Sunday, January 15, 2017

The Disruption Cult

These days, all the cool businesspeople like to talk about disruption. For example, they say Amazon is an economically disruptive force because it undermines the entire business model of brick-and-mortar stores.  It's not just another kind of store, it solves the problem of distributing goods in a completely different way than stores. Or, Uber is disruptive because it undermines the business model of taxis. Or, AirBnB is disruptive because it undermines the hotel industry. You get the idea.

Disruption is always assumed to be good now. Investors want to invest in the next disruptive technology. But until about 10 years ago, people considered disruption to be a neutral or even slightly negative term. A disruption could be positive if it solved a problem. Often, however, it had a connotation of upsetting an existing order that was assumed to have good reasons for being the way it was. A disruptive student was a kid who intentionally dropped his book on the floor when the teacher turned around to write something on the board. Not good. The teacher was assumed to know better than the student how to run a classroom.

A related word is impact. Everyone says they want to have impact, and now we assume that means a positive impact. We've chosen to ignore the fact that impact can be negative. Johnny Manziel definitely had an impact on the Cleveland Browns, but it was negative.  There was an older term, creative destruction, coined by the economist Schumpeter, but destruction is too strongly negative, so you don't hear that one much any more. (It did not help that Schumpeter derived the concept from a close reading of Marx and that he contended it would result in the very demise of capitalism.)

So these two words, disruption and impact, have lost their "values-neutral" meanings and now are always taken as a positive. I contend that some recent socioeconomic changes have contributed to this.

If you take the Uber example, whether its impact has been positive or negative impact depends on who you talk to. It's had a positive impact on people who have cars and free time, and like to make money by giving people rides. It's had a positive impact on people who need rides and used to have to pay taxi fares, which cost more than an Uber ride because of legal limits on how many taxis are allowed in a given city.  From a naive free-market perspective, those positives added up over the whole of an economy are a big positive impact. But if all the taxi drivers get laid off and have to make a living by welfare or stealing, then the positive impact is considerably muted.

But these impacts are not at all what gets people excited about disruption. What gets them excited is that, even though Uber loses hundreds of millions of dollars a year, its founder has become a multibillionaire. In other words, it is not so much the rationalization of the ride industry that they like, it's the consolidation of it under a small group of people who became very, very rich. A group of people who don't seem all that different from you and me, in terms of ability or energy.

From one perspective, Uber and companies like it look like a long-overdue rationalization of the taxi business. That's something almost everyone should get behind. Marx was against this sort of thing, which means it's probably good. (My feeling about Marx is that he asked all the right questions but came up with a horrible answer.)

But big ideas attract shady operators in a way that hasn't happened in this country in over 100 years.  I do not mean to pick on Uber. I think it's a great idea, as long as people are fairly compensated for taxi medallions that were bought in good faith under the old system. But you have to ask why Uber's backers are willing to absorb huge losses for years. If a taxi company lost money several years in a row, it'd probably lose the ability to borrow money and go out of business. But the deep pockets behind Uber allow it to operate at a loss until...I guess until the taxis are all gone. It may be of interest that Uber employs David Plouffe, someone who has no experience in the taxi business - or any business, for that matter - but lots of experience running political campaigns for the likes of President Obama. From this perspective, Uber looks less like progress and more like an elite-backed gambit to corner a market, that could have come straight out of Jay Gould's Gilded Age playbook.

So we have a clique of people at the highest reaches of finance and government who apparently can profit from any economic disruption. If the disruption helps more people than it hurts, great, but if not, too bad. In this environment it is not hard to see how disruption took on a very positive connotation among the prestige press, which is now really just a mouthpiece for the elites. Today, it's gauche to assume that the existing order is good. It's fashionable to assume that every existing institution is arbitrary and ripe for disruption. Disruption is good! A real cynic might say that the ultimate disruption is to create a state of low-level war somewhere, so that no institutions can survive except the ones that are allowed to survive by the architects of said low-level war.




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