Other companies caught up fast. Customers decide which businesses succeed and which ones fail. This is why centrally planning an economy doesn’t work. “Politicians and bureaucrats don’t know what people are going to value,” explains Malone. “They pick winners and losers based on what they want or what they think is going to earn them the most important allies.” Blockbuster’s demise began when it charged a man named Reed Hastings $40 in late fees. That annoyed him so much, he started a subscription-based, mail-order movie rental company he called Netflix. Then, Netflix made movies available online. Now we have instant access to more entertainment than ever through Disney+, Hulu, Amazon Prime, etc., all for a fraction of the cost of the original Netflix. Still, we complain. That’s how it is with capitalism, and it’s a wonderful thing. While we complain, entrepreneurs like Hastings invent faster, easier ways to get us what we want. Many offer us options we never knew we wanted, putting old giants out of business. There is an economics lesson in that. When entrepreneurs face competition, they often lose, but the fights make life better for us consumers. This process of old things being replaced by new and better ones was dubbed “creative destruction” by economist Joseph Schumpeter. We see creative destruction in every industry.
There is an economics lesson in that. When entrepreneurs face competition, they often lose, but the fights make life better for us consumers...
The first flip phone cost $1,000 and couldn’t do the things we expect phones to do today. Competition drove further innovation. We got the Blackberry, and then the iPhone. What amazing things will businesses come up with next? Malone’s video points out that the best way to find out is to keep government and central planning out of the mix. Once government wades in with regulations, it tends to freeze the current model in place, assuming it’s the best way to do things. But the best way to do things is one that we haven’t even thought of yet, produced by the endless creative process called competition. © The Creators
John Stossel is an award-winning contrarian journalist and most recently the author of No They Can't! Why Government Fails – But Individuals Succeed.
American Consequences
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