May 15, 2017The Weight of Capitalism's Creative Destruction
News of Nokia’s foray into digital bathroom scales is a stark reminder of the difficulties of staying on top. For those with fond memories of Nokia’s iconic mobile “brick” phones, the image of this former superpower embarking on a consumer electronics comeback is evidence of what economists call capitalism’s creative destruction.
Many of today’s Millenials remember little of Nokia’s 14-year run as the market leader. In 2000, Nokia was the largest handset company in the world with a market cap of $250 billion compared with Apple at just $15 billion. In 2014, shortly after the sale of its mobile devices division to Microsoft, the slumping company stopped selling phones altogether. Today, Apple tips the scales at approximately a $770 billion market cap while Nokia, in its latest incarnation as a provider of telecom equipment and fledgling consumer electronics, is valued around $32 billion. What happened?
The road to and from corporate stardom is littered with casualties, but it’s especially treacherous for tech companies whose fortunes are tied to the latest industry innovations. In hindsight, Nokia was too slow to migrate to one of the new smartphone operating systems that dominated after Apple’s 2007 introduction of the iPhone. They were blinded by their previous success and too wedded to their Symbian platform. The same can be said of RIMM’s allegiance to Blackberry OS. Almost overnight, Samsung and Apple, with their feature rich Android & iOS platforms, dominated the smartphone market, sending competitors into the history books.
It’s hard to imagine this former heavyweight making a comeback in consumer electronics but history has a funny way of repeating itself. The company’s roots date back to 1865 when it began as a Finland-based pulp company and produced toilet paper – it’s first entry into bathroom products. Over the years, Nokia has operated in a variety of industries including rubber, forestry, cable, electricity, and electronics. More recently, a company operating under a license from Nokia started selling an updated smartphone based on the classic Nokia 3310. Early China sales have been robust but only time will tell whether there’s more to it than just nostalgia.
Evidence of capitalism’s “incessant industrial mutation” appears regularly in the financial press but contrary to early Marxist predictions, this creative destruction process has not led to capitalism’s demise. Instead, it leads the world in producing ever-higher living standards and operating efficiencies. However, while innovation has the potential to address some of the world’s most pressing problems, we cannot dismiss the burdens placed on those upended by today’s accelerating pace of creative disruption.
Thankfully, the proliferation of online education, graduate business degrees and professional certifications means workers have more options than simply relying on government-sponsored retraining programs. However, the key is accepting responsibility for a career of life-long learning. Adding to your skillset won’t eliminate economic uncertainty, but it will ensure that the journey is far more enjoyable and rewarding.