What is a 'Paradigm Shift'

A paradigm shift is a major change in how some process is accomplished. A paradigm shift can happen when new technology is introduced that radically alters the production process of a good. For example, the assembly line created a substantial paradigm shift not only in the auto industry, but in all other areas of manufacturing as well.

BREAKING DOWN 'Paradigm Shift'

A paradigm shift can require that entire departments be eliminated or created in some cases, and millions or even billions of dollars of new equipment purchased while the old equipment is sold or recycled. Paradigm shifts have become much more frequent in the past hundred years, as the industrial revolution has transformed many social and industrial processes. This process is likely to become even more commonplace in the future as our rate of technological advancement increases.

Example of a Paradigm Shift

For example, the internet created a paradigm shift in the way business is conducted. Email and scan replaced the fax machine and courier services. Orders for securities can now be placed directly by the client via the internet and are sometimes executed in seconds. Before the internet, a client would have to call their broker who would write out an order ticket for the broker's record, then call the firm's floor broker to execute the trade. Stock quotes are now widely available through multiple sources thanks to modern technology, whereas 100 years ago people needed ticker machines installed in their offices. All of the old-time equipment such as order tickets, fax machines and ticker machines are now obsolete thanks to the paradigm shift brought on by modern technology.

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