Ménage à trois

Hindu Deities and the economics of capitalism

The Trimurti is a concept in Hinduism in which the cosmic functions of creation, maintenance, and destruction are personified by the forms of Brahma the creator, Vishnu the preserver and Shiva the destroyer. These three deities are the Hindu Trinity and represent the different aspects of transformation.

Of fax machines and VCRs

Schumpeter is one of two economists (him and Keynes) that have schools of thought named after them. He came up with the concept of Creative Destruction in capitalism. Creative Destruction describes the process of innovation being adopted and supplanting existing businesses and paradigms. The economic landscape is continually changing as older ways of doing things are swept aside by new technologies and approaches. Think: Blockbuster Video, Kodak, My Space, Nokia and a million others. Beta or VHS?

The Innovator’s Dilemma

Clayton Christensen wrote about this dynamic in his seminal book The Innovator’s Dilemma. In it he describes companies trying to hold on to their markets and customers in the face of upstart competition and becoming marginalized and obsolete because they entrench instead of recognizing, embracing, and exploiting new developments.

Netflix approached Blockbuster Video to see if they wanted to acquire Netflix and Blockbuster dismissed the threat and declined. High tech companies like Facebook, Google, MicroSoft, and Amazon acquire nascent technologies in order to preempt being disrupted out of their leadership positions and simultaneously make bets on the future.

Survival of the Fittest

We tend to promote this kind of disruption as the inevitable consequence of progress and innovation. And as consumers we benefit from the options, choices, products and services that get deployed. We think of marginalized companies as just part of the circle of economic life; the law of the capitalist jungle.

But these clean sweeps also impact people. Car services like Uber and Lyft provide real benefits to travelers and I love these platforms that match folks with a need with folks that have excess capacity, whether with their car, or home like AirB&B, or in their closet with EBay.

Downside

The Angel of History’s face is turned towards the past…

Where we perceive a chain of events, he sees a single catastrophe…

A storm irresistibly propels him into the future, while the debris before him is piled skywards. This storm is what we call progress.

- Walter Benjamin

There is a downside that needs to be addressed. I heard a heartbreaking story recently about a New Yorker who scraped and saved and bought a taxi medallion, which allowed him to run his own cab. Guys like him are very hard working and trying to put together a business that will support him and his family. The ride matching services have disrupted the industry and the value of taxi medallions has plummeted. This guy was left with an asset that was way under water. Think about if you bought a house and took on a mortgage and very rapidly the house lost three quarter of its value and you were stuck with the debt. All you wanted to do was get ahead and the tables turned. This poor guy committed suicide.

This is so sad to contemplate. There must be a better way. One that promotes and encourages innovation and also provides a safety net for those who are steamrollered.

Companies like Uber that are aware that a consequence of their success is going to be massive disruption should show empathy and responsibility toward some of the disrupted as part of a larger constituency of their business. Success shouldn’t be just pure stone-cold competition and let the chips fall where they may. Government steps in and regulates business where there are market failures but corporations should also widen their idea of corporate and civic responsibility.

They could put aside a fund to help assuage these cases with compensation or maybe hire these people to mitigate the damage their success juggernauts wreak. It is an issue that should be though about, discussed and implemented. It’s just good business. Otherwise it is a ding to the brand and how they are perceived in the marketplace and by customers.

Most tech companies are tone deaf to the human consequences of their love of disruption. That’s a great source of energy but can also be a liability if governments decide to step in and regulate in a less than effective way.

I like companies that are socially responsible and creative at addressing downsides of their impact. It enhances their reputation in my eyes. I want to feel comfortable and good about using a service and not have hanging doubts about abetting unintended yet harmful consequences. It harshes my mellow.

We need to acknowledge and placate the Trimurti.