Greenspans"Creative Destruction"

verfasst von Erwin, 05.10.2000, 09:27

Aus dem nachfolgenden Artikel geht nicht ganz klar
hervor, wie umfassend dieser neue"In"-Begriff von
Greenspan gemeint ist.

Die gleichzeitige Erwähnung der ´Irrational exuberance'-
These läßt einen aber im ersten Augenblick etwas schaudern,
weil man unwillkürlich vermutet, nun breche im boomenden
Ami-Land der große Fatalismus aus - so nach dem Motto:
"Was soll´s eigentlich, irgendwann muß eh alles den Bach
runter gehen."

Oder ist es vielleicht tatsächlich so - gehören ´Boom and
Bust´ zur Natur des Menschen wie Frühling, Sommer,
Herbst und Winter?

----

By Chet Currier

New York, Oct. 4 (Bloomberg) -- To give your next conversation about investing an up-to-date ring, let drop the phrase ``creative destruction.''

It's a favorite of Alan Greenspan's. When the chairman of the Federal Reserve uses a distinctive expression of that sort, you can expect to hear more on the subject from commentators everywhere.

Almost four years ago Greenspan invoked the term ``irrational exuberance'' talking about the stock market, and those words haven't stopped echoing. Now ``creative destruction'' bids to attain something like the same mythic status.

Mutual fund managers are doing their share to popularize the idea. You also see it more and more as a factor in calculations about the choices facing fund investors.

The phrase originated with economist Joseph Schumpeter in the first half of the 20th Century. One simple way to think of it is as an ancestor to today's popular buzz, ``Change is good.''

Depending on your point of view, ``creative destruction'' may describe either the prime virtue or the worst evil of capitalism.

Certainly it's easiest to be a fan of creative destruction when somebody else's outmoded institution is being plowed under by entrepreneurs with a better technology to offer. The concept gets harder to love when the demolition takes your job or your retirement savings down with it.

Encouraging Change

But wherever you stand on the politics of it, the logic is plain to see: In a dynamic economic system -- in other words, in all economic systems -- the greatest good for all is served by allowing innovation to flourish, whatever mayhem it inflicts on businesses and people that can't adapt.

Any short-term benefit achieved by protecting the status quo comes at a huge long-term cost in lost productivity and progress. The U.S. dominates the world economy now because it has embraced change, opening the gates for the new to crush the old.

As Greenspan observes, practically everybody else now strives to follow that model. ``Market-directed capitalism has become the paradigm for most of the world,'' he said in an August speech on globalization.

Down at the level of day-to-day investing, meanwhile, we see ``creative destruction'' as an increasingly specific force in the strategies of mutual fund managers -- and in decisions by their clientele to buy stock funds, bond funds, or neither or both.

``Corporate bond investing in a New Age economy is a dangerous proposition,'' writes the world's most famous bond fund manager, Bill Gross of Pacific Investment Management Co. ``It flies smack into the headwind of Schumpeter's 'destruction.' A diversified portfolio of equities seemingly moves in the other direction, soaring then jet-streaming along at the benefit of Schumpeter's `creative' tailwind.''

Flying High

In a winner-take-all environment, Gross reasons, a few successful stocks can be enough to make a diversified stock portfolio pay off handsomely. But in bonds, which lack stocks' ability to soar, even a few big losers can spoil a whole bond portfolio's return.

Robert Turner, whose Turner Investment Partners manages $9 billion in mutual funds and other accounts with a heavy emphasis on high-tech stocks, says, ``The tech sector is the quintessential example of `creative destruction.'''

The investment rewards from the Internet and other innovations will remain great, Turner predicts. ``We think tech stocks will continue to outperform the market.'' But the attrition rate, among both old and new-style businesses, also promises to be high.

If you can't pick winners in this rough-and-tumble environment -- and Turner argues that it's awfully hard to do that -- a kind of barbell diversification strategy, heavy at both extremes of the risk spectrum, may be worth considering.

You put some of your money in stock funds whose managers you think stand the best chance of sorting out which companies will achieve the greatest triumphs.

The other end of the barbell? No matter how keen your appetite for growth, you keep part of your nest egg out of the `creative destruction' pot in, say, an intermediate-term government bond fund.

Its prime characteristic should be low, or no, risk of default. The point is to cover yourself just in case the heretofore wondrous process of creative destruction turns less creative and more destructive.

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• Greenspans"Creative Destruction" - Erwin, 05.10.2000, 09:27