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I'm not sure that this is a bad thing in the short term. Unhealthy businesses closing are better for the economy in the long run as it redistributes capitol, ta

by arel 12y ago

I'm not sure that this is a bad thing in the short term. Unhealthy businesses closing are better for the economy in the long run as it redistributes capitol, talent, resources to those that are productive. Japan can tell you all about their "zombie economy"

notacoward 12y ago
This isn't about healthy vs. unhealthy businesses. If that were the case, the businesses that closed would be balanced by new ones (of the same size) that opened. This is about consolidation from a larger number of smaller companies to a smaller number of larger ones. It would be a bit surprising to hear - on HN of all places - that big companies are inherently healthier or better to have than small ones.
- humanrebar 12y ago
  I don't know. We used to have a bunch of owner-run video rental shops around. That has been replaced with streaming and RedBox. Does that mean we're unhealthy? Maybe some of the consolidation is due to the increasing importance of supply-chain at the expense of location in low-margin businesses.
seanccox 12y ago
"The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again." -JM Keynes
- humanrebar 12y ago
  I'm not a fan of that quote. It's a straw man. The critics of Keynes don't think it's flat after the storm. They think the storms are caused by Keynesian carbon emissions, among other things.
michaelochurch 12y ago
The problem is that large, unhealthy businesses are "too big to fail" and still get to survive for a long time. Even if they're shut down, the executives move on and infect (zombify) other companies. We already have a zombie economy. Well-connected people can fail in bad faith, break the law, and nothing bad ever happens to them. A few seats may be exchanged, but it's the same set of (mostly, inept and morally bankrupt) people in charge. Has anything been learned from the fiasco of 2008? Not really. We've added some regulations, but we still have the same people running the corporate economy and, while they may be short-sighted and greedy, they're not stupid and will find ways around this set of regulations just as they did the last ones. Now, on the matter of small businesses: the question of whether "creative destruction" is good comes down to, "why did those businesses fail?" If a restaurant fails because it's badly run and produces a low-quality product, that's a good thing. If it fails because the local economy has gone to shit, that's a bad thing. I think that most of the change is an increasing rate of the latter. On the macro scale, I don't think the proportion of businesses that "deserve" to fail has increased. If anything, it's lower because it's harder (outside of the Valley) to start one. That said, the real problem isn't that businesses are failing. That's inevitable. It's that new ones aren't being created (because no one has the capital).
- digitalengineer 12y ago
  You could even say that more regulation makes more competition less probable. What good are more rules in a time of To Big to Fail? The entry to market is now more difficult for starting business owners.
  - turnip1979 12y ago
    This is a key point. Large existing businesses have the resources to deal with the regulations. Brand new ones don't. More than that, they lack the knowledge capital to even understand the landscape, which certainly discourages a lot of people.
VLM 12y ago
"redistributes capitol, talent, resources" If capital is unavailable intentionally by central control of the economy, the talent has a negative value (mismanagement destroyed the company, perhaps) and the resources are regulated away except for grandfather clause'd incumbents, then this good idea doesn't happen. If it did happen, it would be good, but I believe it no longer happens.

by arel 12y ago

notacoward 12y ago

This isn't about healthy vs. unhealthy businesses. If that were the case, the businesses that closed would be balanced by new ones (of the same size) that opened. This is about consolidation from a larger number of smaller companies to a smaller number of larger ones. It would be a bit surprising to hear - on HN of all places - that big companies are inherently healthier or better to have than small ones.

humanrebar 12y ago
I don't know. We used to have a bunch of owner-run video rental shops around. That has been replaced with streaming and RedBox. Does that mean we're unhealthy? Maybe some of the consolidation is due to the increasing importance of supply-chain at the expense of location in low-margin businesses.

seanccox 12y ago

"The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again." -JM Keynes

humanrebar 12y ago
I'm not a fan of that quote. It's a straw man. The critics of Keynes don't think it's flat after the storm. They think the storms are caused by Keynesian carbon emissions, among other things.

michaelochurch 12y ago

The problem is that large, unhealthy businesses are "too big to fail" and still get to survive for a long time. Even if they're shut down, the executives move on and infect (zombify) other companies. We already have a zombie economy. Well-connected people can fail in bad faith, break the law, and nothing bad ever happens to them. A few seats may be exchanged, but it's the same set of (mostly, inept and morally bankrupt) people in charge. Has anything been learned from the fiasco of 2008? Not really. We've added some regulations, but we still have the same people running the corporate economy and, while they may be short-sighted and greedy, they're not stupid and will find ways around this set of regulations just as they did the last ones. Now, on the matter of small businesses: the question of whether "creative destruction" is good comes down to, "why did those businesses fail?" If a restaurant fails because it's badly run and produces a low-quality product, that's a good thing. If it fails because the local economy has gone to shit, that's a bad thing. I think that most of the change is an increasing rate of the latter. On the macro scale, I don't think the proportion of businesses that "deserve" to fail has increased. If anything, it's lower because it's harder (outside of the Valley) to start one. That said, the real problem isn't that businesses are failing. That's inevitable. It's that new ones aren't being created (because no one has the capital).

digitalengineer 12y ago
You could even say that more regulation makes more competition less probable. What good are more rules in a time of To Big to Fail? The entry to market is now more difficult for starting business owners.
- turnip1979 12y ago
  This is a key point. Large existing businesses have the resources to deal with the regulations. Brand new ones don't. More than that, they lack the knowledge capital to even understand the landscape, which certainly discourages a lot of people.

VLM 12y ago

"redistributes capitol, talent, resources" If capital is unavailable intentionally by central control of the economy, the talent has a negative value (mismanagement destroyed the company, perhaps) and the resources are regulated away except for grandfather clause'd incumbents, then this good idea doesn't happen. If it did happen, it would be good, but I believe it no longer happens.