It is the second most famous term in the history of economics after Adam Smith’s metaphor invisible hand. It describes the competitive market process in the real world. It was coined in 1942 by the famous, iconoclastic Austrian-American economist Joseph Schumpeter, who would reminisce:
I set out to become the greatest lover in Vienna, the greatest horseman in Austria, and the greatest economist in the world. Alas, for the illusions of youth…. As a horseman, I was never really first rate.
“Creative Destruction” …
The best businesses rise to the top in consumer-driven markets. Less competitive firms contract and even disappear. Creative destruction is the process whereby the bad is eliminated, the better replaces the good, and past performance gives way to new strategies and victors. No firm is forever, and financial loss is a characteristic of capitalism, as is the more used term profit.…