Wednesday, November 08, 2006

Schumpeter and Machiavelli

I came across this passage while re-reading Howard Rheingold's book "Smart Mobs." It's right on the money.


"New technologies have a history of destroying the dominance of prior technologies or making them obsolete. Joseph Schumpeter claimed, “This process of Creative Destruction is the essential fact about capitalism.” Lawrence Lessig reminded me of Machiavelli’s counterpoint to Schumpeter: “Innovation makes enemies of all those who prospered under the old regime, and only lukewarm support is forthcoming from those who would prosper under the new.” Those who created an infrastructure in which the devices (telephones, televisions, and radios) are inexpensive and dumb, the network that connects the devices is highly specialized and expensive to install, and the service is sold on a metered basis (telephony, cable TV, and wired Internet access) are challenged by new enterprises in which cheap devices are the network, and no private enterprise owns the medium that carries their messages. The old telecommunications regime, if it is to survive, must either block challenging innovations politically, acquire the companies that challenge them, or change into different kinds of enterprises themselves. The market and the consumer have no obligation to remain loyal to obsolete technologies when something better comes along; just because Western Union had a large investment in telegraphy doesn’t mean that telephony should have been prevented through regulation or legislation.”


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