Netflix and the Post Office: Creative destruction at work

If you are a Netflix subscriber you got CEO Reed Hasting's insulting apology yesterday, telling you that they were going to split into 2 services. I saw this letter as saying "We are sorry for buggering you. Now, how about another good buggering", as now we find out that not only has the price gone up 60%, but we will now have to deal with 2 web sites if we have both streaming and DVD's. The WSJ reports that Netflix had received 16k angry emails by noon.

It is clear that the future of this service is in streaming video, a far superior way to deliver video than waiting a few days for the post office to bring a dvd to you. The WSJ story also noted that Netflix expects dvd by mail to be gone in 15 years. I'm thinking it won't last that long.

So the question now is "Once Netflix (or Qwickster) is no longer shipping dvd's by mail, why do we need the post office?". Think about it. What does the USPS bring you that you want or need? Most days whatever I pull from the mailbox gets tossed in the recycling box right away. I still get Sports Illustrated and The Economist by mail, but I could read those on line. In fact, in recent months the post office had taken to delivering my magazines 2 days later than before, making it more likely that I will begin reading on line. They must have hired consultants from the newspaper industry: when demand for your product declines, decrease it's quality and hasten your demise.

Both Netflix and the USPS are examples of what economists call "Creative Destruction". New, better ideas replace the old. The post office has been sheltered from this somewhat, in that it has a government granted monopoly to deliver the mail. This is a situation that makes no sense whatsoever, particularly today.

If the Post Office were really a private company, as it is sort of supposed to be, it would have been finding other technologies and products as it saw that the growth of the internet meant a decrease in it's traditional business. It would also have already closed the thousands of post offices that they now say they need to close. Unfortunately, they are still controlled by politicians, who control their pricing and operation. You can be pretty sure that Congress will not let them close those PO's. Would you want to hand a potential election opponent the attack slogan "He closed your post office"? I am betting that even those government-hating Teabaggers will not allow their own local PO to close.

Here's what we ought to do: get out of the postal business. Sell the post office in an IPO and let it be run as a real business. Let competitors compete with it, thus improving service and lowering costs. I am guessing that in a competitive business, the postal workers wouldn't take their lunch break at noon, just when the few customers they still have come in to use the post office.

Protecting the post office makes no more sense than protecting the typewriter business would have 25 years ago. Or, protecting the DVD business does today.

Isn't it interesting that the government dictates that everyone gets postal service, which we could certainly live without, but not medical care, for which our need is far more important!