Saturday, March 19, 2011

"Schumpeterian Gales of Creative Destruction: 10 Dying U.S. Industries on the Verge of Extinction" (but you can still buy an American made buggy whip!)

Via Carpe Diem:
From the Special Report "Dying Industries" from ISISWorld:

"While the U.S. economy is headed further into recovery, not every industry is performing well. Industries go through life cycles, and largely speaking, these are growth, maturity and decline. Even in a recovery, declining industries continue to underperform, and within IBISWorld’s database of close to 700 industries, about 200 are in their decline phase. Of these 200, IBISWorld has identified 10 industries that may be on the verge of extinction in the United States:

1. Wired Telecommunications Carriers 
2. Mills 
3. Newspaper Publishing  
4. Apparel Manufacturing 
5. DVD, Game & Video Rental  

HT: Economic Policy Journal who writes:
...Apparel manufacturing has gone off shore, so that's a bit misleading and I'm not sure about number 6. But the remainder looks pretty accurate.

BTW, Perry writes that these industries are facing extinction because of "Schumpeterian gales of creative destruction" and this is accurate, but many view Schumpterian's creative destruction as the beginning and end of entrepreneurship, which is inaccurate. A much more insightful view of entrepreneurship was developed by the economist Israel Kirzner. Building on the analysis of Ludwig von Mises, Kirzner in Competition and Entrepreneurship makes the important insight that entrepreneurship is a kind of arbitrage, where a person sees an opportunity to take advantage of a price discrepancy between markets....
Odds and ends:
Our last post that mentioned Schumpeter:

Cycles: Schumpeter vs. Wall vs. The Cobden Centre (S&P 400?)
These darn cycle charts look so elegant that you almost wish they could divine the future.
Then your higher brain kicks in and you think "If the charts could predict, why would they need me?"
That was also a bit of lizard brain/survival impulse....
...The chart depicts the flow of the Kitchin and Juglar cycles integrated in 56-year long wave cycles.
Note that Schumpeter’s model presented 18 business cycles in a regular long wave....CHARTS

With all the manipulations by central banks and politicians anyone who tries to bet on an idealized repitition is bound to be disappointed. You might be better off making prop bets On the Periodicity of Crop Circles.

And a New York Times story we threw in the link-vault last year:
Failing Like a Buggy Whip Maker? Better Check Your Simile
NEED to describe a hand-held mathematical calculator? Try “buggy whip.” A typewriter? A VCR? They’ve been called buggy whips, too. Even newspapers have received that label. (That one hurts.)

Buggy whips, used to prod the horses harnessed to wagons and carriages, started to become obsolete when automobiles appeared in the late 19th century. Today, any line of business facing the life-or-death challenge of a digital age will be described, sooner or later, as a contemporary buggy whip maker.

But when one looks at the mechanics of the horse-and-buggy era, it quickly becomes clear that carriage makers and carriage parts makers would serve as much better case studies of attempted technological adaptation. The buggy whip makers were mere fringe players at the margins of the carriage business, which centered on wood and iron work.

The buggy whip analogy is “an obscurity sitting on an anachronism,” said Daniel M. G. Raff, an associate professor of management at the Wharton School of the University of Pennsylvania....MORE
As for buying an American buggy whip (also coachwhip, carriage whip) most tack shops have them or can get them.

Online (!) can probably hook you up.

Westfield Whip Manufacturing Company, Inc. based in Westfield, The Whip City, MA has been making them for over a century. has a list of manufacturers and vendors.

Finally, going back to that NYT article, some thoughts on industries in transition, beginning with a refutation of the proud papa of the simile:
...It’s unlikely that we would even refer metaphorically to buggy whip makers if it weren’t for Theodore Levitt, a Harvard Business School professor. In 1960, he wrote about their plight in a Harvard Business Review article, “Marketing Myopia”; hundreds of thousands of reprints have been sold.

In the article, Mr. Levitt said that businesses should concentrate on their customers’ needs, not on specific products. If only the buggy whip makers had thought of themselves as being in the personal transportation business, providing a stimulant or catalyst to an energy source, Mr. Levitt wrote, they might have survived into the automotive era.

But Mr Levitt’s suggestion that only a failure of imagination kept the whip business from jumping to the automotive business seems historically ungrounded. I spoke recently about buggy whips with Thomas A. Kinney, an assistant professor of history at Bluefield College in Virginia and author of “The Carriage Trade: Making Horse-Drawn Vehicles in America.”...