A few days ago I learned that the phone company is now offering fiber optic Internet service into my neighborhood, something that will increase the download speed at my house more than tenfold over our current DSL service. I signed up without a second thought, and then called my DSL carrier to break the news that I was leaving.

“But sir,” said my phone rep, “Greg,” in his lilting Indian accent, “you have been with us for 10 years!” He sounded like I was breaking up with him.

“I know, ‘Greg’, but whattayagonnado?” I said, doing my best Tony Soprano impression. “Something better has come along.” 

“Well what can we do to keep you?” he asked, moving to step #2 in his “What To Do If A Customer Tries To Cancel” procedure checklist.

“Increase my download speed to 18mb a second like I’m going to get from the fiber optic line,” I told him, knowing he had about as much ability to do that as my dog does to meow.

“Well, we can’t do that, but we can increase it from 1.5mb to 3mb a second!” he said, as though coming in at 1/6 the connection speed of fiber optic was going to be a lot more compelling than 1/12.

“Sorry, ‘Greg’,” I said. “I’m cancelling.”

“But sir, you’ve been with us for 10 years!” he said again. “We value our relationship with you and want you to stay!”

I thought back on my deep relationship with my DSL carrier over the years. I couldn’t seem to recall any golf outings, or steakhouse lunches, or gambling trips to Vegas. Heck, I couldn’t even see the thing I was paying them for. The only thing I had ever gotten from them was a monthly bill and an invisible portal to the World Wide Web.

After “Greg” tried the remaining nine steps on his checklist to no avail he finally gave up and put me through to the cancellation department. When I got off the phone I couldn’t help but think of the experience as a lesson in “Creative Destruction” – the notion that companies are at their most vulnerable right when they seem to be at the pinnacle of success. Once a company becomes a world dominator, goes the theory, they lose their edge and appetite for risk – the very things that made them successful in the first place. Inertia sets in, and then new technologies come along that suddenly render them obsolete or irrelevant.

That is certainly the case with my old DSL carrier. When I first signed up with them a decade ago DSL was the hottest thing around – a blazing gateway that blew my old dial-up connection out of the water. The company was one of the darling stocks of the New Economy, poised, it seemed, to dominate the new virtual landscape forever. Now, a scant decade later, their stock price has been sliced by eighty percent and they stand helpless as a new technology is steamrolling over them, unable to offer anything even remotely competitive. They are learning that, when what you offer is a commoditized service, there is no such thing as customer loyalty – only customer inertia.

What’s happening to my DSL carrier is a story as old as capitalism, and it is happening with blinding speed in today’s technology-driven world. That’s why investors today can’t afford to bet their money on the fate of just a few individual stocks, as investors thirty years ago routinely did. No matter what the analysts want us to believe, there is simply no telling who the winners and losers are going to be in any industry in the long term, as investors in such formerly venerable companies as Enron, AIG and Wachovia have found out firsthand. In fact, if you buy into the notion of Creative Destruction, then piling into what conventional wisdom tells us are today’s hottest stocks may well lead us right to tomorrow’s losers.

There is an easy way around this. When you create a broadly diversified portfolio, you are buying, in effect, the global capital markets. You are buying the whole shooting match, and you can sit back and let the phone company and the cable company and the DSL provider slug it out over the years without having to worry about who the winner is going to be, because you own them all, and thousands of other companies in hundreds of other industries to boot. You can let Creative Destruction run its course and not have to worry that, one day, you’ll end up with all your money riding on a company that is stuck with a technology that is heading the way of the VCR.

 Sorry, “Greg.”