A book review: Prophet of Innovation

By Tor W. Andreassen

30 September 2020 10:00

A book review: Prophet of Innovation

Having read this book, one sentence came to mind: While business leaders plan for eternal life, markets are a brutal destructor of firms!

Prophet of Innovation: Joseph Schumpeter and Creative Destruction by Thomas K. McCraw. 624 pages. Published May 8th, 2007, by Harvard University Press.

Front cover of Prophet for Innovation
The cover of Prophet of Innovation: Joseph Schumpeter and Creative Destruction by Thomas K. McCraw. 624 pages. Published May 8th, 2007, by Harvard University Press

Trans World Airlines, Kodak, Pullman, NOKIA, Digital Equipment Corporation, British Leyland--all once as strong as dinosaurs, all now just as extinct. Destruction of businesses, fortunes, products, and careers is the price of progress toward a better material life. No one understood this bedrock economic principle better than Joseph A. Schumpeter. "Creative destruction," he said, is the driving force of capitalism.

Described by John Kenneth Galbraith as "the most sophisticated conservative" of the twentieth century, Schumpeter made his mark as the prophet of incessant change. His vision was plain: Nearly all businesses fail, victims of innovation by their competitors. Businesspeople who ignore this lesson, may cause the death of their organization. To survive, they must be entrepreneurial and think strategically. Yet in Schumpeter's view, the general prosperity produced by the "capitalist engine" far outweighs the wreckage it leaves behind. Again, it is the ability to build on the stronger firms, learn from the best, that new firms arise.

This is the fundamental energy of the market economy. Apple’s founder, Steve Jobs, commencement address at Stanford in 2005 alluded to this process: when firms die, they give space to new. It is also the fundamental premise of nature and species: a term made famous in the fifth edition (published in 1869) of On the Origin of Species by British naturalist Charles Darwin, which suggested that organisms best adjusted to their environment are the most successful in surviving and reproducing.

During a tumultuous life spanning two world wars, the Great Depression, and the early Cold War, Schumpeter reinvented himself many times. From boy wonder in turn-of-the-century Vienna to captivating Harvard professor, he was stalked by tragedy and haunted by the specter of his rival, John Maynard Keynes. In 1983 – 100 years after the birth of both men - the American business magazine Forbes defined Schumpeter, not Keynes, the best navigator through the turbulent seas of globalization. Time has proved that assessment accurate.

"Prophet of Innovation" is also the private story of a man rescued constantly by women who loved him and put his well-being above their own. Without them, he would likely not have survived, so fierce were the conflicts between his reason and his emotions. Drawing on all of Schumpeter's writings, including many intimate diaries and letters never before used, this biography paints the full portrait of a magnetic figure who aspired to become the world's greatest economist, lover, and horseman--and admitted to failure only with the horses.


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