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♪ [music] ♪

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- [Narrator] "Infinity War" is known [br]for its spectacular special effects.

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But we can pretty certain[br]that in a couple of decades.

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they'll look old and outdated.

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That's just the way it goes with movies.

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- [Ian] The first adult movie

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that I ever saw was [br]the original "Jaws" in summer camp.

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It was terrifying,

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and now you go back

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and look at the mechanical shark

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that jumped onto the boat,

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the great white, [br]over 20 feet long, thrashing about,

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and you go, "That is a ridiculous, [br]stupid-looking thing."

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So, I feel pretty clear [br]that we have come a long way

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since the '70s in terms [br]of graphics.

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- [Narrator] This constant [br]improvement is not limited

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to special effects --

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sound quality, picture quality, [br]theater seats.

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You name it, [br]it seems to have improved.

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Well, maybe not the acting.

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- [Edward] Oh no, not the bees![br]Not the bees! Ahh!

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- [Narrator] Economists have a term[br]for this type of improvement --

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"creative destruction."

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- [Tyler] Creative destruction was [br]a term in Economics

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coined by an Austrian economist,[br]Joseph Schumpeter,

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early in the 20th century.

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It's really become [br]a central driving idea in Economics.

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- [Narrator] Creative destruction[br]describes the continual process

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of innovation in which new products[br]and services replace outdated ones.

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Take photos -- we live in a world

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of smartphones, Instagram,[br]and augmented reality.

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How we got here reveals[br]a long and winding path

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of creative destruction.

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- When I was a kid, [br]you take a photo,

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and the Polaroid comes out,

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you wave it around because you think[br]it's going to make it dry faster.

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I don't know [br]if that actually worked.

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And it's several minutes later,

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and it probably doesn't [br]look very good,

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but you have it!

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And 10 years later, it's all faded, [br]and it probably doesn't keep.

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- [Narrator] Before the digital era,[br]you might have a Polaroid

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or you might buy film,[br]typically from Kodak.

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You had to pay [br]a few dollars for film,

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which got you about 20 pictures,

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and then pay more[br]to get them developed.

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- [man] Got double prints with mine!

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- [Narrator] If, whoops, [br]your eyes were shut -- too bad!

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You didn't know until days later.

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And if you accidentally [br]opened your camera,

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poof, your pictures are gone!

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Digital cameras came on the scene[br]at the end of the 20th century.

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Entrepreneurs quickly improved[br]the cameras, the software,

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and the accessories.

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People increasingly switched [br]away from film.

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It was cheaper, easier [br]and more enjoyable.

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These entrepreneurs represent [br]the creative side

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of creative destruction.

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But what about the flip side,[br]the destruction?

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Polaroid employed [br]over 20,000 people in their heyday.

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Kodak dwarfed Polaroid,[br]employing over 120,000 employees

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and being one of the most [br]well-known companies in the world.

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The digital age,[br]while rejoiced by consumers,

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ushered them both[br]into bankruptcy.

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- But let's be clear, the people[br]that used to make the Polaroids

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and the Kodaks[br]don't like that development

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because they just lost jobs.

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- [Narrator] Polaroids have had [br]a bit of a resurgence lately

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as a retro product,

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but that's actually [br]not the same company

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that made the originals.

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That Polaroid is long gone.

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See, there are two sides [br]of creative destruction.

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Entrepreneurs inventing new products[br]or ways to save money

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are how we improve [br]our standard of living.

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These improvements are [br]the foundation of prosperity,

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and positively impact [br]generation after generation.

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But the flip side can make jobs[br]or even whole industries go extinct.

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Unlike the games, [br]that pain typically subsides.

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People usually find new jobs.

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Most of those thousands[br]of employees at Polaroid and Kodak

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went on to other types of work.

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When you take the long view,

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these job changes[br]have historically been beneficial.

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In the 1800s, more than half [br]of the United States

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was employed in farming.

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Because of time-saving inventions[br]like the tractor,

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farmers now make up[br]less than 2% of the workforce.

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- Now you might think,[br]"My goodness! Those poor farmers!

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Where did they go? What kind of jobs[br]could they possibly have had?"

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But by liberating that labor,[br]we made it possible for people

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to do things, [br]like produce automobiles,

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produce airplanes,

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for more people [br]to become entertainers

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or movie stars, [br]more people to become doctors.

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- [Narrator] So in the long run,

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we have fewer people[br]working with film

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and more building [br]photo apps and the like.

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However, in the short run,

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the transition can [br]be extremely painful.

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If you've spent your life perfecting [br]the craft of developing film,

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you're not walking out of Kodak[br]and into a sweet gig at Instagram.

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You might just be out of a job[br]and out of luck.

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Creative destruction comes [br]in many forms.

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We often think [br]of the transformative technology,

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like the tractor,[br]or the digital camera,

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or the smartphone,[br]which fundamentally changes

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how we do things.

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Here's a not so obvious source[br]of creative destruction -- trade.

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- Trading with another nation,[br]it is a kind of technology.

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It's a way of getting [br]something else more cheaply.

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You're taking things [br]you used to produce,

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finding a newer, cheaper way [br]of doing it --

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be it with tractors, with robots,

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or with foreign trade.

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And they're all technologies[br]enabling us to produce

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new and better things more cheaply.

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- [Narrator] For example,[br]roses used to be grown in the U.S.

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raised in heated greenhouses.

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Now, instead of burning fuel[br]to keep the roses warm,

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most of our roses come [br]from warm weather climates.

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This creative destruction[br]has produced a plentiful supply

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of affordable roses.

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But just like with Kodak,[br]not everyone benefits.

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That rose farmer [br]in Pennsylvania isn't thrilled

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by the introduction of foreign roses.

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She might be out of a job.

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More than ever, better education[br]and training programs are needed

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so that people can transition[br]to new types of work.

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- Why is this so important now?

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I do think there's [br]a very specific reason,

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and that is the nature of jobs[br]and the workplace is changing

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at an accelerating rate.

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So the importance of being able [br]to retrain yourself,

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the importance of being able [br]to learn how to learn

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has never been more important[br]than it is today.

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- [Narrator] Why did Tyler say [br]the workplace is changing

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at an accelerating rate?

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Remember how [br]the information revolution

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allowed companies to slice [br]and dice their factories

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into a global supply chain?

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That has increased competition[br]in the workplace.

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Take Apple -- they're evaluating[br]every link of their supply chain.

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Can they make this step cheaper?

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Can they make this component better?

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Back in the old days, [br]employees just had to worry

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about losing their job[br]to someone nearby.

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Now they might lose it[br]to a person or robot or software

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that could come [br]from anywhere on the planet.

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This means that jobs appear,[br]disappear, and evolve

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more quickly than ever.

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That sounds intimidating,[br]but remember,

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this competition drives[br]the frequent explosions

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of creative destruction[br]that are the signs

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of a healthy, vibrant economy.

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But we can't forget [br]the flip side of the coin.

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There are those that are hurt[br]by these explosions.

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- So there's no question[br]that creative destruction

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has been a great thing [br]for human beings.

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We just need to remember that [br]the people that are displaced --

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we have to make sure [br]that we don't forget those people.

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We have to make sure [br]that they have opportunities too.

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- [Narrator] Next up, we'll ask

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are there winners and losers[br]of globalization?

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Click "Next Video" to keep learning.

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♪ [music] ♪