“Quite likely the political leadership everywhere is about up to average. The reason why it seems to be below the average is that people have fallen into the habit of asking politics to do what only industry can do” – Henry Ford, Today and Tomorrow.
In Ford’s prescient remark, we find a kernel of truth that has only grown more relevant in the modern era. While governmental intervention is crucial in certain aspects of social welfare, the dynamism, creativity, and innovation inherent in industry can deliver powerful solutions to societal issues. This is not to claim that the government has no part in finding innovative solutions to problems but to say that the government would be best to offer a carrot to industry instead of a stick.
The concept of ‘creative destruction’, coined by Schumpeter, implies the continuous process of annihilation and creation inherent in capitalist economies. Outdated industries and technologies are replaced by innovative, more efficient ones, leading to economic growth and societal progression.
Impactful startups epitomize this. By their very nature, they challenge traditional business models and propose novel solutions to societal problems. This disruptive capacity is particularly pronounced in sectors like energy, biotechnology, edtech, healthcare, and agriculture, where startups are at the forefront of transformations that promise not only financial returns but also yield environmental and societal impacts as a direct consequence of the financial returns.
Investing in such startups supports this cycle of creative destruction. It facilitates the development and proliferation of new technologies and models, accelerating societal advancement. Investors, therefore, do not just reap financial returns but also contribute to the continuous process of societal improvement and economic evolution. This is a notable benefit of the market’s approach compared to that of a government, which, while they might have the aims of societal benefit, simply is not a problem solving entity by nature-governments are tribal entities by nature-thus, making them less capable of direct and immediate problem solving.