There’s a point in the movie Other People’s Money when Danny DeVito’s character – Lawrence Garfield – explains to a group of workers that their company will go out of business, no matter how good they are at their jobs.
He yells that even the best buggy whip maker went out of business as cars became the norm…
It makes me think of shorthand, which they taught in high school for years… or secretaries…
Personal computers wiped away some of the main functions secretaries once performed. Things like the creation and receipt of memos, files, mail. Shorthand left the building for the same reason.
These are all clear examples of creative destruction.
That’s where a new technology or process displaces the old. It causes short-term pain… even displacement. But in the long-term, it leads to a better standard of living for the world.
And such advancements can come quickly in tough economic times. Because that’s when companies try to save money to survive. That’s when consumers seek out ways to stretch their dollars.
That’s what the U.S. now faces… a number of new creative destruction junctures in different industries, including energy…
The word fracking has gone mainstream, even though it still shows up in red when I type it in MS Word. The term is short for fracturing and refers to the process of hydraulically breaking up rock formations underground to release oil and natural gas.
This process has vastly increased the amount of recoverable natural gas and oil in the U.S., which will lead to an energy boom in the years ahead.
I have no doubt that this is creative…
The wave of energy supply, particularly natural gas, is bringing about innovation in natural gas powered engines for cars, trucks, you name it… This could significantly cut the amount of emissions created in the U.S. while lowering the cost of operating vehicles.
There is also a wave of innovation in the refueling arena. There are a large number of consumers that already have natural gas piped to their homes, so it’s possible to refuel a natural gas car at your house.
Which brings up the destruction part…
The guy at the corner who sells gasoline is already feeling the pinch of high-mpg cars and hybrids. If consumers can refuel their vehicles at home through existing infrastructure, then even fewer of these stations will be needed.
And fewer gasoline tanker trucks will be necessary on the roads.
The move to the new technology has great potential to lower costs, improve quality of life and generate jobs. At the same time it will displace an old technology, leading to the decline of certain support businesses along with the associated jobs.
Such is the process of creative destruction.
The key insight is not to dwell on what is lost, but to look for the opportunity in what is gained.
P.S. Creative destruction is an ever-present phenomenon during the Economic Winter Season. As such, there are opportunities for those who know where to look. Like this one, for example…
Ahead of the Curve with Adam O’Dell
$2 Natural Gas Prices: A Thing of the Past?
Natural gas has been the tale of two trends. One up, one down.