Creative Conservation

capitalism-socialism-and-democracy-joseph-a-schumpeter-first-edition-1943-signed.jpgI just checked the index of my dissertation to see if this book to the right is listed. It is not. Strange.

Rarely has a single idea had so much impact on me. Creative destruction, a concept that Joseph Schumpeter is most famous for, comes from that book. I will not try to explain it here because either you already know what it means or else you should really read it from the source.

In my dissertation I was interested in the impact of the efforts of entrepreneurs–specifically every single one of the thousands of entrepreneurs that started up a hotel business from the 1880s to the 1980s on both the Canadian and US side of Niagara Falls–to join together to develop a mutually beneficial solution when facing a collective threat. In this century-long story I had metrics to determine how those efforts impacted the likelihood of a hotelier’s staying in business after starting up. Niagara Falls was at risk of being ruined as a natural attraction. Hoteliers on each side of the border joined one another, cooperating with their direct competitors, to find a solution to that risk. Hoteliers, independently of the actions of those on the other side, jointly invested in conservation initiatives. The rich quantitative data show that on the side of the border that invested more heavily in conservation, over the course of 100 years hotels had fewer failures (permanent closure) overall. Bravo, Canada.

The creative destruction idea was likely in an earlier draft of my dissertation. But my academic discipline was Organization, rather than Economics, so likely I was persuaded by my dissertation committee to consider a more sociological explanation for my findings. Which I did. And while these two words also do not show up in my dissertation, creative conservation was what most caught my attention. If destructive forces outside the control of individual entrepreneurs can lead to their demise, what is to be done? Cooperate when the circumstances call for it. The key is avoiding collusion, which benefits the few at the expense of the many, so the cooperation must be structured in a way that is unmistakably good for all cooperating.

For Schumpeter, the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” It is implied that progress is inevitable and that progress inevitably involves destroying the old order to free up resources for the new order (according to my rusty recollection, so please read his book). I am Schumpeter-inclined, but sometimes progress needs a nudge, sometimes from a single disruptor and sometimes in the form of collective action.

This idea, creative conservation, is at the heart of our new venture, Authentica. A summary of why: in the few decades since tourism became an important economic activity in Costa Rica, local artisans struggled due to the import of low-cost replicas from Chinese factories of Costa Rican traditional handicrafts. Artisans have recently engaged in collective action to solve this problem. Workshops and creative communities joining forces to improve design, production quality and efficiency–all kinds of improvements. Authentica joins their efforts with two shops, designed so local handicrafts, specialty coffees and artisanal foods receive the attention they deserve.

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