For us to gain the greatest benefits during the possible 30-year window that might be available to us due to our oil windfall, we will have to look beyond what we see around us and become innovative. Innovations are just ideas that no one ever thought about, until some entrepreneur came up with them. Potential profits are a signal to entrepreneurs. And entrepreneurs serve consumers. According to Steve Jobs, the founder of Apple, the task of the entrepreneur is to imagine what the consumer wants, even though the consumer does not know it yet. We must encourage this thinking.
The idea of entrepreneurship appears to have been derived from the French verb entreprendre, meaning “to undertake.” One of the first clear statements using the modern meaning comes from the 18th century economist J.B. Say: “An entrepreneur is an economic agent who unites all means of production — the land of one, the labour of another, and the capital of yet another, and thus produces a product. By selling the product in the market, he pays rent of land, wages to labour, interest on capital, and what remains is his profit. He shifts economic resources out of an area of lower and into an area of higher productivity and greater yield. But entrepreneurship is more than just buying low and selling high.”
In a word, profits, not greed, should be the motivating factor for entrepreneurs. But this assumption began to wane that self-interested pursuits were the organizing force of a modern economy. Keynes pointed to this when he extolled the “tendency of big enterprise to socialize itself,” a phenomenon by which enlightened middle managers — guided by science, reason, and administrative esprit de corps — would at last supplant the animism of the Invisible Hand. If “the corporate system is to survive,” Adolf Berle and Gardiner Means wrote, in the conclusion to their seminal study of the modern American corporation, “the ‘control’ of the great corporation should develop into a purely neutral technocracy, balancing a variety of claims by various groups in the community, and assigning to each a portion of the income stream, based on public policy rather than private cupidity.”
However, the revolt against socialized capitalism, and the re-evaluation of greed, took shape after the Second World War, led by efforts of the Austrian economist Joseph Schumpeter, and, later on, the architects of Agency Theory. Against Keynes, Schumpeter presented a new vision of capitalism as “Creative Destruction.” The “relevant problem” for economists, he said, was not how capitalism “administers existing structures” (the purview of the middle manager) but “how it creates and destroys them,” an anarchic activity undertaken by Schumpeter’s hero, the entrepreneur.
As an icon for capitalism, the pugnacious individualism of the entrepreneur was entirely at odds with the vision of managerial capitalism – and we have to understand this at this point of our development trajectory. According to Schumpeter, what drove an economy was headlong innovation, not careful administration. This was the hallmark of entrepreneurial activity, the courageous effort of an inspired mind, not the fruit of corporate collaboration. We have to encourage the persons who are willing to think outside of the box.
An appeal to “private cupidity”, however, was not the only way of eliciting such inspiration, but it was certainly the most obvious. The followers of Agency Theory, who began filling the ranks of business schools and economics departments in the ‘60s and ‘70s, eschewed the common cause of managerial capitalism as an endorsement of soft socialism, an inducement to fuzzy thinking, and a recipe for corporate decay. Instead, they portrayed the company as a collection of self-serving individuals, whose interests could be aligned with those of shareholders only by appeals to Keynes’s semi-pathological propensity: the love of money. Thus, the rise of stock options, performance pay, and other compensatory strategies aimed to spark innovation in the executive suite. For the most part, the moral arguments called upon to support these recommendations took a familiar form. Greedy behaviour could be tolerated, even encouraged, but only if it eliminated worse offences: starvation, exposure, idiocy. This perspective pervades our times, whether we like it or not.
