What typically happens during creative destruction?

During creative destruction, new technologies indeed lead to the establishment of new markets. This concept, introduced by economist Joseph Schumpeter, describes the process whereby innovation results in the demise of older technologies and businesses that can no longer compete effectively. As new technologies emerge, they create opportunities for new products, services, and industries, ultimately transforming the economic landscape.

For instance, the rise of digital photography rendered traditional film photography largely obsolete, resulting in the establishment of new markets for digital cameras and smartphone photography applications. This process not only allows for the growth of innovative companies that capitalize on these new technologies but also leads to the evolution of consumer habits and market preferences.

Understanding this concept highlights the dynamic nature of economies, where change is constant, and new enterprises often arise from the ashes of the old, reshaping markets and driving economic progress.