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Perhaps, but honestly, I think Schumpeterian creative destruction is... at this point, more of an idealistic take. It exists, but it isn't a permanent feature

by netcan 5y ago

Perhaps, but honestly, I think Schumpeterian creative destruction is... at this point, more of an idealistic take. It exists, but it isn't a permanent feature of the big fish economy that stock markets represent. There are processes like online travel retail overtaking travel agenting. That's a sort of creative destruction. Mostly though, travel agents were an SME sector. Like the proverbial (and literal) restaurant trade, they're subject to market forces in this way and the theory often plays out in practice. Heavy price competition. Creative destruction. Etc. Banking OTOH, doesn't really have a creative destruction dynamic to speak of. Most auto manufacturers are what and who they were 20 or 50 years ago. Big tech, also, doesn't compete like restaurants do. It's more about holding control via network effects, platforms or whatnot. Avoiding head to head competition and market price dynamics entirely. GME fell somewhere in the middle. They're kind of restaurant like, but also relatively big and publicly traded. In any case, the financial meta game can often be more relevant and determinant of reality than market dynamics as per Schumpeter, JS Mill and the like.

JumpCrisscross 5y ago
> Schumpeterian creative destruction is... at this point, more of an idealistic take Schumpeterian creative destruction is an ideal. But the process of innovation it describes is well documented in the study of entrepreneurship, venture capital, new firm formation and the industrial dynamic of new entrance. > isn't a permanent feature of the big fish economy that stock markets represent Most of the stock market isn’t Goliaths. Formation and destruction still reigns in most of the economy. There, short sellers add value. (I’m more sceptical of private equity and its leverage tactics.) > Banking OTOH, doesn't really have a creative destruction dynamic to speak of. Most auto manufacturers are what and who they were 20 or 50 years ago Banking and auto manufacturers share a history in being bailed out. Big Tech looks like a classic market failure, though Facebook’s stumbling gives me pause on that conclusion.
- netcan 5y ago
  >> Schumpeterian creative destruction is an ideal. But the process of innovation it describes is well documented in the study of entrepreneurship, venture capital, new firm formation and the industrial dynamic of new entrance I'm not sure we disagree, at least not much. What I meant is that descriptions/theories/models/takes^ such as these are an ideal, I agree. The extent to which this ideal describes what appears to be a dominant process in the part of the world we're describing varies. What I'm (halfheartedly) arguing is that the Schumpeterian description currently, isn't so dominant. At least, it's not dominant enough to be the basis for understanding short selling... I don't believe. In fact, the share price of a company isn't necessarily very important to the operation of the company... in theory. Short selling is, also in theory, not necessarily all that impactful on share prices. >>Banking and auto manufacturers share a history in being bailed out. True, but again, this is markets in practice. The long term, perfect free market ideals are not something that generally exist in reality for a lot of reasons... both good and bad depending on your perspectives. I don't think Schumpeter meant for his ideas to apply only in hypothetical markets. Creative destruction was as a powerful force, for example, in the early decades of auto manufacturing. Banking has always been somewhat perplexing to economists, who can't really agree on whether or not they should be considered "firms." We might disagree about short sellers vs leveraged buyouts. I'm more skeptical of short selling and derivatives value add, more willing to entertain the idea that leveraged buyouts have a useful role. At least leveraged buyouts relate directly to financing business activities. ^Economists, atm, seem to like the term "story."

by netcan 5y ago

JumpCrisscross 5y ago

> Schumpeterian creative destruction is... at this point, more of an idealistic take Schumpeterian creative destruction is an ideal. But the process of innovation it describes is well documented in the study of entrepreneurship, venture capital, new firm formation and the industrial dynamic of new entrance. > isn't a permanent feature of the big fish economy that stock markets represent Most of the stock market isn’t Goliaths. Formation and destruction still reigns in most of the economy. There, short sellers add value. (I’m more sceptical of private equity and its leverage tactics.) > Banking OTOH, doesn't really have a creative destruction dynamic to speak of. Most auto manufacturers are what and who they were 20 or 50 years ago Banking and auto manufacturers share a history in being bailed out. Big Tech looks like a classic market failure, though Facebook’s stumbling gives me pause on that conclusion.

netcan 5y ago
>> Schumpeterian creative destruction is an ideal. But the process of innovation it describes is well documented in the study of entrepreneurship, venture capital, new firm formation and the industrial dynamic of new entrance I'm not sure we disagree, at least not much. What I meant is that descriptions/theories/models/takes^ such as these are an ideal, I agree. The extent to which this ideal describes what appears to be a dominant process in the part of the world we're describing varies. What I'm (halfheartedly) arguing is that the Schumpeterian description currently, isn't so dominant. At least, it's not dominant enough to be the basis for understanding short selling... I don't believe. In fact, the share price of a company isn't necessarily very important to the operation of the company... in theory. Short selling is, also in theory, not necessarily all that impactful on share prices. >>Banking and auto manufacturers share a history in being bailed out. True, but again, this is markets in practice. The long term, perfect free market ideals are not something that generally exist in reality for a lot of reasons... both good and bad depending on your perspectives. I don't think Schumpeter meant for his ideas to apply only in hypothetical markets. Creative destruction was as a powerful force, for example, in the early decades of auto manufacturing. Banking has always been somewhat perplexing to economists, who can't really agree on whether or not they should be considered "firms." We might disagree about short sellers vs leveraged buyouts. I'm more skeptical of short selling and derivatives value add, more willing to entertain the idea that leveraged buyouts have a useful role. At least leveraged buyouts relate directly to financing business activities. ^Economists, atm, seem to like the term "story."