Creative Destruction:

The Austrian economist Schumpter once postulated that Capitalism could only be understood as continuous innovation and creative destruction. He likely had a point, although I doubt he had any idea of the speed at which the innovation and destruction  might happen.

In the horse and buggy days it took many years before the automobile   became dominant and then the horse and buggy Industry did not put up much of a fight. Now this all seems to be changing. Now no one it seems goes without a fight. It’s all rather like King Canute ordering back the waves on the shore of the ocean.

The innovation is being led by the digital revolution and the Internet and now the ‘Cloud’  The protagonists are the phone and cable companies, the old providers of content, taxi services, travel , hospitality and many other forms of service.

The innovation almost always provides greater freedom of choice and usage at lower prices to the consumer. A win win situation and a from a classic  economic viewpoint a more efficient use of scarce capital. What is different now, is the resistance to change bought on by the establishment, is many times an oligopoly. I have likened this in the past to the regulators attempting to get on a train that had already left the station.

I wrote in a previous  post  ‘Uber Uber’ the upstart Taxi Company,  about the battle being waged by an over-regulated and excessively profitable industry against a new service that offers greater freedom of choice at a lower cost. The battle rages on with insults and threats from all quarters including the heavy hand of government, and the apparent hubris of an intransigent company that believes  their model must be the sole survivor.

Recently we have seen the advent of a new battle over the delivery of content on cable and the airwaves. The new dominant player is Netflix  with over 40 million users that now projects the demise of the current TV Distribution model within the next two decades. This of course assumes that the current major players will go quietly, a very dubious proposition, in the North American Market.

It is the last link in the distribution process that all the fuss will be about. The cable or the satellite that joins the viewing device to the internet. The Band Width and in recent musings the time of usage.

The millennials’  do not watch television. They prefer to watch what they want, when they want, it by streaming content to their laptops or other mobile devices. This leaves traditional sources out of the loop. All of this means trouble.

It is my contention, born of experience, that oligopolies do not compete, at least not in the traditional sense. So beware the promise of even treatment for the various sources of content. Much more likely is a dirty fight ending once more in government regulation.

If and when this happens, it is but a hair removed from control of the internet itself, something that every government democratic or otherwise  can only dream about. Sin taxes be damned, what if they  could tax internet usage by the minute?

The dream of a free unrestricted internet is just that, and a fleeting one at that.

 

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