Attack of the Virtual Tomatoes!!!!

The good news: US unemployment seems to be improving a bit.
The bad news: Unemployment is still 9.7%, and the government projects lethargic job growth.
Worst of all: Many fear jobs lost in the recession may never come back.

Scary as it seems, that last bit's probably right—the big three US automakers, for example, have closed dealerships and furloughed plenty of folks who may leave Detroit for good. But while people mourn the death of the US auto industry, from where I sit, it's been only slightly better than comatose for the last two decades. And as folks look back at jobs lost—wringing hands that we can't compete with the Germans, Japanese (faulty floor mats and acceleration issues aside), Taiwanese, Koreans, Indians, and pretty much everyone else making cars—they're missing the revolution going on right here at home—in tomatoes. Virtual tomatoes. Apparently, we're great at growing them.

In case you don't have a Facebook account, let me tell you about a little company called Zynga. They make games with quaint names like FarmVille and FishVille for the popular social-networking site. Some Facebookers shell out hard-earned dollars to grow virtual tomatoes. You can't touch, smell, or pair them with mozzarella. The point? To "grow" more of them than your buddy and then sell or "gift" them to other players. You can also buy virtual fish for a not-real aquarium. Amazingly, these virtual fish might be four times as expensive as real goldfish from your local pet store. Is this profitable? Staggeringly so. Get this:

• Zynga claims to have 235 MILLION monthly active users. (Who are these people?)
• Want to see an even bigger number? How about the $250 million dollars they made last year. Not too shabby.
• Listen up CNN.com—they don't need advertisers anymore.
• Zynga is hiring like gangbusters at four offices in the US and India. High paying jobs.
• They've raised several hundred million dollars in financing. Folks are lining up to get a piece of the action—all based on demand for fake tractors and fabricated farms.

I won't even begin trying to explain this phenomenon to my grandmother. In her world (and most of mine) brick and mortar stores sold tangible goods that people consumed until they ran out. Most jobs in the US consisted of going someplace to make or sell things—real things. While there's still a lot of "making things" in the US (and in fact, we're still the largest "maker of things" in the world), innovation continually transforms our economy—whether we understand the Zyngas of our time or not.

"Creative destruction" is a term coined by economist Joseph Schumpeter in 1942 when my grandma's grandma was lamenting the loss of craft shops to factories. It describes what happens when innovation gives rise to new products, companies, and industries, making old products, companies, and industries—as much as we might love them—obsolete. As we've written about here before, this often happens just when you least expect it—during and just after a recession—and in largely unpredictable ways. History is littered with innovative companies seizing recessionary conditions to come to market.

As much as we want to lament the loss of the old companies (RIP Tower Records), capitalism thrives on this process. I'm reminded of a passage in TS Elliot's Four Quartets,

"When the train starts, and the passengers are settled….
You are not the same people who left that station
Or who will arrive at any terminus…
Here between the hither and the farther shore
While time is withdrawn, consider the future
And the past with an equal mind."

Our economy is ever changing—but we can't touch what's past. And what's to come is just as unreal. The pre-recession economy didn't contain thousands of jobs making Facebook game applications—nor do we know what comes next. This isn't to say Zynga—which isn't publicly traded anyway—is a great investment. Could be virtual tomatoes dropkick unemployment—or something even stranger and more surprising. Doubtless it will be many innovations we can't see yet. But as long as the world turns, out of the ashes, the new will rise. And over more than a short period of time, unemployment projections can't predict that dynamism with any degree of accuracy.