The Breezes of Creative Destruction
So long Borders.
JULY 26, 2011 by SANDY IKEDA
Filed Under : Entrepreneurship, Competition
Waiting for a lunch date in Wall Street last week, I noticed a large Borders sign across from Trinity Church, where I happened to be standing. “That’s a much better place to wait on such a hot day,” I thought.
I hadn’t heard the news that Borders was closing all its stores, so looking into its windows as I crossed Broadway, I was surprised to see the inside cavernous and empty. What was a few days ago a lively gathering place was now, seemingly, dead space.
The first time I set foot inside a Borders was in Fairfax, Virginia, during a sabbatical in 1998, long after it had become a successful business and an important social hub among many of my friends. One of them, long-time libertarian intellectual and fellow Grove City College alum Walter Grinder (with whom, thankfully, I still correspond), had invited me to meet him there. I had never heard of it.
It turned out to be big, very big. Our business that day wasn’t buying books but talking about them. There was a coffee bar inside – unusual for a bookstore, I thought at the time – and we took our drinks back outside to a patio table in front of the store. I recall talking about the urbanist Jane Jacobs, whom I’d only recently begun reading, and naturally Walter knew all about her. I had just gotten an unpleasant grilling on a paper I had given on her work, and Walter’s advice was (and I’m paraphrasing here): “Don’t let harsh criticism keep you from writing!” Well, I’m still writing about Jacobs.
While each of us may have fond memories of Borders and will miss it, our preferences for the competition – Barnes and Noble, Amazon.com, and the iPad – are what have led to its failure. And as dramatic as this bit of business news has been, in the larger scheme of things economic change happens fairly slowly, at least compared to changes caused by governments.
The Age of Mind-Boggling Change
I’ve written before how Joseph Schumpeter described competitive forces as “gales of creative destruction.” Seen from the perspective of someone who has lived through the greater part of the twentieth century, the social change wrought by markets and the freedom to experiment that they unleashed in art, science, and social attitudes may indeed seem rapid and radical.
My father-in-law passed away a few weeks ago. In his 93 years he lived through truly incredible economic, political, technological, and social changes. Indeed, his generation has experienced more such changes than any other generation in history – not American history, but in the history of the world. (Just in terms of wealth, the past 100 years has been staggering. The Economist magazine recently reported that “over 23% of all the goods and services made since 1 AD were produced from 2001 to 2010.”) When he was boy, few homes had telephones, most Americans lived in rural areas, and anti-miscegenation and Jim Crow laws were in force nearly everywhere. By the end of his life nearly everyone carried a mobile phone (in his 80s he taught himself how to Skype and email), four out of five Americans were urbanized, and same-sex marriage became legal in New York.
Changes at the Margin (and at the Borders)
But from a day-to-day or even year-to-year perspective, these changes, dramatic as they are, happen incrementally. “Gales of destruction” better describes the sudden upheavals wrought by the political power of the State: the hundreds of billions spent on stimulus and bailouts, trillions on “quantitative easing,” and the millions of lives snuffed out in government-conducted wars and cultural revolutions. Whatever creative merit the State might possess (personally I think it adds up to not much at all), princes, parliaments, and presidents have been, and I fear will continue to be, the unmatched causes of widespread social destruction.
Because of such incalculable costs, attempts to radically change the social landscape or to conquer new worlds are the dreams of insulated politicos, not market entrepreneurs. Yes, the market can be heartless and feckless, but, without the aid of government intervention, never so deadly as the state.
Of course, especially for those who spent their capital, their working lives, or hard-won leisure hours in a business such as Borders, market forces may indeed seem destructive and even cruel. For some the change will be truly devastating, although most will find other, perhaps better alternatives. And developers do raze buildings and sometimes whole blocks (although at that scale crony capitalists tend to rely on political connections to push the cost onto others). But in a free market they do so in the expectation that, from the consumers’ point of view, what they build will have greater value than what they tear down.
In the case of that Borders space, though, I’m pretty sure there won’t be much physical disruption. Given the location, before long some new business or other use will just quietly move in. That’s the way change typically happens on the market, even in this revolutionary age – incrementally, not cataclysmically, and hardly noticed. In the market, changes and the adjustments to them, unless viewed over the lifetime of someone like my father-in-law, take place pretty slowly when all is said and done. More like a gentle breeze than a gale.
As I crossed back over to Trinity Church I couldn’t help but notice that Broadway and Trinity Place was awhirl with people, tourists mostly, on their way to the New York Stock Exchange, or the Federal Building a block away, or to Ground Zero, a block the other direction — some of these people, like me, disappointed perhaps at the prospect, at least for the time being, of having to walk a little farther for their book and cup of coffee. Others won’t notice that this giant chain is even gone, or know it was ever there.