What Creative Destructionism Means To You

In The Age of Turbulence Alan Greenspan spends half of his memoir talking about his life and the other half  talking about free markets.

Greenspan says that individual and global protectionism is always destructive to the creation of material well-being. It’s somewhat ironic that in an attempt to protect certain industries, we can actually end up destroying them.

But if domestic industries are in  decline due to foreign competition, doesn’t everyone lose? Yes… and no. In the short-term workers will lose jobs and wealth for some individuals will temporarily decline. But Greenspan postulates that by maintaining open trade policies, a sort of economic cannibalism takes place where new industries emerge and eat up the old. Old jobs give way to new jobs and wealth continues to increase as national economies stick to areas where they have competitive advantages.

Hence the age of turbulence, where Greenspan believes this process of economic cannibalism and periods of instability will likely increase in the coming years. The good news, according to Greenspan, is that our economic trajectory should continue to increase as long as we maintain free markets.

Here are some of the possible outcomes of creative destructionism.

• Jobs should be seen as temporary because your particular job - or your entire industry for that matter - may be obsolete before your career has ended. People like stability, but today’s economic conditions just aren’t conducive to that stability. The average college graduate will have three jobs before turning 25, boomers will have 11 on average before turning 40. Abrupt job and career changes will likely increase in the future as industries and job functions continue to morph and evolve.
• Companies should constantly look to expand their business models, even if that means cannibalizing other areas of business. Where one company could once stick to doing the same thing for decades, companies today should always be looking for their next niche because what is trend-setting today may be old-school tomorrow. In some cases, that may mean destroying a portion of a business (even if it is profitable) to direct resources to the creation of another area of business that promises future revenues.