Clayton Christensen’s theory of disruptive innovation, introduced in The Innovator’s Dilemma in 1997, was a specific and careful idea. It described a pattern where new entrants with simpler, cheaper products entered markets from the bottom, improved over time, and eventually displaced incumbents who had over-served the most demanding customers. It was a description of a mechanism, not a manifesto.
What the word “disruption” has become in Silicon Valley parlance is something quite different — a general license to destroy existing institutions, regulations, and business models, usually while avoiding the obligations that those institutions and models carried.
Disruption as Regulatory Arbitrage
The ride-hailing industry is the most obvious example. Uber’s disruption of the taxi industry involved several genuine innovations — smartphone-based dispatch, dynamic pricing, and service quality improvements. But it also involved something simpler: treating drivers as contractors rather than employees, thereby avoiding the employment costs and protections that taxi companies were required to provide. The “disruption” was partly a business model innovation and partly a labour law arbitrage.
This pattern recurs. “Disrupting” housing means building hotels that aren’t regulated as hotels. “Disrupting” finance means offering products that avoid the consumer protections required of banks. The innovation is real; so is the regulatory avoidance.
What Legitimate Disruption Looks Like
None of this is to say that disrupting established industries is wrong. Many incumbents deserve to be disrupted. Taxi cartels were genuinely bad for consumers. Legacy banking was exclusionary. The question is whether the disruption improves the underlying service in ways that benefit the people who use it and the people who provide it — or whether it primarily benefits investors by externalising costs that were previously internalised.
The distinction matters more now than it did when disruption culture was forming in the 2010s, because the companies that emerged from that culture now have significant market power and political influence. They are no longer insurgents. And the habits of thought that justified their insurgency — growth at all costs, move fast and break things, beg forgiveness rather than ask permission — are ill-suited to incumbency.
