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From McCraw's discussion of Schumpeter's legacy:

(p. 496) No country, regardless of how long it has been prosperous, can take permanent affluence for granted. Nor can any company assume its continued existence---as names such as Digital Equipment, Pan American Airways, Pullman, Douglas Aircraft, and the Pennsylvania Railroad remind us. Each of these companies once epitomized the cutting edge not only of its own industry but of American business as a whole. And all are now in the dustbin of history, along with hundreds of thousands of other businesses of all sizes---once as strong as dinosaurs but now just as extinct.

Source:

McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.

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"Steve Ballmer is the second Microsoft chief executive to butt his head against the view that a new era in technology brings a new market leader." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 4) The Yahoo affair obscures the larger story: Microsoft's long, long struggle -- since 1993 -- to maintain its leadership position while the Internet grew ubiquitous. Mr. Ballmer, who joined Microsoft in 1980 as its 15th employee, and Bill Gates, his mentor who will retire next month as a full-time Microsoft employee, have certainly tried their best to avert the inevitable decline of the company's influence.

In 2000, Mr. Ballmer credited Mr. Gates for noting that no company in the computer business had ever stayed on top through what Mr. Gates called "a major paradigm shift." The two men wanted Microsoft to be the first company to achieve that goal. An interesting challenge, but some problems are of a size that dwarf the abilities of multibillionaire mortals.

In a 1995 internal memo, "The Internet Tidal Wave," Mr. Gates alerted company employees to the Internet's potential to be a disruptive force. This was two years before Clayton M. Christensen, the Harvard Business School professor, published "The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail" (1997). The professor presented what would become a widely noted framework to explain how seemingly well-managed companies could do most everything to prepare for the arrival of disruptive new technology but still lose market leadership.

It's Google, of course, that has developed the musculature to step forward and lay claim to being Microsoft's successor as industry leader in the Internet era. If there had been any way Microsoft could have prepared for this day, it had ample time to do so. In 1993, fully five years before Google's founding and two years before Mr. Gates's memo, Nathan P. Myhrvold, then Microsoft's chief technology officer, wrote his own memo, "Road Kill on the Information Highway." It spelled out in prescient detail how each of many industries would be flattened by the build-out of digital networks, and it said that the PC software business would be no exception.

For the full commentary, see:

RANDALL STROSS. "Digital Domain; The Computer Industry Comes With Built-In Term Limits." The New York Times, SundayBusiness Section (Sun., May 18, 2008): 4.

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(p. 156) Because it proceeds by competitively destroying old businesses and hence the existences dependent upon them, there always corresponds to it a process of decline, of loss of caste, of elimination. This fate also threatens the entrepreneur whose powers are declining, or his heirs who have inherited his wealth without his ability. This is not only because all individual profits dry up, the competitive mechanism tolerating no permanent surplus values, but rather annihilating them by means of just this stimulus of the striving for profits which is the mechanism's driving force; but also because in the normal case things so happen that entrepreneurial success embodies itself in the ownership of a business; and this business is usually carried on further by the heirs on what soon become traditional lines until new entrepreneurs supplant it. An American adage expresses it: three generations from overalls to overalls. And so it may be. Exceptions are rare, and are more than compensated for by cases in which the descent is still faster. Because there are always entrepreneurs and relatives and heirs of entrepreneurs, public opinion and also the phraseology of the social struggle readily overlook these facts. They constitute "the rich" a class of inheritors who are removed from life's battle. In fact, the upper strata of society are like hotels which are indeed always full of people, but people who are forever changing.

Source:

Schumpeter, Joseph A. The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle. Translated by Redvers Opie. translation of 2nd German edition that appeared in 1926; translation first published by Harvard in 1934 ed. London: Oxford University Press, 1961.

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Over the weekend of August 16-17, 2008, I caught a few minutes of an interview on one of the C-SPAN channels. Charles Murray was handing softball questions to an academic philosopher named Kronman. Kronman was pontificating that life could only be meaningful because there was death. He suggested that those pursuing longevity research were misguided.

I sat there appalled, pondering how many wonderful, amazing projects we could get done, if only we had more time.

Some wise philosopher once said that you can only have useful dialogue with someone if the two of you have some shared assumptions. I don't expect to be dialoguing with Anthony Kronman anytime soon. And that is just as well, since life is way too short to waste much time worrying about the Anthony Kronman's of the world.

(In case you think I'm making this up, I quote below, from Kronman.)

(p. 229) The spiritual emptiness of our civilization has its source in the technology whose achievements we celebrate and on whose powers we all now depend.

Technology relaxes or abolishes the existing limits on our powers. There is no limit to this process itself. Indeed, every step forward is merely a provocation to go further. This might be called the (p. 230) technological "imperative." . . .

. . .

(p. 230) If we lived forever, our powers, however great, would have no significance. How could it possibly matter whether we exercised them one way or another, sooner rather than later? This can matter to us only within the framework of a lifetime, that is, within the boundaries of a mortal existence. That we sometimes imagine (or think we imagine) that we want to have and use limitless powers in a limitless life is an illusion that always depends on our covertly smug-(p. 231)gling into our imagined picture of such an existence some essential feature of the human mortality we can never escape. In reality, the idea of immortality is for us quite unimaginable. It remains an empty abstraction.

PS: The following sentence appears on the copyright page of Kronman's book: "The paper in this book meets the guidelines for permanence and durability of the Committee on Production Guidelines for Book Longevity of the Council on Library Resources."

So the longevity of books is pompously praised, while the longevity of humans is belittled?

Don't waste time on:

Kronman, Anthony T. Education's End: Why Our Colleges and Universities Have Given up on the Meaning of Life. New Haven, CT: Yale University Press, 2007.

(Note: ellipses added.)

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The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.

attributed to George Bernard Shaw

Source:

Elkington, John, and Pamela Hartigan. The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World. Boston, MA: Harvard Business School Press, 2008.

(Note: Elkington and Hartigan cite Shaw's Man and Superman as the location of the Shaw quote.)

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McCraw on the nature of "a Schumpeterian program" :

(p. 169) Yet it is not difficult to identify a Schumpeterian program---at whatever level of analysis one chooses: the individual entrepreneur, the business firm, the industry, or even the country. At all levels, Schumpeter's litmus test is whether the players are pursuing innovation and bringing about creative destruction. If they are, then the program is Schumpeterian.

Source:

McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.

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McCraw (2007, p. 112) quotes from Schumpeter's diary:

Really, I don't quite regret any of my efforts and failures---every one of them taught me something about myself and life that uniform success would have hidden.

Source:

McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.

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Michael Crichton speaking on environmentalism at the Fairmont Hotel on September 15, 2003. Source of photo: Bill Adams' posting at http://www.pbase.com/bill_adams/image/21439440

The papers announced yesterday (11/6/08) that Michael Crichton had died of cancer a couple of days earlier (11/4/08).

I had mixed feelings about his stories. On the one hand, they seemed mainly to stir up unrealistic fears about technology, which I see as mainly a benefit to humanity. On the other hand, they often involved intelligent heroes who struggled against danger, and won (or at least partly won).

Crichton's best story may have been one of his last, State of Fear. In that book, he took on the environmental movement, and showed in a powerful appendix, how some scientists and scientific institutions have failed us, by creating fear that is not grounded in the free exchange of ideas and evidence.

Crichton did not have to take on this issue---it earned him vituperative enemies, and probably lost him some readers. But in the end, he too was an intelligent hero who struggled against danger---the danger of politically correct closed minds.

Michael Crichton, Rest in Peace.

P.S.: Crichton had some scientific credentials. Here are a couple of interesting facts about his life:

(p. A27) At Harvard, after a professor criticized his writing style, the younger Mr. Crichton changed his major from English to anthropology and graduated summa cum laude in 1964. He then spent a year teaching anthropology on a fellowship at Cambridge University. In 1966 he entered Harvard Medical School and began writing on the side to help pay tuition.

. . .

In 1969, after earning his medical degree, Mr. Crichton moved to the La Jolla section of San Diego and spent a year as a postdoctoral fellow at the Salk Institute for Biological Studies. Already inclining toward a writing career, he tilted decisively with "The Andromeda Strain," a medical thriller about a group of scientists racing against time to stop the spread of a lethal organism from outer space code-named Andromeda.

For the full obituary, see:

WILLIAM GRIMES. "Michael Crichton, Author of Thrillers, Dies at 66." The New York Times (Thurs., November 5, 2008): A27.

(Note: ellipsis added.)

Michael Crichton during an April 11, 2002 lecture at the Harvard Medical School (from which he graduated). Source of photo: http://www.hno.harvard.edu/gazette/2002/04.18/11-crichton.html

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"Amit Chatwani, writer of Leveragedsellout.com and a book, "Damn It Feels Good to Be a Banker."" Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A28) Happy hour in the financial district has its own taxonomy. The other night amid the several sidewalk tables on Stone Street, Amit Chatwani, the 26-year-old behind the satirical Wall Street blog Leveragedsellout.com, broke down the scene within seconds of his arrival.

The young woman carrying a canvas "deal bag" with the Goldman Sachs logo was most likely a bank associate, he surmised. The younger-looking man reading the so-counterintuitive-it's-intuitive business book "The Black Swan" was an analyst with big-picture dreams. And the rest of the tables were filled with tech-support and human-resources staff, he figured.

"They have to be back-office, because it's too early for bankers to be out," Mr. Chatwani said. "They could be traders, I suppose. Or compliance and risk management, which is basically middle-office that's treated as back-office."

But Mr. Chatwani would be the first to admit that his assessments of the culture of Wall Street are not, at the moment, holding their value. His book, written under the name Leveraged Sell-Out and entitled "Damn It Feels Good to Be a Banker," was published by Hyperion in August, giving it a fair claim to some kind of Worst Timing Ever Award.

For the full story, see:

ERIC KONIGSBERG. "Attn, Satirist of the Spoiled of Wall Street: Bad Timing, Dude." The New York Times (Thurs., October 16, 2008): A28.

The reference for The Black Swan book mentioned above, is:

Taleb, Nassim Nicholas. The Black Swan: The Impact of the Highly Improbable. New York: Random House, 2007.

A marvelous review of The Black Swan, is:
Diamond, Arthur M., Jr. "Review of The Black Swan: The Impact of the Highly Improbable." Journal of Scientific Exploration 22, no. 3 (Fall 2008): 419-22.

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Source of book image: online version of the NYT review quoted and cited below.

(p. E1) Yeltsin's grievance against the Communists began before he was born, in an all-too-common history of family heartbreak that Mr. Colton pieces together with a good deal of original reporting. The Yeltsins were dispossessed for the bourgeois crime of having built a farm, mill and blacksmithing business. Yeltsin's grandfather died a broken man. His father was charged with the catch-all crime of "anti-Soviet agitation and propaganda" for grousing at his job on a construction site, and sent to a forced-labor camp for three years.

When Yeltsin joined the Communist Party, it was not out of devotion to the professed ideals but because a party card was a requirement for promotion to chief engineer in the construction industry. And when he moved into the hierarchy, he was already a man who chafed at party orthodoxy. No radical, he "nibbled at the edges of what was admissible," Mr. Colton writes, pushing for market prices in the local farm bazaars, encouraging entrepreneurial initiative in the workplace, complaining that the top-down system smothered self-reliance.

For the full review, see:

BILL KELLER. "Books of The Times; The Making of Yeltsin, His Boldness and Flaws." The New York Times (Weds., May 7, 2008): E1.

(p. 222) For Yeltsin's contemporaries, deliverance from Marxist scripture and Soviet srtuctures took many forms. For him, it was an ease with the market and recoil against the overbearing state. Mikhail Fridman, who became one of Russia's first billionaires as a banker and oilman, makes the point well:

Yeltsin as an individual who had inner freedom . . . instinctively moved toward the market as the end. That is because . . . as my namesake Milton Friedman says, "Capitalism is freedom." . . . [Yeltsin thought] it was necessary to give people freedom and they would make out well. How exactly to do that he did not know. [But he did know] that it was necessary to free people from control: We were squeezing them dry. He thought that if we let them go they could move heaven and earth. . . . This is the level on which he thought about it. . . . He took a dim view of all these [Soviet] controls. [He felt that] the controllers had long since believed in nothing.

. . .

(p. 525) Stewart, working as a photojournalist, taped Yeltsin's remarks on August 24, 1990, in Dolinsk. She calls them "laissez-faire populism."

Source:

Colton, Timothy J. Yeltsin: A Life. New York: Basic Books, 2008.

(Note: ellipses and bracked words in Fridman (sic) quote were made by Colton; other ellipses were added by me.)

(Note: the quote from p. 525 is from endnote number 38.)

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Wabash economics professor Ben Rogge's best lecture focused on a question made famous by Schumpeter: "Can Capitalism Survive?" In some ways, Ben's message was a pessimistic one.

But near the end of his lecture, Rogge included the following quote from Schumpeter's Capitalism, Socialism and Democracy:

(p. xi) This leads to the charge of "defeatism." I deny entirely that this term is applicable to a piece of analysis. Defeatism denotes a certain psychic state that has meaning only in relation to action. Facts in themselves and inference from them can never be defeatist or the opposite whatever that might be. The report that a given ship is sinking is not defeatist. Only the spirit in which this report is received can be defeatist: The crew can sit down and drink. But it can also rush to the pumps.

Source of quote:

Schumpeter, Joseph A. Capitalism, Socialism and Democracy. 3rd ed. New York: Harper and Row, 1950.

Reference to Rogge's collection of essays that includes the title essay mentioned above:

Rogge, Benjamin A. Can Capitalism Survive? Indianapolis: Liberty Fund, Inc., 1979.

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Source of formula title and of formula: online version of the WSJ commentary quoted and cited below.

(p. A17) Here's how ill-conceived regulation poisoned the system. Until recently, bank CEOs and regulators slept well at night thanks to a financial model developed in the 1990s called "value at risk" or VaR. It assesses historical variances and covariances among different securities, informing financial institutions of the risks they're taking. By assessing risk factors across all securities, VaR can compare historical levels of risk for given portfolios, usually up to a 99% probability that banks would not lose more than a certain amount of money. In normal times, banks compare the VaR worst case with their capital to make sure their reserves can cover losses.

But VaR can't account for extreme unprecedented events -- the collapse of Barings in 1995 due to a rogue trader in Singapore, or today's government-mandated bad mortgages bundled into securities that are hard to value and unwind. The "1% likely" happened. And because the 1% literally didn't compute, there was no estimate of the stunning losses that have occurred.

Yale mathematician Benoit Mandelbrot pointed out the shortcomings of the VaR model in his "The (Mis)behavior of Markets," published in 2004. He noted that bell curves work for, say, disparities in the height of people. In markets, instead of flat tails of rare events at either end of the bell curve, there are "fat tails" of huge upsides and huge downsides. Markets are more complex than the neat shape of bell curves.

Last year's bestselling nonfiction book had a similar theme. In "The Black Swan," former trader Nassim Nicholas Taleb pointed out that extreme outcomes are actually common, warning that financial engineers -- "scientists," as he calls them -- ignore these unlikely outcomes at their peril. But today's credit panic was not entirely unpredictable. Mr. Taleb was prescient in writing, "The government-sponsored institution Fannie Mae, when I look at their risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup. But not to worry: Their large staffs of scientists deemed these events 'unlikely.'"

For the full commentary, see:

L. GORDON CROVITZ. "The 1% Panic." The Wall Street Journal (Mon., OCTOBER 13, 2008): A17.

(Note: the online version of the article had the following added subtitle: "Our financial models were only meant to work 99% of the time.")

For the Taleb book mentioned in the commentary, see:

Taleb, Nassim Nicholas. The Black Swan: The Impact of the Highly Improbable. New York: Random House, 2007.

For an insightful review of the Taleb book, see:

Diamond, Arthur M., Jr. "Review of the Black Swan: The Impact of the Highly Improbable." Journal of Scientific Exploration 22, no. 3 (2008): 419-22.

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(p. 152) The early market is driven by the demands of visionaries for offerings that create dramatic competitive advantages of the sort that would allow them to leapfrog over the other players in their industry.

Source:

Moore, Geoffrey A. Living on the Fault Line: Managing for Shareholder Value in the Age of the Internet. 1st ed. New York: HarperCollins Publishers, Inc., 2000.

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McCraw on Schumpeter's History of Economic Analysis:

(p. 460) . . . , Schumpeter compared Keynes to David Ricardo: "His work, is a striking example of what we have called above the Ricardian Vice, namely, the habit of piling a heavy load of practical conclusions upon a tenuous groundwork, which was unequal to it yet seemed in its simplicity not only attractive but also convincing. All this goes a long way though not the whole way toward answering the questions that always interest us, namely the questions what it is in a man's message that makes people listen to him, and why and how."

Source:

McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.

(Note: ellipsis added.)

(Note: italics in original.)

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Source of book image on the left:                    
http://images.barnesandnoble.com/images/25780000/25788683.jpg
Source of book image on the right: http://www.churchillsociety.org/Churchill%20Book%20Discussion%20Group.htm

Several recent books support a common conclusion that freedom is fragile, and its preservation can sometimes depend on the courage of a few individuals. I recently heard discussions on C-SPAN of a couple of books (images above) on WW2 that emphasize this point. Hitler might very well have succeeded in the long-term conquest of continental Europe, and even Great Britain, if Churchill and a few others had not taken a stand.

Earlier, also on C-SPAN, I heard John Ferling make a similar point with regard to the American Revolution. (See the images of his two relevant books below.) Were it not for the actions of George Washington, and a few others, the revolution very well might have failed.

One can view this as a bad news, good news, story. In earlier entries on the blog, I have quoted articles suggesting that the French are especially bothered by how "precarious" life can be. Well, the bad news is, that on this, the French may be right.

But, on the other hand, the stories of Churchill, and Washington, also tell us that with some courage and determination and wisdom, individuals can sometimes make a big difference in how stories end. That is the good news.

(And yes, Nassim, luck matters too.)

Books referred to:

Ferling, John. Almost a Miracle: The American Victory in the War of Independence. New York: Oxford University Press, USA, 2007.

Ferling, John. A Leap in the Dark: The Struggle to Create the American Republic. 1st ed. New York: Oxford University Press, USA, 2003.

Lukacs, John R. Blood, Toil, Tears and Sweat: The Dire Warning: Churchill's First Speech as Prime Minister. New York: Basic Books, 2008.

Olson, Lynne. Troublesome Young Men: The Rebels Who Brought Churchill to Power and Helped Save England. 1st ed. New York: Farrar, Straus and Giroux, 2007.

Source of book image on the left:                     http://images.barnesandnoble.com/images/7790000/7793679.jpg
Source of book image on the right: http://images.barnesandnoble.com/images/13420000/13429252.JPG

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Source of book image: http://www.bookswim.com/images_books/large/The_Worst_Hard_Time_The_Untold_Story_of_Those_Who_Survived_the_Great_American_Dust_Bowl-119185970830588.jpg

Timothy Egan's book presents an engrossing picture of what life was like in a particular time and place in U.S. history. The time is the 1920s and 1930s, and the place is the lower "high" plains, mainly of Oklahoma and Texas. Egan is a master of telling us meaningful stories about the goals and struggles of particular people, so that we care when the land blows away from them, and they suffer.

You will need, however, to look elsewhere for a deep understanding of the causes of what happened. Egan mainly aims at describing, not explaining. And when he explains, he mainly rounds up the usual suspects one would expect a New York Times reporter to round up (e.g., Herbert Hoover).

(For deeper and more illuminating explanations of what was going on during the worst of the period, you'd do better by consulting Amity Shlaes's The Forgotten Man.)

References to books mentioned above:

Egan, Timothy. The Worst Hard Time: The Untold Story of Those Who Survived the Great American Dust Bowl. Boston: Houghton Mifflin, 2006.

Shlaes, Amity. The Forgotten Man: A New History of the Great Depression. New York: HarperCollins, 2007.

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From McCraw's summary of an article entitled "The Function of Entrepreneurs and the Interest of the Worker" that Schumpeter published in 1927 in a labor magazine :

(p. 178) Schumpeter's key point here is one he hammered home many times: it is the insatiable pursuit of success, and of the towering premium it pays, that drives entrepreneurs and their investors to put so much of their time, effort, and money into some new project whose future is completely uncertain. High entrepreneurial returns are essential to generate gains not only for individuals but also for society, through the creation of new jobs.

Source:

McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.

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"Making glass has long been energy-intensive, but soaring energy prices provide a strong incentive for that to change." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 4) Glassmaking is a based on old, stable technologies that require lots of materials and energy. The basic furnace, which melts sand into glass at extremely high temperatures, hasn't undergone a fundamental change since the 1850s. Furnace designers have long contented themselves with small improvements, such as using pure oxygen to improve energy efficiency.

Today, glassmaking faces a technological upheaval that offers a reminder that "it is a mistake to assume that older technologies are less dynamic than new ones," says David Edgerton, a historian at Imperial College in London and the author of "The Shock of the Old," a history of the evolution of pre-electronic technologies in the 20th century.

. . .

Mr. Greenman sees a new willingness to innovate among glassmakers who, until recently, usually shunned technological advances because savings in materials and energy didn't justify the costs of introducing new designs and processes.

"Many innovations were, frankly, thwarted by cost," says C. Philip Ross, a consultant in Laguna Niguel, Calif., who has studied technological options for the industry. "There's a lot of upside in revisiting old, discarded ideas."

Glassmakers are searching for both small and large advances on three fronts: designing more efficient furnaces; creating much stronger glass; and using heat better.

. . .

The potential revolution in glass-making suggests a new model for innovation: Creators go back to the future, spending almost as much time retrieving once-discarded inventions as they do creating new ones.

For the full story, see:

G. PASCAL ZACHARY. "Ping; Starting to Think Outside the Jar." The New York Times, SundayBusiness Section (Sun., June 15, 2008): 4.

(Note: ellipses added.)

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McCraw quoting the diary of Schumpeter's former professor, Friedrich von Wieser:

(p. 101) "He is not misled by prevalent sentiment," the professor wrote in his diary. "Schumpeter has courage, an asset which cannot be over-praised."

Source:

McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.

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Source of book image: http://images.barnesandnoble.com/images/26910000/26912572.jpg

(p. A 13) Cortés was a man of deep contradictions. A devout Catholic, he was horrified by the sights and sounds of Aztec worship: its human sacrifices and cannibalism, its skull racks, its idols draped with human body parts, its priests with their blood-clotted hair. But he was not above massacring his enemies or burning them at the stake. He was genuinely dazzled by his first sight of the Aztec capital, Tenochtitlán, with its tidy fields and gleaming stone causeways, a city of nearly a quarter-million people that was, he wrote in a letter to the Spanish king, more beautiful than any in Europe. Even so, he was ready to destroy it all to feed his desire for gold and to bend the Aztecs to his will.

If Cortés was a man of contradictions, Montezuma was not. Studious and conscientious, he had been trained for Aztec priesthood before becoming emperor in 1503 -- the same year that Cortes set out from Spain for America. Montezuma believed in the rightness of his own convictions but also, it appears, in the importance of an open mind. As Mr. Levy shows, he always looked for ways to dispel a crisis by placating the feelings of all concerned. He would have made a fine college president. From his first meeting with Cortés in November 1519, though, he was desperately overmatched.

Montezuma hoped that, by giving Cortés magnificent gifts of gold and silver, he could make him go away. He made him want to stay instead. The Aztec ruler never quite shook off the suspicion that Cortés might be the Aztec god Quetzelcoatl returning home according to ancient prophesy -- a suspicion that led Montezuma to want to treat the intrusive Spaniards as guests rather than a threat.

Cortés exploited Montezuma's weakness without scruple, squeezing one concession after another out of him until, though outnumbered by more than 1,000-to-1, Cortés made him a hostage. When Montezuma had lost all credibility with his people and was no longer useful, Cortés cast him aside. Montezuma died a broken man -- although probably not, Mr. Levy argues, at Cortes's order. It is more likely that Montezuma died from wounds inflicted by his own subjects. When they saw him appear in chains and appeal for calm, they had bombarded him with stones and arrows. His weakness, they understood, had betrayed them to the Spanish.

For the full review, see:

ARTHUR HERMAN. "Bookshelf; Spain Says Hello." The Wall Street Journal (Thurs., July 10, 2008): A13.

The reference for the book, is:

Levy, Buddy. Conquistador. New York: Bantam Books, 2008.

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Source of book image: http://www.paulorfalea.com/downloads/CopyThis_1.jpg

(p. R7) Some entrepreneurial titles are written -- and resonate with readers -- for more personal reasons.

Paul Orfalea, the founder of Kinko's, says he wrote his book, "Copy This!: Lessons from a Hyperactive Dyslexic Who Turned a Bright Idea Into One of America's Best Companies," because he wanted parents of kids with dyslexia to know that their children could succeed in life.

Workman Publishing, an independent publisher based in New York, initially printed 35,000 copies in 2005. Today, after two additional printings, there are 50,000 hardcovers in print. A paperback edition was published in March 2007, with a reworked title.

For the full story, see:

JEFFREY A. TRACHTENBERG. "Running the Show; Me, Me, Me; So many entrepreneurs are writing books about how they made it. Their books, though, aren't nearly as successful." The Wall Street Journal (Mon., June 16, 2008): R7.

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From McCraw's discussion of Schumpeter's "legacy":

(p. 500) In the new world of academic economics, neither the Schumpeterian entrepreneur as an individual nor entrepreneurship as a phenomenon attracts much attention. For professors in economics departments at most major universities, particularly in the United States and Britain, a focus on these favorite issues of Schumpeter's has become a quick ticket out of a job. This development arose from a self-generated isolation of academic economics from history, sociology, and the other social sciences. It represented a trend that Schumpeter himself had glimpsed and lamented but that accelerated rapidly during the two generations after his death.

Source:

McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.

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Source of book image: http://www.simplenomics.com/wp-images/settingthetable-1.jpg

(p. R7) Most successful entrepreneurs like rattling on about how they did it.

The bookshelves have never been more crowded with such exploits from consultants, real-estate moguls and retailers. And publishers say there are more on the way. With layoffs and cutbacks dominating the headlines, demand for advice books based on true-life stories is peaking.

. . .

So what does it take to succeed?

"Pragmatic advice, [a book written by] somebody with a fairly high public profile, and a person who can hit the lecture circuit after the first rush of publicity and keep the book selling," says Grand Central's Mr. Wolff.

Those factors have contributed to the staying power of restaurateur Danny Meyer's book, "Setting the Table: The Transforming Power of Hospitality in Business."

News Corp.'s HarperCollins Publishers first published 30,000 copies in October 2006. (News Corp. also publishes The Wall Street Journal.) Mr. Meyer's work, chatty personal anecdotes wrapped around a core message that emphasizes hospitality as the key to creating satisfied customers, proved a hit.

. . .

"The most surprising thing was the interest from the hospital community," Mr. Meyer says. "That's an industry in turmoil based on the absence of hospitality. They over-focus on the metrics of stays and cure rates rather than how they make people feel."

For the full story, see:

JEFFREY A. TRACHTENBERG. "Running the Show; Me, Me, Me; So many entrepreneurs are writing books about how they made it. Their books, though, aren't nearly as successful." The Wall Street Journal (Mon., June 16, 2008): R7.

(Note: ellipses added.)

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From McCraw's discussion of Schumpeter's "legacy":

(p. 496) Because of the importance of entrepreneurship, and because Schumpeter wrote about it with such insight and verve, his name will be forever linked to the idea.

Source:

McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.

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http://www.tbpcontrol.co.uk/TWS/CoverImages_0/074/757/0747579857.jpg

(p. B7) As Mr. Kynaston sets his scene, what immediately becomes clear is that the recent past is not so recent. "Britain in 1945. No supermarkets, no motorways, no teabags, no sliced bread, no frozen food. ... No launderettes, no automatic washing machines, wash day every Monday, clothes boiled in a tub, scrubbed on the draining board. ...Abortion illegal, homosexual relationships illegal, suicide illegal, capital punishment legal. White faces everywhere." And with all those white faces was the single overwhelming, blanketing fact of deprivation, a bare-bones existence. Britain had just prevailed in a struggle for its very survival, but victory never looked so grim.

. . .

The Labor Party won the 1945 election in a landslide on a promise of national planning. The debate now was how far to take socialism, with the Laborites divided between the hell-bent nationalizers and the more market-oriented Keynesians. In 1946 Keynes himself admitted (though privately) that "I find myself more and more relying for a solution of our problems on the invisible hand" of the market, "which I tried to eject from economic thinking 20 years ago."

. . .

Almost invisible in Mr. Kynaston's sparkling panorama is a sign of what was to come. One Conservative politician was out of step not only with Labor's policies but even with the prevailing views of her own party. Margaret Roberts was just about alone in condemning the welfare state as "pernicious," destructive of the national character. In 1951, a year after Labor's second postwar electoral victory, she got married. Her husband's name was Thatcher.

For the full review, see:

Barry Gewen. "Books of The Times - In Postwar Britain, the Grim Face of Victory." The New York Times (Thurs., June 12, 2008): B7.

(Note: ellipses within the Kynaston quote are in the original; ellipses between paragraphs are added.)

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Source of book image: http://www.arthurbrooks.net/images/book-2.gif

(p. A13) In "Gross National Happiness," Mr. Brooks has assembled an array of statistics to measure the mood of America's citizens and to discover the reasons they feel as they do. Most often he cites polls that ask for self-described happiness levels, matching up the answers with various beliefs, habits, life choices or experiences.

And what exactly is happiness? Who knows? The term might refer joy or contentment or moral self-approval or material well-being or appetitive pleasure - or some combination of them all. Mr. Brooks is aware of the problem. He says that Potter Stewart, the Supreme Court justice, could have been describing happiness when he said, of pornography, "I know it when I see it."

. . .

He challenges those partial to tales about long-suffering Wal-Mart workers and surly burger flippers to rethink their victimology creed. The woe is not nearly as widespread as rumored: 89% of Americans who work more than 10 hours a week are very satisfied or somewhat satisfied with their jobs while only 11% are not very satisfied or not at all satisfied. Most surprisingly, Mr. Brooks writes, there "is no difference at all in job satisfaction between those with below-average and above-average incomes."

What really makes Americans hate their jobs is a perception that advancement is impossible. And while Mr. Brooks agrees that the nation's income gap is growing, the national happiness level is steady. Just under one-third of American adults say that they are "very happy"; up to 15% are not too happy; and everyone else is somewhere in the middle. Those numbers have been roughly true since the early 1970s. More government spending doesn't seem to raise happiness levels, though direct government assistance may diminish it. Charitable giving, Mr. Brooks adds, generally lifts the spirits; Americans do a lot of it.

For the full review, see:

DAVE SHIFLETT. "Bookshelf; How to Be of Good Cheer." The Wall Street Journal (Mon., May 12, 2008): A13.

(Note: ellipsis added.)

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McCraw is correct in identifying Schumpeter's "signature legacy":

(p. 495) Schumpeter's signature legacy is his insight that innovation in the form of creative destruction is the driving force not only of capitalism but of material progress in general.

Source:

McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.

(Note: italics in original.)

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Source of book image: http://creativecapital.wordpress.com/category/how-to-buy-creative-capital/

Doriot taught at Harvard during the whole time that Joseph Schumpeter taught at Harvard. Given that their interests apparently overlapped, it is surprising that there are no references to Schumpeter or to "creative destruction" in Ante's book.

There are also no references to Doriot in McCraw's recent comprehensive intellectual biography of Schumpeter.

(Scherer in his essay "An Accidental Schumpeterian" mentions taking a useful course from Doriot, but does not illuminate the relationship, if any, between Doriot and Schumpeter.)

(p. A17) Before Sand Hill Road near Stanford University became the center of the venture-capital universe - before Google and Pets.com - the modern market for financing risky startup companies took shape far from Silicon Valley in the years after World War II.

ARD was the first to raise what was then known as "risk capital" from outsiders at a time when investors' wounds were still fresh from the stock-market crash of 1929 and the Depression of the 1930s. The high failure rate of start-ups had generally precluded raising money from average investors. And so ARD's chief competitors in the postwar years were the Rockefellers and another old-money operation, J.H. Whitney & Co.

. . .

The company would hardly merit attention except for its one grand slam, Digital Equipment Corp., which helped establish the East Coast high-tech stronghold along Route 128 outside Boston.

Digital, a minicomputer maker co-founded by former Massachusetts Institute of Technology engineer Ken Olsen, received $70,000 from ARD in 1957 in return for a 70% stake, which eventually grew in value to hundreds of millions of dollars. Mr. Ante calculates the investment's return at 70,000%.

. . .

Doriot, who taught at Harvard for 40 years, beginning in 1926, offered a popular class that was ostensibly about manufacturing but was more a seminar in his business philosophy. "He stressed common sense themes such as self-improvement, teamwork, and contributing to society," Mr. Ante writes. Doriot was known for "spicing up his philosophy with practical and pithy words of advice." Among them: "Always remember that someone somewhere is making a product that will make your product obsolete."

For the full review, see:

RANDALL SMITH. "Bookshelf; Money to Make Things New." The Wall Street Journal (Weds., May 21, 2008): A17.

(Note: ellipses added.)

Reference to the biography of Doriot:

Ante, Spencer E. Creative Capital: Georges Doriot and the Birth of Venture Capital. Boston: Harvard Business School Press, 2008.

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Source of book image: http://press.princeton.edu/images/k8618.gif

(p. A13) The space shuttle Discovery arrived safely home over the weekend, and I suppose we are all rather relieved - that is, those of us who were aware that the shuttle had blasted off a couple of weeks ago on yet another mission. Space exploration is attracting a lot of excitement these days, but the excitement seems to have less to do with the shuttle and more to do with private space ventures, like Richard Branson's Virgin Galactic or Robert Bigelow's plans for space hotels or Space Adventures Ltd., whose latest customer for a private space trip is Google co-founder Sergey Brin. He bought a ticket only last week.

Robert Zimmerman's "The Universe in the Mirror" serves to remind us that NASA, too, can do exciting things in space. Yet the career of the Hubble Space Telescope has been both triumphant and troubled, bringing into focus the strengths and the weaknesses of doing things the NASA way.

. . .

In addition to telling a thrilling tale, Mr. Zimmerman provides a number of lessons. One, he says, is the importance of having human beings in space: Had Hubble not been designed for servicing by astronauts, it would have been an epic failure and a disaster for a generation of astronomers and astrophysicists. Though robots have their uses, he notes, "humans can fix things, something no unmanned probe can do." . . .

But the biggest lesson of "The Universe in a Mirror" comes from the utterly dysfunctional funding and management system that Mr. Zimmerman portrays. Hubble was a triumph, but a system that requires people to sacrifice careers and personal lives, and to engage in "courageous and illegal" acts, in order to see it succeed is a system that is badly in need of repair. Alas, fixing Hubble turned out to be easier than fixing the system that lay behind its problems.

For the full review, see:

GLENN HARLAN REYNOLDS. "Bookshelf; We Can See Clearly Now." The Wall Street Journal (Mon., June 16, 2008): A13.

(Note: ellipses added.)

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From McCraw writing about Schumpeter:

(pp. 318-319) The New Deal struck him as still another prelude to authoritarianism. He became convinced that Roosevelt's program represented a step toward either fascism or socialism, and in either case potential dictatorship. He wrote a friend that Roosevelt was like a child mindlessly breaking a machine because he didn't understand its design. The president "is going to turn me into a fan of [Ludwig von] Mises," his classmate at the University of Vienna who had become a free-market fundamentalist and an opponent of almost all government intervention.

Source:

McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.

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(p. 257) Entrenched interests fought tenaciously against mechanization and the factory system. Unlike the Prussian inventor of a ribbon-weaving loom, who was put to death in 1579 by order of the Danzig Municipal authority, "Entrepreneurs were not necessarily strangled," but "they were not infrequently in danger of their lives."

Source:

McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.

(Note: the phrases in quotation marks are quotations from Schumpeter's Business Cycles book.)

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(p. 225) The longer Schumpeter taught at Harvard, the more he came to resent the bureaucratic routines of academic life that impinged on his research and writing. He especially disliked departmental meetings, and after several years he began to refer to his colleagues as the "fools" (full professors, a play on the German pronunciation of "full") and "asses" (associate and assistant professors). "These committees!" he wrote a friend, "This mentality, that believes that the core of the world is that one committee dines and makes a report for another committee, which in turn dines."

Source:

McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.

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