Reading Group

Category: Reading Group

The Adult

This is a continuing live blog for the Innovation & Entrepreneurship Reading Group‘s discussion of Thomas McCraw’s Prophet of Innovation.  You can see previous entries by clicking on the “Schumpeter Live Blog” tag below.

The second section of the book covers Schumpeter’s life between 1925 and 1940, following the death of his beloved mother and his beloved wife, who died in childbirth of his son, who also died.  McCraw emphasizes that this had a rather profound impact on Schumpeter as he straddled time between Bonn and Harvard, all the while repaying the massive debts he accumulated during his vaunt into the private sector. The capstone of this section is that he, indeed, settled into Harvard permanently and reluctantly married for a third time.  These events set the stage for the final act of his life as The Sage, as McCraw puts it.

Given the tragedy in his life and his need to pay off his massive debts, it is not surprising that this was not the most productive period for his scholarship.  Two pieces jumped out at me as worth discussing — “Social Classes in an Ethnically Homogeneous Environment” and “The Instability of Capitalism.”  Continue reading The Adult

L’Enfant Terrible

Welcome to the Innovation & Entrpreneurship Reading Group’s Live Blog of Thomas McCraw’s Prophet of Innovation: Joseph Schumpeter and Creative Destruction.  The theme of the book is Schumpeter’s emphasis on capitalism as a process of creative destruction.  That is, entrepreneurship and innovation creates value and is the engine of the capitalist economy, but those that win at the game (successful entrepreneurs) leave a “gale of creative destruction” in their paths.  Hence, he sees capitalism as a positive-sum game, but not necessarily as making everyone better off.   Just ask any horse and buggy dealer.

The first chunk of the book, L’Enfant Terrible, covers the first 42 years of Schumpter’s life.  During that time, he had him traveling from Austria to England to Cairo to the United States, serving as a lawyer, a minister of finance, a businessman, and a scholar.   In the scholarship realm, depending on whom you believe, he wrote what was perhaps his defining work — The Theory of Economic Development.*

David Hounshell provides some context for this early work and Schumpeter’s entrepreneur, mark 1.

The entrepreneur is the innovator in Schumpeter’s conception. His original word for the entrepreneur was der Unternehmer, literally undertaker—not in the sense of mortician but from the French verb, entreprendre, to undertake. Schumpeter identifies the entrepreneur as the person who makes new combinations and carries them out. Entrepreneurs are change agents; they create the basis for economic growth.

Continue reading L’Enfant Terrible

I&E Reading Group, Prophet of Innovation

I’m sure that I am not the only member of the I&E Reading Group plodding through Thomas McCraw’s enthralling Prophet of Innovation this week.  I will also start in on the “live blog,” as promised.

The book is a linear progression through both his life and his thinking about economics.  One of the clear messages, and, indeed, a clear message of virtually any history of thought book, is that the thinker is shaped by his or her environment (see, for example, The Worldly Philosophers and New Ideas from Dead Economists).   McCraw certainly paints Schumpeter (a.k.a., Jozsi, Schum, Schumy, Schump, Go-Go) as a product of his environment.   From his mother’s social climbing (Chapter 2 Summary:  Jozsi was something of a mama’s boy) to the horror and devastation of World War I to his spectacular failure as an investment banker, each of these experiences is linked to Schumpeter’s intellectual and professional trajectories.

McCraw divides this world up into three parts: L’Enfant Terrible,  The Adult, and The Sage.  By the time he’s 40, he’s already “played many parts — boy genius, Austrian aristocrat, English gentleman, Cairo attorney, Viennese economist, university professor, minister of finance, investment banker, socialite, and free-spirited Casanova” (124). Not to mention, triumphant swordsman in a duel with an uncooperative librarian (I’m looking at you, Mr. Gilbert).  That’s quite a whirlwind.  Not incidentally, he had also written some defining pieces, including The Theory of Economic Development and “The Crisis of the Tax State,” which made him almost world famous.

So, this week and next, I will be “live blogging” the book.  Rather than recounting the fascinating details of Schumpeter’s life in the “live” blog, I am simply going to offer up some thoughts and topics for discussion that I have carved out and that other members of the group have provided me.   I will likely have my first post up later tonight.

You can get a listing of our progress by clicking on the tag “live blog” below.   I hope it’s helpful.

Reading Group (?): Innovation and the Gales of Creative Destruction

A number of faculty members have formed a reading group for issues of innovation and entrepreneurship. Fittingly, it is called the Innovation and Entrepreneurship Reading Group.

Our first book is Thomas McCraw’s award-winning Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Schumpeter is a central figure in entrepreneurship and innovation scholarship, and is closely associated with the idea that entrepreneurship drives economic growth. He describes innovation as a “perennial gale of creative destruction,” whereby new ideas and products destroy and displace the status quo. Hence, innovation is not unambiguously good thing, as by its very definition it creates classes of winners and losers.

Schumpeter provides the conventional framing of the innovation process as a triumvirate — invention, innovation, and diffusion. Invention is simply the development of a new idea or technology. He argued that inventions were not the story, and that innovation was associated with creating value of the idea. By this definition, innovation is not restricted to technological phenomena. An organization can be innovative by restructuring or doing things in a different way, provided, of course, that there is some value added.

If you are interested, check The Moodle for more information. Or you can contact me directly. I would be happy to spend some time with any student or group of students interested in discussing the book.