Creative Destruction: Technology and Trade (episode 2)

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

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

they'll look old and outdated.

That's just the way it goes with movies.

- [Ian] The first adult movie

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

It was terrifying,

and now you go back

and look at the mechanical shark

that jumped onto the boat,

the great white,
over 20 feet long, thrashing about,

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

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

since the '70s in terms
of graphics.

- [Narrator] This constant
improvement is not limited

to special effects --

sound quality, picture quality,
theater seats.

You name it,
it seems to have improved.

Well, maybe not the acting.

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

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

"creative destruction."

- [Tyler] Creative destruction was
a term in Economics

coined by an Austrian economist,
Joseph Schumpeter,

early in the 20th century.

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

- [Narrator] Creative destruction
describes the continual process

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and services replace outdated ones.

Take photos -- we live in a world

of smartphones, Instagram,
and augmented reality.

How we got here reveals
a long and winding path

of creative destruction.

- When I was a kid,
you take a photo,

and the Polaroid comes out,

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

I don't know
if that actually worked.

And it's several minutes later,

and it probably doesn't
look very good,

but you have it!

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

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

or you might buy film,
typically from Kodak.

You had to pay
a few dollars for film,

which got you about 20 pictures,

and then pay more
to get them developed.

- [man] Got double prints with mine!

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

You didn't know until days later.

And if you accidentally
opened your camera,

poof, your pictures are gone!

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

Entrepreneurs quickly improved
the cameras, the software,

and the accessories.

People increasingly switched
away from film.

It was cheaper, easier
and more enjoyable.

These entrepreneurs represent
the creative side

of creative destruction.

But what about the flip side,
the destruction?

Polaroid employed
over 20,000 people in their heyday.

Kodak dwarfed Polaroid,
employing over 120,000 employees

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

The digital age,
while rejoiced by consumers,

ushered them both
into bankruptcy.

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

and the Kodaks
don't like that development

because they just lost jobs.

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

as a retro product,

but that's actually
not the same company

that made the originals.

That Polaroid is long gone.

See, there are two sides
of creative destruction.

Entrepreneurs inventing new products
or ways to save money

are how we improve
our standard of living.

These improvements are
the foundation of prosperity,

and positively impact
generation after generation.

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

Unlike the games,
that pain typically subsides.

People usually find new jobs.

Most of those thousands
of employees at Polaroid and Kodak

went on to other types of work.

When you take the long view,

these job changes
have historically been beneficial.

In the 1800s, more than half
of the United States

was employed in farming.

Because of time-saving inventions
like the tractor,

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

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

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

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

to do things,
like produce automobiles,

produce airplanes,

for more people
to become entertainers

or movie stars,
more people to become doctors.

- [Narrator] So in the long run,

we have fewer people
working with film

and more building
photo apps and the like.

However, in the short run,

the transition can
be extremely painful.

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

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

You might just be out of a job
and out of luck.

Creative destruction comes
in many forms.

We often think
of the transformative technology,

like the tractor,
or the digital camera,

or the smartphone,
which fundamentally changes

how we do things.

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

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

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

You're taking things
you used to produce,

finding a newer, cheaper way
of doing it --

be it with tractors, with robots,

or with foreign trade.

And they're all technologies
enabling us to produce

new and better things more cheaply.

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

raised in heated greenhouses.

Now, instead of burning fuel
to keep the roses warm,

most of our roses come
from warm weather climates.

This creative destruction
has produced a plentiful supply

of affordable roses.

But just like with Kodak,
not everyone benefits.

That rose farmer
in Pennsylvania isn't thrilled

by the introduction of foreign roses.

She might be out of a job.

More than ever, better education
and training programs are needed

so that people can transition
to new types of work.

- Why is this so important now?

I do think there's
a very specific reason,

and that is the nature of jobs
and the workplace is changing

at an accelerating rate.

So the importance of being able
to retrain yourself,

the importance of being able
to learn how to learn

has never been more important
than it is today.

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

at an accelerating rate?

Remember how
the information revolution

allowed companies to slice
and dice their factories

into a global supply chain?

That has increased competition
in the workplace.

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

Can they make this step cheaper?

Can they make this component better?

Back in the old days,
employees just had to worry

about losing their job
to someone nearby.

Now they might lose it
to a person or robot or software

that could come
from anywhere on the planet.

This means that jobs appear,
disappear, and evolve

more quickly than ever.

That sounds intimidating,
but remember,

this competition drives
the frequent explosions

of creative destruction
that are the signs

of a healthy, vibrant economy.

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

There are those that are hurt
by these explosions.

- So there's no question
that creative destruction

has been a great thing
for human beings.

We just need to remember that
the people that are displaced --

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

We have to make sure
that they have opportunities too.

- [Narrator] Next up, we'll ask

are there winners and losers
of globalization?

Click "Next Video" to keep learning.

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