“Disruption,” as applied to business, has become synonymous with innovation, and for some it is unambiguously positive as a driver of economic progress. But for others—such as the cab drivers who’ve seen their fortunes fall with the advent of ride-hailing apps—the downside of disruption is evident. In this installment of the In-House Ethicist video series, Chicago Booth’s John Paul Rollert reviews why disruption is so critical to capitalism, how it led to the Luddite backlash, and how economist Joseph Schumpeter, who coined the phrase “creative destruction,” regarded the cultural turmoil disruption engenders.
(upbeat jazz music. John Paul Rollert stands in front of a green screen.) John Paul Rollert: Disruption. It’s one of those words that might have had a slightly different meaning for you when you were in Miss MacElroy’s kindergarten class. (An over-the-shoulder image appears of John Paul Rollert dressed as a kindergartener in a classroom, holding a ferret in a cage.) Bringing a ferret to show and tell, gargling milk at snack time (image changes to John Paul Rollert spewing milk at a table with other kindergartners, Miss MacElroy in the foreground closing her eyes and cradling her forehead in her hand), or taking your pants off at recess. (A pair of pants lands on John Paul Rollert’s shoulder as he’s talking. He pulls them off and drops them to the floor as he continues.)
These are all the types of activities that would have seen you labeled a disruption. And if you think that’s a compliment, I’d suggest giving Miss MacElroy a call. (over-the-shoulder image of Miss MacElroy on the phone in her classroom, a surprised expression on her face)
Things are a little different, however, when it comes to business. Far from being a negative force, one that generally annoys people and undermines the work at hand, disruption is often celebrated. Business journalists routinely cheer evidence of disruption—in the automobile industry, communications, entertainment, you name it. And they tend to shower praise on a group of people they like to call the disruptors. (over-the-shoulder image of a man’s torso, his hands pulling his dress shirt and tie aside to reveal a “D” on his chest, à la Superman)
Wanna be one? Forget taking off your pants. You can attend events like Crunchbase’s annual disrupt conference, or take seminars in disruption in places like Harvard, Stanford, or Columbia. You can even get an entire master’s degree in disruption at the Hult School of Business.
Take that, Miss MacElroy. (over-the-shoulder image of Miss MacElroy in her classroom, arms crossed, staring sternly back)
Then, of course, there are the books on disruption, a whole backpack full of them. The most famous by far is this one (John Paul Rollert holds up a copy of The Innovator’s Dilemma), The Innovator’s Dilemma by Harvard Business School’s Clayton Christensen. The book starts with a simple question: Why do some super successful companies, companies that seem so good at responding to the needs of their customers, fail? The reason, Christensen says, is that “sometimes doing what seems like the right thing, is actually the wrong thing,” a paradox he calls the “innovator’s dilemma.”
(John Paul Rollert tosses book aside.) Now, for Christensen, the way out of this paradox is for companies to keep an eye on what he calls “disruptive technology"—those innovations that fundamentally change the market for some good or service. Take the way you listen to music. Your great grandfather’s record player became your grandmother’s 8-track, which in turn became your father’s tape deck, and then your older sister’s CD player, and finally your iTunes. As Christensen points out, consumers simply can’t predict the next thing they won’t be able to live without. (over-the-shoulder image of a man holding a sign that reads: “Best CD player EVA!”) And woe betide the electronics executive who spends a fortune trying to provide the cutting-edge CD player you say you want when what you really need is Spotify.
For Christensen, examples like this have significant implications for how exactly capitalism works. A vision of the economy that owes a great debt to this man (over-the-shoulder black-and-white image of Joseph Schumpeter), Joseph Schumpeter. Schumpeter was one of the most important economists of the first half of the 20th century. He put innovation at the heart of his account of capitalism. But it was innovation with an edge. Economic progress in capitalist society means turmoil, Schumpeter said in Capitalism, Socialism and Democracy, by far his most important work. The system of capitalism, he said, was incessantly being revolutionized from within by the intrusion of new commodities or new methods of production or new commercial opportunities.
Schumpeter called this process “creative destruction,” a phenomenon that defined capitalism for him. On his account, the way we do business is fundamentally conservative, for it tends to resist change. Progress, in turn, can only come about when the commercial status quo is disrupted, clearing the way for new ideas, new approaches, and new ways of thinking. It’s a turbulent process. Remember, creation and destruction go hand in hand. And if you look around, you can see it going on today. Take the tech sector. (over-the-shoulder image of a postcard that reads: “Greetings from Silicon Valley”) Amazon ran Borders, Barnes & Noble, and neighborhood bookstores everywhere into the ground by letting you buy Avengers fan fiction from the comforts of your underpants. (over-the-shoulder image of John Paul Rollert lounging on his couch in an undershirt with a remote control in hand) Netflix saved you the anxiety of anyone at Blockbuster figuring out your unrequited love for Gérard Depardieu. (over-the-shoulder image of a Netflix high-rise building crushing a Blockbuster movie chain) Have you seen Green Card?
(over-the-shoulder image of a scene from the Green Card. Image changes to a close-up of Gérard Depardieu. Rollert shrugs at the image and swoons) Oh, Gérard.
(over-the-shoulder image of an eccentrically dressed young person in front of a yurt in the desert) And for every early investor in Uber you fork at the prospect of buying a LEED-certified yurt for next year’s Burning Man, there’s a lunch counter full of cabbies using their taxi medallions as coasters. (Over-the-shoulder image shifts to a black-and-white photograph of three men drinking in a pub.)
(over-the-shoulder black-and-white image of a cab driver leaning out his window, shaking his fist, with an angry expression) Now, if you’re one of those cabbies, you have a good idea, morally and practically, of what’s at stake in disruption.
This is not a new story, of course. At the beginning of the 19th century, the introduction of new machines into the textile industry disrupted the work of handloom weavers across England. These were skilled workers, and they often came from generations of weavers. Their way of life was threatened. And so many of them did the only thing that seemed natural. They began breaking into mills and smashing the machines that were putting them out of business. These weavers famously organized themselves into a mass movement, the Luddites, a secret organization that rapidly spread across England during the Napoleonic Wars. They did so much damage, the crown mustered soldiers to subdue them, and in Parliament an emergency measure was passed that made their activity a crime that was punishable by banishment to Australia (over-the-shoulder image of John Paul Rollert photoshopped wearing Australian outback gear, his arm around a crocodile)—and even hanging.
Now, I suspect that none of us are ready to defend industrial sabotage. But let’s be clear about what the Luddites were doing. They were trying to protect their creations by engaging in a little destruction. Now, for the most part, Clayton Christensen doesn’t wrestle with the cultural implications of his theory, but Joseph Schumpeter did. And whenever he speaks about creative destruction, he does so with a full appreciation that the disruption he was describing did not just apply to business. It had significant implications for the way people lead their lives, and the communities they’re part of.
Schumpeter may be right that capitalism by nature will always be a messy process. Still, you don’t have to be a Luddite to believe that we should be wary of the rhetoric of disruption and how it permeates so much of American society. It’s not just the fact that what’s being disrupted is often the livelihoods of people who don’t have the social, political, or financial capital of the very individuals who are disrupting them. But when you make a virtue of shoving people aside in business, odds are you’re probably going to be a jerk in your private life too. (over-the-shoulder image of a businessman shouting into a phone)
So yes, by all means be innovative, be ambitious, but when it comes to being disruptive, remember what Miss MacElroy would say (John Paul Rollert catches the pair of pants that are tossed back on set): keep your pants on. You’re not the only person who matters.
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