As the world turns, technology continues to evolve at an astonishing pace. For example, artificial intelligence, robotics, and virtual reality are now part of our business processes. Obviously, these advances are designed to improve efficiency in the production of goods and services. They also improve quality while reducing costs. Who doesn’t want cheaper and better goods and services? Sounds great but there is a downside. These types of technological advancements displace many workers. Likewise, look at the technological advancements you are carrying with you. Look at your phone and think about it. If you are like most of us, you have all sorts of Apps on your phone. You can pay your bills, buy things (whether you need them or not), entertain yourself, chat with your friends, make movies and so on. The convenience is truly remarkable. However, this convenience also has a downside. You can get yourself in financial trouble. In my practice, I can say with certainty that technology can, and often does, contribute to bankruptcy.
History Doesn’t Lie
In the 1940’s, economist Joseph Schumpeter came up with the term creative destruction. Schumpeter characterized creative destruction as innovations in the manufacturing process that increase productivity, describing it as the process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. In short, new technology replaces old technology. For those who do not adapt, their business or industry can be completed wiped out. For those who do adapt, there is often financial hardship that comes along with reinventing yourself and your career, business, or professional life.
To make this point clear, here are some examples of industries impacted by technology:
- Travel agencies – we have Hotels.com, Expedia, Travelocity, Kayak and many others. I am sure that the phones are pretty quiet at traditional travel agencies.
- Cable television – who streams on Peacock, Netflix, Hulu, Sling?
- Retail – you can buy anything on Amazon, so you do not even need to leave your house. Likewise, who goes to the record store anymore?
- Taxi and limousine services – Uber and Lyft anyone?
The above examples are fairly recent. In earlier times, the car replaced horse and buggies. There used to be elevator operators. And do you remember taking your camera film to be developed at the store – or those adorable little photo kiosks in supermarket parking lots?
I am not in the business of predicting the future, However, we all can be sure that technology will create change. For every improvement or benefit technology brings, there is a flip side. Perhaps people will lose their jobs and businesses. Or maybe technology will be the cause of some other hardship. Either way, technology contributes to bankruptcy – I see it all the time.
In future blogs, I will address how technology contributes to bankruptcy by focusing on several specific examples. So, stay tuned. In the meantime, please call me if you have any questions about this blog or other bankruptcy questions.