Creative Destruction by Al Sikes

I was in the front row. The first act of a three-act play had begun. The newspaper industry was coming face-to-face with Craig’s List and other online classified services that were syphoning off crucial business. Realtors had begun to deploy three-dimensional ads, job seekers were searching out online postings and auto buyers were turning to online sites for both information and negotiation.

My role was to represent the Hearst Corporation as its board member in a start-up called the New Century Network. The year, 1995. The investors were the major newspaper companies. Essential to its success was collaboration in turning local and regional news assets into a compelling online service. The first to withdraw its support was the New York Times company. To the New York Times the New Century Network felt like a potential challenger. The start-up was stillborn.

Act Two began as newspapers either closed, were sold to vanity purchasers, or reduced their news coverage to diminishing levels. And now the question is what will replace newspapers as we have known them? What development, in fact gathering and reporting, will make “fake news” a clear contrivance?

Karl Marx was sure capitalism would eventually fail because of what Joseph Schumpeter, an Austrian economist, in the middle of the 20th Century called “creative destruction”. Schumpeter’s vision of capitalism saw “innovative entry by entrepreneurs as the disruptive force that sustained economic growth, even as it destroyed the value of established companies” and, I should add, their employees. Schumpeter, like Marx, was pessimistic about the sustainability of capitalism.

America’s history is one of adaptation. Business leaders adapt or they fail. Government leadership is no different. If government leadership had not provided support to the millions of employees who lost their jobs in the Great Depression, revolution was possible. And to lessen the impact of the Great Recession of 2008, massive amounts of public capital was used to help industries and provide liquidity.

Realistically, job loss, because of creative destruction, does not provide the political propellant for decisive action. Jobs are shipped overseas to take advantage of lower wages. Check. Computers prey on manual work. Check. Networked computers close down retailers. Check. Streaming music wipes out much of the record industry. Check. And of course with these and other acts of destruction, people’s lives, indeed their worldviews, are ripped apart.

And when the worldview is assaulted, what psychologists call a key “anxiety buffer mechanism” is compromised or destroyed.

When a force is powerful and destructive, incremental responses seem inadequate. Donald Trump was elected because business as usual would not do. Hard left calls for socialism, to some, provide a worldview that is attractive. If you don’t know history, socialism cloaking itself in “free this and that” seems like the answer.

But, let me go back to those “anxiety buffer mechanisms” (ABM). Where do people go when their lives have been disrupted or destroyed by market forces beyond their control? Psychologists point to the ABMs; in my lay mind they can form a virtuous circle.

Working alongside worldview are self-esteem and relationships. If, your worldview about your career is destroyed, do you have a support network to shore up your self-esteem? In what is sometimes called a hyper-individualistic society, often the answer is no.  

I am now at the edge of knowing what I don’t know, so let me turn back to how I translate what I see in today’s political world.

Often a company’s response to disruption is denial or avoidance. But the best company leaders see disruption for what it is and adapt. Without adaptive leaders Marx will finally be right; creative destruction will undo, in one way or another, our capitalist underpinnings. The same dynamic operates on government.

In our next President we need an adaptive leader, regardless of gender or ethnic mix. We need a leader who has successful experience in re-shaping government institutions and policies to confront the world as it is, not as we remember it. America needs a leader who can turn dynamism into a compelling agenda, indeed a winsome one. Only dynamism will re-shape our institutions and ultimately become the immovable object that defeats or at least lessens the consequences of creative destruction.

Al Sikes is the former Chair of the Federal Communications Commission under George H.W. Bush. Al recently published Culture Leads Leaders Follow published by Koehler Books.