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The price of disruption

  • Published at 08:56 pm January 7th, 2020

There’s always going to be winners and losers

Disruption is an odd word. As per its dictionary definition, it is the “disturbance or problems which interrupt an event, activity, or process,” which give off an air of negativity. However, when it comes to the world of business, it takes an altogether different form.

By now, almost everyone knows the story of Uber, the ride-sharing app which allows commuters to essentially take a ride in a stranger’s car. What started out essentially as an alternative to traditional means of commuting such as cabs and public buses has now firmly established itself as among the most essential of apps individuals install into their smartphones along with one of the shining examples of a start-up becoming among the most prominent companies in the world.

Uber’s impressive rise has naturally seen numerous other similar apps follow in their footsteps, intending to piggyback on their success to carve out a space for their own in the ride-share market. Some, such as Lyft, have done a stellar job.

Of course, in the context of Bangladesh, and in particular, Dhaka, Pathao is perhaps the most significant ride-sharing app. Though at first glance, the app seemed yet another Uber knockoff, there were sufficient differences, such as its primary focus on bikes, in addition to its appeal as a local app that allowed it to skyrocket in popularity seemingly overnight. 

Incorporating food delivery in anticipation for the inevitable entry of Uber eats was yet another calculated move, and deserves plaudits.

If there is one word that apps such as Uber can intricately be linked with, then that is disruption. It may also be fitting to put Pathao in the same category. Perhaps revolutionary would also be a fitting word. There is no denying the impact both these companies have made in the lives of people; Uber has done it around the world in hundreds of major cities while Pathao continues to be relevant in Bangladesh despite Uber’s eventual entry into the country.

The world throughout history has been shaped by disruption, or disruptive innovation as it is often in the form of groundbreaking invention or discovery initially, which ultimately, depending on scalability and price, is integrated into the economy and is responsible for creating value which ultimately “disrupts” an existing market. The telegram gave way to the telephone, radio gave way to TV, coal gave way to oil -- and so the cycles go.

At first glance, it is very tempting to applaud this disruption in the world. After all, everyone loves a story of the status quo being challenged. And all people (or so they think) love alternatives and more choices, more options. And of course, as human beings, we are essentially creatures of heuristics. This simply means we’ll gravitate towards the option that is most convenient to us, preferring the shorter route, but not necessarily the better route.

However, caught up in the excitement that naturally occurs when something new is making waves, what is often forgotten is the opportunity cost of this disruption. When a new technology or breakthrough is replacing an older one, value is certainly created but there is also value lost.

Nowhere is this more apparent than in the story of Amazon, perhaps the biggest disruptor as far as a single company could be. While Amazon owner Jeff Bezos is currently the richest person in the world, and Amazon’s presence in virtually every imaginable sector in the world, what is easy to overlook is the sheer number of businesses that Amazon has put out of business.

It started with bookshops. Amazon’s early days were as a virtual bookstore, and, due to their incredibly low prices as a result of doing away with a brick and mortar store, other traditional bookshops such as Barnes and Noble were unable to compete, and thus, had a slow but eventual demise.

In the case of Bangladesh, both Uber and Pathao have essentially levelled the playing field when it comes to transportation, and the auto-rickshaw (CNG) pullers no longer command the astronomical fares they used to, on account of the alternatives that are now present. This is a good thing.

However, in both examples, there are human beings who are now less well off than they were. In the case of Barnes and Noble employees, trained to operate in a certain kind of business, it is no wonder that they struggle to find employment once they were laid off their work. In the case of CNG riders, the arrival of Uber and Pathao has just reduced their overall income, as they still have to deposit a certain amount to the owners.

When looking at it from a utilitarian point of view, it is easy to dismiss these concerns as nothing but minor adjustments in the accommodation of these newer and better methods. However, not everything can be reduced to philosophical ideologies, and there is a real human cost of individuals losing their jobs and having reduced income.

As such, while on the surface, disruptive innovation looks to be nothing but positive, a look beneath the surface shows that there are indeed winners and losers. Such is life I suppose. 

AHM Mustafizur Rahman is an Editorial Assistant at the Dhaka Tribune.