Tuesday, July 1, 2014

Free Enterprise Offers The Cheese To The Second Mouse

“It's true that the early bird gets the worm, but the second mouse gets the cheese.”

Charlemagne (742? - 814)

 Is this not the way of free enterprise?

Innovation is one of its hallmarks!  An entrepreneur with a great idea has the wherewithal to introduce it into the product market.  It takes off.  He changes it, improves it, and and sometimes continually creates new from old.

But so do others!  The original idea or product might be common for some time.  Then someone comes along with a transforming change.  That is changed again, and again, and even again.

Joseph Schumpeter called this process "creative destruction."  Capitalism and free market economies are rife with creative destruction!  Innovation!

The early bird truly gets the worm in free enterprise.  And there is room for others.  Sometimes the original idea does not take hold, but someone comes along with an improvement (the second mouse taking the cheese, so to speak) and runs with it!

What is the most famous product essentially creatively destroyed and changed for the better?  

The telephone!

We all know that Alexander Graham Bell invented the telephone.  But the sounds were very faint in Bell's version.  And even fainter over longer distances.  Edison improved on that.  He introduced a telephone with a "Carbon Button Transmitter."  With this device the telephone user would speak into one part of the phone and listen with another.  Edison's separate receiver used a small chalk cylinder, which created much clearer sound!  This separation of speaking and hearing method is still used today!  Bell and Edison later combined their efforts to form the "United Phone Company," and what had made both men very rich made them both very richer!

Free enterprise still works like that today.  It always has and it always will.

All products have a life cycle, called by economics the "Product Life Cycle."  Products grow in usage, slowly or quickly, but eventually reach a point of saturation or leveling off of sales.  Some companies deal with this with the old "New and Improved!" technique.  These tweaks work especially well with products everyone needs - like soap or razor blades.  A fleck of blue in the soap here, another really cool blade there, and the product cycle begins anew.  

The biggest thing that changes product life cycles may be innovation.  Not mere improvements, but change, like the telephone or typewriter.

The original telephones and typewriters are dead and gone and now are treasures for collectors.  I still have my college typewriter!  But while the idea for each has changed little, the products themselves have altered radically.  Slowly the word telephone is being replaced with the more generic "phone," or more recently "smart phone."  And the beat goes on!

Charlemagne had it right!  Free enterprise can happen for the first or second or more, but it happens!


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