The Paradox of Progress

The creation of new products, new services and new operating models in business ecosystems follow a paradoxical pattern. Bursts of these intensely progressive periods are invariably interspersed with periods of dramatic destruction of the old order.

This surprising paradox of progress was best explained by the Austrian economist, Joseph Schumpeter, back in the 1940s with his theory of “creative destruction”, which originally coined by the German economist, Werner Sombart. Schumpeter vividly summarised this paradox of progress as “gales of creative destruction”, the process that incessantly revolutionises the economic structure from within, incessantly destroying the old, incessantly creating a new.[1] His seminal works, Capitalism, Socialism and Democracy, released in the wake of the Great Depression of the 1930s, described the collapse of old businesses and industries, which accelerated the process of innovation by new players who replaced the empty market spaces.[1]

Creative destruction, one of the pillars of the Schumpeterian paradigm, remains capitalism’s driving force, ensuring the perpetual regeneration of businesses. This can be measured by the number of patents filed, by the life cycle of new firms, their entry, growth and exit, and the average differential rate of creation and destruction of firms.[2]

Natural ecosystems, however, are subject to a brutality far harsher than Schumpeter’s creative destruction process at work within business ecosystems. Here, nature, red in tooth and claw, operates under the merciless cruelty of Darwinian principles of natural selection.[3] Let us take a quick journey back to the very beginning.

The first signs of life appeared on earth around 3.5 billion years ago with largely single celled organisms existing until about 540 million years ago.[4][5] Then, a massive proliferation of life commenced with the “Cambrian Explosion”, a period of intense creation that lasted around 30–40 million years.[4] The Cambrian Explosion was evolution’s big bang moment and arguably the most important biological event after the origin of life.[6] A majority of the new life forms created during the Cambrian explosion, however, were subsequently destroyed by the five great mass extinctions over the next 440 million years. A devastating asteroid strike 66 million years ago fuelled the fifth mass extinction that famously destroyed the dinosaurs. This catastrophe, however, yielded way for the smaller mammals that were scurrying around in the shadows of the dinosaurs, giving them opportunity to finally evolve and flourish.[7] A calamitous celestial event, ultimately drove even more biodiversity on the planet, leading to the evolution of our very own deep ancestors, the hominids.

In more recent times, the transformation of medieval Europe also viciously illustrates the power of creative destruction. Europe was then a feudal society with poor peasants exploited by the wealthy landlords, who benefitted from their labour. The terrifying Bubonic plague, or the black death, killed between 30–50% of Europe’s population between 1347–1352, drastically reducing the size of the peasant class. Labour thus became a scarce and valuable resource, resulting in the upward socio-economic mobility of the peasants, coupled with a radical redistribution of wealth among survivors of the plague. By the end of the 1400s the feudal system finally crumbled, only to unleash the birth of the Renaissance – a golden age of creativity that swept across Europe and revolutionised art, architecture, music, science, literature and trade.[8]

The paradox of progress, with periods of creation interceded by periods of destruction, is mirrored in the evolutionary processes of species and ecosystems. This stands testimony to a Schumpeterian truth; the scroll of creation almost always begins with a scroll of destruction, followed by yet another scroll of creation. Charles Darwin, almost a century before Schumpeter, presciently concluded his “Origin of Species” with words, “there is grandeur in this view of life… that, from so simple a beginning endless forms most beautiful and most wonderful have been, and are being, evolved.”[9]

The paradox of progress will continue to play out its arrhythmic melody over the vastness of time, adapting to its mood requires that we harmonise our actions in synchrony with its discordant tune.

References

[1] Schumpeter, Joseph A. 2013. Capitalism, Socialism and Democracy. Routledge.

[2] Aghion, Philippe, Antonin, Celine, Bunel, Simon. 2021. The Power of Creative

Destruction: Economic Upheaval and the Wealth of Nations. Harvard University Press.

[3] Dennett, Daniel C. 1995. Darwin’s Dangerous Idea. Penguin Books.

[4] Parker, Andrew. 2003. In the Blink of an Eye: How Vision Triggered the Big Bang of Evolution. Free Press.

[5] Centre for Near-Earth Object Studies. NEO Basics. Like on Earth: Asteroid Impact.

[6] Yong, Ed. 2019. The Inevitable Evolution. National Geographic.

[7] Carroll, Sean B. 2006. The Making of the Fittest: DNA and the Ultimate Forensic Record of Evolution. W.W. Norton & Company.

[8] Cantor, Norman F. 2001. In the Wake of the Plague. Simon & Schuster.

[9] Darwin, Charles. 1859. On the Origin of Species by Means of Natural Selection. London: John Murray.