Posted by: seanmalstrom | October 29, 2008

What Does the Wimpering Cry of a Disrupted Industry Sound Like?

Disruption is a very vicious thing… to the disrupted industry. But it is very just. The only way a business can survive being disrupted is being humble. This is the reason why Iwata said Nintendo must not become arrogant and why Reggie keeps saying Nintendo must stay paranoid. Comfort and arrogance will destroy an industry because it puts up blinders which prevents it from seeing the upcoming disruption. Show me a disruption, and I will show you an industry that is arrogant and comfortable. Show me a destroyed business from disruption, and I will show you a business who refused to humble themselves.

While disruption is occurring in the video game industry, and those who are arrogant and comfortable are revealing who they are as they see Expanded Gaming as a *threat* to them (how can more customers playing video games be a threat?), I want to spotlight an industry that has been thoroughly disrupted and is nothing but a shell of its former self… and is on the verge of total implosion. This would be the Old Media meaning traditional newspapers (New York Times, Houston Chronicle, etc.) as well as traditional nightly television news (ABC, CBS, NBC).

What does a disrupted industry do right before it dies? It veers hard for government nationalization. I kid you not! When the railroads got disrupted and were dying, they all kneeled for government subsidies. The problem with channeling funding from the government into a disrupted business is that it breaks the Wheel of Disruption. It is right and proper that industries should die when they cannot generate profit. Why? It is because customers are the barometer of quality. Railroads weren’t disrupted because of automobiles and airplanes; they were disrupted because railroads thought they were in the railroad business and not the transportation business. Railroads never bothered to *compete* against automobiles and airplanes. In the same with Old Media, they always saw the Internet or alternative sources as irrelevant, as something so below them that they didn’t need to compete. Now the New Media is taking over and the Old Media is on its back, soon to be completely dead.

The next obvious path would be the Old Media to attempt to be funded by the government (which brings up huge issues as that would create a state press, a government funded press is not allowed First Amendment protection). A very insightful piece on the death, and why the Old Media is arrogantly chasing customers away, was written by former Forbes editor Malone. The key quote from his piece is this:

Picture yourself in your 50s in a job where you’ve spent 30 years working your way to the top, to the cockpit of power … only to discover that you’re presiding over a dying industry. The Internet and alternative media are stealing your readers, your advertisers and your top young talent. Many of your peers shrewdly took golden parachutes and disappeared. Your job doesn’t have anywhere near the power and influence it did when your started your climb. The Newspaper Guild is too weak to protect you any more, and there is a very good chance you’ll lose your job before you cross that finish line, 10 years hence, of retirement and a pension.

In other words, you are facing career catastrophe — and desperate times call for desperate measures. Even if you have to risk everything on a single Hail Mary play. Even if you have to compromise the principles that got you here. After all, newspapers and network news are doomed anyway — all that counts is keeping them on life support until you can retire.

And then the opportunity presents itself — an attractive young candidate whose politics likely matches yours, but more important, he offers the prospect of a transformed Washington with the power to fix everything that has gone wrong in your career.

With luck, this monolithic, single-party government will crush the alternative media via a revived fairness doctrine, re-invigorate unions by getting rid of secret votes, and just maybe be beholden to people like you in the traditional media for getting it there.

And besides, you tell yourself, it’s all for the good of the country …

We ask our children, “What do you want to do when you grow up?” What we should be asking them is: “What type of character do you want to be when you grow up?” The character matters more than the profession. What good is it to become a CEO if you are a crook? Or an investor if you are a clown? Or a doctor if you are a cheat? Real achievement flows from the inner fountain of character, not the shoddy external foam of appearance. People with drive and humility rise up easily in life for it is, to them, like walking through empty rooms.

And, second to character, what absolutely must be taught and learned by everyone is financial education. This is the education of how to create your own financial house, your own cashflow, rather than depending on someone else’s.

Think of the editors Malone is talking about. They started off at the very bottom of the corporate ladder and invested their life to climbing to the top. Now, at the top, their industry is being disrupted and they realize they are at the top of a collapsing castle. They, themselves, don’t care about those below them who are starting to climb the corporate ladder even though that ladder is falling apart. The editors invested their life to get to the top of an industry that is crumbling. Thus, they become bitter, fearful, and desire to be nationalized so they can retire (or continue to perform their business however they want without being affected by annoyed customers or lack of customers [which is what nationalization or subsidies would do]).

What if these editors were financially smart? Well, they could begin a new business in the New Media, take their knowledge and epxerience of Old Media and create a powerful new New Media business. They could alter their business model so the Old Media would thrive with the New Media. The editors would have a ton of options. However, since they are not financially smart, their options are only two:

1) Watch your industry dissolve and your retirement along with it (but keep your journalistic character)

2) Do everything possible to aim for government subsidies that would secure your retirement and allow you to not change your day-to-day business, in other words, allows you to remain arrogant and comfortable (but at the total cost of your character and integrity).

As Malone has pointed out, editors are choosing option two. If Old Media is rapidly dying, and a politician says they will subsidize it, is the Old Media doing everything it can to get that politician into power a sign of self-interest? Of course it is. Imagine if there was an option three…

3) You create or fall back on your own financial house that you created and you, alone, control.

My point in all this is the lack of financial education is helping fuel corruption within business and government. When people know how to generate wealth on their own, they don’t need to seek government subsidies or corrupt their character in order to keep making money. Have you ever felt the NEED to work at a job you HATED? If you had the ability to generate wealth on your own, you could quit your job whenever you wanted. This is why I connect the corruption in the Old Media to the lack of financial education. People like the idea of the Old Media, of the grand old newspapers and grandfatherly anchormen. If editors were entrepreneurs, they would be able to see beyond being in the ‘news’ buisness, and I don’t think the Old Media would have been as disrupted as severely as it became.

What if, within ten years from now, gaming companies that only work with Core Gaming go to their government of their nation and demand government subsidies under the ‘importance of culture and the nation’? You might laugh, but this is exactly what happened with various industies from railroads to painters.

It is by Nature’s Law that for children to come into their own that parents must die. It is the same with parent industries and child industries. The automobile industry would not have come into its own if the buggy industry became *protected*. Neither will the Internet come into its own if newspapers and televised news become *protected*. The Wheel of Disruption, like the cycle of life, must continue to turn.



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