The Corporate Law Group

Andy and Creative Destruction

Andy and Creative DestructionWe recently noted an item in Fortune about Andy Grove, who sadly passed March 21, 2016, titled The Immigrant Who Created Silicon Valley. For those of you not schooled in Valley history, Grove was born in Hungary in 1936 and was a founder and CEO of Intel. If you haven’t read his High Output Management, stop reading right now and go get a copy.

But this post is not just about Andy. We all need to say, “Thank You” to communist Hungary for putting down the Hungarian Revolution of 1956. Without that, Grove may have never left and Silicon Valley may never have been birthed. As Acemoglu and Robinson illustrate in Why Nation’s Fail, when the status quo is protected, creative destruction cannot do its job innovating and society will stagnate. Hungary pushed Grove out and the US benefitted.

And wow did Grove destroy stuff. That’s what innovation does. It pushes people out of their comfort zones. Destroys their business, while creating a new one. Buggy whips, moustache wax, public telephones, US mail, tickets by phone, ice for ice boxes, cassette tapes, floppy disks, paper maps (we just threw out 50), encyclopedia, percolators, rolls of film, pagers, VCR’s, facsimiles, typewriters. The list is almost endless and, if you note, a lot of this stuff was invented recently too. The more things destroyed by innovation the better off you know your society is. The more innovation is rewarded the faster your society is replacing the old with the new.

The more things are protected, the more bailouts of old companies, the more you choke innovation and the worse off you will be. That is why the bailouts of General Motors and AIG were horrible things for the US. Who knows how many innovative auto makers we would now be watching grow. How many new ways of making and selling cars folks would be trying. Instead we have GM. Still. And it looks exactly the same as it did before we bailed it out. Andy disrupted everything he touched, especially management, and we are all better off for it.