The U.S. Economy Could Use More Disruption

FiveThirtyEight: “Talk to anyone in Silicon Valley these days, and it’s hard to go more than two minutes without hearing about ‘disruption.’ Uber is disrupting the taxi business. Airbnb is disrupting the hotel business. Apple’s iTunes disrupted the music industry, but now risks being disrupted by Spotify. Listen long enough, and it’s hard not to conclude that existing companies, no matter how big and powerful, are all but doomed, marking time until their inevitable overthrow by hoodie-wearing innovators.”

“In fact, the opposite is true. By a wide range of measures, the advantages of incumbency in corporate America have never been greater.”

Economists Ian Hathaway and Robert Litan write in a new Brookings Institution paper, “The business sector of the United States appears to be getting ‘old and fat.'”

The dominance of established businesses is directly correlated to the fact that fewer Americans are starting new businesses. Older businesses simply have less to fear from would-be disrupters.

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The bottom line of this research: “The U.S. economy has become less flexible, more risk-averse and slower to react to changing circumstances. Maybe it could use a little disruption.”