Thanks to economists, entrepreneurship now has a name and a definition. Entrepreneurship in the 20th century looked like defining what an entrepreneur actually was.
Joseph Schumpeter and the study of entrepreneurship
The study of entrepreneurship began in the 20th century, and an Austrian economist named Joseph Schumpeter was one of the first to study it. Aside from his study of entrepreneurship, he’s known for creating the idea behind ‘creative destruction.’
Schumpeter’s most well-known book is titled Capitalism, Socialism, and Democracy. In this work, he agrees with the idea of Karl Marx that capitalism would be replaced by socialism. But unlike Marx’s belief that capitalism would be brought down by a revolution, Schumpeter believed that capitalism would fall on its own due to the work of intellectuals.
When it comes to entrepreneurship, much of the modern thoughts on entrepreneurs and entrepreneurial spirit is credited to Schumpeter. He was likely the first scholar to study the idea behind entrepreneurs, and he argued that the innovation of every nation was only possible because of entrepreneurs.
Gale of creative destruction
‘Creative destruction’ is a concept in economics credited to the work of Joseph Schumpeter. Schumpeter described creative destruction as “the process of industrial mutation that continuously revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”
Creative destruction was based on the ideas of Karl Marx and Marxist thought on the topics of capitalism. In this way, Marx also referred to this process as annihilation, the idea that capitalism destroys and reconfigures previous economic processes.
The gale of creative destruction was meant to explain how innovation can be both beneficial and destructive at the same time. The new ideas spread by entrepreneurs can bring new employment and wealth to a community. But the ideas of failed entrepreneurs can destroy jobs and businesses. Schumpeter described that, while innovation is a crucial part of society, we must be aware that the majority of innovations fail.
What it means to have an entrepreneurial spirit
Joseph Schumpeter’s work was significant to the rise of entrepreneurship because he was able to identify what it meant to have an entrepreneurial spirit. According to Schumpeter, necessary qualities of an entrepreneur were creativity and resourcefulness, the ability to use available resources in a new way. One aspect of this was knowing and understanding the difference between inventions and innovation.
Invention is the process of creating and developing a product or device. On the other hand, innovation means finding a new way to deliver a product or service. Simply put, invention is often the discovery of knowledge, whereas innovation is the development of a method or process. Not every entrepreneur is an inventor, but they are always able to innovate.
Business and the Great Depression
The Great Depression was a time of financial trouble for many people across the world. This drastic shift in the economy happened after the stock market crashed in October, 1929. In certain countries, the unemployment rate rose as high as 33%. But despite financial trouble, even entrepreneurs can succeed during a recession.
Take James A. Ryder, for example. In the middle of the Great Depression, Ryder started his own business after purchasing a pickup truck to haul trash and construction materials around South Florida. With just one truck, Ryder started the truck-rental industry. Other large rental companies, such as U-Haul, later followed in Ryder’s footsteps.
He had to borrow the money to purchase his first Model-A Ford truck, but several years after starting his business, Ryder purchased more trucks and began leasing them out to other businesses.
With the many changes in travel and cargo transport, Ryder’s company quickly grew. Ryder Systems, originally founded in 1933 in Miami, Florida, has now brought in almost $9 billion in revenue.
Key entrepreneur: Walt Disney
Like many entrepreneurs, Walt Disney started small. Although most people today know Disney as the successful creator of the Walt Disney Company, in the early 1900s, Disney was laid off from his job at a commercial art studio.
Disney and his friend, Ub Iwerks, decided to start their own studio and began making animated films. They created a series of animated sketches which they called ‘Laugh-O-Grams.’ Disney clearly had unique ideas, but after a New York film distributor cheated Disney and Iwerks, he was forced to file for bankruptcy.
After the failure of his original studio, Disney relocated to Hollywood. He planned to pursue a career in cinematography, but saw an opportunity for success after selling Alice’s Wonderland. Walt Disney and his partner began experimenting with different characters, leading to the creation of Mickey Mouse. It was risky to launch a film enterprise during the transition to motion pictures with sound, but Disney was a visionary. He quickly produced Steamboat Willie, his first cartoon with sounds and music, and the cartoon was an immediate hit.
Key entrepreneur: Madam C.J. Walker
Known best as a philanthropist, activist, and entrepreneur, Madam C.J. Walker was a trailblazer in the 20th century. She wasn’t always known as Madam C.J. Walker, and those who knew her by her birth name, Sarah Breedlove, saw her transformation from a farm laborer to one of the most successful entrepreneurs of the 20th century.
Her success came from a scalp ailment that caused her to lose her hair. She tried many products and even experimented with her own concoctions before she finally developed her ‘Madam Walker’s Wonderful Hair Grower.’ But it was her marketing skills and drive for success that led to her becoming a successful entrepreneur. Sarah started out by giving free demonstrations and even selling her product door to door. This innovation showed how much she believed in her product and how much she was willing to risk in order to sell it.
After she started to become successful, her husband believed the business had reached its full potential, but she knew she had more to offer. Madam C.J. Walker’s unwillingness to settle for a small amount of success allowed her to become America’s first self-made woman millionaire.