Rich Tucker

Recently the social networking site MySpace announced it was firing some 500 people -- half of its staff.

How can this be? Just six years ago, savvy billionaire Rupert Murdoch was willing to pay $580 million for it. Furthermore, social networking is becoming more popular every day. They’re making movies about Mark Zuckerberg. Goldman Sachs thinks the Facebook site is worth $50 billion, although they’re only making the investment available to foreigners.

Ah, but that’s just the way things are on the Web. In 2006, MySpace was the hot, happening property. Today it’s outdated and boring, destined to be remembered only because it was once mentioned in a Katy Perry song. And that’s assuming anyone remembers her a decade hence.

Luckily, the passing of MySpace is happening quietly. Murdoch is looking for cost savings, but not a bailout. And the federal government wouldn’t give him one anyway. This is important, because it shows that, for now, the Web remains a haven of creative destruction.

As economist Joseph Schumpter explained, the latest and greatest ideas can often thrive only by upsetting the existing order. Thus “creativity,” (in with the new) often requires “destruction” (out with the old).

Often, though, the government stands in the way. That’s a problem in any industry, but especially in the fast-moving high-tech world.

“Most of the federal government’s intrusions in the twentieth century were efforts at preventing disruption by new technologies in order to usher in a future more orderly, less chaotic,” writes Tim Wu in his new book The Master Switch. “That might sound like a sensible objective, but the effort can be easily perverted into serving special interests.”

Wu examines the history of broadcasting as an example.

“Radio is hardly our most vital medium, yet it is hard if not impossible to get a radio license, and to broadcast without one is a federal felony,” Wu notes. He explains how a couple of big companies worked over the years with the government to limit competition. First, they managed to delay the onset of FM broadcasting, and later they were able to transfer their control of networks directly from radio to television.

“The best antidote to the disruptive power of innovation is overregulation,” Wu writes. “In fact, a close review of the 1930s makes clear that the early FCC was among the most useful tools of domination that industry has ever invented.” And these days, the FCC seems eager to do for the Web what it’s done for radio.


Rich Tucker

Rich Tucker is a communications professional and a columnist for Townhall.com.