Friday, March 23, 2007

Creative Destruction

Creative destruction, as applied to Economics, is the idea that the demise of some firms / industries may be beneficial for the economy since it frees up resources to be used more efficiently by other firms. A quote from the film "Other People's Money" carried on Newmark's Door illustrates this perfectly:

You know, at one time there must have been dozens of companies making buggy whips. And I'll bet the last company around was the one that made the best [....] buggy whip you ever saw.
Now, how would you have liked to have been a stockholder in that company?

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