CNN, Ball Corp and Creative Destruction

Sitting in an airport recently, a logo caught my eye. It was a curved white line over the red letters “CNN.” My first thought was, “Hmmm. They’re still around?” Then I started fondly remembering all the things I’d rather do then watch cable news. Like shave my head with a cheese grater.

Eventually I started thinking about Joseph Schumpeter, though, and ended up feeling pretty positive about the economic future of the United States. And I was about to board a Spirit Airlines flight, even.

Schumpeter coined the phrase “creative destruction,” now usually referred to as the Phoenix-like rise of new businesses out of the ashes of once successful enterprises.

At one point, CBS had a lock on American eyeballs when it came to TV news. Then a plucky upstart from Atlanta named CNN earned its bona fides during the first Gulf War in the early 1990s. It was a ratings juggernaut…until it wasn’t anymore. In July of 2012, CNN had 20% fewer viewers than the prior July. Now, FOX News has a program that hits the air at 2:00 AM which has more viewers than CNN’s prime time lineup. FOX will be the ratings king…until it isn’t anymore.

It’s not just happening in the TV news industry, but in almost every major facet of our economy. And long-term, it’s healthy. It’s a way to slough off dead weight and reinvent and reinvigorate tired organizations. Is there pain involved? Absolutely. Being unemployed is brutal. And everyone from the head of CNN to the food cart guys outside their once bustling-studios in Atlanta feels the pain. But it’s also part of the cycle – new businesses sprout up, hopefully having learned from the lessons of the past while improving the future and growing even more wealth for their new employees. And some of those new businesses even provide meaningful new products and services that people actually need.

You feelin’ me, Zuckerberg?

It happened in the steel industry. The auto industry. The tech industry. Like it or not, it’s bound to keep happening. And even inside big companies, within all those divisions and segments and dotted-line org charts, creative destruction runs amok…or else the stagnant parts of those companies eventually die out.

Remember the old Ball canning jars? My grandmother made the world’s best bread and butter pickles every fall, and saved six of those big old jars full of them just for me. And I would eat them all in about two days.

The Ball company still exists. It no longer makes glass canning jars, though. It now makes aluminum aerosol packaging. And satellites. Does very cool solar electric propulsion stuff. Brake fluid cans. But no more glass pickle jars.

Why? Ultimately, they simply had to change. If Ball had been stuck making glass jars for the not-quite-as-popular-as-it-once-was home canning market, it wouldn’t have done a fraction of a fraction of that $8.5 billion in sales it did last year.

So, I’m keeping the faith about the U.S. economy. That’s not always easy these days, when it’s so joined at the hip with dysfunctional politicos. And to paraphrase someone else, it’s much easier to sound smart being a pessimist about the economy than when taking a non-apocalyptic view. But long-term, we’ll be okay – as long as we continue to allow smart people to keep reinventing their industries, their businesses and themselves.

Cale Smith

About Cale Smith

Portfolio Manager at Islamorada Investment Management.
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