Wednesday, September 2, 2009

the innovator's dilemma, and how rich countries die

The innovator's dilemma describes how very successful companies are brought down by new firms with new technology that at first only satisfy the "low-end" of the market, i.e. consumers with minimal expectations. Since this section of the market is usually the least profitable, the successful company sees the new firm as innocuous. But as the new technology improves and is capable of satisfying more and more users, the old company is displaced. (There was a good TED video about this from rkumar, but I had lost the link. Best alternative I've found is this)

This reminds of a similar article I came across a few months ago, right here. It talks about something a little bit different, about how special interest groups takes a long time to form, but once formed they make the economy less efficient. Thus, older countries are in generally less efficient than newer ones recently recovered from a war.

Two strikingly different theories, about two different groups, causing the same result: the failure of what was once a rich and powerful group.

What I can't help but notice is how silly the notion of a "company" or a "state" really is. A company or a state is really but a group of people with a certain idea, mandate, or a set of laws. The most important aspect of a company/state, though, should not be the idea/mandate/laws, but its people. So does it really matter that a few company has died, but a few others are thriving, if the same people from the former companies are now helping the new companies succeed?

What if the company itself had noticed the trend, and decided way ahead of the game that its business will no longer be profitable, and that its people should choose to invest their time in something better? Same goes with a state - is there any way for a state to notice its own inefficiencies, and without the destruction of a war, decide to start anew? In the end, the basic unit that we are interested in is the people. So long as people are happy and healthy, does it really matter whether they belong to old company/country A or new company/country B?

The problem is that we are change-averse. The reason we want the old company to exist, and we want to keep living in country A is because it's something we're familiar with. Change implies uncertainty, and uncertainty means that things could potentially turn out worse than before. It's also very likely that at least one person or group would be hurt by the change (older employees, unions, etc). Is there any way to compensate? I don't know - and yes, this can be a problem.

Yet if change is imminent, then wouldn't it be smarter to embrace it instead of avoid it? Wouldn't it be better to have a company/country die peacefully in the hand of its founders when everyone is ready, than to have the crap kicked out of it when you're least prepared?

I guess the other more open-ended question is... is it possible for us to live and thrive as individuals, without the fictitious idea of a company or a state?

End of Entry