Nature and myth thrive on creative destruction. The natural wildfire burns away dead undergrowth to foster new life. Violent volcanism gives birth to our planet's most fertile soils. In myth, the phoenix rises from its own ashes, and the classic hero's journey bestows strength, courage, and value through darkness and despair.
Creative destruction sustains economic growth too. Without cycles of entrepreneurial spirit and innovation, we would trend sideways, not up and to the right. Famous 20th century economist Joseph Schumpeter wrote economic creative destruction comes in waves of varying length and amplitude (the longest are called Kondratieff Waves).
Each wave is spurred by innovation, rapid growth, and eventually competitive leveling off. Sometimes these waves constructively and destructively interfere with one another, generating great leaps forward or self-correcting depressions. But the net result is forward progress.
Current creative destruction is perhaps most evident in today's media businesses. Just recently, Take-Two Interactive Software Inc. reported $500 million in first week global sales for the latest installment of video game blockbuster Grand Theft Auto. Comparatively, Marvel's latest film release, Iron Man, which banked the second largest non-sequel opening weekend of all time, could only manage a measly $201 million globally in its first five days.
"Grand Theft Auto" First Week Sales Top $500 Million
By Franklin Paul and Steve Orlofsky, Reuters
Grand Theft Auto is an innovative combination of interactive play, plot and theme. And while many hail it an entertainment masterpiece akin to The Godfather, others worry that despite its mature rating, children might internalize its seemingly cavalier attitude to anti-social acts. But a good ol' heated controversy may be the surest sign rapid innovation is outpacing societal norms. And challenging widely accepted societal models is what fuels progress.
Similar evolutions are taking place in other traditional media business models. For example, the best part of waking up was once Folgers in your cup and a crisp morning paper hot off the presses. But today print newspapers are struggling to keep pace with the speedy, real-time internet generation. Many of the big dynasties are selling out in the face of slowing profits and merciless competition.
Out of Print
By Eric Alterman, The New Yorker
Traditional music labels also face new competition from digitized dance beats and direct distribution online. But riding the wave forward, British rock band Radiohead recently offered fans to "pay what they wanted" for an online release of their latest album, In Rainbows. The band preempted the album's inevitable internet "leak" by leaking it themselves. And still they managed to sell hard copies to audiophiles craving to rip plastic, devour printed lyrics and cover art, and venerate the remains with a seat of honor on their CD tower.
Pay What You Want for This Article
By Jon Pareles, The New York Times
To be sure, those uncomfortable with innovative ebbs and flows will always drag their feet and lament the good old days. But as long as capitalism survives, expect advancement to be captained by those who, like Radiohead, find resurrection in rainbows.
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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.