Sometimes it’s appropriate to repost an article. The elites use “creative destruction” as an excuse to destroy main street businesses, gain market share, and exploit the Producing Class. But it’s all a sham. Companies like Facebook, Amazon, and Uber are on a Ruthless Quest for dominance, and they use so-called creative destruction as an excuse to accumulate power. We explain it in our March 17, 2022 article, “The Creative Destruction Smokescreen“ below:

Let’s talk about a brilliant new business model. You contact a company to hail a ride. A car will pick you up and take you where you want to go. Then you pay them when you arrive at your destination. 

Think about how game-changing this innovation would be for society. One company has accumulated over $22 billion in losses since its founding in 2009 trying to make this dream a reality. They might even become consistently profitable someday, depending on how you measure profits of course. 

As you might have guessed that company is Uber. And their business model is nothing new at all. It’s been around since cars were invented. (Actually, it’s been around since rickshaws were invented.) Yet, Uber is destroying the traditional taxi industry in what is celebrated as a classic case of creative destruction.  

It is indeed more convenient to call an Uber than a traditional taxi. And true, the taxi industry is outdated and fragmented. As a result, we’re told this creative destruction is part of a natural process that brings innovation and economic development. Except that explanation is a smokescreen for what’s actually going on. And it’s used to justify pretty much anything elites do to accumulate wealth and power. But let’s back up.  

What Is Creative Destruction? 

Creative destruction was originally defined by Austrian economist Joseph Schumpeter in 1942. As described by Wall Street firm Goldman Sachs: 

“The notion of ‘creative destruction’ emphasizes that in an open, free and capitalistic society innovation can disrupt certain industries, forcing established companies and business models to either adapt or die.” 

A common example is Ford’s Model T, the first mass-produced automobile using an assembly line. Once more people owned cars, fewer people used horses to get around, transforming the transportation industry. 

Another example is Kodak, the leading company in the photography industry for over a century and the fourth most valuable US brand in 1996. During that time, developing film took time and was costly. The introduction of digital photography gave you instant access to photos – for free. Unfortunately, Kodak didn’t adapt and filed for bankruptcy in 2012.  

Examples like these are used to brand creative destruction as a good thing.  

Let’s be clear, nobody wishes we still primarily get around by horse or use traditional film for photos. And while there are certainly examples of creative destruction that represent true economic progress – the kind that benefits everyone – the term is radically misused these days.  

The expert class now use it as a catch-all to explain away questionable business practices and the hollowing out of the producing class.  

Auto and clothing factories moving overseas? Creative destruction. Main street businesses bankrupted by big box retail? Creative destruction. Software development and customer service teams outsourced overseas? Creative destruction.  

In other words, the term is their way of saying, “You don’t understand economics – just shut up and enjoy your cheap rides and free shipping”.  

Fake Innovation 

Many large companies use the creative destruction smokescreen to distract from their business practices, Uber is just one example. So let’s dig a little deeper.

Why on earth would venture capitalists and other investors pour $22 billion into a modern version of Yellow Cab? Simple, to gain market dominance in the industry. They used that money to acquire as many riders and recruit as many drivers as possible. Once Uber dominates a particular market, they control the demand and the supply. And in turn, they control market prices.  

Ever heard of surge pricing? That’s Uber’s real “innovation.” Don’t like it? I guess we can call the cab company they put out of business. Market dominance equals maximum profits to the elites. Nothing more.  

Want to know Uber’s other fake innovation? They don’t own the vehicles. So instead of buying cars and hiring drivers, they recruit drivers (at questionable pay) to drive their own cars. Imagine if the low-wage workers in an iPhone factory had to buy their own machinery to get a job. That’s Uber.  

Again, we can’t deny that Uber offers modest value to the market. More convenience for riders, income potential for drivers. But at what price? If it requires monopoly pricing, worker exploitation, and bending the law, then no thanks.

There must be a better way. Certainly, the brightest minds from Silicon Valley to Wall Street could figure it out if they wanted.  

Scale Is Not The Problem, The Ruthless Quest For Dominance Is 

It makes perfect sense for companies to want growth. As production volume increases, per-unit costs decrease for a variety of reasons. This is called economies of scale. It’s a key driver for businesses that make physical goods. It also applies to service and digital businesses.  

Startup companies usually want to increase production volumes until they reach economies of scale. It allows them to lower prices and increase profits. Many companies will continue pursuing growth even after they’ve reached peak efficiency. They invest the extra profits back into workers, upgraded equipment, or creating new products. This is a good thing.  

There’s a point, though, where company growth is no longer driven by economies of scale or optimizing profits. Instead, it’s driven by a ruthless quest for market dominance. To illustrate this, we created the patent-pending (not really) Conjoined Polygons of Market Dominance. Not to be confused with the Conjoined Triangles of Success.  

We typically recognize this quest has gone too far when a company acquires monopoly power. By then, much of the damage is already done. It’s better for us to call out companies who are on this quest before they reach their goal.  

“You Keep Using That Word” 

The expert class will continue using the term creative destruction to cover for companies on the ruthless quest for dominance. But we’re not fooled.  

Uber is a tricky example, which is why we led with it. They are a newer company in a fragmented category. Plus, a veil of technology and innovation intentionally shrouds what they’re really doing. We hope you see through all that now.  

Once you see how the creative destruction smokescreen is used to defend questionable business practices, other examples become all the more obvious:    

Amazon is the largest online retailer with over 40% of US e-commerce sales. They started selling books (we already had book stores), then electronics (same), then started selling items on behalf of third parties (ever heard of consignment shops?). Now they are building a fleet of delivery vehicles (1907 called and UPS wants their business model back). There’s nothing new here. In exchange for that nothing, Amazon’s scale allows them to exploit workers, bully suppliers, put smaller retailers out of business, and cheat third party sellers. All while providing a massive audience for cheap knock-off products from Chinese factories. Ah, creative destruction at its finest.  

Possibly no company has done more to further the cause of fake creative destruction than Walmart. Walmart is the largest retailer in the world but uses the same retail model that’s been around since the beginning of commerce. Their power is entirely derived from their scale. Low wages, squeezed suppliers, gutted main street businesses, and an endless flow of cheap goods from factories in China. Are you sensing a theme here?   

Google wasn’t the first search engine and their technology isn’t radically different than the alternatives. But Google overwhelmingly dominates the search market, which allows them to dominate the digital ad market, manipulate and censor information, and make moves to literally own the physical flow of information around the world. In addition, Google . . . wait for it . . . helps the Chinese Communist Party (CCP). But hey, it’s “free”, so all is good, right?  

Glenn Beck @glennbeck

Absolute horrors are being committed inside China's concentration camps RIGHT NOW. But companies like Apple, Google, and Facebook not only continue to work with China, but have even GIVEN the CCP the tools it needs to spy on and round up its people.

10:10 PM ∙ May 25, 2021

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All of these examples describe the same phenomenon. Industry “disruptors” using nothing more than scale to destroy weaker competition. No real innovation. Nothing creative. Just lots of destruction. We sometimes save a little money, but domestic jobs are lost in the process, wealth flows into fewer hands, and we strengthen authoritarian regimes. That’s a bad tradeoff.   

Main Streeters Lead The Way 

As usual, Main Streeters have considerable power to address the ruthless quest for dominance of companies like these. Here are just a few ideas:  

Amazon: Review your orders for last month. What items could you buy local instead? What Subscribe & Save items could you cancel? What regular purchases could you delay to reduce consumption? Amazon’s entire business model is to construct a direct line between them and your wallet. Stand in their way.  

Walmart: If you are planning a trip to Walmart, review your list. Again, is there anything that you could buy from local merchants or farmers markets instead? See if there are other items you could delay purchasing until next month. Every dollar that doesn’t go to Walmart goes into the local economy or your savings account. That’s a great tradeoff.  

Google: Use DuckDuckGo for search instead of Google. If you choose to use Google, don’t click on ads. Instead, when you see an ad for a product you are interested in, go directly to that company’s website. It saves that company money and starves Google of some revenue. Also, try to get your information off of Google’s spyware products like Gmail and Google Docs. There are several alternatives listed here.  

Someday, Congress, the FTC, and state attorney generals may successfully address the monopoly-level power companies like these have. But anti-trust actions are complex and take time. Until then, we are the ultimate trustbusters.  

What slight spending shifts could you make this week to begin starving giants like these of their power? Destroying monopoly power is the creative destruction we need to beat the elites.  

God bless and God bless America, 

Jeff and Luke