Minor Thoughts from me to you

A few days ago I said that we shouldn't be afraid of the future. It's impossible to predict where the next round of innovation will come from, but it always comes. Economists love to talk about "creative destruction" -- the idea that the market will destroy old, inefficient, unneeded businesses and create new, efficient, needed businesses instead. But how does creative destruction work? How can a business failure of a business slump lead to a new business?

Let's look at Bonobos. Not the primates, the pants company. Here's how they describe themselves.

Bonobos exists to solve two problems we had ourselves. (1) Men's pants do not fit well; they are either baggy, frumpy, and unflattering. Or way too tight. We make pants that fit and look better, on most gents and especially on guys with athletic builds. The second problem (2) is retail. How could we enjoy paying 120% markup to try on clothes in an uncomfortable public environment where sales associates--who are total strangers--either scrutinize our figures, or pay no attention to us at all? Meanwhile, pricing games are no fun. We're tired of waiting for sales... but paying full price makes no sense when inevitably everything will go on sale. We got tired of the traditional retail shopping experience. So we are building a different kind of clothing company, one that offers a fantastic customer experience, innovative low-cost distribution, and a stylish product that fits well.

Their pants are sold only online and at a steep discount, compared to traditional mens' pants. Now, $100 a pop is still too expensive for me (I tend to dress sloppy because I can), but it's cheap for the market they're entering. And they're definitely being helped by the lousy economy. Check out Smart Money's recent profile of the company.

Turns out that even in a downturn, the number of business start-ups is pretty constant, hovering at around 640,000 a year. Economic slumps typically last six months, so they don't tend to affect entrepreneurial plans that have been years in the making. Nor is the start-up success rate hurt by the vagaries of the business cycle, says Brian Headd, economist at the Small Business Administration.

There are actually advantages to starting up in tough times. You get a year or two to iron out kinks before the buying climate picks up, notes Bob Goodson, president of YouNoodle, a San Francisco-based entrepreneurial networking site. Overhead costs are lower, commercial space is easier to find, and there's less competition for talent. Bonobos, for example, was able to save up to 15 percent on salaries for junior staff, and found associates willing to work 30-day trial periods without permanent job offers -- which would have been impossible in a hot economy.

Jobs are being destroyed in the banking, investment, and construction industries. In exchange, jobs are being created in other industries. New companies are hiring the newly available talent and investing in the suddenly cheaper resources around them. New companies and new ideas will grow out of the ashes of our current crash & burn economy. Just wait and see.