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Preserved: How the Twinkie will Survive

Translating Wall Street: The Twinkie's survival is a story of American capitalism.
Published: December 9, 2012
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The result was the same no matter what the cause: 18,000 jobs lost and about $130 million lost by Ripplewood's investors.

The tortuous path Hostess took over the years to an abrupt, and for some, painful end is really a classic American story: no government bailouts, and most Americans will barely bat an eye at Hostess's passing.

It is part of the story of how capitalism works; what Austrian economist Joseph Schumpeter called “creative destruction.”

According to the Concise Encyclopedia of Economics, creative destruction suggests that “lost jobs, ruined companies and vanishing industries are inherent parts of the growth system.”

If creative destruction sounds a bit Darwinian, that's because it is. But if it's cruel to some, it's probably also necessary: out from the economic wreckage caused by creative destruction come new companies and new industries that create new and better products and technologies that make us healthier and improve our standards of living.

Think of Twinkie baker James Dewar's horse-drawn pound cake wagon — if you're waiting for one of those to come along today, you may be waiting a long time.

Throughout the corporate turmoil, the Twinkie continued to sell as if nothing was happening. According to The Wall Street Journal, about 36 million packages of Twinkies were sold in 2011, not including sales from Wal-Mart and Sam's Club. And Twinkies themselves have remained pretty much the same — except for the switch from banana cream filling to vanilla (some would say “white”) cream during World War II, and a few tweaks like the green filling promoting the movie “Shrek” and the recent chocolate filling variety.

Just like it did all the prior corporate events, the Twinkie will survive its maker's liquidation. Corporate bankruptcy is almost like a snapshot accounting for creative destruction.

The products that a company makes that have value are separated from those that don't; the former are perpetuated and the latter retired (a fact that sometimes designates those who will keep their jobs from those who won't).

Twinkies will survive because enough people still want to eat them. Similarly, the name “Hostess” will survive if it has value as a brand.

But not even the Twinkie is immune to capitalism's laws. For now, it is safe. But tastes may evolve, something better may come along, or sugary snack cakes may fall out of favor with a more health-conscious public. But should that happen, it won't be a bad thing.