Sep 172012

A recent episode of Planet Money described the process of “creative destruction”.

“By 1991 Walmart has taken over Woolworth’s place on the Dow Jones, by 1997 Woolworth’s has closed down all of its stores […] Why isn’t Woolworth’s prepared to make that change, they should be better prepared than anyone. They could’ve been Wal-Mart, why didn’t they go out to the rural areas and build giant stores? […] When you have an incremental innovation, where it’s just about trying to do what you already do a little bit better, the established firms are really good at that, they’ve got all the resources and all the expertise. But whenever there’s a disruptive innovation that comes along, a totally different way of doing something, that causes a problem for the established firms.”

10% of companies go bankrupt every year. If a major cause of death for powerful, established companies is failure to adapt, it is important that anyone who plans to live for thousands of years be willing and able to adapt to changing conditions. This includes being willing to change your values. Maybe not drastically, and maybe not the most fundamental values. But inflexibility is a death sentence, and it is far better to keep yourself mentally limber than to default to brittle conservatism. If you resist all minor changes for long enough you can become so entrenched in your old positions that once change is finally inevitable you may be unable to adapt in time, and go the way of Woolworth’s.

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