The Power of the Free Market

Creative Destruction

The new reigning champion?  The cell phone.

The devices left in its wake:

  1. Digital assistant
  2. Telephone
  3. Digital camera
  4. iPod
  5. Watch
  6. Alarm clock
  7. Radio
  8. Radar detector
  9. GPS device
  10. Video game
  11. Answering machine
  12. Computer

These are just a few.  Many many more are being “destroyed” everyday.

The impact?

Investors should heed the mobile phone’s Schumpeterian powers. When the century began, bankers ‘beamed’ each other information via the now-quaint infrared technology of the Palm Pilot, whose maker boasted a $92 billion market value. Palm shifted into mobile phones but lost 97 percent of its value along the way. This should provide a cautionary tale to other industries standing in the cell phone’s path.

But is this a good thing?  With all of these “industries” going the way of the dinosaur, aren’t we all worse off?

There will certainly be winners from the cell phone’s creative destructive properties. New companies will spring up to innovate. Each wave of technological innovation creates more market cap than the one it replaces, Morgan Stanley notes.

Indeed.  Rage on.

2 responses to “The Power of the Free Market

  1. Good and interesting point. As it becomes cheaper and easier to drop cell phone chips into any portable device, perhaps some cell phones will be creatively destroyed by future netbooks or Gameboy devices that have cellular capability.

    • erhaps some cell phones will be creatively destroyed by future netbooks or Gameboy devices that have cellular capability.

      Even placed in cars. Certainly will be fun to watch.

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