GENERAL MOTORS, which, like Ford, lost $1.3 billion in the third quarter, will lay off 30,000 workers and close or downsize 12 plants in a desperate effort to avoid bankruptcy. Kodak is frantically attempting to build its digital business as the use of film declines. Knight Ridder shops for a buyer as the collapse of its local newspaper monopolies destroys its viability. Several airlines have declared bankruptcy as their uneconomic cost structures cripple their ability to compete for customers. Telecoms companies watch the value of their wires drop as cell phones, voice-over-internet, and cable companies poach their customers. Blockbuster flirts with bankruptcy as new, more convenient ways of delivering films (“content,” to use the more modern term) to the screens of couch potatoes make a trip to the rental stores unnecessary.
That destruction of the value of existing assets and businesses is, fortunately, only half the story. The other half was long ago pointed out by Joseph Schumpeter. Schumpeter is said to have remarked, “Early in life I had three ambitions. I wanted to be the greatest economist in the world, the greatest horseman in Austria, and the best lover in Vienna. Well, I never became the greatest horseman in Austria.”
