Jill Lepore deserves an award for her New Yorker essay against the gospel of disruption. The last paragraph alone is a sufficiently fine piece of writing to warrant reading the whole thing. For those of you blessedly unfamiliar with the theory of disruptive innovation, it goes like this: Everyone, every institution that is superb at providing a product or service is in truth a Goliath, merely waiting for a little innovative David to topple him with a better way to do his job. Why work up your muscles to carry a cudgel if you can deal death with a slingshot? Amazon has disrupted book-selling. Online commentary has disrupted journalism. MOOCs will disrupt the university (people swear). You who are merely doing your job exceptionally well and profitably – you are a complacent fool. In her essay, Lepore beats the tar out of the scholarship that gave rise to this preaching. Apart from pointing the article out to you, I want to comment briefly on how she says what she says. In truth, Lepore gives two arguments for the price of one, and it’s the second that I find more fetching and worth a little extra remark. Mainly, and entertainingly, she points out the entire theory of disruptive innovation is bunk on its own terms. It neither explains what it’s meant to explain, nor predicts what it’s meant to predict. It’s a fable that comforts the comfortable, by depicting their rapacious waste as the inevitable manner of capitalism’s progress. I won’t try to summarize what Lepore says about the embarrassing failures of the theory, because she already says it well. But Lepore makes a secondary argument you could almost miss. She notes that even if the theory of disruption were sound, there are certain human activities to which it should not be applied. Innovation and disruption are ideas that originated in the arena of business but which have since been applied to arenas whose values and goals are remote from the values and goals of business. People aren’t disk drives. Public schools, colleges and universities, churches, museums, and many hospitals, all of which have been subjected to disruptive innovation, have revenues and expenses and infrastructures, but they aren’t industries in the same way that manufacturers of hard-disk drives or truck engines or drygoods are industries. Journalism isn’t an industry in that sense, either. Lepore says all this, but spends little time on it; having noted that people aren’t disk drives, she spends most of her essay observing that the theory of disruptive innovation doesn’t really apply to disk drives anyway. I’d hazard a guess Lepore knows her essay works better this way. A significant portion of her readership would find it tedious to be told less briefly that we need to remember, or revive, the language of public trust, public interest, public service. Lepore’s choice of emphasis reminds me of the origins of American liberalism in a different age. Back in the early 1900s, Charles Beard noted that merely to tell Americans that their factories were injuring workers more wantonly than those of any other country would fail to move a nation so fixated on profit. You had, he said (and I’m paraphrasing, because I’m not able to look it up at the moment), to tell the American people that it was inefficient to keep killing workers – that it was a waste of human capital, an unproductive use of resources. This rhetorical tactic aims at moral ends by appealing to a venal calculus. Like the commuter who rescued his fellow-citizen from a train track because he didn’t want to be late to work, maybe we will rescue our public goods from disruption – not because it’s the right thing to do, but because we won’t profit if we don’t. William Timberman 06.24.14 at 6:02 pm I’d hazard a guess Lepore knows her essay works better this way. Framing again. Game theory again. Do I reveal my antediluvian origins if I say I regret the necessity? Well, so be it. Fortunately for all concerned, irony has no power whatever against the inevitable. (That roar you hear in the background is the sound of a global intelligentsia outsmarting itself yet again — a sound very like that, if memory serves, which attended my own intellectual individuation.) What’s driven me crazy from the start about the gospel of disruption is that on one reading it commits the naturalistic fallacy–we should change everything because this thing is happening. Even if it were true, there’s no evidence that we would know how to predict and act on the disruptive process. Or that we should act on it. But if you don’t assume that, you can’t make the money on disruption. Note that the New Yorker put Christiansen out there as some kind of profit earlier, which was extremely irksome. I literally cackled with glee about 2 paragraphs in. I’ve been desperately waiting for someone to puncture this balloon. Another glorious thing about her piece was that she really shows how the capacity to do actual historical analysis is necessary for these wanna-be gurus. (Well, necessary if they want to make claims approximating truth. It’s not necessary for them to make absurd ideological claims and make money doing so. Thomas Friedman’s house is proof of this.) And they don’t have a clue how to do history. You will not believe how hard it is for people to understand that secondary argument. Jaysus. Ah, I should explain just a bit more: The problem with intelligent people is that they can create elaborate arguments to buttress weak sentiment, e.g. Charles Murray. Because people are complex and contrary, such gossamer arguments usually depend on talking about essential aspects, where there aren’t any, of people. The arguments are constructed that way because it slants the playing field anytime the axiomatic stuff isn’t blasted to smithereens. Adversaries thus tend to find venally neutral terms in place of acid and evisceratory rhetoric, of course, in the name of decorum. We all then start talking as if capitalist utilitarianism is here, natural, and always the best dictionary and thesaurus, no matter how crazy the bland is… Quite a long article, so I’ll have to come back to this. There’s still a couple things I can say here: One, how did all the “Innovator’s Dilemma” discussion totally miss the phenomenon of the Hidden Champions (or the Mittelstand, as it was once called in Germany)? When these companies are “disrupted” it seems plain to me that we are likely looking at an opportunity for data point-picking, but the bulk of Hidden Champions continue along for the long run. Has there been a sustained critique of the idea before now? This blog post has some commentators already moving in the direction of questioning the possible value the “innovator’s dilemma” could have in, say, a discussion of healthcare. Jill Lepore mentions a facet of this that wasn’t immediately obvious to me: Not only are some types of job not ripe for innovation, but there are in fact many types of job those ethics are betrayed by the mindset of disruptive change. There is a great exchange here between Timothy Geithner and NPR host Robert Siegel, where Geithner argued that “banks are different.” The whole exchange is noteworthy, as Siegel presses Geithner with the point that the apparent complexity of banking looks like an innovation. Geithner denied this, stating that it was essentially a regulatory and scale problem: This was not a crisis caused by financial innovation on a massive scale. It wasn’t a crisis caused fundamentally by a set of new fancy things that, in retrospect seem very risky. It was a crisis caused because we had a long period of confidence that it was safe to lend a lot of money, safe to borrow a lot of money relative to income, that your house prices would never fall, that recessions would be short and shallow. We can believe Siegel, and we say that banking and innovation don’t mix. We can believe Geithner, and we still must say that innovation and banking don’t mix. In truth, how many bankers likely told their bosses at review that they “weren’t in the business of innovating?” How many shareholder packets claimed that? One final note. How much misplaced faith are people putting in “the innovator’s dilemma” as the answer to inequality? My guess is – a whole lot. I’m not sure how much it can do in most industries, where abuse of the patent system and high capitalization simply close off opportunities for prospective competitors. Yet this is probably likely to be presented as “the good part” of destroying established companies. Great post, Eric. Thanks particularly for the quote/paraphrase from Charles Beard. When you find or remember where it’s from, would you mention in a comment or update? Interesting. Maybe the way to sell gun control to Americans is to point out that massacres of schoolchildren result in the destruction of potentially valuable human capital, which is uneconomic. Wall Street spends 58 minutes of every hour trying to predict which technologies will prove to be disruptive and which will make little difference. History has proven definitively that despite all of energy and motion they can do this correctly exactly 50% of the time (less fees and expenses of course). (Before anyone asks, the other two minutes are spent pilaging innocents, maiming adorable puppies and otherwise causing global mayhem, unless of course they are simply wasted.) The Temporary Name 06.24.14 at 7:59 pm A sort of embarrassing response, I think: sponds-to-new-yorker-takedown-of-disruptive-innovation But Christensen understands a key point: Well, in the first two or three pages, it seems that her motivation is to try to rein in this almost random use of the word “disruption.” The word is used to justify whatever anybody—an entrepreneur or a college student—wants to do. And as I read that, I was delighted that somebody with her standing would join me in trying to bring discipline and understanding around a very useful theory. I’ve been trying to do it for 20 years. As regards Lepore’s secondary argument, in Systems of Survival Jane Jacobs argued at length that applying the values and goals of business to enterprises whose values and goals are different is problematic. Jacobs said that doing so produces “monstrous moral hybrids”. I’ll resume my role of third-grader here and ask: Didn’t Marx write ‘The bourgeoisie cannot exist without constantly revolutionizing the instruments of production, and thereby the relations of production, and with them the whole relations of society. … All that is solid melts into air,’ etc. So is Lepore and her fans here arguing against Marx, or is disruption different from revolutionizing the means of production? I’ve generally found that observation of Marx repeatedly confirmed in daily life, especially amid the corps, and it certainly seems to be functioning well to immiserate that part of the working class who still have jobs. I recently read a sort of biography of Western Electric, and while it was modest in its style, diction, and intellectual penetration, it chronicled a history of constant creative destruction well enough, right up to the point where it was finally creatively destroyed itself. No doubt the money men crawled out on top and went to infest some other wreck-to-be. That’s the way we do things, isn’t it? Stephenson quoter-kun 06.24.14 at 9:01 pm I always thought that “disruption” was something about how you can’t beat the local maximum by starting from the local maximum (because someone else is there already), so you have to start somewhere else (“downmarket” is the typical example); in turn, the occupier of the local maximum won’t be able to compete with you once you’ve found a higher maximum. Of course, that’s also pretty much tautological if you assume that incumbent businesses occupying the local maximum will refuse to leave it – you just need to assume that some greater maximum exists elsewhere, then start climbing a bunch of hills until you find it. It certainly makes a neat model. The problem is that Clay Christensen picked the aggressive-sounding word “disruption” for this concept, and people now think that calling their crummy new business “disruptive” makes them sound edgy and exciting. Rich middle-aged white men exhorting their naive proteges to be more “disruptive” is not a pretty sight for anyone with a modicum of self-awareness. These people are certainly distasteful. It does not follow, however, that they are necessarily wrong. Maybe the top of the hill that the MOOCs are climbing right now is going to turn out to be higher than the hill that traditional universities are sitting on. It’s probably worth finding out if that’s the case. In the abstract, the idea that new interactive and communicative technologies ought to change how we educate ourselves (and how much that costs) does not seem particularly outlandish. I can’t feel terribly upset that some people are trying it, even if I think they’re occasionally a tad obnoxious about it. Is being “disruptive” good for business? In a way, probably not. It rests on the assumption that the path less traveled does actually lead to a pot of gold, which probably isn’t true in most cases. Trying to disrupt an industry is hard and most of the time it won’t work. Most plans to disrupt existing, proven business models are simply going to fail. It might be better in most cases to aim lower and make some existing business a little bit more efficient. The flip-side is that improving existing institutions might be even harder. There’s good evidence that most improvements in productivity come about through the entry of new firms rather than the sudden improvement of existing ones (whatever Bain Capital might say otherwise). Hierarchical organisations really don’t like listening to the tier 7 functionaries even if they have a much better idea for how the business should work than the people who are in charge. It’s probably a good thing that some firms get disrupted, and the ones we should be really afraid of are the ones who seem to be immune to it. I’m not sure I get Eric’s point about why, then, some organisations – those consisting of “people”, as opposed to the soulless droids who start, own, operate or work for other organisations – ought to be immune from disruption. The example institutions were, in some cases, disruptive themselves once. Churches have pretty much always been in the business of disrupting each other, and using technology to do so. I’m going to hate myself for typing this, but many religious movements start off as downmarket outsiders, being dismissed as cranks by the establishment, which they eventually infiltrate and take over. At a sufficiently abstract level, that’s disruption in action. There’s no obvious reason why organisations of people cannot, or should not, be disrupted. I can understand people saying that they don’t like the specific disruptions on offer: disrupting education is simply not possible as universities represent a centuries-old tradition that cannot be improved upon by a team of Silicon Valley 20-somethings on caffeine drips; or, if it is possible, it will lead to education that is worse, not better, and therefore we must now allow it; or, even if it is possible to deliver better education by some measure, the wider costs make it undesirable. The problem is that if you’re picking your arguments from The Rhetoric of Reaction, you’re probably not making very good arguments. Sitting athwart history shouting “stop” has never worked very well, least of all in America. If I’ve understood correctly, the argument is that, since disruption isn’t the only way to improve things, we could profitably attempt to rediscover some of the other ways. To borrow from Hirschman again, we could use a bit more Voice and a bit less Exit. To which I would wholeheartedly agree, but I would point out that here the disruptionists have an advantage: they’re well-organised, well-funded and have a clear and ambitious program of action. Those of us who think that we could make institutions run better by, say, making them more democratic, are sadly reduced to carping about the excesses of the other side most of the time. Stephenson quoter-kun 06.24.14 at 9:05 pm (“…must not allow it…” in the middle of my penultimate para) The problem is that if you’re picking your arguments from The Rhetoric of Reaction, you’re probably not making very good arguments. Sitting athwart history shouting “stop” has never worked very well, least of all in America. The trouble is that that line of argument can be used to push any brand of snake oil or hucksterism or just plain bad idea under the sun. “There’s no point in sitting athwart history shouting ‘stop’; in the future everyone will be ordering their pet food online. You might as well get on board with the inevitable and buy as many shares of pets.com as you can…” I should probably re-read the Lepore article because on my first reading I thought “some good points, but it could have been a so much better article, with a bit more focus and details…” but then, innovation theory is something I’ve spent plenty of time with… 1) I think the point is that sometimes the theory of disruption breaks down and is effectively snake oil. For example, a lot of the stuff in healthcare about “using technology to overcome Baumol” is actually just about selling people on a lower, less effective service. Christensen would point out that it’s not real disruption if the original low-end product never gets better, but that rarely stops the hype machines… (And indeed, he also distinguishes the “good enough” low-end product due to tech advance as a separate case.) 2) If you look at studies from the US/UK you get mislead into believing productivity advances come from entry/exit. In Germany/S. Korea, pretty much the opposite. The evidence for exit is mostly sentimental trash from glibertarian romantics who like to believe in some non-existent underdog economy in the USA… “This rhetorical tactic aims at moral ends by appealing to a venal calculus. Like the commuter who rescued his fellow-citizen from a train track because he didn’t want to be late to work, maybe we will rescue our public goods from disruption – not because it’s the right thing to do, but because we won’t profit if we don’t.” This could very well work, and sometimes does; but then the problem is of course, what happens when we are faced with a situation where the right thing to do is not efficient, and does not save resources? 100+ years (at the least) of liberals making this tactical decision in terms of argument makes sense in the short term — it’s a good strategy — but is disastrous in the long term, as we actually feel awkward, queasy, and annoyed by argument about the public good and the ethical society. Since not enough people go ahead and make that argument, we lose the capacity to even make it a viable option, strategically speaking. The key to ‘disruption’, and what distinguishes it from the ‘creative destruction’ thinking which it draws on, is the premium it puts on the cheap and nasty: quality is the enemy, because mediocrity is cheaper and hence will outsell it. This in turn means that the people you want to empower are not the people doing the work – least of all if they’re doing the work because they believe in it – because they’ll just drag you down with their professionalism and their belief in a job well done. Disruption is explicitly anti-worker, and (incidentally) anti-Tom Peters and anti-Peter Drucker into the bargain. (Argument borrowed from here.) The primordial Real in which a (pre-Oedipal) human subject is born is differentiated from the real which a subject integrated into the symbolic order experiences. In the former, the real is the continuous, “whole” reality without categories and the differential function of language. Following the mirror stage, however, and the eventual entrance of the imaginary and the symbolic (the split of the subject between the conscious imaginary and the unconscious symbolic), the real may only be experienced as traumatic gaps in the symbolic order. An example of this are traumatic events such as natural disasters, which effectively break down the signification of everyday life and cause a rupture of something alien and unrecognizable, without the usual grammar of the symbolic that conditions how to make meaning of something and how to proceed. But that’s a little narrow and technical. We come into being as speaking subjects by means of a disruption in the Symbolic. And of course, what Anarcissie said. And also, the proletariat comes into class consciousness-for-itself by means of a rupture with the prevailing hegemony. Revolution is a rupture with atrophied institutions. Etc It is very bourgeois liberal to be frightened of a discourse of discontinuous change. And I didn’t even mention RBC theory and real shocks. Or Naomi Klein. The Lapore article is a great example of the kind of sensible writing that enforces and maintains an ontological hegemony. Phil’s comment, not surprisingly, is insightful (and his link foregrounds some things Lepore herself says (not all of which I agree with)). But the point of disruption, and you see this is you read Lepore’s article, is not that employees hold back companies from surviving. It’s that non-survival is a foregone conclusion. Disrupted companies can hold on for years, sometimes, but not forever, and they never come back to where they once were. That doesn’t mean–and no one says, except the kind of people who were chanting “paradigm shift” twenty years ago–that everyone is disrupted. It does mean that once no one wants minicomputers anymore, you can’t just make better minicomputers and still play in the big leagues. Back in 1990, companies were dealing with two disruptions: the PC and Microsoft. We are down to exactly one company that existed in 1980, out of a dozen or more, still making a good amount of money on state-of-the-art computers (and IBM and a few others in smaller markets). On the other hand, in 1995 it had been “decided” that nobody could compete with Microsoft and they’d have 100% of every software market, and that did change. 1) I think the point is that sometimes the theory of disruption breaks down and is effectively snake oil. For example, a lot of the stuff in healthcare about “using technology to overcome Baumol” is actually just about selling people on a lower, less effective service. Christensen would point out that it’s not real disruption if the original low-end product never gets better, but that rarely stops the hype machines… I don’t think it’s about selling people on a less effective service, although it can be about selling them a cheaper one. If you look at stuff like the increased use of robotics in surgery and IBM’s Watson as a diagnostic tool, the eventual hope is that you might be able to make health care cheaper and more reliable, especially if you don’t need doctors for a whole bunch of medical tasks. There’s definitely a “snake oil” element, although that’s mostly with the use of “disruption” as a selling point. It’s just a way to make startups that are usually too risky for banks to touch and too expensive for the entrepreneurs to self-finance to appeal to the vanity of rich would-be investors. There’s plenty of precedent for that – British banks in the late 18th century usually wouldn’t touch factories as investments because of the risk and perceived tawdriness of them, at least from what I remember of reading Peter Stearns. 2) If you look at studies from the US/UK you get mislead into believing productivity advances come from entry/exit. In Germany/S. Korea, pretty much the opposite. The evidence for exit is mostly sentimental trash from glibertarian romantics who like to believe in some non-existent underdog economy in the USA… South Korea had plenty of entry/exit, including among the Chaebol Conglomerates. That was something that Joe Studwell pointed out in his book about how East Asia industrialized while talking about South Korean industrial policy – most of the giant conglomerates around today are not the same ones that existed back in the 1960s and 1970s in South Korea. I’m not sure what the Marx quote has to do with disruption in this case, but it’s a point worth pursuing. The “innovators” really don’t care about the relationship between business or workers – hence SN’s mention of the naturalistic fallacy. The author’s focus on capitalism in America at a particular period in time does not mean that we can’t apply these same categories to relationships between workers. It’s an interesting omission. This Amazon review by Kartick Vaddadi of The Innovator’s Dilemma says the book contrasts three types of change. All of them are useful for consumers. Then there is a discussion of how it is that responsiveness to protecting particular kinds of change is useful and gets enshrined in companies, and where it isn’t. Kartick Vaddadi’s statement that SSDs in computers are “disruptive” over regular hard drives is right – if we mean what the difference is for consumers. If we’re talking about the difference to manufacturers, though, patent portfolio sharing and cross-licensing, as well as the expiration of many fundamental research patents, mean that there are a large number of companies that manufacture them. Many other recent technologies that are arguably “disruptive” have been developed within a notably stable industry. Take the video space: sedTV and FED could have been disruptive for providing great new displays, but cost ruled them out years ago. Digital coin miners have kept graphics hardware manufacturers nVidia and AMD well in the black for a period, though that party is now over. It’s not just external events that push these changes, though: AMD and nVidia seem to mirror each other when they roll out DX12 (from nVidia, in collaboration with Microsoft) after Mantle, or when AMD decides it needs FreeSync after nVidia announces G-Sync. These are two technologies (and standards) that provide that experience of a “disruptive” improvement to consumer technologies, and they appear to have been done through cooperation, instead of winner-takes-all strategies. Both companies are paying very close attention to ways in which they might be able to catch up their competitor dipping into forbidden secrets, in hopes of forcing a disruptive exit from the marketplace. But it’s not clear that this is anything more than just churning on. Even in the case where some company can force such an issue through the courts, the government has been cautious of throwing an established company overboard (when such a large part of the economy could trail behind it). At this scale, companies are more likely to settle for patent cross-licensing and royalties to evade criticisms of monopoly (which is basically one result of directionless “disruption” taken to the extreme), as with Intel and AMD. Yet the idea of disruptive technological development isn’t all bunk. Onto quoter-san’s point: The “local maximum” sounds close to saying that there is an upper bound of some type, like ‘how pure can we refine our materials,’ ‘how precise are the production processes,’ ‘which metallurgy and crystallography textbooks do we read.’ All these things can improve over time. But at every step the level of research and understanding is far less than it could be, so we never actually do what is “optimum” (or among the optimal choices) when imagining a complex piece of technology. Only relatively recently (I think in the mid-80s) did we really start moving computer modeling of technology to incorporate physical modeling. And of course there is a limit to how far we can spend calculating what is best. Electrical engineering textbooks state as standard that you can use a “lumped load” model for many tasks, and below certain frequencies you don’t need to pay close attention to RF effects and the like. The latter is an omission by design; the former is omitted by accident. The idea of “disruptive technologies” is best when it points out that not only do we somewhat lag behind achieving what is possible, but in fact whole fields of discovery often go unnoticed due to accidents of history, physiology, and everything else. Start thinking of “what would aliens value in technology?” or alternative histories (wouldn’t Neal Stephenson approve?) and this becomes clearer. What if IBM researchers hadn’t stumbled across the eclectic raft of insights (spin-coating, the analogy to vinyl discs) that made the magnetic rotary hard disk a reality in 1956? “Disruption’s” place in advancing technology seems way overrated. We can find Usenet posts from the early 1990s with people accurately predicting how much RAM people would have. Moves away from 2D manufacture to more 3D manufacture were known and used by Seymour Cray when his computer company was relatively young, even though only recently have such ideas started to be developed for consumer products. The basic problem seems to be a simple human one: It’s easy for bureaucracies to get too focused on things that are entirely extraneous to the decision making, and even if they try to do everything right, there’s still the possibility somebody else will find that low-hanging fruit first. The key, I think, is trying to figure out whether we actually need companies to become immortal institutions – are HP or IBM immortal? GM or Ford? – and also how it is that we can make sure that companies with the expertise and the people get rewarded. I’ll just end up by mentioning one of the all-time technology whoppers: Sight-shorted businessmen looking for something like the next “disruptive change” gave away one of the crown jewels of 20th century display technology, because the grass was greener on the other side. From the piece: The four Jewish men who worked in an almost-secret division called Autometric for Paramount Pictures on the project then called Chromatron—which after a handshake became the Japanese “invention” the Trinitron—are barely a footnote on Wikipedia, while the engineers at Sony live on in glory. Nobutoshi Kihara, who in 2011 died in Tokyo at eighty-four, was as celebrated in Japan for his role in the Trinitron’s invention as he was for inventing the Walkman. The project was sold for a mere one million dollars in a deal cooked up at a cocktail party. Within a few years it made billions, the Trinitron dominating the world market. Sony tweaked five years of research for sure, but in this daughter’s opinion they should share credit. Even if in my father’s opinion: “Who cares? I don’t think about it, only you.” The story as I have it so far, is that the stores wouldn’t stock color sets because the picture was so unsteady. Engineers were under fire to produce a bankable consumer model. The head office was always breathing down their necks. Someone was going to make a killing. If a man at RCA made the breakthrough, it would reestablish his company as the leader. The big executives visiting the floor would say things like, “That Tokyo fellow put SONY on top of the map with the transistor radio. Out of nowhere, they led the world.” Or: “Think bigggg. New ideas saved Ford, the ’49 Sedan was introduced in ’48 and saved the company from bankruptcy.” Finally, prediction #4 off this list should sound pretty familiar today. And sure, “big leagues” begs the question. If popularity doesn’t matter, and you think IBM’s or Honeywell’s product (whatever those are) are higher quality than a Lenovo laptop–and they probably are, in a lot of ways–pointing out that IBM doesn’t make PCs anymore and whatever acquisition of Honeywell’s, which used to do so doesn’t, either, is irrelevant. Sometimes I work hard to agree with you; more often I have difficulty getting past my initial “Oh, FFS.” If I say, “don’t think of a pink elephant!”, can you avoid imagining a pink elephant? The Lapore article is a great example of the kind of sensible writing that enforces and maintains an ontological hegemony. If I say, “don’t think of an ontological hegemony”, can you avoid imagining an ontological hegemony? “Ontological hegemony” is one of those big green things they put around large British estates, isn’t it? They used to hunt people in them. Hey! No fighting in the War Room more disruptions of the disruption thread! I have surely reached my quota for this thread Don’t want to derail substantive discussion here. But do want to note that the principle triumph of Reaganists is the invidious creep of market think into all aspects of life. I immediately thought of this thread when reading: ml The point about how hard the business press focuses on the non-normal-ness of Tesla sharing its patents is very applicable. We are encouraged to think of disruption in antagonistic, competitive ways. We are encouraged to think of cannibalistic business plans as being dangerous. It’s all about who’s winning and who’s losing in the papers, when disruptive change is fundamentally about the rewiring of networks and the construction of new networks of more modern conceptions. When Tesla wants to do a little mutualism, patent lawyers stand agape. They will not be disrupted. Schumpeter tried to reason out how it was that there were so many obvious market inefficiencies and so much obvious waste in the economy, when the invisible hand ensures that there will be hardly any waste or inefficiency. He argued that each industry inevitably approaches monopoly, and this makes it easier for innovators to come up with alternative technology. The old established industry has had a long time to improve on their learning curve, they will be somewhere near their local optimum. The innovators will be far from their own local optimum, but they must get better than the established approach before they can compete. Monopoly lowers the bar, and so helps to increase the rate of innovation. He argued that business cycles are a good thing because in recessions the least productive businesses fail and so release the resources they were inefficiently using to be available for new purposes. People see the inefficiency of recessions, but they don’t see the higher efficiency they cause. Left to itself, everything the economy does encourages creative destruction which improves the economy in the long run. Schumpeter made JustSo stories to explain the contradiction between observed facts versus the theory of efficient markets. Anyway, apart from the hoopla there is something important about the disruptive concept. If you are running a business in a particular market niche, and you get an innovation which results in that’s very good. Like, customers get improvements they are willing to pay more for, and also those improvements let them use your product more. Even after your competitors catch up with you, you get a slice of a bigger pie. But what if instead you get an innovation which results in 1. Lower costs 2. Lower or same sales. Then you can sell cheaper and increase market share. But when your competitors catch up, you get a slice of a smaller pie. If you already have a significant market share, you benefit from the first kind of innovation and you suffer from the second kind. But if you start out with no market share, you benefit either way. Assuming you have sufficient resources to actually break into the market with your cheap innovative product. There are various ways to assign importance to this. It’s a concept that has some uses. I don’t see that it has a lot of moral significance, unless you are in the market for moral justifications and you think this is a better fit to your needs than competing intellectual products. William Timberman 06.24.14 at 11:40 pm Bob, it’s no use. Ontological Hegemony, Inc. doesn’t need a standing army — there’s never any shortage of volunteer defenders both savage and genteel. Maybe if you called it Maggie’s Farm instead you’d seem closer to the soil, and therefore more trustworthy, more the sort of person they’d like to have a beer with. And then they’d listen, right? For what it’s worth, way back here in the last row, me, I’m listening, and I prefer it as it comes, if you please, without all the customary hail fellow well met. (It’s hard enough to think about these things as it is without the added burden of appearing respectable — let alone chummy — while I’m doing it.) Business is boring and discouraging for most of those participating. There’s a market for preachers, who can feed the spiritual need. Clayton Christensen, I’m sure, imagines himself a scholar and a theoretician, but what he is, is a coach-at-half-time of a losing game for dispirited salesmen, wishing they were doing anything half as meaningful as playing a high school basketball or football game. For this reason, the strongest parts of Jill Lepore’s essay, for me, concerned the concept of disruption as a cultural phenomenon, expressing the intense anxiety of the times. (And, bob mcmanus, with all the incisiveness of the impenetrable Nagel, may have been addressing this, I don’t know.) I wanted her to make the connection between the depth psychology of the faith in disruption and the yawning vacuum where public purposes and ethical commitment should be in the political and business discourse. I wanted her to make that connection and explain it, and I feel disappointed. She did try to challenge the pretension with which Christensen transforms his “case-studies” into just-so stories, decorated with bumperstickers masquerading as analytic concepts. It is kind of mean to challenge Christensen’s enthusiasm for “disruptive” innovation with the fact that Seagate, a focus of one of his first studies, is still the largest hard-drive maker, after more than 40 years. And, I like mean. But, it was not clear to me what her point was. Ditto, for the observation that U.S. Steel is a unionized workplace. And, for the record, journalism is a profession; journalists work for businesses that publish stuff. @30 So much of public discourse gets confused by the fact that journalists think journalism is a pure public good. The Temporary Name 06.24.14 at 11:58 pm For this reason, the strongest parts of Jill Lepore’s essay, for me, concerned the concept of disruption as a cultural phenomenon, expressing the intense anxiety of the times. I may not be a cheery and content person but I don’t recall the times that weren’t anxious. Maybe “disruption” is the Late, Great Planet Earth for suits. J Thomas @ 28 I agree, Christensen’s ideas do seem to be a recycling of Schumpeter’s in some ways. Schumpeter could use the term, economic rent, in a sentence and hope to be understood. He understood that the economy had a structure, and economic rents marked out power in that structure. Christensen’s ideas have evolved in the direction of emphasizing the business model, and the potential of a new technology to enable or require a different business model. Schumpeter would have understood “disruption” in terms of capturing or diverting sources of economic rent. Early Schumpeter celebrated the entrepreneur as a hero of wild spirit; late Schumpeter was very impressed by the organizational resources of the large American business corporation, with its R&D labs and planned obsolescence. In Capitalism, Socialism and Democracy, when “Socialism” was closely associated with central planning, Schumpeter wondered aloud whether planning by giant corporations would not come close to driving what we would call start-ups — the founding of wholly new enterprise on new principles and producing new products — toward practical extinction. Schumpeter did not foresee just how far the processes of incremental improvements would carry us. Nor do we fully appreciate how very different the world of work and business seems as a result of the progress of incremental innovation in the processes of making things. The business model for building a railroad wasn’t so hard to figure out: you bought land along the route, in anticipation of the effect building the road would have on property values. And, once the railroad was built, the railroad had considerable advantages in speed and cost of transport with which to bargain over rates, though many roads went bankrupt discovering that merchants gained considerable leverage as well, knowing that the railroad was stuck with its sunk-cost investments and sizeable overhead. Still, the business model, so to speak, had tangible elements forming a visible outline. Did you know that a television network was originally based on ownership of a high-capacity transmission line connecting member stations? That was the eponymous “network” and its costs were considerable enough to form part of what economists used to call a barrier to entry, along with factors like the limited number of television channels in each market — there were only 12 on the VHF dial back in the day, and less than half of those available in any given city — and the huge costs of esoteric devices like cameras, not to mention the highly trained, unionized technicians. Now what’s a television network? A website and a Roku app? One of the biggest sunk-cost investments might be the marketing concept and the logo design. That’s an extreme example, but it’s the outcome of a general trend. The unit costs of manufactured goods has become remarkably low, and the proportionate effect of investments in intangibles like “brand” very large. Christensen is haunted, I understand, by a missed prophecy regarding the iPhone and Nokia, which he tries to explain away by a reference to smartphones competing with (disrupting) personal computers. But, personal computers are disrupting themselves, by becoming so cheap, that you cannot build a company with the overhead of a Dell or H-P around them. I wouldn’t recommend that anyone get their religion from the Harvard Business School, but I can see why businessmen might feel the need for one. The world must seem fragile, indeed, when business rests not on tangible brick-and-mortar and the quasi-rents of expensive machines or the expertise of loyal workforces, but on brand names, clever graphics and intellectual property claims. Temporary Name: I don’t recall the times that weren’t anxious. Yes, of course. To every age, etc. I thought Lepore was fairly clear, though, in tying this particular concept of disruption to the particular character of our anxieties, in contrast to other times. Ed Herdman 06.24.14 at 10:09 pm @ 20: ‘I’m not sure what the Marx quote has to do with disruption in this case…’ My thought was that disruption was not a novelty, but inherent in capitalism. Lepore says, very generally, well, it didn’t really happen, a lot of the old companies are still around, a lot of the new disruptive ones disappeared, and so on. The focus is on companies. However, to take one example, the PC didn’t disrupt the computer world; it disrupted the office, the workplace. In 1960, business offices were full of people typing, running mechanical calculators, running copiers, receiving and sending and carrying mail around and so forth. A lot of the jobs required a certain amount of skill and knowledge and were sometimes paid accordingly. Thirty or forty years later, most of those people were gone because their jobs were gone. Some of them wound up programming computers and some of them wound up as associate assistant manager of the produce department in the local Safeway. A good many of them went on Welfare or Disability or retired early. So the PC and related equipment were the means of chopping out a significant section of the middle working class, the substance of many communities. It was part of stopping the mill that turned immigrants, internal and external, into worthy citizens; it was part of the turn where ‘we’ started going down, although our companies and their leaders were continuing to go up. That is how this particular phase of disruption worked. The Temporary Name 06.25.14 at 1:00 am I thought Lepore was fairly clear, though, in tying this particular concept of disruption to the particular character of our anxieties, in contrast to other times. It does occupy a funny space as a manual for and justification of self-immolation. A lot of them went into administration and management and “services”. A kind of Jevons effect took over, but one with darker motives than just wasting paper on the long, long way to the paperless office. Administration began to busy itself with very complex administrative tasks, the better to make itself essential and valuable, re-organizing for the brave new world. “Disruption” could be a friend to a certain sort of administrative busywork. Isn’t that part of the message of Lepore reflecting on her early temp career? The growth of Administration drove out-sourcing, for example, and the use of temporary workers on contract. Administration began to eat the University alive. And, it’s goal is the MOOC, the equivalent of my television network qua Roku app, where all that’s left to do is administer the revenue stream. In 1960, business offices were full of people typing, running mechanical calculators, running copiers, receiving and sending and carrying mail around and so forth. Heck, in 1975 my Highlights magazine came with an address label written out longhand! In 1959 the US Government and General Motors sent out payroll checks engraved on rock–true fact! Seriously, trying to drum up sympathy for the person who lost their job saying “we need this in triplicate” and “that was a computer error” like they did in 1970, by claiming other industries not only caused their problems but that other industries didn’t have job losses themselves, seems to me terribly misguided. The Temporary Name 06.25.14 at 1:05 am Seriously, trying to drum up sympathy for the person who lost their job saying “we need this in triplicate” and “that was a computer error” like they did in 1970, by claiming other industries not only caused their problems but that other industries didn’t have job losses themselves, seems to me terribly misguided. Should sympathy be drummed up for that person? Should sympathy be drummed up for that person? The Temporary Name 06.25.14 at 1:10 am One kind. Do you figger that person deserves sympathy? Is that a question you really think the answer might be “no” to? What a craptastically insulting thing to say. The Temporary Name 06.25.14 at 1:20 am My apologies then. But why would sympathy from that angle be terribly misguided? I think I reached close to the same conclusion in my second overlong post, roughly. If you’re saying that there is a disruption inherent in capitalism and that focusing only on one aspect of it causes a disconnect with reality – then probably, yes, that appears to be the case. Not sure that it’s quite accurate to the history of IBM to say that the PC didn’t disrupt things – but it’s really beside the point (for reference, I remember an IBM insider saying “IBM at the time had the people, had the technology, everybody was ready to go…and the company just didn’t.”) The PC, and the Microsoft/IBM split, really was disruptive for IBM. The bigger story behind that, though, is this: IBM’s still around, and they’re still selling services and computers that would look fairly familiar to people who sold System 360s back in the day. So it turns out that protecting that market actually has kept IBM in good stead. They weren’t beating the world with software development, during the heyday of Microsoft, but they didn’t need to be. I’ve seen stacks of old printing plates used by IBM to print their punched cards. You can probably find them on eBay still. It’s not a stone tablet – but close enough, right? Interesting point on shifting blame. In this discussion, you often hear people say “we have to spin off a company to protect the main company (and also isolate the spinoff from entrenched staid corporate culture), and that “entrepreneurs” must always try on their own and fail repeatedly. There are lots of emotional reasons why these things might happen, but I can’t accept the argument that things must be this way, that companies can’t have internal leadership to follow a new vision while protecting old strategies. The idea that a spinoff is isolated from the main company seems silly, like moving an office across the street or into another state somehow means that it’s no longer in competition with the old markets. Because entrusting internet and cellphone technologies to a company with “telegraph” in its name has worked out so well. Lepore says, very generally, well, it didn’t really happen, a lot of the old companies are still around, a lot of the new disruptive ones disappeared, and so on. alu=972 But senor, the old nondisruptive company does not always lose. @ Bruce: You mean the company that invented many of those same technologies? There is the Bad Bell, which had to be fought on issues like Carterfone, but there is also a Good Bell which theoretically allowed stability, and developed a lot of the ubiquitous technology of the ‘net and telephony, either internally, or at Lucent, or whatever else got spun off. Simplistic, maybe. I’m more interested in restricting companies from doing bad than I am with blowing them up, and ensuring that the tech landscape is forever fragmented. Standardization could theoretically help but I don’t think a Kropotkinesque (“Fields, Factories, and Workshops”) view of small local players adhering to standards would help with economies of scale. But maybe I’m wrong in this – it’s been argued for a long time that you have to reach a critical mass in having the right people in the same place to do big things, but a lot of our big tech standards are done at cross-industry meetings, and Big Thinkers tend to step on each others’ toes anyway. okay, a bit OT, but what’s the deal with all the replies with comment numbers that don’t match? I’m having to work a bit harder to follow what’s going on. I am horrified to read that someone thought I might be trying to drum up sympathy for somebody. ‘The heavy is the foundation of the light; the still is the basis of the quick.’ Thus, if you dismember the infrastructure, the superstructure collapses. (‘That which is to be thrown down is first lifted up.’) If disruption is really inherent in capitalism, and as Marx says capitalist disruption destroys culture, and if you do not desire collapse, then either disruption must be managed, or the capitalist social order must be cleverly replaced by something else. (What a magic trick that would be!) But instead, disruption is being fetishized. (That is probably a symptom, rather than a cause.) In any case, collapse will not be averted. The only thing wrong with Uncle Karl’s little poem is the last line: ‘… Man is at last compelled to face with sober senses his real condition of life and his relations with his kind.’ That seems most unlikely, going by how previous dissolutions of the established order worked out. William Timberman 06.25.14 at 2:31 am If we’re looking for concrete examples, what about Apple, Inc.? Apple, it seems to me, is the perfect embodiment not only of Christensen’s thesis, but of LePore’s antithesis as well. And if, a thousand years from now, archaeologists should uncover the remains of Apple’s apparently empty spaceship headquarters, and its thousands of apparently empty retail outlets, all emblazoned with Jony Ive’s tantalizingly reductionist version of the apple-with-a-bite-out-of-it corporate logo, what will they think they’ve found? The temples of a successor to Judeo-Christianity, maybe — the cross of humility replaced by the symbol of a belated, yet somehow insanely successful acceptance of the serpent’s gift? I’m indulging myself in a fanciful vision here, I suppose, but I’d argue that it’s not entirely inconsistent with what Apple does in fact represent. And what about that iPhone — what it is and what it does? Can you think of a more perfect symbol of both the streamlined moderne and the classic contradictions of capitalism? Mirabile dictu, it even fits in your pocket. Perhaps one area where the Marx quote is also relevant is that the orginal Marxist meaning of ‘destruction’ (whether creative or otherwise) is that it can lead to crises which existentially threaten any particular system as a whole (whether an industry, specific market, particular nation state’s economy, or capitalism as a whole). Disruptions can lead to the risk or reality of systemwide collapse. This is analogous to the insights of ecological theories on systems tipping points or collapse (ie Gunderson and Holling’s Panarchy) in which unpredictable disruptions can lead to cascading failures throughout interconnecting systems and thus shift them into a neew spahse space (ie a world in which large hard drives are no longer necessay – or in which VHS is the new agreed video technology). The problem seems to be is that Schumpeter (and those who have come after him like Christensen) are more than willing to valorise the destructive effects of disruptive innovations (clear away the dead wood!) while ignoring the original connotations of the concept. There’s a disconnect in scale between such sub-system disruptions and the overall pristine equilibrium of the system itself – sometime clearing away the dead wood is dangerous if it had other purposes or unintended side effects such as housing for small mammals in a forest (literal ‘dead wood’) or employment for citizens (and how archaic that word sounds!). Sometimes the cascading effects of disruptions are systemwide – these boosters don’t seem to acknowledge that. neew spahse space What happens when the ‘infinite number of monkeys’ are slysdexic? Obviously meant ‘new phase space’ :) If by the PC didn’t disrupt the computer world; it disrupted the office, the workplace you didn’t mean to imply that the significant effects of the PC revolution had nothing to do with the disruption of the workplaces of people who worked on and with computers even before the PC revolution, I apologize. I was annoyed by what I thought was the implication, which was apparently inadvertent, that technology is bad primarily because it eliminated the jobs of accountants and receptionists–and doubly annoyed by what I thought was the suggestion that if computer industry workers had suffered, their suffering didn’t matter, or that it was okay to explain it away, more okay to explain away one kind of workers’ suffering than another’s. And I couldn’t help pointing out that there was a lot of mechanization of office work already in the 1950s (my mother worked for a company that made that kind of equipment, I just finished Revolutionary Road, which in 1955 has machines for doing the kind of thing Francis Spufford describes the Soviets’ trying to do in Red Plenty), which helped the economy grow as much as it did, and which also led to a lot of jobs, but led as well to complaints about big bureaucracies that were also already tied to ideas about computerization. That part was meant to be a joke, sorry if it came off wrong. The temples of a successor to Judeo-Christianity, maybe — the cross of humility replaced by the symbol of a belated, yet somehow insanely successful acceptance of the serpent’s gift? Also don’t forget that the first Apple went on sale for $666.66 and the Apple start up sound is in fact the … Okay, you all, just wait one second… What is it when we’re talking about when we are talking about disruptive innovations? Going through this thread, it seems like “disruptive goods” seems to outweigh any other kind of innovation. Not disruptive logistical/backoffice/manufactoring device, nor do we talk about disruptive government services like the damming of the Colorado, victorious armies, or welfare programs. I mean, shouldn’t a big part of this discussion be about Obamacare and the theorizing/politics leading up to the startup, since a big part of health care reform was precisely how and how not to disrupt? If we’re talking about ideology, shouldn’t we be talking a bit more about the split between private and public good in more than just the sense that this managerialism helped to reduce the public infrastructure or bust unions? Where, how, and when discourse about disruption is probably important, as well as where the discourse is aimed it. I started thinking about this stuff because floopmeister @53 is talking about clearing away dead wood. All the leftover buggywhips? What? Okay, you all, just wait one second… What is it when we’re talking about when we are talking about disruptive innovations? Going through this thread, it seems like “disruptive goods” seems to outweigh any other kind of innovation. Not disruptive logistical/backoffice/manufactoring device, nor do we talk about disruptive government services like the damming of the Colorado, victorious armies, or welfare programs. I mean, shouldn’t a big part of this discussion be about Obamacare and the theorizing/politics leading up to the startup, since a big part of health care reform was precisely how and how not to disrupt? If we’re talking about ideology, shouldn’t we be talking a bit more about the split between private and public good in more than just the sense that this managerialism helped to reduce the public infrastructure or bust unions? Where, how, and when discourse about disruption is probably important, as well as where the discourse is aimed it. I started thinking about this stuff because floopmeister @53 is talking about clearing away dead wood. All the leftover buggywhips? What? William Timberman 06.25.14 at 3:01 am The fruit of the tree of knowledge. What could go wrong? Floopmeister, you seem to be barking up the wrong tree here. In other words, you seem to have misread my intent. Must I spell it out? William Timberman 06.25.14 at 3:20 am Point taken, floopmeister, and apologies for my own misreading. Given your previous post, it did seem unlikely, but like bob mcm at times, I can’t seem to color inside the lines, and have on ocassion been taken to task for crimes I haven’t actually committed. Less so here than elsewhere — the CT fathers and mothers are an admirably tolerant bunch — but still…. Whatever one’s fancies, one never likes to be mistaken for a snake handler. Of course Marx has something (important) to say about disruption. It is at the heart of his theory of relative surplus value. Lepore may be right to claim that “disruption” is used in a facile way – and is no doubt uttered a thousand times a day in pitches by 20-somethings to angel investors here in the Valley. But if you don’t think the phenomenon isn’t real you haven’t been paying attention – just spend a few minutes looking at the DRAM industry or considering the implications of Moore’s Law. William – no problem. The exact same thing has happened to me on numerous occasions (including one memeorable case here at CT where I entirely missed the joke). Sometimes I think what is really needed for online discourse is the worldwide online introduction of ‘Sarcastica’ font :) http://www.dafont.com/sarcastica.font I can understand why everybody missed it, but I believe I mentioned “Not disruptive logistical/backoffice/manufactoring device” arenas in my second post. Actually, in my draft I was even more explicit about this. List-o-mania: – Relations between workers and management – Bureaucracies (Gone Wild!) – Common artifacts (TVs) – Devices and techniques commonly used to create artifacts (metallurgy and the Heavy Press Program…speaking of that, I don’t think there has been any technology to disrupt the merits of the Alcoa-type presses, which remain useful in specialized industries. Likewise, the heavy engineering investments going into automotive weight reductions to meet the new CAFE standards would seem to put steel industries in a tight spot, but actually there’s a lot of room there, even if you don’t believe the bullish-on-steel reports out of ArcelorMittal.) – Space goat holy shrines! They like them apples. Lepore writes, “Beginning in the eighteenth century, as the intellectual historian Dorothy Ross once pointed out, theories of history became secular; then they started something new—historicism, the idea ‘that all events in historical time can be explained by prior events in historical time.'” Ross looks like an interesting scholar. However it should be pointed out that most scholars of the previous few generations would recognize this as Lovejoy’s argument of the relationship between the 18th century’s “temporalizing” of the great chain of being, and Leibnitz’ principle of sufficient reason. Lovejoy probably would have seen the current “disruption” rhetoric as yet another romanticist variation on the basic framework. It is remarkable how thoroughly the West is still ensconced in an era that started in the 18th century. I really don’t accept Amazon’s supposed disruption of the book selling business. Amazon “disrupted” the book selling business only because, for reasons I do not understand, its stockholders allow it to operate as basically a charitable enterprise dedicated to providing consumers with staff that’s really cheap because Amazon doesn’t need to turn a profit. I don’t think Amazon would be particularly disruptive if it had to turn a profit to stay alive. I think it would be out of business in a year or two. to turn a profit to stay alive. I think it would be out of business in a year or two. Yes, you would think we would have disrupted that whole Enlightenment thingee by now. William Timberman 06.25.14 at 4:46 am Every now and again one of us has, but after Blake, we’ve been afraid to mention it to anyone above the rank of corporal. So…what in the fullness of time ought to have become an Umwertung aller Werte is now generally considered a form of onanism. I see someone has mentioned the Bloomberg followup @9. I was surprised at Christensen’s dismissive attitude, his whining about how Lepore was “mean” and most telling, his continual use of her first name when he reveals, at the last, that he has never mee her. I couldn’t get past the sense of outraged entitlement that a womanhad dared to impugn his credentials. Between that and the revelation that the investment was nothing more than him selling his name, what credibility does he have left? This criticism seems narrow to me. It is more generally the market, of which one manifestation may be Schumpeterian disruptive innovation, from which certain institutions need to protected. For example, Richard Nelson argues that the provision of the news is a public service, but we can’t count on private institutions guided by profit made through paid subscribers and advertisers to provide the journalism that a democracy needs for its functioning. Disruptive innovations that take a lot of advertisers and paid subscribers elsewhere may further compromise the quality of the news, but even in the absence of disruptive technologies, the market already poses grave threats to the operation of some important institutions. This criticism, as quoted here, does not seem to cut deeply enough. But I look forward to reading the article. I am reminded that Nathan Rosenberg, most sympathetic to Schumpeter, once criticized his exaggeration of the economic importance radical innovations and relative neglect of the incremental innovations that were responsible for most technological progress. Another place to look here is Chris Freeman’s theory of national systems of innovation in particular at the performance of systems in which venture capital, looking for next big thing, has less power. If the market were 100% competitive, there were no barriers to entry and other restrictions (like patents and brand protection, for example), then there would’ve been disruption all the time, and nothing but disruption. No business would survive for more than a week. Disruption is limited to the extent that competition is restricted. I think it is important to understand that in Capitalism, Socialism, and Democracy, Schumpeter describes his idea of “creative destruction” in the context of a very careful argument that capitalism will destroy itself by setting up OTHER seeds of its own downfall. It is as if he wants to counter any opinion that “creative destruction” is part of that downfall process: “creative destruction,” he says, is really the process of capitalism being healthy. So don’t point to it, and say that is why capitalism will fail. Capitalism’s failure will come certainly, but for very different reasons. (In a similar way, his book starts out with a learned four-chapter criticism of Marx: Schumpeter dismisses some of Marx on the way to presenting his own theory of why capitalism will fail — and which he finally calls a Marxian analysis!) I think however as we enter an historical stage that uses fantasy rhetoric like “disruptive innovations” for what appear to be self-marketing ploys, Schumpeter himself might have wondered whether the real story here is that finally, capitalism is mentally imploding, which is indeed part of his argument about how capitalism will set up the seeds of its own downfall. Stephenson quoter-kun 06.25.14 at 7:10 am For all the talk of Schumpeter, I still think that Hirschman is more relevant. Hirschman’s conception of organisational ‘slack’ explains how, over time, a business can drift away from delivering the best possible value to its customers (indeed he thought it was inevitable, that organisations are “permanently and randomly subject to decline and decay, that is, to a gradual loss of rationality, efficiency, and surplus-producing energy no matter how well the institutional framework within which they function is designed.”). When this happens, customers can express their dissatisfaction by exiting the relationship or by speaking up in some way, and it’s only in response to this that the decline might be arrested or reversed. Hirschman was definitely interested in the question of which kinds of customers would be the canaries in the coal mine, and he hypothesised that some companies might actually be quite happy to lose their most troublesome customers in the short run, however deleterious this might be in the long run. However, where Hirschman thought that this might lead to a stable situation in which fairly mediocre near-monopolies could survive indefinitely, Christensen argues that such mediocrity will eventually create the possibility of disruption. The company simply drifts too far from its customers, or perhaps from a specific sub-group of those customers who demand the most innovative products, that it cannot anticipate future demand reliably. Moreover, this shift can appear sudden, because it’s not easy to measure the pent-up demand for alternatives to the current market leader. There are pretty good examples of this today. If you measure the market share of operating systems in the “personal computer” industry, you might conclude that MS Windows is still dominant. Until, that is, you consider smartphones and tablets as “personal computers” and you realise that Windows – despite the massive, corporate-policy-mandated install base that has existed since the 90s – is at around 35% and falling. There are more personal computers running Linux (Android) than Windows! Desktop PC sales are flat or declining. Microsoft, a mediocre (in terms of its operating systems) near-monopoly is being disrupted, and it’s pretty much explicable in terms that Christensen laid out. Microsoft was simply on to too much of a good thing with the Windows operating system and couldn’t figure out how to engage new markets without undermining the Windows revenue stream, and now those new markets are bigger than the old ones. I don’t think Schumpeter has anything particular to say about this. Sure, this process could be described as “creative destruction”, but that concept can be widely applied. Slack and disruption seem to capture a bit more about the dynamics – they provide mechanisms by which creative destruction can happen which makes saying “it’s just creative destruction” seem a bit empty. Disrupted companies can hold on for years, sometimes, but not forever, and they never come back to where they once were. But that (as Lepore points out) is the trouble with the ‘disruption’ story – it’s an each-way bet. $DISRUPTOR succeeds and $DISRUPTED goes bust? What did I tell you! $DISRUPTOR goes bust? Failure’s all part of the process! $DISRUPTED is still around and doing fine? Ah, but they’re not dominant any more… Like Lepore, I’ll take a disrupted Seagate over a disruptive MiniScribe any day. And this is also the point of the article I linked – not to discuss the details of Disruption, The Process but to identify the distinguishing marks of “Disruption”, The Snake Oil. Whether disruption corresponds to anything real or not, “disruption” is a very influential – and mostly pernicious – brand of management-speak; that article suggests where it came from and why. It’s not just Seagate, though – even if Seagate doesn’t get into the SSD business, there’s still Hitachi HGST, Western Digital, PNY, OCZ (well, Toshiba), even old standby Intel (bubble memory doesn’t cut it anymore). Within this space, disruption sure doesn’t seem to be the guiding pattern for industry. Disruptors seem at most to exist as fine grains floating with the currents, while companies exist, like sponges, to filter and trap them. Tech sponges. People love to talk about the failed companies of days gone by, but nobody seriously thinks that when DEC dried up, all its research into CPUs was reinvented by other players. That persisted and still exists as the kind of innovation that Congress sought to reward with the patent act. For every one of these companies, as well, I’d not be surprised if there are still other “Hidden champions” hanging around, like Texas Memory Systems. … we swapped paperback novels—Kurt Vonnegut… that kind of thing I feel strongly that Lepore’s article wants to be called Schumpeter, Foma and Granfalloons Feals like there are lots of emotions in this debate because distrutive innovation is such a right wing buzzword and because its now applied to Universities teaching methods. Dont see how the narrower model is worthless. Wont happen always everywhere obviously. The German mittelstand in particular is a very weak argument against disruptive innovation, since they sit on such small upmarket niches. They are often specialiced in the little part of the market with very high quality demands thats left, while the entire rest of the market is supplied by some Chinese factory. Everyone else in the west is usually doing bad or is bankrupt as predicted by the theory. To me, it seems like disruption is a misuse of Schumpeterian creative desctruction for tech-business guru purposes. The whole point of creative destruction is you can’t know where its coming from next; some people can make vaguely intelligent guesses. You just benefit from a good market position while you can. There is no way of taming it. In that sense, Lepore is right on target calling bullshit. But I think criticising creative destruction itself on the basis that these companies last longer than implied by supposedly overwhelming market forces slightly misses the point: we are fundamentally interested in profits going to firm owners or shareholders. The fact that firms themselves survive in some form by changes in ownership does not imply that creative destruction hasn’t taken place. Their products and practices have still been changed dramatically. The question is instead how long out-sized returns to existing owners are maintained. I think one does see large swings in returns on that front. You don’t do THAT well buying shares in already successful companies, and not consistently. Shareholders don’t benefit all that much when a big company they own stock in sucks in a new entrant – its actually