Monday, January 04, 2021

Jeff Bezos vs. Joseph Schumpeter

In his book Capitalism, Socialism, and Democracy the economist Joseph A. Schumpeter discussed whether or not entrepreneurs would be come obsolete because technical progress would be come routine once it was controlled by big business and committees. A little bit like medieval knights or military generals becoming obsolete in times of peace.

But it seems like Bezos wants Amazon to act like a new company all the time so it does not atrophy the way Schumpeter says big companies might.

After excerpts from this article I will have excerpts from the book to give you an idea of what Schumpeter was saying.

See How Amazon Wins: By Steamrolling Rivals and Partners: CEO Jeff Bezos still runs the e-commerce giant with the drive of a startup trying to survive, and that strand of its corporate DNA is becoming a liability by Dana Mattioli of The WSJ.

"He still exhorts employees to consider Amazon a startup. “It is always day one,” he likes to say. Day two is “stasis, followed by irrelevance, followed by excruciating, painful decline, followed by death.” Mr. Bezos originally considered calling his company Relentless, and still redirects to Amazon’s site." 

Now some Schumpeter:

"modern largest-scale business represents a petrified form of capitalism."

"let us glance at that possibility . . .  that methods of production have reached a state of perfection which does not admit of further improvement.

A more or less stationary state would ensue. Capitalism, being  essentially an evolutionary process, would become atrophic. There would be nothing left for entrepreneurs to do. They would find themselves in much the same situation as generals would in a society perfectly sure of permanent peace."

"economic progress tends to become depersonalized and automatized. Bureau and committee work tends to replace individual action"

"Or take another military analogy. Warfare in the Middle Ages was a very personal affair.The armored knights practiced an art that required lifelong training and every one of them counted individually by virtue of personal skill and prowess. It is easy to understand why this craft should have become the basis of a social class in the fullest and richest sense of that term.But social and technological change undermined and eventually destroyed both the function and the position of that class. Warfare itself did not cease on that account. It simply became more and more mechanized—eventually so much so that success in what now is a mere profession no longer carries that connotation of individual achievement which would raise not only the man but also his group into a durable position of social leadership. 

Now a similar social process—in the last analysis the same social process—undermines the role and, along with the role, the social position of the capitalist entrepreneur. His role, though less glamorous than that of medieval warlords, great or small, also is or was just another form of individual leadership acting by virtue of personal force and personal responsibility for success.His position, like that of warrior classes, is threatened as soon as this function in the social process loses its importance, and no less if this is due to the cessation of the social needs it served than if those needs are being served by other, more impersonal, methods."

"To sum up this part of our argument: if capitalist evolution—“progress”—either ceases or becomes completely automatic, the economic basis of the industrial bourgeoisie will be reduced eventually to wages such as are paid for current administrative work excepting remnants of quasi-rents and monopoloid gains that may be expected to linger on for some time. Since capitalist enterprise, by its very achievements, tends to automatize progress, we conclude that it tends to make itself superfluous—to break to pieces under the pressure of its own success. The perfectly bureaucratized giant industrial unit not only ousts the small or medium-sized firm and“expropriates” its owners, but in the end it also ousts the entrepreneur and expropriates the bourgeoisie as a class which in the process stands to lose not only its income but also what is infinitely more important, its function."

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