Destructive Creation

AAA

DEFINITION of 'Destructive Creation'

When innovation leads to destruction. Destructive creation was coined as a play on Joseph Schumpeter's famous term "creative destruction", which suggests that innovation leads to changes and economic growth. The term destructive creation was popularized during the financial crisis of 2007-2009, when large banks and insurance companies ceased to exist as a result of financial innovations.

INVESTOPEDIA EXPLAINS 'Destructive Creation'

Financial innovation is a different animal than other types of innovation. For example, when the PC was invented, it replaced the typewriter and increased efficiency; as a result, the economy profited. In other words, there was little downside to this innovation. However, some recent financial innovations could be said to me more destructive than productive. Derivatives, structured investment products and non-conventional mortgages have all fallen under public scrutiny in recent years as innovations that proved to bring more harm than good.

RELATED TERMS
  1. Game Changer

    1. A person who is a visionary. 2. A company that alters its ...
  2. Joseph Schumpeter

    One of the 20th century's great economic and political thinkers. ...
  3. Creative Destruction

    A term coined by Joseph Schumpeter in his work entitled "Capitalism, ...
  4. Old Economy

    A term for the old blue chip industries that enjoyed fabulous ...
  5. New Economy

    A buzzword describing new, high-growth industries that are on ...
  6. New Paradigm

    In the investing world, a new paradigm is a totally new way of ...
Related Articles
  1. Patents Are Assets, So Learn How To ...
    Investing Basics

    Patents Are Assets, So Learn How To ...

  2. Can Business Evolve In A Green World?
    Entrepreneurship

    Can Business Evolve In A Green World?

  3. Which Is Better: Dominance Or Innovation?
    Active Trading

    Which Is Better: Dominance Or Innovation?

  4. 3 Secrets Of Successful Companies
    Investing

    3 Secrets Of Successful Companies

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center