Books – Page 133 – artdiamondblog.com

FDR Turned Schumpeter into a Fan of Ludwig von Mises

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.

Schumpeter on the Government Execution of an Entrepreneur

(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.)

Schumpeter on Fools, Asses, and Academic Committees

(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.

William Manchester Shows the Darkness of the Dark Ages

Source of book image: http://www.cs.princeton.edu/~aahobor/Lucy-Day/Images/Covers-50/A-World-Lit-Only-by-Fire.jpg

William Manchester was better known for other books, but I recommend A World Lit Only by Fire. It is not always pleasant reading, but it is often fascinating, and sometimes amusing or edifying. Unlike some historians, who are afraid to call the Dark Ages dark because they are afraid to make value judgments, Manchester details just how ‘brutish, nasty and short’ life was during the centuries from 400 AD to 1000 AD (and to a large extent even up to 1600).
He also exposes the failings of institutions and historical individuals who are now revered, including martial Popes who lived ostentatiously with funds extracted from starving peasants, and Protestant ‘reformers’ who burned books and murdered those they considered heretics.
Only a few hundred years separates us from the times that Manchester chronicles. It is useful to contemplate how far we have come, and how far we may fall, if we do not recognize and defend the values upon which civilization depends.

Reference:
Manchester, William. A World Lit Only by Fire: The Medieval Mind and the Renaissance, Portrait of an Age. Back Bay Publishers, 1993.

Policeman to Speeding Hoover: “Drive On, Brother”

In her eye-opening The Forgotten Man, Amity Shlaes shows that Herbert Hoover, while not the hero of the Great Depression, was hardly the consummate villain that politically correct legend has made him out to be.
The hapless, hated Hoover, after his electoral defeat by the real villain, FDR, drove the countryside seeking tranquility and direction. At one point, in the middle of a hot summer night, Hoover, with his son Allan, sped toward the cooler Palo Alto:

(p. 221) Hurtling down the highway, Hoover looked in the rearview mirror and saw a flashing red light gaining on him. Soon he could hear a siren. Dutifully, he pulled off the highway and fumbled for his license, handing it to the stern police officer. The patrolman looked at the license, then examined it more closely in the illumination of a headlight. Returning to the car window, he placed a foot on the running board and asked Hoover, “Tell me are you that guy?” The ex-president, with a slight grin, said, “Yes, I guess I’m that guy.” The policeman then asked, “Well, does it make you feel any better to drive sixty miles an hour down this Valley Pike in the middle of the night?” Hoover reflected for a moment and replied, “Well, under the circumstances I think it does.” The highway patrolman stepped back from the running board, looked Hoover in the eye, and with a wave of his arm said, “Drive on, brother.”

Source:
Wert, Hal Elliott. Hoover the Fishing President: Portrait of the Private Man and His Life Outdoors. Mechanicsburg, PA: Stackpole Books, 2005.

The reference on Amity Shlaes’s book, is:
Shlaes, Amity. The Forgotten Man: A New History of the Great Depression. New York: HarperCollins, 2007.

Talking a Good Game is Little Correlated with Getting it Done

Bossidy and Charan’s advice below on hiring managers fits with Christensen and Raynor’s advice to hire managers who have had the right experiences, in preference to those who have the ‘right stuff’ (aka ‘charisma’).

(p. 119) In our experience, there’s very little correlation between those who talk a good game and those who get things done come hell or high water. Too often the second kind are given short shrift. But if you want to build a company that has excellent discipline of execution, you have to select the doer.

Source:
Bossidy, Larry, Ram Charan, and Charles Burck. Execution: The Discipline of Getting Things Done. New York: Crown Business, 2002.

McCraw on Schumpeter

Source of book image: http://reader2.com/wasp1028

I am in the process of writing a full-length review of McCraw’s book for the annual Research in the History of Economic Thought and Methodology. Suffice it to say that McCraw’s book is very useful and very interesting, and gets a lot right that is important. Most notably, McCraw appreciates that Schumpeter’s central message is that innovation is what matters most about capitalism.

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

CEO Michael Dell’s Management Advice

Source of book image: http://ramz-thoughts.blogspot.com/2007/12/new-addition-to-my-book-shelf.html

I have had Direct from Dell on my ‘to-read’ list for years, and it finally made it to the top. The book has some interesting anecdotes, and some useful generalizations, but not as many as I had hoped.
In fairness, if I had read the book closer to its publication year, in 1999, maybe some of the observations would have seemed fresher, that today seem like stale clichés.
For example, it is clever to quote (p. 209) the hockey player Wayne Gretzky as saying that he doesn’t skate to where the puck is; he skates to where it will be. And then apply the saying to business by advising that managers skate, not to where the profits currently are, but to where the profits will be in the future. Reading this in Dell’s book did not excite me, because I had already read it in Christensen and Raynor. But Dell’s book came out before Christensen and Raynor, and it’s not a failing of the Dell book that I had read the Christensen and Raynor book first.
But some of what Dell writes, was a cliché even back in 1999. For example, it is a cliché that customers should matter; but simply saying ‘listen to your customers’ is not very useful. Sometimes customers are not very articulate about what they would value, and sometimes they need to be educated, and sometimes your current customers might not buy an innovation that other potential customers might love.
Christensen and Raynor in The Innovator’s Solution, have emphasized the desirability of thinking about what job customers need to have done.
One useful bit of advice in Direct from Dell is that companies should segment themselves into different units to serve different kinds of customers. This might be a useful stratagem to make it easier to execute Christensen and Raynor’s advice. (But it goes against another common dictum in management books: achieve economies by cutting out duplication and by achieving economies of scale.)
The book has some interesting examples and observations, but the signal to noise ratio is not as high as in the very best management books by former CEOs, such as in Andy Groves’ Only the Paranoid Survive and in Jack Welch’s Jack: Straight from the Gut.

References:
Christensen, Clayton M., and Michael E. Raynor. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.
Dell, Michael. Direct from Dell: Strategies That Revolutionized an Industry. New York: HarperCollins Publishers, Inc., 1999.
Grove, Andrew S. Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company. New York: Bantam Books, 1999.
Welch, Jack. Jack: Straight from the Gut. New York: Warner Business Books, 2001.

Business Model More Effective than Charity at Helping Poor

Nobel-Peace-Prize-winning economist Muhammad Yunus. Source of image: online version of the WSJ article quoted and cited below.

(p. A9) In his new book, “Creating a World Without Poverty,” Mr. Yunus . . . defines social business as “cause-driven” rather than profit-driven. And yet, it is not a charity: Its owners are entitled to recoup their investments, and the social business must recover its full costs, or more, even as it concentrates on creating products or services that provide a social good. It does this by charging a fee for its products and services. (One example: a business that manufactures and sells low-priced, nutritious food products to underfed children. Grameen America is also a social business.)
Mr. Yunus freely acknowledges that the free market has done a great deal for the poor. “I didn’t say that what is there is wrong. I said the structure was not complete. One piece was missing. We couldn’t express within the business world all the things we want to do for others.”
He argues that in today’s world, people whose main ambition is to help those in need tend to be pushed into philanthropy, which isn’t always the most efficient way to bring about change. In philanthropy, he says, the “dollar has only one life, you can use it once . . . social business dollar has endless life, it recycles. And you build institutions.” He continues, “when it’s an institution you bring creativity into it. You bring innovations into it. You bring continuity into it.”
Mr. Yunus argues that it’s extremely difficult to bring efficiency to charity. But “the moment you bring in a business model, immediately you become concerned about the cost, about the revenue, the sustainability, the surplus generation, how to bring more efficiency, how to bring new technology, how to redesign, each year you review the whole thing . . . charity doesn’t have that package.”

For the full article, see:
EMILY PARKER. “THE WEEKEND INTERVIEW with Muhammad Yunus; Subprime Lender.” The Wall Street Journal (Sat., March 1, 2008): A9.
(Note: first ellipsis added; other ellipses in original.)

Global Warming Alarmists “Want Us to Sacrifice Liberty”

President of the Czech Republic, Vaclav Klaus. Source of photo: online version of the WSJ article quoted and cited below.

In addition to his insights into global warming, Vaclav Klaus is an advocate of the work of Joseph Schumpeter.

(p. A9) Mr. Klaus is . . . interested in the politics of global warming. He has written a book, tentatively titled “Blue, Not Green Planet,” published in Czech last year and due out in English translation in the U.S. this May. The main question of the book is in its subtitle: “What is in danger: climate or freedom?”
He likens global-warming alarmism to communism, which he experienced first-hand in Cold War Czechoslovakia, then a Soviet satellite. While the communists argued that we must all sacrifice some freedom in pursuit of “equality,” the “warmists,” as Mr. Klaus calls them, want us to sacrifice liberty — especially economic liberty — to prevent a change in climate. In both cases, in Mr. Klaus’s view, the costs of achieving the goal, and the impossibility of truly doing so, argue strongly against paying a price of freedom.
. . .
In Europe, Mr. Klaus has the reputation of a firebrand, if not a loose cannon. This is a president, after all, who calls global warming “alarmism” a “radical political project” based in a form of “Malthusianism” that is itself grounded on a “cynical approach [by] those who themselves are sufficiently well-off.”
“It is not about climatology,” he insists. “It is about freedom.”

For the full article, see:
BRIAN M. CARNEY. “The Weekend Interview with Vaclav Klaus; The Contrarian of Prague.” The Wall Street Journal (Sat., March 8, 2008): A9.
(Note: ellipsis added.)