The Entrepreneurial Mind

Its funny how things converge once in a while. I was thinking about the economist Schumpeter on our morning walk this morning. (Sorry honey...I promise it was in one of those quiet moments between our conversations during our walk). Schumpeter is credited as being the first economist who captured the power and process of entrepreneurship in the economy. He coined the phrase creative destruction to describe what entrepreneurs do. It is the process of innovation, which is what fuels long-term economic growth. As we come up with new ideas, old products and services become obsolete and fall by the wayside.

I was thinking that it was like the ill-fated policy we had in the US to prevent any and all forest fires at all costs. We've now learned that the seeming destruction caused by forest fires is actually vital in keeping the forest healthy over the long term. By fighting the fires, thinking we were helping preserve the forests, we were actually hurting the forests ability to continuously regenerate itself. The forest fires were the process of creative destruction for the forests!

I was thinking about how the power structure that has been created by large public corporations and the government over the past decades fights natural economic progress and change. Through their power, corporations attempt to institutionalize what they make and protect it through legislation. It is like the fire fighters thinking that preserving what is right now is actually best for the economy. It is not.

If you think about it, that is a big part of the reason that we continue with gasoline powered transportation even though we know it can't last and hope and pray that we can get out of our dependence. But the industries tied to gasoline-based transportation, and the government that has become their partners, do what ever they can to fight off the natural process of creative destruction that should be moving our economy to its next stage of development.

Anyway, I get home this morning and there in the inbox of my e-mails is link from one of my favorite local blog visitors, Ben Cunningham, to a post that has a quote from George Gilder. Now George Gilder is one of my favorite modern day writers. He tends to spend most of his time writing about technology, but often wanders into broader issues. For example, one of my all time favorite essays, The Soul of Silicon, is an article that he wrote based on a talk he gave at the Vatican. It was in the no longer published magazine Forbes ASAP (creative destruction at work -- ASAP died with the death of the dot.coms). I recommend you read it several times. There is so much going on in this article that you will not capture it all in one read.

So here is the quote from Gilder that Ben sent to me this morning:

As entrepreneurs accelerate the processes of creative destruction that impel all economic advance, the economists measure the destruction but not the creativity.... So countries that multiply the production of well-defined and well-catalogued products of the past -- from subsidized steel ingots to protected automobiles -- will seem to grow faster than countries that multiply entrepreneurs and innovations.

Now this is getting really odd. The quote from Gilder, one of my all time favorites writers, sent to me by one of my favorite local blog visitors, quotes my favorite economist, Schumpeter, in relation to something I had just been thinking about on my walk with my favorite person. As governments amass too much power they seem to fight the creative destruction process vital to sustain an entrepreneurial economy. Over-regulation hampers and can even destroy the natural process of creative destruction. The politicians are like the fire fighters preventing the natural economic burn-off needed to keep our economy moving forward and evolving as it has to do to stay strong.

I told you that it is strange how things like this all come together sometimes....