Before Senators Joe Manchin and Chuck Schumer reached agreement on the Inflation Reduction Act, Manchin was villainized by climate activists for obstructing the legislation. The most dramatic critique called Manchin’s reluctance “tragic” and predicted that he would become “the one man who single-handedly doomed humanity”.
Joe Manchin had lots of company. History is full of examples of leaders who failed to imagine technological transitions. But individual short-sighted leaders hardly stopped the progress of the transition at hand.
Kodak was so invested in its identity and profitability as a photographic film company that it missed the transition to digital photography. Kodak’s miscalculation was so bad it eventually led to bankruptcy, but hardly put the kibosh on the growth of digital photography and the demise of film.
Xerox is credited with inventing the first personal computer at their Paolo Alto research lab fifteen years before Apple’s Macintosh. But Xerox managers failed to see the potential of their invention and decided not to bring it to market. They were, after all, a profitable copier company, and couldn’t imagine how computers could enhance the copier business. Their lack of imagination may have delayed the computer age – but the rest is history.
This story of established interests failing to make the leap to a new technology is so well established that it has a name, “creative destruction”, coined by the economist, Joseph Schumpeter, in 1942. According to Schumpeter
“Capitalism, then, is by nature a form or method of economic change and not only never is but never can be stationary.”
Circumstances, like the war in Ukraine or a reluctant Senator Manchin may create some twists and turns in capitalist transitions, but they are not the drivers. The primary driver is competition from innovation: “the new commodity, the new technology, the new source of supply, the new type of organization.” These innovations threaten the “foundations and very lives” of established interests.
Frustrated climate activists noisily villainize coal barons, like Joe Manchin, and petroleum companies, like Exxon Mobile, for not leading the way. Meanwhile clean tech and green energy entrepreneurs quietly innovate and create the future.
Consider the following:
· Kentucky, another coal mining state, now has more, better paying jobs in clean tech and clean transportation than in coal – by a factor of 7! (Climatenomics)
· Think X, a thinktank focused on technological transitions, developed a report for Germany that notes:
“Disruption of the energy sector by solar, wind, and batteries (SWB) and disruption of the transportation sector by electric and autonomous vehicles (E-Avs) is inevitable within 10 years” [emphasis is my own].
In economist, Schumpeter’s, words, the “perennial gale of creative destruction” is at work, and the method of change is “capitalism”.