Creative Destruction Happens Quickly; Those Who Wait End Up In The Rubble

from the just-a-warning dept

When we talk about the economics of industries that are in transition, such as the newspaper industry or the entertainment industry, we often point out the need to adopt new business models that embrace the economic realities those industries face. Regularly, supporters of those industries respond that it's folly to jump to a new "unproven" business model without real proof that the new business model will succeed -- especially when the old business model is still going strong. There's this belief that the companies in those industries can just hang on while everyone else experiments, and when a new business model is clear, they can comfortably make the switch and everything will be fine. And, it is true, that even disintermediated businesses have a history of sticking around and throwing off cash for a long time after the disruptive technology disintegrates their foundations.

Yet, as this article in The Atlantic points out with regard to the newspaper industry, when "the end" comes, it comes amazingly fast. It is true that old industries can hang on for a while, but they reach a sort of tipping point where suddenly everyone realizes that the emperor has no clothes. And, at that point, there really isn't any time to make the necessary shift to the new business model. Instead, there's just bankruptcy. So, sure, the record labels and the newspapers can wait it out and hang on until there's "proof" that some new business model makes sense. But, by the time that proof is there, their old business might not be.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Anonymous Coward, Jan 9th, 2009 @ 8:05pm

    Yes, change will come to the news industry...but I rather doubt I will be one of those sipping my morning coffee at the dining room table and reading the news via a scroll bar on a monitor. I like that tactile sensation of turning pages, whether it be a newspaper or a new book.

    Yes, change will also come to the entertainment industries, but unlike newspapers there is still that thorn in the side of new business model evangelists known as Article 1, Section 8, Clause 8. They have the opportunity to adapt, but only time will tell if they will take advantage of the opportunities afforded them by new technological advances.

     

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  2.  
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    Anonymous Coward, Jan 9th, 2009 @ 9:22pm

    Hey Mike,

    what you say in this article reminds me of Einsteins definition of Insanity. "doing the same thing over and over again and expecting different results."

     

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  3.  
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    ToySouljah, Jan 9th, 2009 @ 10:34pm

    CTB

    i work for a grocery company in TX, and the rule we live by is C.T.B. (Change The Business). We are always looking for new streams revenue...sometimes the projects work, and other times they do not. I think it's about time other companies learn to do the same. We have been around over 100 years (104 this year) and our outlook is still looking strong. Our biggest competitor is the big W that is known for taking out smaller businesses, but then again we are comfortable where we are and not trying to conquer the world either lol. Basically, as long as our customers and employees are happy we figure we'll be fine. I dread the day they ever decide to be publicly traded though...I doubt that will ever happen ::fingers crossed::

     

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  4.  
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    James Hofmann, Jan 10th, 2009 @ 1:39am

    It is unlikely to expect incumbents to succeed in an overturned marketplace, as they retain all the burdens of the old environment. While some businesses can change and survive, that is because they are in an environment which favors such. Monopolistic industries favor entrenched groups that eventually turn into dinosaurs.

     

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  5.  
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    Merriam Webster, Jan 10th, 2009 @ 7:46am

    What people don't understand about "disintermediated" news sources on the internet, is that there is a level of trust that is now missing. Whereas before we had large institutional sources, with reputations to protect, we now have thousands of effectively anonymous sources. It will take a while for people to realize that what they used to get for their $0.25 was a competent editor who provided at least some level of due diligence. Now, you have to provide that due diligence yourself, and who has time for that?

    "Disintermediated". Wow. That's worth $10.00. You could get a job working for a newspaper using words like that! Here's a new one for the new media age "Disinformationalized".

     

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  6.  
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    pr, Jan 10th, 2009 @ 10:08am

    Re:

    MW has a point, but at least in my town (and I suspect every other town in the country) I don't count on the editors of my local newspaper to do any editing, save to slant things to their own political biases.

    I don't know how to solve the newspaper problem, but the original article is saying that when the end comes, it will come quickly. They need to embrace that. The more they sit around and hope that a new and more draconian copyright enforcement scheme will save the old ways of doing things, the less effort they will expend on figuring out how to make a living in the new order. And I want them to make a living in the new order, it's just going to be impossible to do it by controlling the number of copies of a physical good.

    Contrary to Techdirt dogma, I would like a pay scheme, a subscription probably. True, I would like to get good stuff for free. Yes, I have more than enough passwords to remember. More importantly I would rather pay for something that I want than rely on the kindness of strangers with their own agenda. I want the reporters working for ME, not for the advertisers.

    How I imagine this working with PBS would be that individuals would sponsor one episode a year of a show they like. That's a lot more direct than having an entire season sponsored by business advertising, oops, excuse me, "Enhanced Underwriting". Kill the pledge drive, kill the government funding of propaganda, if you don't pay for the show you like, it ceases to exist. As often as I felt like paying for the ego trip I could watch my favorite show and see my name on TV. They could cancel their subscription to the Nielson ratings because they would know for sure what the viewers like.

     

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  7.  
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    bigpicture, Jan 10th, 2009 @ 10:56am

    Business Model

    Why do you think there is currently so much issue with copyright, patents, DRM etc? The old business models are using these as a protection umbrella to hang on to these old business models. But when these protection mechanisms eventually collapse under the pressure, then there will be wholesale adoption of new business models that align with prevailing cultural and customer mores.

    How can an individual have sole rights to information or ideas? Like ideas don't develop simultaneously by separate individuals or groups across the world? Does any scientific, technical or artistic information or works for that matter, not rest on what culturally went before. Is everything not just a product of the Universe?

     

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  8.  
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    Merriam Webster, Jan 10th, 2009 @ 11:44am

    Re: Re:



    Exactly. Pay them directly and you have more than a snowball's chance in hell of getting something useful and true. Let the advertising interests fund the industry, and you get Fox News.

     

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  9.  
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    Oh Please ...., Jan 10th, 2009 @ 12:13pm

    Re:

    "...there is a level of trust that is now missing. Whereas before we had large institutional sources, with reputations to protect, we now have thousands of effectively anonymous sources. It will take a while for people to realize that what they used to get for their $0.25 was a competent editor who provided at least some level of due diligence. Now, you have to provide that due diligence yourself, and who has time for that?"

    Do you believe everything you read in the "institutional sources" ? If so, then I suggest you read more than one of them. As you probably recall, there have been many instances where a respected journalist was caught submitting falsified stories. One even got an emmy for the fake story - remember that one ?

    http://www.cnn.com/2003/US/Northeast/05/13/ny.times.investigation/

     

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  10.  
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    Anonymous Coward, Jan 10th, 2009 @ 12:21pm

    errrr, maybe it was a pulitzer rather then an emmy

     

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  11.  
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    Lonnie E. Holder, Jan 10th, 2009 @ 9:18pm

    Except...maybe not...

    You start off with the assumption that the newspaper business needs to change. It would be more accurate to say that, given the evidence, the newspaper business should consider changing. Why do I say this?

    The last time newspapers were dying and consolidating, someone had the audacity to begin a new, nationwide newspaper, called USA Today. Pundits predicted the paper would never work. Well, silly them.

    Just because there is evidence that a business is changing does not necessarily mean that every member of that business will die. Newspapers may continue to survive in some local markets for a long time just because no one else effectively serves that market. We have seen many people make similar statements about local papers. I agree. I have subscribed to a local paper for years just because it is the only source of local gossip.

    Rash generalizations are never wise, even when there is evidence that portions of a business are changing, it does not mean that business will change everywhere. The kind of person that would make this sort of unwarranted conclusion would likely make a similar conclusion about, say, patents, where abuse by some or weakness in some places becomes a catastrophe and total failure of the system. Remember what happens when you assume.

     

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  12.  
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    aikanae, Jan 11th, 2009 @ 12:47am

    Newspapers did change

    Newspapers did change. They laid off 75% of investigative reporters before 2004 and went to reciting press releases, as they were written. There was even prizes given out to those that "reported" closest to verbatim from the releases.

    Newspapers lost trust of the public because of that. "Yellow journalism" turned out to be more credible than what was (and still is) being reported, unchallenged in daily papers. Add to that media consolidation and all local news sounds the same. Is local TV news fairing any better when 3 stations give the same report except for the first line?

    At one time, news reporting was given special privileges and they failed to use them. I won't read the local newspaper - or listen to the local TV news (same corporation) because it is too misleading, no criticism or suspicion, and misleading in ways that are difficult to discover (softer variations of Faux news).

    What I can't really say is whether or not it's always been like this. It may have been but I would not have known about it without having an alternate source of news and the ability to do my own research on the internet.

    The only positive outcome of the last 8 years has been that I've learned more about history and government than I've learned in the preceding 35 years. If I only had access to newspapers, I never would have known their information was faulty.

     

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  13.  
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    Anonymous Coward, Jan 11th, 2009 @ 4:02am

    Re: Re: Re:

    Let the advertising interests fund the industry, and you get Fox News in the center and ABC, CBS, and NBC on the far left.

     

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  14.  
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    Karl Rove is Evil, Jan 11th, 2009 @ 6:58am

    Re: Re: Re: Re:

    "Let the advertising interests fund the industry, and you get Fox News in the center and ABC, CBS, and NBC on the far left."
    Really?Really?Really?Really? (Done in my best Seth Meyer Amy Poehler voice).
    You need to get on my left 'cause you ain't right!

    Back to topic: Any companies that wait to try new models are admitting that are not the most capable at succeeding at business and need others to "show them the way". I think a good responsible company reacts to the change and anticipate(or leads) the movement. The rest are dolts that just following the crowd (ie citi).

     

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  15.  
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    Matt, Jan 11th, 2009 @ 12:53pm

    Some ideas for the new economy

    One of the challenges is that startups are able to get into existing businesses relatively quickly. But many companies decide for whatever reason, not to experiment with, say a web-fulfillment distribution that complements a print subscription method until it's too late. The papers then value the printing over the content. But there has to be balance.

    The end result is that once subscription-based news that was printed, is given away without subscription, at no cost on the web. For example, when growing up, I wore several Wolf T-Shirts. Wolf shirts were always my favorites. In glorious iron-on beauty it told the lonely tale of a single solitary wolf alone in the cold harsh tundras of T-Shirtville, standing form his rock (it was a he) and staring ominously out of my chest to anyone who would dare look it eye to eye. I had the spirit of the wolf...in T-Shirt form. I also wore dragon T-shirts (silk-screened by a family friend) and on one of my first days of junior high I proudly displayed a full-on Popeye T-Shirt which came to my knees. How I survived that day, I don't know. Maybe...just maybe, it was the spirit of the wolf. In any case, my own experiences have allowed me to be tolerant of the Wolf T-Shirt. Where some may laugh and cite them to be a gross display of tack, I see them as an affirmation of life - of nature - of the wolf within us all.

    This can be accomplished a number of ways, which is why I claim this upcoming Wednesday to be National Wolf T-Shirt Day. Unpack your boxes, head to your nearest flea market or discount warehouse clothing outlet and wear your Wolf T-Shirts with pride! Tundra Wolves! Red Wolves! Mexican Wolves! Steppen Wolves! The spirit of the wolf is alive ... in YOU!

     

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  16.  
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    Lonnie E. Holder, Jan 11th, 2009 @ 12:55pm

    Re: A good comment in a similar vein

    Dave:

    Excellent commentary that suggests an underlying problem on overreliance on the internet for information: what is truth and what is opinion? It is increasingly difficult to discern the two. In many cases, people couch their opinion to make them appear to be truth, and then people are caught up in the misinformation. Soon, there is little truth left, and many people become the sheep following a self-proclaimed savior while listening to the overly vocal cries of wolf.

     

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  17.  
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    Anonymous Coward, Jan 11th, 2009 @ 3:01pm

    I think that nothing highlights this point better than the US auto industry today.

     

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  18.  
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    Lonnie E. Holder, Jan 11th, 2009 @ 4:23pm

    Re:

    AC:

    I am still trying to figure out how the US auto industry went wrong. But it is possible they did not, or at least Ford did not. They now have the highest new car quality, according to J.D. Power & Associates. Toyota, the former leader, continues to fall back in the ranks, now behind Hyundai. How the mighty have fallen.

    Ford's drop in sales is also the least of any of the major car companies, including Toyota. Of course, Ford has had the best selling vehicle for 27 years in a row.

    Perhaps GM and Chrysler continue to have issues, but Ford's current excellent performance in quality and sales compared to Toyota and Hyundai is a welcome change.

     

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  19.  
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    Anonymous Coward, Jan 11th, 2009 @ 10:50pm

    Newspaper? What's that?

    Does anyone under 35 ever read a newspaper? I'm in my early 30's and though I sure have that old fashioned ritual of sitting down in the morning/after work to read the news, it's all online. And I'm a luddite who shuns cell phones and HDTV.

    My feeling is that some day soon the newspapers will find that their last customer is dead.

     

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  20.  
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    Lonnie E. Holder, Jan 12th, 2009 @ 5:23am

    Re: Newspaper? What's that?

    My son reads a newspaper regularly. I have been quite surprised in my travels that the under 35's tend to be a bigger consumer of USA Today than I am. I think you are sounding the death knell of the newspaper a little too hastily.

     

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  21.  
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    Anonymous Coward, Jan 12th, 2009 @ 6:34am

    Re:

    @ the retard that posted comment #5 who thinks he's clever:

    http://en.wikipedia.org/wiki/Disintermediation

    Its an economic term. Given this is all about economics of business models It sort of makes sense.

     

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  22.  
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    Anonymous Coward, Jan 12th, 2009 @ 6:38am

    Re:

    "Whereas before we had large institutional sources, with reputations to protect..."

    ...and advertising spots to fill. Modern news is mostly sensationalist entertainment. Few editors perform due diligence to make sure their reports are accurate. Their "diligence" is only in determining whether they can get by with printing an article without major legal backlash. Read what makes the front page on most newspapers or the advertised story in the evening news. It is sensationalized garbage.

     

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  23.  
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    hegemon13, Jan 12th, 2009 @ 6:41am

    Re: Re: Re: Re:

    Oh, give me a freaking break. Center?!? Seriously? I'm a registered Republican, but I have no illusions. Faux News is as biased and slanted as they come.

     

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  24.  
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    Anonymous Coward, Jan 12th, 2009 @ 6:44am

    Re: Re:

    @ Lonnie E Holder:

    Essentially the US Auto Industry started to go wrong back in the 80's when they decided to ignore R&D of electric engines. They kept pushing trucks and SUVs through the 90's and then when the gas prices skyrocketed things quickly went down hill.

    Couple that with the way they tried to save money which quickly translated into cutting corners which gave them a less favorable reputation for reliability than their Japanese counterparts.

    Before fanboyism kicks in let me just point out that the older (50's-early 70's) Fords and Chevy trucks and cars tend to be in use more commonly than newer ones (early 80's through 90's). Part of this is the way the fiberglass bodies are designed and auto crashes, but a larger part is the cost of maintaining those engines versus the older ones.

    Compare that to Honda cars and those little Toyota trucks which are everywhere still after 20 years while their US counterparts of that era are slightly harder to find (at least in my area).

    Anyways, percentage wise for losses Toyota and Honda are doing far better than The Big Three. Toyota actually has a large waiting list of customers for the Prius, they just aren't keeping up with the demand. Honda sales (again in my area) are starting to pick up for the 09's currently.

    A lot of people are going for the fuel efficiency and reputation of reliability over something that for the last two decades has been run on advertising campaign based on "America Made".

    If only they had had the foresight to keep R&D going for the fuel efficiency, but they were more interested in making it Big and Powerful.

     

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  25.  
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    hegemon13, Jan 12th, 2009 @ 6:48am

    Re: Except...maybe not...

    "The kind of person that would make this sort of unwarranted conclusion would likely make a similar conclusion about, say, patents, where abuse by some or weakness in some places becomes a catastrophe and total failure of the system."

    When those "few" abuses stifle innovation across the entire technological realm; when those abuses stop critical progress in communication, medicine, etc; when those abuses mean that no business is safe from patent troll lawsuits, even those who do their due diligence or legitimately invent something on e their own, that is a total failure of the system.

    I will grant that not all newspapers will necessarily disappear, and some may not even have to change. However, that point is moot, because the original article never stated otherwise.

     

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  26.  
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    chris (profile), Jan 12th, 2009 @ 6:49am

    Re:

    there is a level of trust that is now missing. Whereas before we had large institutional sources, with reputations to protect, we now have thousands of effectively anonymous sources. It will take a while for people to realize that what they used to get for their $0.25 was a competent editor who provided at least some level of due diligence.

    right, thankfully competent editing and people's reputations saved us from being sold a war that was based on faulty intel.

    the mainstream media and the government are a feedback loop, the government says something, the media repeats it, and then the government goes on CNN says "don't take our word for it, look at the front page of the new york times".

    when the truth about iraq came out, the media got it's feelings hurt over being made a fool of and now it barely reports on iraq, good, bad or indifferent. it's convenient to blame the administration for pulling a fast one on the media, but the news media is equally to blame for being had.

    Now, you have to provide that due diligence yourself, and who has time for that?

    i'm sorry that news no longer comes in a convenient drive thru package with a happymeal toy, but fear not. it takes 30 seconds to set up an rss reader with competing views of the news (conservative vs. liberal, british vs. american, etc.) or you could just talk about it with your friends, or are you too busy for those too?

     

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  27.  
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    hegemon13, Jan 12th, 2009 @ 6:52am

    Re: Re: A good comment in a similar vein

    "Excellent commentary that suggests an underlying problem on *overreliance on the internet* for information: what is truth and what is opinion?"

    Your point is a good one, except that it applies to all news, including the major networks, not just news found on the internet. For that matter, I can get all my information from the exact same source online as I do on TV or in the newspaper, and the accuracy will be identical. Being online, in itself, does nothing to the quality of the news.

     

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  28.  
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    chris (profile), Jan 12th, 2009 @ 6:54am

    Re:

    but I rather doubt I will be one of those sipping my morning coffee at the dining room table and reading the news via a scroll bar on a monitor. I like that tactile sensation of turning pages, whether it be a newspaper or a new book.

    yeah, and the news/entertainment industry can continue doing business the old fashioned way as long as the baby boomers are still alive to be sold to, but when they are all dead, what then?

     

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  29.  
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    chris (profile), Jan 12th, 2009 @ 7:01am

    Re: Business Model

    How can an individual have sole rights to information or ideas? Like ideas don't develop simultaneously by separate individuals or groups across the world? Does any scientific, technical or artistic information or works for that matter, not rest on what culturally went before. Is everything not just a product of the Universe?

    go back to canada, hippie. this is america. we sell things to suckers to make money. that's the american way. you can all hold hands on the golden gate bridge and sing kumbaya if you want, but you won't make any money doing it, and what's the point of doing anything if you can't make money doing it?

     

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  30.  
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    chris (profile), Jan 12th, 2009 @ 7:12am

    Re: Some ideas for the new economy

    i bought this wolf shirt for my junkie brother, it's magical power cured his aids:

    http://imagechan.com/img/6238/Wolf%20Jacket/

     

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  31.  
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    chris (profile), Jan 12th, 2009 @ 7:34am

    Re: Re:

    I am still trying to figure out how the US auto industry went wrong. But it is possible they did not, or at least Ford did not.

    i can't speak for the rest of the country but i have always bought the same kind of car: small, fuel efficient, and unique looking. over the years my favorite cars have been a toyota tercel, a honda civic hatchback, and a VW golf.

    american car makers have for the most part made big, generic looking gas guzzlers, so the only american car i ever owned was a ford festiva, a small generic looking economy car.

     

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  32.  
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    Lonnie E. Holder, Jan 12th, 2009 @ 10:11am

    Re: Re: Re:

    I think my car was a Ford Escort with a manual transmission. I routinely got 34 mpg on the highway. It was a surprisingly good highway car. I sometimes regret having given it up. It was very reliable and I had zero problems with it, versus the Toyota Corolla I had that had heater and brake problems.

     

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  33.  
    identicon
    Lonnie E. Holder, Jan 12th, 2009 @ 10:17am

    Re: Re: Except...maybe not...

    The vast majority of non-software industries hardly seem "stifled." I also wonder which "few" abuses have stifled innovation across the entire technological realm. I have been in several industries and I have never been "stifled" by a patent.

    I also fail to recall a patent that has stopped "critical progress" in medicine. Could you point one of those patents out?

    As for granting that not all newspapers will necessarily disppear, I never said the original article said they would. As for some newspapers not having to change, the second paragraph of the original article implied that newspapers in general would either have to change or die.

     

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  34.  
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    chris (profile), Jan 12th, 2009 @ 2:03pm

    Re: Re: Re: Except...maybe not...

    I also fail to recall a patent that has stopped "critical progress" in medicine. Could you point one of those patents out?

    http://www.msnbc.msn.com/id/18490388/

    http://www.independent.co.uk/news/world/americas/cl inton-challenges-us-control-over-aids-drug-patents-448188.html

     

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  35.  
    identicon
    Lonnie E. Holder, Jan 13th, 2009 @ 5:33am

    Re: Re: Re: Re: Except...maybe not...

    Chris:

    The first link came up blank on my computer. The second link was about some patients being unable to afford AIDs drugs. Hardly a "stopping" of "critical progress" in medicine. It may be a difficulty in patients in getting high tech drugs, but progress in medicine continues independent of patient treatment.

     

    reply to this | link to this | view in thread ]


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