The Concept of Creative Destruction: The Industrial Revolution, Ai, and the Cryptos (and why it is normal to be worried)
Just as in the classic “Art of War” by Sun Tzu, what makes war an “art”? Or is there something beautiful like art in war? But we will not talk about Sun Tzu here. As posed earlier, in the term “creative destruction”, is there something “creative” in destruction? If none, what do we mean by “creative” in the first place? Or what is creative destruction in a general sense? In the proceeding paragraphs, I will discuss the economic concept of “creative destruction”, its historical attributes, and how it relates and complicates to this contemporary unprecedented proliferation of Ai and other technological innovations.
The idea of creative destruction has its cornerstone in the works of Karl Marx: an act of destroying existing wealth to generate a new one under capitalism. The term was popularized only in the 1940s by a political economist, Joseph Schumpeter, which also refers to “Schumpeter’s gale”. He defined it as a “process of industrial mutation that continuously revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one”.
To put it simply, creative destruction is the replacement of the old with the new. It entails destruction in the sense that an established or prevalent idea that encapsulates the status quo — may it be in business, products, resources, services, occupations, and many others — is at risk of being irrelevant to the point of becoming obsolete or futile. This happens because of a rising element, a product of creation usually in the form of technological innovation, that can outrightly change the current economic and, perhaps, political system. This innovation within the phenomena of creative destruction creates both winners and losers: those at risk of being irrelevant and those has the potential to reap the benefits of the new one. At this point, before I proceed to the contemporary discussion of Ai along with other innovations of contemporary discussion that capture the idea of creative destruction, it will be prudence to discuss first a certain crucial historical event: The Industrial Revolution.
Image source: re-thinkingthefuture.com/2021/03/31/a3740-what-is-the-impact-of-industrial-revolution-on-architecture
The Industrial Revolution first happened in Britain way back 18th century and eventually in other parts of the world. The revolution is widely known as the first technological breakthrough in history. This is also an early example of creative destruction. Industrial Revolution destructed the status quo of systems to pave a more efficient and cost-saving method. This is an event where factories, industries, plantations, and many related workplaces now made use of automation in the form of machines. It facilitated the transition from human-facilitated production to automated machines. As posited earlier, this created winners — the entrepreneurs and business owners — but this was at the expense or destruction of some who were in the losing realm — skilled laborers and factory workers. These people were greatly affected by the transition as this meant that their jobs would be replaced with machines. They resisted and protested the innovations that the revolution yielded. The effect of the creation of and the transition to machines for industries caused a hefty loss that some even directly harmed the entrepreneurs for coming up with innovations that had put them at a great loss. Prominent among them were the “Luddites” (which now describe people who resist new technology). The Industrial Revolution established a template for an innovation and technology-driven economy for the coming generations. It created the machines yet destroyed a manifold of jobs and the human and manual-driven economic system.
.Image source: currentaffairs.org/2021/06/the-luddites-were-right
Fast forward to the present, I liken the rise of Artificial Intelligence (Ai) to what happened in the Industrial Revolution. Likewise, the proliferation of Ai along with other technological innovations also exhibited the concept of creative destruction in play. This is why the anxiety that these Ai begot is valid since it will surely create winners and losers at the same time and often at hefty detriment on the latter.
First, for the Ai. Ai is portrayed as computers, machines, or software programs that mimic human behavior. It can respond, service, and produce almost, if not totally, the same as humans can. If the Industrial Revolution led to the widespread loss of jobs as machines came into, Ai can replace humans totally (surely this will be a subject of debate). Not just only it creates automated and high-technology services, but it will also ensure serious complications. Since it mimics humans, creation when it comes to cognitive products is also at serious risk. For instance, Ai can now produce digital artwork, produce a song, and even mimic a voice of a popular singer. Not just the manual skills are at risk of being destructed amidst this creation of potentials Ai can provide. It now also encompasses those intangibles such as the products of human imagination and creativity; hence, the combined terms of “artificial” and “intelligence”. See this whole spectrum of discussion on Ai. It created unprecedented possibilities, yet it also complicates and destructs a wide range of elements.
Image source: medium.com:
Another astonishing technological advancement that also portrays creative destruction is cryptocurrency. It is a new form of money or currency that operates along a new technology-driven finance system. As opposed to “real” currency or money that we have in our wallets, these cryptos, such as Bitcoin, are digital. Sure, you will ask about online wallet platforms such as Paypal, GCash, and Maya. Cryptos are completely different since they operated in a different finance system. Online wallets, despite digital, still operate in a traditional finance system which is also regulated by the government. Cryptos on the other hand are not just digital it is also not regulated by the government. It operates along what crypto pundits call as the “Blockchain Technology”. This blockchain serves as a digital ledger or record holder for transactions. These cryptos and the technology it creates can destruct traditional established banks and its system and even annihilate the control of the government in finance and the economy. Just as the Ai, albeit once-unimagined potential it creates, it complicates a magnitude of elements that the present or the status quo is encapsulated.
From the seemingly lengthy discussion we have on the concept of creative destruction, there is a glaring wisdom it exhibited. Development through gradual changes in varied aspects is not just about those set forth by the “creation” of innovations or machines. It is also transformative in the sense that it changes, whether minimal or total, the present to pave the way for the upcoming. It is a work of constant change. With these changes seemingly inevitable to cease or resist, we shall endeavor that these changes set forth will work in favor of and something that flourishes rather than completely destroy us.
