by Simon Bond

We have said it before but we’ll say it again.

The accelerating rate of change ensures that more technologies alter more aspects of life at an ever-quickening rate.

Income diversification is the golden rule of the early 21st century. 

A little-understood dimension of this is the concept of Joseph Schumpeter's 'Creative Destruction', where the process of technological change topples existing norms and replaces them with new ones, often quite rapidly.

Those that fail to create and maintain multiple streams of income are imperiling themselves. 

The hottest career one can embark on, which will never be obsolete, is that of the serial entrepreneur.

The typical process of creative destruction results in X wealth being destroyed and 2X wealth being created instead, but by different people. For each disruption 'X' might be as much as $1 trillion.  

As a result, the US economy might be mired in a long-term situation where vanishing industries force many laid off workers to start in new industries at the entry level, for half of their previous compensation, even as new fortunes created by the new industries cause net wealth increases. 

The US could see a continuation of high unemployment combined with high productivity gains and corporate earnings growth for several years to come. Big paydays for entrepreneurs will make the headlines frequently, right alongside stories of people who have to accept permanent 50% pay reductions. 

This would be the 'new normal'. By way of example.

– Amazon is the ultimate deflationary business. Everybody knows the story well. They launched as an online book seller. They had huge scale advantages because they could offer a much wider book selection since they didn’t need to be limited to the physical floor space of a physical retailer.

They had huge cost advantages because they didn’t need to pay for retail space or all of the retail workers. They even had a government break because they didn’t need to charge taxes and thus consumers got an even better price.

Google – They have led the deflationary pressure on advertising, bringing whole industries into chaos. This has particularly hurt the print media businesses that can no longer charge enough to pay for editorial, printing & distribution. They are bringing deflationary economics to word processing, spreadsheets and office automation. They are bringing deflationary economics to local advertising. I would describe Google as the ultimate scale & deflationary business. 

Skype – As with many deflationary businesses, Skype started by giving away its product for nothing. Free phone calls anywhere in the world is as deflationary as it gets. Telecommunication companies are still charging people for phone calls when the cost to them of providing the calls is small. Data transfer is what costs telecom companies money these days.

LinkedIn – Lots of people talk about LinkedIn as a social network. What interests me is the deflationary impact that LinkedIn and other recruiting websites have had on the recruiting market.