Schumpeter, interrupted:: the impact of “destructive creation”


Euskara: Joseph Schumpeter ekonomialaria

Euskara: Joseph Schumpeter ekonomialaria (Photo credit: Wikipedia)

I wrote a couple of articles last year, citing the lack of creative destruction in UK Finance and Insurance as a problem, so it is very interesting to read this article. Also good to know that the trend for non-conventional thinking is flourishing at Bank of England.

destructive creation: the type of self-serving innovation intended to improve [short term] returns at the expense of or with out benefit to the customer.

I use the term “unconventional” but, when reading this paragraph, I was reminded of Gresham’s Law. Further food for thought perhaps…

If this is true, it suggests that the economy is suffering from a failure to innovate. Joseph Schumpeter, the granddaddy of innovation economics, first described the innovative process of one of creative destruction, of good ideas driving bad ones to the wall and of capital being reallocated, often rapidly and disruptively, from the old to the new. Broadbent’s analysis suggests that we need more of this if the economy is to recover.

via Schumpeter, interrupted. – Nesta.

Banking: Understand systems first; DON’T over-regulate; save $200bn p.a. for starters…


I can see, precisely, where the headline-writer was coming from and why. The extract of the article from ft.com is below but I felt the need to bring this together with an IBM report (a link to the report at the end of this article) that gets closer to the root of the problem – it still falls short – but points in the direction of an alternate path…

imageBy my interpretation, IBM are telling banks to “look within for the answers they seek”. They have highlighted something pretty fundamental. Made even more tantalising when they quantified it at $200 bn per annum with an emerging market of $900 bn per annum to play for!

“The financial system on which Dodd-Frank is being imposed is far more complex than the lawmakers, and even most regulators, apparently contemplate,” wrote Mr Greenspan.

Read more of this post

Leadership urgently required: Sustainable value or race to the bottom?


I make no apologies for promoting the thoughts and text of someone, whose thinking (on a wide range of financial matters) I have come to respect enormously. Nick’s article (below) reminded me that, if all we do is look address what we observe – treating symptoms – we can expend too much time, effort and money applying patches or plasters (in the form of legislation, regulation, processes) without actually EVER identifying and tackling cause(s). Add a time horizon of years or even decades and the ability of a system to perform the task(s) for which it was originally intended…

Complexity decl marg returnsIs this how successive Governments have allowed the Public Sector to become excessively complex: structurally fragile, morally and financially bankrupt, monuments to institutional neglect?

– why “users” and frontline services suffer in the face of budget cuts whilst layers of management indulge in self-preservation?

Is this why Corporate rewards that are results-driven rather than strategy-led have increased moral hazard?

Why Financial Regulation failed and is “too complex” to pursue those responsible – but not, apparently, accountable – for destroying the global economy? Read more of this post