Wednesday, January 30, 2008


I have read (some) and wrote (little) about Joseph Schumpeter, the economist who first theorized, in the early 1900s, about entrepreneurship and who predicted the attacks its very success might engender. A book review in today's Journal rekindled my interest in Schumpeter. The review recaps Scott Shane's The Illusions of Entrepreneurship. The book sounds interesting, though I'll probably pass. For now here's a Schumpeter-centric excerpt from the review:

For Schumpeter, entrepreneurs were change agents, not just creators of business enterprises. Their chief function in society was to challenge established ways of doing things. Schumpeter believed that such disruptive newness -- though it created wealth and economic dynamism -- would inevitably meet resistance, sometimes strong resistance. Thus the long tradition of vilifying entrepreneurs, still evident today.
Love the "disruptive newness" reference; reminds me of Victor Hugo's opine: Greater than the tread of great armies is an idea who's time has come. "Strong resistance" and "vilifying entrepreneurs" remind me of Eyeores. Intrigued, I dug a bit deeper ...

... in 1939, Schumpeter wrote that "the history of capitalism is studded with violent bursts and catastrophes" that, while ultimately bettering society, seem "like a series of explosions." He proferred this process, "creative destruction," in his 1942 tome, Capitalism, Socialism, and Democracy. A few bites:
[there is a] process of industrial mutation -- if I may use that biological term -- that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.
Schumpeter posited two theories. In the first one he argued that the innovation and technological change of a nation comes from the entrepreneurs, or wild spirits. He came up with the German word unternehmergeist, meaning entrepreneur-spirit. He believed that these individuals are the ones who make things work in the economy of the country.

Right on. Thanks, Joe, for the unternehmergeist.


Anonymous said...

Thanks so much for this, helped me simplify things a lot.

Anonymous said...

Definitely inspiring, thanks