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DANIEL VAUGHAN: Creative destruction and revolution in your grocery aisle
Right now, we’re living through a massive technological revolution that is rapidly changing every aspect of our daily lives — and it is happening somewhat peaceably. Indeed, we’re far away from the technological doom and gloom reports of years past.
I started thinking about this while grocery shopping over the weekend. My local Walmart has gone through extensive renovations recently. The number of cashier lanes was cut in half and replaced with more self-checkout lanes. The number of self-checkout areas appears to have doubled, which has, in turn, reduced the number of people in lines because, technically speaking, all lines are open.
“Robots are taking cashier jobs” used to be a sign that people would lose jobs and we’d never get them back. News reports would flash across business sites like CNBC warning that the robots were coming, and you needed to get scared now! But the reality is proving to be considerably different.
In my Walmart, what I’ve noticed is that the people in those previous cashier employees haven’t gotten fired; they’ve been shifted to deal with grocery pick-up orders. In fact, the entire store was redesigned to better facilitate the massive amount of pick-up orders they receive. Grocery pick-up carts line the center aisles and around the edge of the store, with employees rapidly working through countless orders.
In fact, not only are jobs not vanishing in this space, they’re being created at a fast clip. Walmart announced last month that it had targeted and hired more than 6,000 veteran spouses needing employment across the country. They’ve also hired veterans needing jobs.
And it’s not just in stores you know that these jobs are popping up. Look at the artificial intelligence systems these stores are installing: IT professionals are maintaining those systems on a local, regional, and national level. And it’s not just Walmart — Kroger is doing similar things in their stores.
We’re living through a technological disruption right now that’s changing every aspect of our lives. And while old jobs are going away, new jobs are being created that no one conceived of just five years ago.
People are ordering groceries from their phone and either picking them up at the store or having those same groceries shipped to their house. Walmart and Amazon have entered into a vast retail shipping war, getting items to their shoppers the next day at no cost.
This piece isn’t to highlight Walmart as a place you should shop. Rather, I’m trying to point out how the world is changing and although the robots are, indeed, taking jobs, they’re also creating new ones — and these new jobs are in entirely new market segments.
And that’s the real spectacle of the capitalistic system at play. People like Bernie Sanders and Alexandra Ocasio-Cortez preach socialism as if capitalism is destroying jobs and making the world worse. But in reality, capitalism — and more specifically, competition between companies in highly competitive markets — is creating and enlarging the market as much as its disrupting lives.
The pie isn’t shrinking or static — it’s expanding.
Another term for it is “creative destruction.” Before old jobs get taken away, new ones often pop up in ways that challenge old models. Sanders and Ocasio-Cortez argue the economic pie is static, and it’s all about distributing that set amount to everyone.
Reality tells a different story.
In a study of corporations on the S&P 500, it was estimated that by 2027, the average company will only last 12 years on the S&P 500 before falling off the list. The study said, in part:
Shrinking lifespans of companies on the list are in part driven by a complex combination of technology shifts and economic shocks, some of which are beyond the control of corporate leaders. But frequently, companies miss opportunities to adapt or take advantage of these changes through economic innovation. For example, they continue to apply existing business models to new markets, are slow to respond to disruptive competitors in low-profit segments, or fail to adequately envision and invest in new growth areas which often takes a decade or longer to pay off.
Successful companies did things differently, according to the report:
We’ve seen the rise of other companies take their place on the list by creating new products, business models, and serving new customers.
Adapt or die.
That’s the motto of corporate America, and the end product is massive gains for the American consumer. Consumers can get what they want, how they want it, and, increasingly, when they want it. And while jobs are being killed off in the process, new jobs are being created in that creative destructive churn that creates entirely new industries.
Economist Joseph Schumpeter used the term “creative destruction” in the 1940s. “The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U.S. Steel illustrate the same process of industrial mutation — if I may use that biological term — that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one,” he wrote. “This process of Creative Destruction is the essential fact about capitalism.”
The internet and our increasingly powerful technology have increased the churn of this creative destruction. And instead of fearing it through the lens of socialism, we should embrace what it has to offer through the power of a free and prosperous capitalist society.
If you want to see it for yourself, all you have to do is walk into your local grocery store. Hope and change are more likely to be found in how you buy your milk and eggs than in our politics. Taken all together, that’s a rather reassuring thought.
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