Creative Destruction, Entrepreneurship, & Discovery
Based on the lecture by Dr. Russell Sobel, “Creative Destruction, Entrepreneurship, & Discovery”
https://canvas.okstate.edu/courses/196370/pages/07-lecture-video-dr-russell-sobel-creative-destruction-entrepreneurship-and-discovery?module_item_id=6368550
Introduction
First off, I wish I could have gone to this lecture. I was planning on going in person when it was scheduled for Thursday, but I could not make it for the reschedule. I very much enjoyed this recording, and I think that this speaker has been the most lively and easy to pay attention to. He has a good personality for public speaking. Dr. Russell Sobel introduced me to Joseph Schumpeter; I had never heard of him beforehand. After the recording, I did some research of my own. I learned that Schumpeter was not only an economist but also a political scientist known for his theories on economic development, entrepreneurship, and innovation. He coined the term creative destruction to describe how innovation and technological advancements disrupt existing industries, showing the never-ending cycle of entrepreneurship. He served as Austria’s Minister of Finance but left politics after he failed to implement his policies. In his book “Capitalism, Socialism, and Democracy” from 1942, he predicted that capitalism would eventually decline due to bureaucratic management replacing entrepreneurial innovation. Even still, his ideas on entrepreneurship and innovation influence modern economics and technological disruption. Sobel used the example of Netflix vs. Blockbuster, how Netflix’s streaming model destroyed the traditional video rental business, showcasing Schumpeter’s cycle of innovation replacing outdated business models. I like the idea of looking at innovation as a cycle of opening new doors by closing others.
Creative Destruction
Somehow, even though I am a business major, I had never heard the term creative destruction before. I think it’s a beautiful term. It splices together two words that aren't usually associated. It describes the continuous cycle of creation in which new technologies and ideas replace outdated ones. This is the process that drives economic progress but also crushes existing industries, which can be seen as a negative. It can cause job losses and business closures, but it should still be seen as an overall positive. Sobel spoke about the rise of automobiles, which caused horse-drawn carriages to be undesirable (which also led to the popularity of dog food in a very horrific way). Although this cycle can be unfortunate for those displaced, it ultimately fosters economic growth and innovation. Unique industries open, creating new job opportunities and improving the experiences of consumers. Schumpeter believed that capitalism thrives on creative destruction, but he also warned that bureaucratic stagnation could slow innovation. As businesses and economies evolve, those that embrace change will remain competitive, while those resistant to innovation risk being forgotten in an ever-adapting world.
Innovation Is Incentivized By Profit
The other idea from the lecture that I found really fascinating was the notion that innovation is fueled by profit; entrepreneurs would not chase their ideas if they did not think they would receive something in return. Sobel speaks on the idea that profit is one of the strongest motivators for innovation in a capitalist economy. Businesses and entrepreneurs continuously seek new ways to improve products, services, and processes to gain a competitive edge and increase revenue, with the end goal of maximizing profitability. The pursuit of profit drives investment in research and development and pushes companies to want to differentiate themselves within the market. One of the best examples is the technology industry. Companies like Apple and Tesla invest billions into their research to create cutting-edge products that set them apart, ultimately keeping them on top and leaving them as the most profitable. The iPhone completely revolutionized mobile technology and is a perfect example of creative destruction. The iPhone got rid of the need for having multiple different devices by combining cameras, radios, TVs, and phones all into one device. This has allowed the company to charge very high prices and dominate the smartphone market. Tesla’s innovations in electric vehicles have made the company highly advantageous, forcing traditional automakers to catch up or risk facing losses. Many car manufacturers are trying to introduce electric versions of their previous vehicles in order to stay relevant. Another market example is pharmaceutical companies. These companies rely on profit incentives to drive medical innovation, as the development of new drugs and treatments requires years of research, testing, and regulatory approvals. Without the potential of a large financial return, companies would be less willing to invest in costly and risky projects. Even during the height of the COVID-19 pandemic, vaccine developments were largely driven by the promise of financial rewards and government funding, proving that profit can accelerate innovation. It is kind of disheartening to think that these companies do not care about the lives they would be saving as much as they do the profit they would gain, but the idea makes sense in a capitalist society. However, while profit motivates innovation, one can argue that it can sometimes lead to short-term thinking or monopolistic practices that actually stifle competition. Despite this concept, I would say the fundamental relationship between profit and innovation remains a driving force behind economic and technological progress, continuously shaping industries and improving consumer’s lives.
Conclusion
In conclusion, I think that Dr. Russell Sobel’s lecture provided an engaging perspective on the forces that drive economic progress. Schumpeter’s theories were very interesting to learn about and can be seen throughout the evolution of technology, transportation, and healthcare. The ideas from this lecture have been my favorite so far. Innovation can be both exhilarating and ruthless. Progress cannot happen without disruption. Dr. Sobel’s lecture made me think about how everyday people view innovation. We often only see its impact once something we are familiar with disappears. It’s also unsettling to think about how many groundbreaking advancements are driven less by a desire to improve lives and more by pursuing financial gain. But that’s just the structure of capitalism; people won’t take risks without chasing a reward. This lecture reflects on how the world keeps evolving, and those who fail to adapt risk being left behind.