49
“Theory grows out of the observation of business practice.”

71f
“The barriers in business are social as well as economic, and those who feel their interests threatened will battle fiercely against innovation.”

73
“The foundation of capitalism, both economically and socially, is, therefore, the insatiability of wants that entrepreneurs have managed to induce consumers to see as needs.”

74
Capital = “accumulated wealth reproductively employed.” Oxford English Dictionary
“Credit must be created out of nothing but future expectations, which is a basic reason why capitalism, of all economic systems, is so distinctly oriented toward the future.”
“The important players in this process are entrepreneurs and investment bankers, who generate “new purchasing power out of nothing.” The investment banker is not just a middleman standing between savers and users of capital; he is instead “a producer” of money and credit, “the capitalist par excellence.””

110
“The crucial element was capitalism’s orientation toward the future; but when the future looked bleak, people were reluctant to take risks.”

164
“change is part and parcel of capitalism itself, and it comes from entrepreneurial behavior within the system.”

254
“Innovating firms do not arise evenly throughout the economy. Instead, groups of these firms emerge just after an organizational or technological breakthrough in a particular industry— either in that same industry or in others allied to it.”

255
“As a result, “the history of capitalism is studded with violent bursts and catastrophes.” It is no gentle process of adjustment but something “more like a series of explosions.” The building of a railroad where none had existed, for example, “upsets all conditions of location, all cost calculations, all production functions within its radius of influence.” Innovation, then, is very much a double-bladed sword.”
“In the real world of business, “nobody ever is an entrepreneur all the time, and nobody can ever be only an entrepreneur.” Particularly in large firms, the entrepreneur often not only innovates but also carries out day-to-day management.”
“Of all economic systems, capitalism alone enables people to become entrepreneurs before they possess the necessary funds to found an enterprise. In the end, “it is leadership rather than ownership that matters.“”
“”Risk bearing is no part of the entrepreneurial function. It is the capitalist who bears the risk. The entrepreneur does so only to the extent to which . . . he is also capitalist, but qua entrepreneur he loses other people’s money.””

255f
“Schumpeter identifies entrepreneurial profit as the prime motivator—”the premium put upon successful innovation. When other participants in the same industry see the new level of high profit, they quickly try to imitate the innovation. The entrepreneur tries to preserve his high profit for as long as possible, through patents, further innovation, secret processes, and advertising—each move an act of “aggression directed against actual and would-be competitors.” These are forms of what Schumpeter would famously call “creative destruction” in Capitalism, Socialism and Democracy.”

256
“a new firm’s intrusion into an existing industry always entails “warring with an ‘old’ sphere,” which tries to prohibit, discredit, or otherwise restrict the advantage afforded to the new firm by its innovation. But whatever may happen in a particular case, every entrepreneur’s high profit is temporary, because competitors will copy the innovation, causing market prices to fall. This sequence of cutting prices, which Schumpeter calls “competing down,” is observable in all industries except those protected by government monopoly.”

257
“A major theme of Business Cycles is the extreme difficulty of changing traditional ways of doing things.”
“the only way to change them was through overwhelming economic defeat.”
“In response, British entrepreneurs often moved their factories out of guild-dominated towns. Operating in the countryside, they could proceed without the fetters of official repression and with the advantage of cheaper labor—although even here, in the new outposts, innovators had to “fix things” with local authorities.” -> Do entrepreneurs in film innovate far away from the traditional film industry so they don’t get in trouble with them? I think so. For example, shooting digitally is still a big topic/issue in feature films but standard in web series.

258
“Besides innovating in production, entrepreneurs often had to change habits of consumption. Industrialists had to convince reluctant customers that they actually needed the new goods. Here Schumpeter places heavy emphasis on the role of marketing in mass consumption and in economic growth itself. “It was not enough to produce satisfactory soap,” he writes, “it was also necessary to induce people to wash—a social function of advertisement that is often inadequately appreciated.””
“From the perspective of producers and investors, it did not matter whether new wants were real necessities. “Needs,” says Schumpeter, “whatever they may be, are never more than conditioning factors, and in many cases mere products of entrepreneurial action.””

259
“”The making of the invention and the carrying out of the corresponding innovation are, economically and sociologically, two entirely different things.” Often the two interact, but they are never the same, and innovations are usually more important than inventions.”

262f
“”The more an innovation becomes established, the more it loses the character of an innovation and the more it begins to follow impulses, instead of giving them.”” The Internet today!

263
Railroadization makes the essential features of the evolutionary process more obvious than any other case: “Hundreds of innovations emerged, both large and small. Great sums of money changed hands, the speed of commerce leapt forward, and a vast array of new products reached national markets.”

264
“Still today, the most important advantages of the corporate form over the partnership are its permanence (it does not die when its founders die) and its limited liability (shareowners risk only their investments in that corporation, not their entire personal wealth).”

265
“From 1897 through 1904, 4,227 American companies merged into 257 large entities.”

266
Corporations “facilitated the “absolute optimum” way to commercialize new technology.”
“Entrepreneurial startups always emerge and grow uninterrupted alongside big businesses.”
To Schumpeter “it remained clear that innovations drove entire national economies forward and that long-term progress far outweighed short-term pain.”
Government regulation is very important, but requires “intelligent civil servants, tuning the engine of capitalism with a careful hand, lest they stifle entrepreneurship.”

267
“”Coincidence of high mortality and high profits ideally expresses this situation.”” Phases of creative destruction are cruel to entrepreneurs (high mortality), but the ones that survive make a lot of money (high profits).

269
“Much of the success enjoyed by individual entrepreneurs came down to their talent for seizing the opportunities of the moment.” Timing is EXTREMELY essential!

270
“”It should not be forgotten that in 1914 there were still above 40 firms fighting the losing fight of the electric automobile.””
“”Capitalism is essentially a process of (endogenous) [sic] economic change.”” Two important aspects: endogenous + continuous change.
“Without innovations, no entrepreneurs; without entrepreneurial achievement, no capitalist returns and no capitalist propulsion. The atmosphere of industrial revolutions—of ‘progress’—is the only one in which capitalism can survive.” -> continuous change!
“”stabilized capitalism is a contradiction in terms.”” -> continuous change!

321
“”capitalism is not gentle to the capitalist”” Capitalism is cruel to most entrepreneurs and capitalists, but very rewarding to a few of them, benefiting everybody as an outcome.

345
“”God what suffering ‘writing’ means!””

352
Definition creative destruction = the “”process of industrial mutation—if I may use that biological term—that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.””
“Since creative destruction is an evolutionary process, the performance of capitalism must be judged “over time, as it unfolds through decades or centuries.””
“”the problem that is usually being visualized is how capitalism administers existing structures, whereas the relevant problem is how it creates and destroys them.””
“Creative destruction constantly sweeps out old products, old enterprises, and old organizational forms, replacing them with new ones.”
Schumpeter coined the term and area of business strategey.

353
“”perfect competition is and always has been temporarily suspended whenever anything new is being introduced.”

355
“under modern capitalism, long-run cases of monopoly are almost nonexistent—even rarer than instances of perfect competition. Hence, high entrepreneurial profits are always temporary. And on balance, big business is unquestionably a positive force for innovation and growth.”

356
Entrepreneurship and technological progress are “”essentially one and the same thing,” the first being “the propelling force” of the second.”

356f
“when capitalism began to spread, persons of “supernormal ability and ambition” could now reach a much higher standard of living, provided they would pursue business careers.”

357
Capitalism freed people “to make a mess of their lives.” They now had sufficient “individualist rope” to hang themselves.”

358
“Employees take economic progress for granted, but they have little emotional attachment to the success of their companies, or of the capitalist system as a whole. As replaceable cogs in a large wheel of enterprise, they feel personally insecure.”
“In the larger sense, the emotional feelings of human beings are so complicated that there can be no assurance that people in general are “happier” or “better off” under industrial capitalism than they had been in medieval manors or villages. Economic efficiency is only one of many human goals, and not necessarily the most important to every individual. Thus the future of capitalism cannot be assured on the basis of its superior economic performance alone.”

368
“”democracy is a political method” for arriving at legislative and administrative decisions. Hence democracy is “incapable of being an end in itself . . . and this must be the starting point of any attempt at defining it.””

369
“The farther removed an issue is from voters’ daily lives, the more remote its rationality be- comes to them. And the greater the distance from rationality, “the greater are the opportunities for groups with an ax to grind” to affect electoral outcomes through “psycho-technics.” Ultimately, the voters’ will is “largely not a genuine but a manufactured will . . . exactly analogous to the ways of commercial advertising.””

373
“[Schumpeter] understood that multidisciplinary work runs a constant risk of dilettantism. But if the scholar does his or her homework, as Schumpeter always did, this danger can be transcended.”

374
“Above all, Schumpeter knew that at some point partial and general syntheses of the insights from all relevant disciplines become essential if people are going to make mature sense of the world.”

388
“big companies [lie] near the heart of advanced capitalist success.”

399
“He had learned, as all authors do, that books have unpredictable lives of their own.”

433
“capitalism is a continuous evolutionary process without an end-point.”
“On the issue of present enjoyment versus long-term economic growth, it was obvious to Schumpeter (as well as to Keynes and all other competent economists) that growth requires investment, and therefore some degree of deferred gratification. […] laissez-faire economies solved this tradeoff in one way, socialism in another. But for in- between systems such as amphibial states, explicit policies were essential to discourage conspicuous consumption and steer resources toward investment.”
“Modern capitalism had become so productive that it was even possible to guarantee all citizens “a certain minimum annual income.””

436
“capitalism was not an easy system to sustain. There was constant temptation to lay even more straws on the camel’s back, and real danger that the camel might collapse altogether. If this happened, then the socialist alternative would appear attractive even to those who had opposed it in the past.”

441
“the preservation of the American way of life (and of the British, French, German, Japanese, and all others operating under mixed economies) depended as heavily on government as on business.”

455
“all fundamental explanation must run” on the analysis of human feelings.
“psychology [moved implicitly] toward the center of economic thinking. Yet, he noted with regret, economists generally did not consult or work with professional psychologists. Instead, they preferred to invent their own assumptions about the mental processes of producers, consumers, and people in general.”
“all human beings grow up having subconsciously developed a sense of how the world works. Everyone who writes on any subject, he says, has experienced “a preanalytic cognitive act that supplies the raw material for the analytic effort. In this book, this preanalytic cognitive act will be called Vision.””
“Schumpeter says that all analysis begins with a distinct intuition that is almost inherently ideological. “It embodies the picture of things as we see them,” and usually our way of seeing them “can hardly be distinguished from the way in which we wish to see them.” This is a dangerous situation for researchers, because it tends to limit the generality of their conclusions.”
“On the other hand, the rules of scholarship typically correct almost all errors deriving from ideology. Different researchers begin with different visions and ideologies, and conflicting conclusions tend to cancel each other out.”

456
“”The first thing a man will do for his ideals is lie.“”
The classical economists “vision became a real obstacle to progress, because it offered no explanation at all of the process of change, which Schumpeter regarded as the essence of capitalism.”
“The pessimists [such as Thomas Malthus, David Ricardo, and James Mill, father of John Stuart Mill] dwelled on limits to growth imposed by the pressures of increasing population and decreasing returns to agriculture. From these premises they inferred “falling net returns to industry, more or less constant real wages, and ever increasing (absolutely and relatively) rents of land.””
“the touchstone of Schumpeter’s own theories of entrepreneurship and creative destruction” is the “”the element of personal initiative.””

457
“First, the accuracy of an economic vision is not always commensurate with the analytical ability of those who hold it. Second, pessimistic visions about almost anything usually strike the public as more erudite than optimistic ones.”

458
“Today, in the twenty-first century, many economists add entrepreneurship to the three factors of production as traditionally conceived: land, labor, and capital.”
“Entrepreneurship is very difficult to measure, and virtually impossible to express mathematically. It therefore does not easily fit into formal models. As Schumpeter noted, entrepreneurial gains do not tend “toward equalization” because they “are not permanent returns at all.” Instead, they emerge whenever an individual entrepreneur innovates in some important way—and then disappear as the innovation spreads. Meanwhile, they have contributed to general economic growth.”
“They have also made the entrepreneur rich, because “entrepreneurs’ gains will practically always bear some relation to monopolistic pricing. Whatever it is that produces these gains, it must of necessity be something that, for the moment at least, competitors cannot parallel.” The best example is the offering of a new product or a new brand. And temporarily, at least, “there are means available to the successful entrepreneur—patents, ‘strategy,’ and so on for pro- longing the life of his monopolistic or quasi-monopolistic position and for rendering it more difficult for competitors to close up on him.””
The essence of strategy is “to affect the behavior of other firms or even their own industry.”

466
“Short-run inequity is the price that must be paid by the masses for the rising living standards that capitalism can achieve.”
“Schumpeter regretted that capitalism distributed its fruits so disproportionately—but in much the same way that he regretted that everyone has to die. He simply thought it an inevitable concurrent of capitalism’s efficiency over the long run.”
“one of the commonest errors of economic thinking by masses of people “is the belief that the majority of people is poor because a minority is rich.””

467
“”Keynes’s influence not only encouraged governments to take a short-run point of view, but it helped to free them from the major traditional restraints on short-run action.””

468
“Compared to Keynes, Schumpeter had no reason to think that life was something a person could expect to enjoy automatically. It was one thing to grow up in Britain—stable, prosperous, and ever-victorious in its many wars— and quite another to be a child of the vanquished, and now vanished, Austria of Schumpeter’s youth.”
“Schumpeter was one of the greatest intellectual innovators in the history of social science.”

474
“if an economy, an industry, or a firm reacts to a significant change in its environment by merely adjusting its existing practice, “we shall speak of adaptive response. And whenever the economy or an industry or some firms in an industry do something … outside of the range of existing practice, we shall speak of creative response.”
A creative response, which can never be predicted and is therefore indeterminate, shapes long-run outcomes in a country, industry, or firm. It often depends on the leadership of specific individuals, and, Schumpeter argued, it “changes social and economic situations for good.” It creates new conditions that would never have developed without it. “This is why creative response is an essential element in the historical process: no deterministic credo avails against this.””

474f
“”I believe that there is an incessant give and take between historical and theoretical analysis and that, though for the investigation of individual questions it may be necessary to sail for a time on one tack only, yet on principle the two should never lose sight of each other.” The combination of narrative, numbers, and theory could exercise a power that none of the three could do alone. Theories are stylized stories; but without real stories and statistics to back them up, they lose much of their force. Schumpeter concluded one of his papers with a sentence that has often been quoted and still resonates in academic life to this day: “Economic historians and economic theorists can make an important and socially valuable journey together, if they will.””
=> That’s what I have to do!

475
“Because of time and chance, no “deterministic credo,” as Schumpeter called it, could ever be correct.”

476
Schumpeter wanted to create “exact economics” (referenced everywhere throughout the book), but finally understood that it’s impossible.
“And over the next generation, “Science and Ideology” became a famous statement of a fundamental truth that characterizes all social sciences, including economics, no matter how “scientific” its pretensions.”
All our research is always based on our basic ideological bias.

477
“Model building “consists in picking out certain facts rather than others,” then working to refine the chosen facts, to adjust them in light of opposing evidence, and to place them all in a theoretical framework.” -> And we chose the facts based on our “vision” which is based on our ideology.

483
“”And so—though we proceed slowly because of our ideologies, we might not proceed at all without them.“” Ideologies are what makes us do what we do -> I love film -> that’s why I do what I do -> without my ideology I wouldn’t do it and EAs might never come into existence and the world wouldn’t change how I hope it will.

488
“One of the few lucky events of Joseph Schumpeter’s life was the manner of his leaving it. As he had written at the time of Franklin Roosevelt’s death, which also came suddenly from a cerebral hemorrhage, “lucky man: to die in fullness of power.””
“In 1950 Schumpeter was the most illustrious economist in the world—more famous at the time of his death than at any other period in his life, and at a moment when he probably cared least about his own celebrity.”

495f
“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. Almost all businesses, no matter how strong they seem to be at a given moment, ultimately fail—and almost always because they failed to innovate. Competitors are relentlessly striving to overtake the leader, no matter how big the lead. Responsible businesspeople know that they ignore this lesson at their peril. Every day they feel themselves, as Schumpeter put it in Capitalism, Socialism and Democracy, “in a situation that is sure to change presently.” They are “standing on ground that is crumbling beneath their feet.””

496
Only through innovation and entrepreneurship can any business except a government-sponsored monopoly survive over the long term. Schumpeter, of course, is the chief proponent and popularizer of the word “entrepreneur,” which appeared in the 1934 English edition of his Theory of Economic Development. (In the original German edition of 1911, he had used the German Unternehmer, which never caught on, partly because its literal meaning is “undertaker.”)”
“Beginning in the late 1920s Schumpeter made it clear that entrepreneurship could occur within large and medium-sized firms as well as in small ones, despite bureaucratic obstacles. By the mid-twentieth century, he was arguing that innovation “within the shell of existing corporations offers a much more convenient access to the entrepreneurial functions than existed in the world of owner-managed firms. Many a would-be entrepreneur of today does not found a firm, not because he could not do so but simply because he prefers the other method.””
“Entrepreneurs were still recognizable personal types, but innovation could also be—and, given the large size of some companies, sometimes had to be—performed by teams of people.”

497
“Schumpeter’s central preoccupations [were] innovation, entrepreneurship, and credit creation”

498
There is a “need for eternal vigilance and timely action by government regulators,” which Schumpeter “persistently underestimated.”

499
“the mixed economy has tended to flatten the business cycle.” Therefore business cycles are a less pressing issue today.

500
“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.”
“What is it, for example, that drives innovation? Is it just the prospect of making money? Or, as Schumpeter had argued early in his career, is it something more than “motivation of the hedonist kind”? Schumpeter believed that the innovator-entrepreneur also had a “will to conquer … Our type [a revealing choice of words that seems to include himself] seeks out difficulties, changes in order to change, delights in ventures.“”

501
“capitalism’s creative elements outweigh its destructive ones. Destruction, however painful, is the necessary price of creative progress toward a better material life. But the correct sequence is vital: creative innovation first, then the destruction of obstacles that lie in its way.”

502
“Schumpeter regarded inequality of opportunity as unacceptable, but he also held that the results produced by inequality of effort were deserved.”
“”The importance of inequality within the highest income brackets should be particularly noticed. A single spectacular success may draw far more brains and means into an industry than would be attracted to it by the same sum if more equally divided.“”

502f
“the benefits to society of important innovations, and the lavish profits accruing to winning entrepreneurs, must be measured against the total costs of time and money invested in the same industry by unsuccessful entrepreneurs as well. They receive no return for their efforts, but their competitive pressure spurs the winners to victory—to the great benefit of society. That the winners receive all the rewards is a mere detail—and a temporary one at that, since the “competing-down” element eventually diminishes that profit, as imitators copy the innovation.”

504f
“Perhaps more than any other top economic theorist, Schumpeter humanized his discipline. After a lifelong struggle, he concluded that exact economics can no more be achieved than exact history, because no human story with a foreordained plot can be anything but fiction. Because of the infinite mixture of influences on human behavior, no two real economic situations are ever exactly alike. Thus, economics does not lend itself to deterministic laws or experiments, as the physical sciences do. The best mathematics in the world cannot produce a satisfactory economic proof wholly comparable to those in physics or pure mathematics. There are too many variables, because indeterminate human behavior is always involved. As the Nobel Laureate in Economics Douglass North remarked in 1994, “The price you pay for precision is inability to deal with real-world questions.“”

505
“Often the best alternative for expressing what one knows about the world is not an equation but a narrative—a story with real characters facing some kind of dilemma.“