joseph schumpeter google

It’s Not Schumpeter’s Gale Anymore, It’s Google’s—And the Wind is Picking Up Fast.

Matthew Snyder Technology 4 Comments

Can an Austrian bureaucrat who’s been dead for 66 years forecast the global advance of technology by 2020? Turns out he can, if we look at Google with his scholarship through a modern lens. And we’d better look and act fast to capitalize.


Joseph Schumpeter, one-time Austrian finance minister who taught at Harvard and became one of the 20th century’s most influential economists, was the leading proponent of “creative destruction.” Schumpeter’s vision holds a great lesson for today’s technology leaders.


In his 1942 text, “Capitalism, Socialism and Democracy,” Schumpeter wrote of a “perennial gale of creative destruction.” His forecast holds solid today, but his theories about timing need updating.


In Schumpeter’s day radio was king but that medium was well on its way to being blown away by television. Three decades later, the gale blew the big broadcasters’ ad revenues away with the emergence of national cable networks. By the 2000s, the big cable providers were battening down the hatches against the proliferation of content choices on the Internet. Schumpeter’s theories about business cycles—using timeframes like 54, 9, and 4 years to form predictable, composite waves of creative destruction—purported to give some sense of predictability to how different technological and economic forces drove businesses and economies forward.


So what had been 30-year cycles started to shorten up as connectivity and computing power increased, but they shortened predictably. Internet, Web, e-mail and desktop to social and mobile—all of these developed more or less predictably according to Schumpeter’s theory.


That was until computing power—the sails that propel the modern service and content economies—evolved to include machines capable of 33.86 petaflops per second. Which are dwarfed, in their computing power, by the collective capacity of mobile devices, personal computers, or any other other category of wireless appliance in common use. The Obama administration has proposed to lead the charge to exascale supercomputers capable of one billion billion operations per second, by 2025. By which time their technology will be completely irrelevant as processing power and connectivity increase faster than the economy has capacity to handle.


This rising wind will destroy big swaths of our economy soon, and we can learn what to do about that if we study some of the anticipatory moves made by the largest, most successful organizations.

Watch how Google sets its sails to windward:

If the economy of tomorrow is all about specific technologies (doubtful), Google sit in the captain’s chair as the company that has:

  • written the algorithms to index and convey the vast majority of the world’s content;
  • created and given away an operating system that runs on billions of devices;
  • launched balloons to deliver wireless signal;
  • pioneered set-top boxes that wrest control away from traditional providers, and more.


If instead the economy is all about content (more likely but not a sure thing), Google’s navigation skills have been improved by:

  • indexing the world’s web pages and books, so that no matter the future of copyright law, Google have their hands on the content;
  • buying and immensely resourcing YouTube, so that no matter the future of copyright law, Google have their hands on the content;
  • developing (and hosting) a suite of business productivity apps, so that no matter the future of business, (trend alert!) Google have their hands on the content; and more.


From this perspective it looks like Google are making ready for a hell of a storm that will have them navigating both tech and content, which they expect to hit soon. The business cycle timeline is unknowable, even to Google, but it’s at least understandable if we go back to Schumpeter. He wrote about cycles measured in dozens of years and handfuls of years. Since the 2000s we’ve been lucky if an identifiable business cycle lasted 10 years or even five. In the past two years, industry titans are making moves monthly that suggest they are preparing for something big, soon.


What could it be?


If we look across both technology and content, there is evidence that a global tsunami of mesh technology will be the next big creative destroyer. WhatsApp, Snapchat, and other channels run on DDWRT mesh software standards, and every modern wireless router has the right hardware to play along. More and more devices are becoming internet enabled regardless of being tethered to a network or provider, and content is being passed around with fewer obstacles and protections than ever.


Content and code are being stored on devices where it never could have been imagined before—my Chevy has the wherewithal to store and display my family photos to me and, with one or two tweaks, will be able to drive my family around without my input. Familiar waypoints like limits on copyright, transmission, and encryption are getting tossed by the wayside.


Soon, all this content will be transmitted around the globe as conveniently and securely as anyone would like it to be. This mesh technology will be upon us at a speed that not even a dead Austrian economist could have ever dreamed of. All it will take is one or two more cycles like this before the gale blows too hard for all but the adept business sailors.

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