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8/8/2013
09:35 AM
Rob Preston
Rob Preston
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Creative Destruction Of Internet Age: Unstoppable

Don't blame Jeff Bezos and the Silicon Valley set for the digital disruption in a range of industries, from journalism to railroads. Get on board.

What do newspaper editors, shopkeepers, commodities traders and railroad engineers have in common? They're all professions in the news in part because they're being threatened or otherwise marginalized by digital innovation.

The Washington Post Co. announced on Aug. 5 that it has agreed to sell the iconic newspaper and other old media assets to Amazon.com founder Jeff Bezos for $250 million. The news followed The New York Times Co.'s sale of the Boston Globe to Boston Red Sox owner John Henry for $70 million, just 6% of the $1.1 billion it paid for the Globe 20 years ago.

Following the Post Co.'s announcement, the online chatter among journalists was less about the big data, ecommerce, UI or other digital innovations Bezos could bring to the declining media properties, and more about the future of the newspaper's reporters, editors and journalistic standards under the "billionaire savior" or "media's new baron."

One former Post reporter and current New Republic senior editor, Alec MacGillis, called for setting the calendar back to 1993. I'm not making up the following passage.

"Amazon has embodied, more than any other of the giants that rule our new landscape, the faster-cheaper-further mindset that scratches away daily at our communal fabric: Why bother running down to the store around the block if you can buy it with a click? No risk of running into someone on the way and actually having to talk to them, and hey, can you beat that price? No thought given to the externalities that make that price possible -- the workers being violently shocked every time they pull a book off the warehouse shelf, or losing a chunk of their lunch break to go through the security checkpoint set up by their oh-so-trusting employer. They're Somewhere Else, working for a company that is Out There, in the cloud."

Bezos offered no simplistic proposals for reversing the Post's declining fortunes, but it's pretty clear he didn't spend $250 million of his own fortune to preserve the status quo. "The Internet is transforming almost every element of the news business: shortening news cycles, eroding long-reliable revenue sources and enabling new kinds of competition, some of which bear little or no news-gathering costs," Bezos said in a statement. "There is no map, and charting a path ahead will not be easy. We will need to invent, which means we will need to experiment."

Apply those last two sentences to companies in every industry. The creative destruction of the information age is accelerating.

No less in denial than New Republic's MacGillis are the "determined floor traders" who, according to Reuters, are suing the owner of the Chicago Board of Trade in an attempt to reverse new rules that further automate commodities trading and signal the end of their "open outcry" tradition. (No word from MacGillis on whether he laments the loss of the "communal fabric" embodied by hulking traders in yellow sports coats shouting bids at each other in trading pits.)

To pull our media industry example in as a comparison, imagine if a group of newspaper publishers decided to sue Craigslist for ravaging their classified ad business. Or if Blockbuster sued Tim Berners-Lee for inventing a platform conducive to distributing movies more efficiently than it can. Markets change. More efficient means of digital marketing, sales, settlement and distribution emerge. Businesses that don't adapt go out of business. I've experienced this digital disruption (and destruction) first hand, and it isn't pretty. But that doesn't make it deniable or avoidable.

"Software is eating the world," is how Netscape founder and tech venture capitalist Marc Andreessen puts it. "More and more major businesses and industries are being run on software and delivered as online services -- from movies to agriculture to national defense," Andreessen wrote in The Wall Street Journal two years ago. "Many of the winners are Silicon Valley-style entrepreneurial technology companies that are invading and overturning established industry structures. Over the next 10 years, I expect many more industries to be disrupted by software, with new world-beating Silicon Valley companies doing the disruption in more cases than not."

Think Bezos taking over The Washington Post, even if Amazon isn't the acquirer and its founder now hails from Seattle rather than Silicon Valley.

Labor unions have attempted to slow down the human toll of digital disruption and its creative destruction. The Communications Workers of America, for example, has long fought to protect its members (as it should), including telephone operators made obsolete by public switching and more recently U.S.-based call center agents whose jobs moved offshore as international connectivity got better and cheaper.

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In the railroad industry, remote control train-positioning devices strapped to yard conductors have let most operators reduce their yard crews from two or three main people to just one, despite union opposition. Now, with a set of interoperable systems called Positive Train Control due to be installed on U.S. trains next year, railroad operators want to downsize their on-board freight crews from two people -- an engineer and a conductor -- to just one. PTC is aimed at preventing train-to-train collisions and over-speed derailments by automatically keeping trains within authorized speed and distance limits on a track. The operators had hoped to downsize their freight crews as a way to start recouping their combined $20 billion investment in the Congressionally mandated program, but the unions have successfully blocked those efforts -- so far. Interestingly, recent fatal train accidents in Canada and Spain have prompted calls for both more and less train automation.

Out of work railroad engineers, mom and pop store owners, call center workers, commodities traders (and, yes, even leathery journalists) can be sympathetic figures. But lawsuits and labor unions and longing for the good 'old days won't stop the march of progress. It's time to look ahead, not behind.

Items from pills to power plants will soon generate billions of data points. How will this movement change your industry? Also in the new, all-digital Here Comes The Internet Of Things issue of InformationWeek: How IT can capitalize on the NSA's big data prowess. (Free registration required.)

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MyW0r1d
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MyW0r1d,
User Rank: Strategist
8/12/2013 | 3:42:30 PM
re: Creative Destruction Of Internet Age: Unstoppable
Possibly, and there were those who thought Apple was over when they fired Jobs the first time. Rarely however are net job figures published and one of the few statistics that are available is unemployment per capita which has almost a decade long negative tendency (not only US but internationally). Companies continue to hold do more with less as a guiding mantra and I don't believe it is finite which after reaching a certain point becomes a negative impact.
RobPreston
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RobPreston,
User Rank: Author
8/9/2013 | 4:50:19 PM
re: Creative Destruction Of Internet Age: Unstoppable
But what about the jobs that Google and eBay themselves have created since they were founded? And what about all the jobs created within the Google and eBay ecosystems? Just because they've cut jobs at companies they've acquired doesn't mean they're net job destroyers. And your example of Motorola Mobility--that business may have gone belly up without Google's acquisition. It was headed the way of Nokia.
MyW0r1d
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MyW0r1d,
User Rank: Strategist
8/9/2013 | 3:44:53 PM
re: Creative Destruction Of Internet Age: Unstoppable
I would like to believe that innovation and disruption as defined in the article also creates jobs not just destroy them, however, history would indicate that simply is not reality. Using your own eBay example, we recall this headline from CNNMoney (as well as others) last fall "EBay's PayPal cuts 445 jobs?" How about this year's Google announcement in Huff Post, "Google's Motorola Mobility Layoffs:1,200 More Workers In U.S., China And India Lose Their Jobs."
Not saying it does not create some jobs, I just question if it creates as many as it eliminates and at what level as I see the middle class shrinking, the upper diminishing in numbers, and the lower increasing.
Nathan Golia
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Nathan Golia,
User Rank: Apprentice
8/9/2013 | 1:57:54 PM
re: Creative Destruction Of Internet Age: Unstoppable
The thing is, every industry is in some way going to be disrupted by digital progress even if it's not existential (as is the case for newspapers). I have been writing and speaking about insurers' preparations for a new world of customer interaction a lot over the past few months. Many are committed to the agent channel G but it's clear that consumers do not want to buy products that way. Insurers, however, still require a certain amount of customization and consultation in the application process in order to identify the risk correctly. The end result is that consumers simply don't buy the right insurance product G especially when it comes to things like life insurance where the need at age 28 or 32 isn't really quantifiable. So insurers must try and find the right balance between facilitating online interaction and leveraging the power of the local agent to identify and sell the right product to the right customer. Some are doing much better than others in this way G but all have to do it.
NJ Mike
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NJ Mike,
User Rank: Strategist
8/9/2013 | 1:50:10 PM
re: Creative Destruction Of Internet Age: Unstoppable
Well said!!! Any technological advancement causes disruption. The invention of the refridgerator put the iceman out of business. The convenience store put the milk man out of business and so forth.
While this disruption is painful to those whose jobs are eliminated, in the big picture, it frees them to do something else to add to the economy. In colonial times and soon thereafter (1700's and 1800') , over 90% of the people in US were involved in agriculture. But technological advancements made workers more productive, freeing them to do something else.
The danger with public policy "experts" trying to stop this is they deal with just what is seen. They would preserve the iceman's job because that can be seen. But what can't be seen is what else that iceman could have done. This may sound harsh, and uncaring, but let's face it, this is capitalism, and it has created the highest standard of living in history.
Thomas Claburn
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Thomas Claburn,
User Rank: Author
8/8/2013 | 8:09:22 PM
re: Creative Destruction Of Internet Age: Unstoppable
To accelerate meaningful action from policymakers, someone needs to develop an automated politician and to have that robot win an election.
David F. Carr
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David F. Carr,
User Rank: Author
8/8/2013 | 7:47:57 PM
re: Creative Destruction Of Internet Age: Unstoppable
I was talking about this broad trend today with people from higher education at the Distance Teaching and Learning Conference at the University of Wisconsin. The parallel between newspapers giving away content online and universities giving away courses online is fairly close and uncomfortable for faculty who see the potential for higher education to be hollowed out the same way newspapers have. Yet ours is not necessarily the first generation to encounter technological disruption.

Richard Baraniuk, the founder of open educational resources initiatives based at Rice University, says it goes back to Plato ranting about the invention of writing, which disrupted the tradition of oral history and was obviously going to ruin education (because people would no longer have to memorize as much if they could write it down). Presumably, that put some people out of work, too, if they couldn't make the transition.
UberGoober
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UberGoober,
User Rank: Strategist
8/8/2013 | 7:42:28 PM
re: Creative Destruction Of Internet Age: Unstoppable
Sorry, Steve, but history has shown that it is NOT a public policy problem. If it were, we'd still be subsidizing the buggy whip makers put out of business by the rise of the automobile. Even the Strategic Mohair Reserve wouldn't die until the mid-90s.

I'll also mention that I had a sticker on a school notebook in the late '60s that said "You can be replaced by a pushbutton!" Indeed, millions were displaced by computers, but if you want to go back to a world where companies have vast rooms full of desks with clerks punching numbers into manual adding machines, you could only be classed as a low-grade moron. The market, not the government, created tens of millions of jobs during the 80s and 90s, largely due to the disruption caused by all that new improved technology.

I wish that the government was good as social engineering, as I believed it was when I was a child, but it is AWFUL at picking winners and losers. The realization is one of the disappointments of growing up.
RobPreston
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RobPreston,
User Rank: Author
8/8/2013 | 6:09:39 PM
re: Creative Destruction Of Internet Age: Unstoppable
Of course, there are no pat answers, so I don't want to suggest that I have them. But technology innovation and disruption create jobs; they don't just destroy them. Google, Amazon, eBay, Facebook and even less successful digital pioneers hire lots of smart, highly paid people. And established companies taking part in this digital revolution aren't just using those innovations to replace people--they're hiring developers, engineers, digital marketers, project managers etc. It's not just a race to the bottom. But the disruption does cause pain, and I'm not confident public policy-makers have the answers.
SteveJ549
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SteveJ549,
User Rank: Apprentice
8/8/2013 | 5:01:14 PM
re: Creative Destruction Of Internet Age: Unstoppable
That's all fine and well, but there seems to be no discussion, or urgency, to address the fact that millions of people are being displaced by such rapid change. Since we live in such a strong consumer-based economy, what are millions of unemployed/underemployed people going to be able to buy except the basics? It seems to me that the bar is being raised higher and higher to obtain good paying jobs. Most will not qualify. This is a public policy problem.
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