By Bill Wade
The universally negative specter of questionably talented politicians mocking business leaders during endless Congressional hearings —while attempting to deflect growing guilt over the current economic situation—has me concerned.
Never before has the entire populace been treated to 24/7 coverage of every bounced check, every layoff, every case of management incompetence or insensitivity. Under the age-old rule that “if it bleeds, it leads,” media are serving up the latest “globalization victim” of the day, even from industries most of us never knew nor cared about.
Back in the time before universal bailouts, this country practiced a more or less free form of capitalism. Free market approaches to economic churn were at least the first option. Success or failure revolved around individual drive and smarts, with appropriate luck.
Our own trucking industry has thrived under this model. While major disruptions have been primarily due to regulatory (EPA, DOT, CARB) influences, one watershed case is worth an autopsy – deregulation from the Motor Carrier Act of 1980.
Talk about giving Darwinism a kick in the rear. Wrenching extinctions, no bailouts, spectacular growth … but not without temporary pain.
Between 1977 (the year before the Interstate Commerce Commission started to decontrol trucking) and 1982, pricing for truckload-size shipments fell about 25 percent in real, inflation-adjusted terms, with some shippers reporting declines of as much as 40 percent. Revenue-per-truckload ton fell 22 percent from 1979 to 1986. Unions screeched and fuel prices were all over the board.
Sound anything like today’s housing, auto or commodities markets?
But wait! A survey of shippers indicated that service quality improved more quickly than ever. In fact, 77 percent of customers favored deregulation. Shippers reported that carriers were much more willing to innovate. Truckers experimented with new price and service options. They restructured routes, reduced empty return hauls and provided simplified rate structures.
By the way, business flourished like never before. Following a record number of carrier bankruptcies, the number of new firms increased dramatically. By 1990 the total number of licensed carriers exceeded 40,000, more than double the number authorized in 1980.
Certainly a pointed illustration of the power of the free market: New supersedes old, efficiency increases and asset allocation supports the most innovative customer-centric solutions.
This whole process of commercial evolution was described famously by the economist Joseph Schumpeter, who popularized the term “creative destruction” to describe the process of transformation that accompanies radical innovation.
In Schumpeter’s vision of capitalism, innovation by entrepreneurs was the force that sustained long-term economic growth, even as it destroyed the value of established companies, some that enjoyed a degree of monopoly power.
Capitalism’s creative ability is only half of its success. It also performs the less popular, but equally necessary, task of eliminating obsolete products, companies and channels.
Creative destruction hurts, but our continually innovating industry generates new opportunities for participants in more creative and productive enterprises (provided they can acquire the necessary skills).
Beware: breaking the emotional attachment to the existing social order is the one thing capitalism seems unable to do. Driven branch or shop managers are rarely as lovable as old timers who are comfortable with the status quo.
Regardless, if your company is going to thrive as it picks among all the new opportunities being created every day, you must work actively at sorting and upgrading the talent on your team … it is what you have to sell!
Schumpeter invented what we now call strategy: “an attempt by firms to keep on their feet, on ground that is slipping away under them.”
Yes, the ground is shifting in heavy-duty distribution and service. We simply must adopt a universally positive view that this creative destruction will clear out the deadwood and allow the rest of us to kick serious butt!
