A THOUGHT ON RUSSIA
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Russia is vast, the vastest country on Earth, twice the size of the USA, or China, five times the size of India, twenty-five times the size of the UK. However, it has a relatively small population of 146 million, fewer people than Pakistan.The recent invasion of afghanistan gave hope to the great Russian dream of it’s army being able ‘to wash their boots in the warm waters of the Indian ocean’, from the words of Vladimir Zhirinovsky, the founder and leader of the Liberal Democratic Party of Russia. The ports on the Arctic, such as Murmansk, would freeze and become ice-locked for several months each year. This does not just halt trade in the region, but also prevents the Russian navy from operating in its true potential. In addition, water-bourne aircrafts are much cheaper than on land. Thus one of Russia’s ultimate plans to achieve the status of being a global power with an unmatched military is to claim a warm-water port where the water does not freeze in winter, with free access to the world’s major trading routes. The lack of warm-water ports has always been and may always be Russia’s Achilles’ Heel. However, Russia’s geography makes up for this loss by having a plentiful supply of oil and gas.
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A DEPRESSING THOUGHT
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The Great Depression (1929-39) was the deepest and longest-lasting economic downturn in the history of the Western industrialized world. In the United States, the Great Depression began soon after the stock market crash of October 1929, which sent Wall Street into a panic and wiped out millions of investors. Over the next several years, consumer spending and investment dropped, causing steep declines in industrial output and rising levels of unemployment as failing companies laid off workers. By 1933, when the Great Depression reached its nadir, some 13 to 15 million Americans were unemployed and nearly half of the country’s banks had failed. Though the relief and reform measures put into place by President Franklin D. Roosevelt helped lessen the worst effects of the Great Depression in the 1930s, the economy would not fully turn around until after 1939, when World War II kicked American industry into high gear
GET NETFLIXED
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The success of Netflix is an excellent example of “creative destruction,” a term originated in the 1940s by economist Joseph Schumpeter, who described it as the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new structure. This process of creative destruction is the essential fact about capitalism.” In fact, Netflix has been so disruptive to existing industries, that its impact is now being referred to by some as the “Netflix effect.”
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Time Warner, despite beating revenue and earnings expectations for the quarter, closed down 9%. Viacom was down 7.5%; 21st Century Fox fell 7%; and CBS, 4.6%.
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Compare that with Netflix, whose stock climbed 2% Wednesday to more than $123 a share. The company’s stock had more than doubled this year before it announced a seven-to-one stock split in June. Netflix stock was rising in Thursday trading.
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The contrast with Netflix highlighted investor jitters about the viability of the traditional cable bundle in the face of heightened competition from on-demand video services like Netflix, Hulu and Amazon, which are investing heavily in high-quality programming.
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MP: The ultimate winners of creative destruction and the “Netflix effect” are the consumers, who reap the benefits of intense, disruptive, cut-throat market competition in the form of a constantly-evolving, never-ending bonanza of innovative consumer products that get better, faster, and cheaper all the time. Thank you Netflix for the gale of market disruption you have brought to the media industry, and thank you to the yet-to-be-identified disruptive Firm X in the future that will eventually challenge Netflix with something that might be called the “Firm X effect.” We live in a much better world because of the “essential fact about capitalism” known as creative destruction, illustrated in recent years by the “Netflix effect.”