Creative Destruction. Two words that summarize the free market’s perpetual pressures, the constant improvements in productivity that make our lives wealthier, easier, and better. New ways of doing things replace old ones. Printing presses replaced scribes. Farm machinery replaced draft animals and human laborers. Digital storage replaced camera and movie film. Word processors replaced typewriters. The fax machine replaced telex. Email replaced the fax machine. In these and countless other examples, workers lost their jobs, businesses lost their customers, but in the aggregate, the world improved.
One modern form of creative destruction has been dubbed “disruption innovation.” It doesn’t simply involve better mousetraps, it changes things in a fundamental way. To cite one example, the invention of the automobile itself wasn’t disruptive, but the invention of the mass production assembly line was.
One of today’s big disruptors is the advent of the “sharing” or “gig” economy. While the two are not truly synonymous, they are close enough to be considered together. Most readers will have heard of Uber, Lyft, AirBnB, and Etsy. They are but a few of many gig economy companies, companies that link people who want to drive others around in their own cars, offer their own apartments as short-term rentals, sell their own home-made products to each other, and so forth. The gig economy is one of many ways that the Internet has disrupted traditional business models.
The popularity of these gig businesses is due in part to their facilitating of part-time and at-convenience work, but it’s also been driven by the barriers to entry that exist in the more traditional forms that these services are offered.
Consider the NY City taxi racket. Only medallioned yellow cabs are permitted to pick up street hails, and the city caps the number of medallions. While “car service” companies also exist, one could only access those by telephone and pre-arranged pickup. Over the decades, this has driven the price of a medallion up to well over a million dollars. Enter Uber and Lyft. By moving the process of ordering a car to a smartphone app, by facilitating the process by which drivers can get a T&LC license, and by enabling people to use their own cars to work when they want, these gig economy companies have changed the economics of the taxi medallion industry, and provided a much-needed alternative to engaging in anti-social competitive jockeying on a street corner in the hunt for often-elusive taxicabs. Medallion owners are unhappy, medallion values are down 80%, traditional taxicab drivers are unhappy, but consumers are better served and gig-drivers can make a living. Naturally, the entrenched interests were didn’t care for this creative destruction, and naturally, they turned to politicians to intervene on their behalf.
The same thing happened with AirBnB, which deeply offended the traditional NY City hotels. So, they barked, the politicians listened, and some obscure rules about sublet minimum durations were invoked in an attempt to kill off this particular gig.
Now, contemplate this bit: There are aspects of dental care, including whitening, cleaning, and denture fitting, that don’t require an actual dentist to perform (and, indeed, many dentists employ others to do so). Some have sought to engage in one or another of these activities under their own shingle, rather than as employees of dentists. Right on cue, rent-seekers talk to politicians, and politicians put road blocks up.
Note the common theme: entrenched interests, sensing a threat to their status quo – a status quo due in no small part to government-imposed constraints, get politicians to interfere with the creative destruction that improves things for everyone else. The politicians create rules, add restrictions and limits that seem tailored to halt innovation, and impose often-onerous occupational licensing requirements. Consider this lulu: In NY City, there’s a rule mandating that anyone who pet-sits for compensation must have a kennel license. Yes, indeedy, if you want to use your own home to dog-sit for people going on vacation (a service I used a couple times, years back), the city says you gotta have a license. Why? Because traditional kennels have enough clout to get politicians to sit and heel on command, and because most politicians seem as if they feel they’re not doing their jobs if they aren’t telling someone “no, you can’t.”
The gig economy was helped along by the ever-increasing number of obstacles to more traditional career paths. Apart from the aforementioned excessiveness in occupational licensing and the difficulties in starting up a small business (John Stossel tried to open a lemonade stand by the book in NY City. He figured out it would take 65 days to do so and gave up), things like increasing minimum wages, books full of rules governing the employer-employee relationship, and extreme defensiveness in hiring practices have incentivized alternate means of earning a living.
There’s something very entrepreneurial in taking on gig work. You set your own hours, you more directly reap the fruits of your level of effort, you embrace a greater level of personal responsibility and self-direction, and you enjoy the freedom to more easily change direction and career paths when opportunities arise. The gig economy is a marvelous thing, and validates the idea that market forces tend to win out even when obstacles get put in the way. Unfortunately, those obstacles slow market forces down, introduce inefficiencies, strangle innovation, and interfere with human progress.
The gig economy will, if permitted to bloom, reintroduce a much-needed sense of entrepreneurship into an economy that had been moving toward corporate-oligopoly. The reflexive opponents of corporate-oligopoly should be in love with the gig economy, but, ironically, their misplaced, deluded, or outright deceitful “concerns” about the public good are working to strangle this new and much-needed disruption. Why? Because despite all the anti-Big-Business rhetoric, that crowd is all about control, and just as it cannot abide Big Business that is not theoretically under its control (in reality, Big Business’s lobbies have far more influence than those who want its purported rapacities held in check do), it cannot abide individuals operating “without a leash,” so to speak. The nannies, do-gooders, and worrywarts want the gig economy held in check, lest it provide services they aren’t personally supervising, curating, and regulating. As usual, they hate others’ liberty, and that means hating entrepreneurship itself.
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