The concept of creative destruction was popularized by the Austrian-American economist Joseph Schumpeter in the early 20th century. The concept was defined by Schumpeter as “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one“. The idea behind the concept is that capitalism will inevitably lead to innovation and progression within industries, constantly finding new and better ways to cater to the needs and wants of the market, stakeholders and owners, which would destroy the existing investment to create new investment. A good example would be how digital photography annihilated the large market for film and disposable cameras dominated by Kodak.
To summarize creative destruction, historically one sated a need through a solution, at present one may sate that need through another solution which usurped the throne from the previous solution, and in the future we may sate that need through a new solution that took over the kingdom from the previous one. A side-effect naturally, is that the present way of life, thinking and infrastructure is constructed around the present solution, which means that for a time-being this must also be reconstructed.
For instance, prior to the advent of the light-bulb, many cities lit their streets using torches or gas, this resulted in a high demand for gas, the companies that produced the streetlamps, and a large industry of men who’s job was to walk around when it got dark and light all the lamps. Once Edison came around with the light-bulb, much of the investments made into gas-based street lights and related industries was rendered obsolete (thus destroyed), by the new creative solution, however new industries blossomed to fill the needs of the new solution. Continue reading