Creative Destruction Of Internet Age: Unstoppable

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.)