equal. Some businesses will lose, while other businesses will win—in good times and bad. Economists have found strong cleansing effects in the marketplace during the recent two U.S. recessions of 1990 and 2001. Businesses failed, of course, but the surviving businesses turned out to be leaner and more efficient. This constructive destruction process has contributed to productivity growth in the United States that is higher than the rest of the world.
The idea of constructive destruction contributing to productivity AND improvement in our economic stability is proven and one way to view the future of our economy. Those who view our economy as either “bad” or “good” are usually political or shallow analysts looking for a story. Economics may be complex but analyses like Jim’s tend to clear the air on vital issues we should all be paying attention to.
What do you think? Is this economic downturn a constructive destruction? Do you think that this is a more reasonable way to view the economy vs. lamenting about oil prices?
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4 opinions for “Constructive Destruction” Help Explain Inevitable Economic Recoveries
Alan Wilensky
Apr 19, 2008 at 12:40 pm
So many cloned business models: YAVSS and YASN (yet another….social network, video sharing site.
Only so much capital can abide in ventures that mimic one to another in every detail. That such a wealth of cake can be so allocated is a testament to the shortsightedness of the VC community.
Many will enter the dead pool; all this occurs against a back drop of numerous decent proposals for vertical applications that could have been optimized for the Web 20 model - in skilled trades, technical product services, etc. But since these pitches were not Facebook apps, they never got a fair hearing.
Bob Turek
Apr 19, 2008 at 10:13 pm
Alan- thanks again for commenting and hopefully there is more to come. What vertical applications are you thinking of? Are you speaking about technology enabling a business?
Alan Wilensky
Apr 20, 2008 at 10:42 am
I was speaking of applications for skilled technical trades, product services performed by technical staff that has implicit community, and self-service forums and social media for consumers of durable, technical goods, such as motorsports and higher end Consumer electronics.
There has been a cold VC shoulder for many of the better product proposals in the aforementioned ilk - because they were not clones of YAVSS and YASN.
Verticals pay. verticals have higher CPM and CPC, if that is the road taken as opposed to subscription fees.
Bob Turek
Apr 20, 2008 at 8:12 pm
Alan- the VC community has always been interesting. They seem to behave like the stock market (investors in general)- i.e., many times decisions are made with little information on what is really going on in an industry. I experienced this when I received stock options near the upswing in the tech market in 1999-2000- no one understood how fast it could go up and, finally, how fast it could go down, let alone the reasons why. Fortunately I did same day trades when my options vested and avoided speculating completely. Apparently even VCs have an immaturity in their thinking when approaching investments. Have you experienced “mature” VCs that understand the CPM/CPC measures and apply them? (by the way, that’s the first I’ve heard of CPM/CPC- saw that wikipedia says CPM is used in advertising to represent cost per thousand page impressions; what is CPC?) Why should those measure be used rather than others that VCs might use?
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