November 30, 2018

The Destruction Index

In an Atlantic profile of Sam Altman, he is quoted as saying, Democracy only works in a growing economy. Without a return to economic growth, the democratic experiment will fail. And I have to think that YC is hugely important to that growth.”

I agree with the premise. But I disagree with the conclusion.

The irony of innovation is that it is destructive.

Innovation means making things more efficient. Efficiency means a computer can connect two callers together faster than a human operator can.

When innovation makes tasks more efficient, those tasks require less time to complete. If they require less time, they require less employees.

Innovation is destructive.

If innovation happens too quickly, perhaps the destruction happens too quickly. The rapid change of innovation is so painful that it hides the economic progress from everyone working in the economy.

It’s hard to see how the world is improving from cheaper cars when everyone in your Michigan town loses their job.

Perhaps there is an ideal rate of innovation, an ideal rate of destruction. It could be measured as a ratio between growth and destruction. Because some economic projects, such as a new road between two towns where nothing existed before, wreak less short-term destruction than companies such as Uber, which directly reduce demand for taxis.

We could call this the Destruction Index.

Because while economic growth is good for everyone (and for Democracy), innovation is not good for everyone. If innovation comes too quickly, perhaps the pain of destruction overshadows the gains of growth.

My guess is that there is a naturally-occurring balance between growth and destruction in a normal, functioning economy. A standard Destruction Index.

It’s worth thinking whether or not it’s smart to artificially skew the index by keeping the innovation” pedal slammed to the metal.

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