John and Kris's Reviews > Prophet of Innovation: Joseph Schumpeter and Creative Destruction

Prophet of Innovation by Thomas K. McCraw
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Jul 22, 10

I was shamed into reading this book. And I’m glad I was. During most conversations I have on a daily basis I feel completely comfortable with the topic – that is I know something about the topic or can steer the conversation toward something I’d rather discuss. A month ago we were invited over for dinner and I was put on the spot. I had no idea who Joseph Schumpeter was or what he thought about anything – much less about his view on innovation, Marx, and the future of capitalism. That night, soon after we put the kids to bed, I did a little research and selected Thomas McCraw’s “Prophet of Innovation: Joseph Schumpeter and Creative Destruction.”

What I loved most about this book was the feeling of sitting in on a week-long seminar with Pulitzer-winner and Harvard Business School professor, Thomas K. McCraw. As a graduate of mediocre Midwestern universities, where I majored in alcohol consumption and passing classes, I always wondered what it would be like to have a true superstar at the lectern espousing wisdom and interesting stories with a sharp wit and an easy smile.

McCraw, very much an advocate of Joseph Schumpeter’s ideals, does an excellent job in balancing Schumpeter the man from Schumpeter the great economist. Schumpeter, best known for his enlightening work on the role of entrepreneurs in capitalism and creating the phrase “creative destruction,” was a man of two dispositions, one public and one private. In public he was jovial, friendly, and always listed among the best lecturers Harvard had to offer despite the fact that he never mentioned his own thoughts in class preferring the Socratic Method after giving equal time to differing schools of thought. In private he was constantly battling depression and working, which were often married in his diary entries that bordered on self-flagellation as he gave himself a score for work done on a given day – most days were labeled “O” for complete failure, even though he published the equivalent of twenty books in the form of massive works and shorter journal pieces.

Schumpeter’s popularity has peaked almost fifty years after his death as more economists look more critically at his much more famous contemporary, John Maynard Keynes. Keynes, Schumpeter thought, focused too much on the short-term and was overly influenced by the Great Depression. Schumpeter’s most famous and lasting work, “Capitalism, Socialism, and Democracy,” was written near the end of his life, which finds its way into most modern MBA programs for it is short, still poignant today, and very much a tour de force in favor of the capitalist free-market system.

Schumpeter, a European from moderate means, had grand ambitions. On his character as a young man before the outbreak of World War I McCraw writes:

“He wore expensive tailored clothes and confessed that "it takes me an hour to dress." Numerous women loved Schumpeter, and he loved them back. "OK, I have a gift for women," he wrote in his diary. He regarded valor as the better part of discretion and enjoyed saying that he aspired to become the greatest economist, horseman, and lover in the world. Then came his punch line: things were not going well with the horses.”

His mother was concerned about his behavior and lifestyle – maybe not as much as The Man In The Yellow Hat’s mother from Curious George, but concerned nonetheless (we’re watching PBS right now: What is his real name? What kind of man only wears yellow and when he leaves the apartment reminds his pet, George, to “be a good little monkey”?) Schumpeter’s mother pushed her precocious and then brilliant son to achieve as much as possible. At one point in his early professorship, at the obscure University of Czernowitz, he had a disagreement over the loaning of books to students with the head librarian. Words were exchanged, nasty words. Schumpeter believed in the revolutionary idea that the university library should loan books to students; the librarian wanted to keep the books in the library. The librarian, as is the custom today at most Ukrainian universities, called for a duel. Schumpeter and the librarian dueled with neither seriously injured. According to McCraw, these two became fast friends afterward.

As his career rapidly progressed he realized that the best opportunities could be found in the much more stable and unapologetically capitalist and democratic America. After divorcing his first wife and “decades of casual affairs and nonchalant dandyism, he became a devoted husband and a deliriously happy man.” Happy until his beloved second wife died in childbirth, as did their only son, this after the recent death of his doting mother. This horrific wave of death cast Schumpeter into a private depression that he would never recover from despite a third marriage and more personal success as he spent the second half of his life at Harvard.

He spent the last decade of his life working on his “History of Economic Analysis,” which incomplete at his death, was published posthumously at 1200 pages by his third wife, Elizabeth. In this massive work Schumpeter attempted to tackle the entire history of economic thought. A book which culminates in the amazing march of human progress while showing that even the brightest minds get sidetracked and “how potentially seminal ideas often get lost, only to be rediscovered decades or even centuries later.”

McCraw has written an excellent book that does a nice job balancing all facets of Schumpeter’s life, leaving the reader to weigh the long-term influence of Schumpeter the man and Schumpeter the economist. 4.5 stars.

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