The inflation and stagnation crisis of the 1970s, which spilled over into the 1980s, prompted nation-wide hand wringing over the future of the American economy. Plant relocations restructured the labor market, as service-sector jobs replaced manufacturing positions. For millions of Americans, work became less permanent, benefits less secure, and wages less gainful. Most important, the big, hierarchical corporations that had bestrode the business landscape in the 1950s and 1960s looked like outdated relics, incapable of replicating the growth of the postwar period and stumbling toward a stagnant future.
In response, a powerful new idea about business quickly achieved near-total ideological hegemony and popular consensus: the future would be built not by institutions but by individuals. The road to renewed growth would be paved by those brave risk-takers who embraced change and started their own companies. In a stagnant economy, a loud set of voices insisted, regular people with drive, moxie, and ideally some venture capital could shake free of the rigid bonds of corporate American and kick-start the economy. New, homegrown companies would not only be more virtuous than big businesses, but they would also prove to be more economically essential. The United States could recover its lost dynamism, but only by tapping the innovative potential of entrepreneurs.
Prior to the 1980s, most popular conversations about entrepreneurs had focused on their adventurousness and individualism. Yet in response to continued stagnation, academics and policy activists began to promote a different vision of entrepreneurship—as a savior for a sickly economy. As New York University economist William Baumol explained in 1998: “Entrepreneurial activity became a concern to the general public in the 1980s when we all thought that the United States was falling behind, and that the rest of the world, particularly Japan, would sink us.” As people grew convinced that “America had lost the spirit of entrepreneurship,” Baumol continued, “we began self-consciously to reacquire that spirit.” And the campaign to recapture that spirit received a vital boost from the ivory towers of academia.
In the early 1950s, only two business-school courses on entrepreneurship were offered anywhere in the country (at Harvard and NYU). In 1970, 16 schools taught it; in 1975, 104 did; and more than 200 did so by the mid-1980s. By the early twenty-first century, 1,600 business schools taught more than 2,200 courses on entrepreneurship, some 277 faculty positions had been endowed, and 44 refereed journals launched.
This growing academic interest had been a long time in the making. Since the rise of modern universities in the late nineteenth century, institutions of higher education had self-consciously devoted themselves to training students for the world of white-collar employment. For business schools, which emerged from the wave of professionalization that accompanied industrialization, this meant teaching the skills students needed to succeed in the bureaucratic hierarchies of large corporations—hence the MBA: master of business administration. By the post–World War II period, in the heyday of corporate capitalism, it made little sense to spend time studying the practicalities of starting a new company. When 188 students at Harvard Business School enrolled in 1947 in Professor Myles Mace’s course “Management for New Enterprises,” the first course explicitly on entrepreneurship at a modern business school, they ventured into what many would have considered a history class.
The idea that entrepreneurship was a historical, not a present-day, phenomenon was, perhaps ironically, reinforced by its most famous theorist and the man most responsible for igniting academic interest in it: Austrian-American economist Joseph Schumpeter, then working across the Charles River from Professor Mace in Harvard’s economics department. From his early writings at the turn of the twentieth century to his highly influential 1942 book Capitalism, Socialism and Democracy, Schumpeter had argued that entrepreneurship—which he defined as “simply the doing of new things or the doing of things that are already being done in a new way (innovation)”—had been central to mass industrialization in the nineteenth century. New firms, new ideas, and new processes, or what Schumpeter called “new combinations,” were essential features of the “gales of creative destruction” (Schumpeter’s famous phrase, which he borrowed from sociologist Werner Sombart) that had defined the rise of industrial capitalism.
Central to Schumpeter’s conception of entrepreneurship, however, was the idea that it was rare. It didn’t happen much, so when it did, the consequences were huge. For Schumpeter, in other words, entrepreneurship was a handy way to understand changes that had already happened. As if to reinforce the point, a cadre of Harvard professors founded the “Center for Research on Entrepreneurial History” in 1948, two years before Schumpeter died, to expand his theories into a historical research agenda.
Following Schumpeter’s death, however, a very different conception of entrepreneurship took root. Building on his explanation for how new techniques and new combinations sparked growth, a cadre of economists and business theorists began to argue that entrepreneurship was in fact far more common and more attainable, if only it could be properly nurtured. The implications of this shift were monumental: if entrepreneurship was widely achievable and new firms were the font of economic growth, the potential was almost magical. By the 1980s, as large corporations looked increasingly sclerotic and clunky, these neo-Schumpeterians had assembled a vast amount of theoretical scholarship to feed to a public hungry for solutions to a lackluster, low-growth economy.
Business theorist Peter Drucker was the most influential force behind the idea that entrepreneurship was for everyone and that anyone could be an entrepreneur. Austrian by birth (like Schumpeter), Drucker established himself as a prominent public intellectual while working as a professor of management at NYU in the 1950s and 1960s and then, from 1971 until his death in 2005, at Claremont University in California. In 1953, he created the second business school course on entrepreneurship (after Mace at Harvard), provocatively called “Entrepreneurship and Innovation.”
What motivated Drucker was his observation, reinforced by a coterie of midcentury scholars, that the United States had become a “postindustrial” society. Following thinkers like sociologist Daniel Bell, Drucker pondered the consequences of a society where technological automation and sophisticated management meant that more jobs were white-collar and labor was more rooted in knowledge rather than rote, routine drudgery. For Drucker, this new order meant new possibilities: more and more workers—whether within large corporations or outside of them—could devote their time to pioneering new and more efficient methods and techniques. All this new brainpower meant that companies of any size could profit through innovation, not just by oppressing their workforces, monopolizing markets, or exploiting natural resources (techniques that had been dominant during the industrial society).
And since the opportunity to behave entrepreneurially was everywhere in American business, Drucker concluded, it was available to everyone. Entrepreneurship was “a discipline,” he summed up in the mid-1980s. “And, like any discipline, it can be learned.”
Drucker’s views had especially pronounced effects at the nation’s business schools. The technical expertise in analytics and management tools that midcentury programs had specialized in seemed less and less applicable in a world of stagnation and corporate downsizing. Frustrated by declining opportunities at big corporate employers, a new generation of Baby Boomer business students began demanding new types of training in how to start and run their own companies.
In response, the course listings for entrepreneurship exploded. Early classes tended to be biographical, focusing on the personal characteristics of successful entrepreneurs. But by the 1980s and 1990s, the growing body of scholarship—produced by the swelling ranks of professors and researchers—provided fodder for more practice-based courses on things like how to secure venture financing. In addition, students could now take more philosophical or theoretical courses, like how to develop an entrepreneurial “mindset.”
This explosion in academic interest in entrepreneurship propelled a society-wide rediscovery of Schumpeter’s theories, at least in a stripped-down, easily digestible form. “Creative destruction,” which for Schumpeter described a Marxian process whereby capitalism fell in on itself, became in the late twentieth century a celebratory stand-in for economic progress itself. (Its echoes were clear in the famous slogan adopted by Facebook creator Mark Zuckerberg in the early 2000s: “Move fast and break things.”) And before long, the appeal of entrepreneurship education spread beyond business schools. Liberal arts colleges, professional schools, and even engineering and agricultural schools all offered courses on entrepreneurship, and undergraduate business majors shot up. By the year 2000, according to one survey, more than 60% of young Americans between 18 and 29 said they aspired to own their own business.
Owning your own business—being an entrepreneur—became deeply engrained in the American psyche during the 1980s. The academic movement, as well as parallel movements among politicians and organized business associations, offered a hot promise in the face of an otherwise gloomy economic landscape. But the power of this new ideal was not limited to the courses students took or even the decisions individual people made to jump into the entrepreneurship fray and start out on their own. It also reshaped national political battles, both affirming the Republican Party’s long-standing image as the party of business and providing openings for new types of liberal Democrats to position themselves as pro-growth capitalists. At the center of those politics was a growing divide between old-style big business and the newer, sleeker companies that enthusiastically embraced the new mantra of entrepreneurship.
Excerpted with permission from One Day I’ll Work for Myself: The Dream and Delusion that Conquered America (W. W. Norton)
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