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Posted by on Apr 27, 2017 in ETF Strategist, Investment Perspective, Market Insight

Creative Destruction; It’s Kind Of A Big Deal

Creative Destruction; It’s Kind Of A Big Deal

By Roger Nusbaum, AdvisorShares ETF Strategist

Seeking Alpha had an interesting snippet the other day about retail stores closing in droves citing the WSJ that through April 6th, 2880 announced closings which is double the same measure for the same time frame from 2016.

This is of course a story about more and more shopping being done on the line (reference to the movie The Internship). You may not need to go to the mall to buy a pair of LeBrons for the aspiring basketball player in the house but for now you can’t print them illicitly in your house which might succinctly capture winners and losers for the time being.

As a bigger concept this is about creative destruction, a concept widely attributed to Joseph Schumpeter from the 1950’s. Creative destruction is what makes laptops and 60 inch televisions be dirt cheap (Moore’s Law is a derivative of creative destruction) and the list of industries that have been impacted is endless. People as consumers have mostly benefitted although it might be a different story for people as workers. Think about auto manufacturing which along with other forms of manufacturing are moving more to robotics and automation. We’ve all seen the posts on Facebook about fast food workers being replaced by kiosks as the minimum wage starts to move a lot higher.

This concept has become part of the argument supporting a living wage (paying everyone a stipend). Part of the theory is that netting everything out a living wage to everyone that replaced all other forms of welfare and Social Security would be cheaper and have the effect of being stimulative in terms of consumption and sales tax revenue.

The math either stands up or it doesn’t. Apparently, the number of people on disability has skyrocketed, with some of the reading I’ve done speculating that the state of the job market being a key factor. As a concept, I find a living wage difficult to swallow.

Part of how we develop as people is by learning about things that go against our beliefs. The result is either increased conviction in what you already believed in or you start to view the subject at hand differently. Over the course of time it is logical to hold firm on some beliefs and change others.

Who knows if we’ll ever get to the point where America confronts this (the Swiss overwhelmingly voted it down a couple of years ago) but where so many things that people believed to be true that turned out to be wrong in the last ten years makes this conversation very interesting.

Printing money and monetizing debt was supposed to lead rampant price inflation but the bigger threat by far was some sort of bad deflationary outcome.

Back to jobs, there is generally a mismatch between the skills that workers have and the technical skills that more and more jobs require. Technology is evolving at an ever-increasing rate. Individually, people are figuring out how to succeed against that reality but measures of underemployment combined with our collective inability to adequately save for the future (presumably retirement) suggest the country hasn’t yet figured out how to solve this.

It’s been a while since we quoted our friend Bill from here in Walker who a long time ago said “you can figure it out now or you can figure it out later but you’ll be a lot better off if you can figure it out now.” That sentiment fits here.