The Obsolescence Of The Entrepreneurial Function

IN my theory of vanishing investment opportunity, a reservation was made in favor of the possibility that the economic wants of humanity might some day be so completely satisfied that little motive would be left to push productive effort still further ahead. Such a state of satiety is no doubt very far off even if we keep within the present scheme of wants; and if we take account of the fact that, as higher standards of life are attained, these wants automatically expand and new wants emerge or are created, 1 satiety becomes a flying goal, particularly if we include leisure among consumers’ goods.

However, let us glance at that possibility, assuming, still more unrealistically, 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. Profits and along with profits the rate of interest would converge toward zero. The bourgeois strata that live on profits and interest would tend to disappear. The management of industry and trade would become a matter of current administration, and the personnel would unavoidably acquire the characteristics of a bureaucracy. Socialism of a very sober type would almost automatically come into being. Human energy would turn away from business. Other than economic pursuits would attract the brains and provide the adventure. For the calculable future this vision is of no importance. But all the greater importance attaches to the fact that many of the effects on the structure of society and on the organization of the productive process that we might expect from an approximately complete satisfaction of wants or from absolute technological perfection can also be expected from a development that is clearly observable already. Progress itself may be mechanized as well as the management of a stationary economy, and this mechanization of progress may affect entrepreneurship and capitalist society nearly as much as the cessation of economic progress would.

In order to see this it is only necessary to restate, first, what the entrepreneurial function consists in and, secondly, what it means for bourgeois society and the survival of the capitalist order.

We have seen that the function of entrepreneurs is to reform or revolutionize the pattern of production by exploiting an invention or, more generally, an untried technological possibility for producing a new commodity or producing an old one in a new way, by opening up a new source of supply of materials or a new outlet for products, by reorganizing an industry and so on. Railroad construction in its earlier stages, electrical power production before the First World War, steam and steel, the motorcar, colonial ventures afford spectacular instances of a large genus which comprises innumerable humbler ones—down to such things as making a success of a particular kind of sausage or toothbrush. This kind of activity is primarily responsible for the recurrent “prosperities” that revolutionize the economic organism and the recurrent “recessions” that are due to the disequilibrating impact of the new products or methods. To undertake such new things is difficult and constitutes a distinct economic function, first, because they lie outside of the routine tasks which everybody understands and, secondly, because the environment resists in many ways that vary, according to social conditions, from simple refusal either to finance or to buy a new thing, to physical attack on the man who tries to produce it. To act with confidence beyond the range of familiar beacons and to overcome that resistance requires aptitudes that are present in only a small fraction of the population and that define the entrepreneurial type as well as the entrepreneurial function. This function does not essentially consist in either inventing anything or otherwise creating the conditions which the enterprise exploits. It consists in getting things done.

This social function is already losing importance and is bound to lose it at an accelerating rate in the future even if the economic process itself of which entrepreneurship was the prime mover went on unabated. For, on the one hand, it is much easier now than it has been in the past to do things that lie outside familiar routine—innovation itself is being reduced to routine. Technological progress is increasingly becoming the business of teams of trained specialists who turn out what is required and make it work in predictable ways. The romance of earlier commercial adventure is rapidly wearing away, because so many more things can be strictly calculated that had of old to be visualized in a flash of genius.

On the other hand, personality and will power must count for less in environments which have become accustomed to economic change—best instanced by an incessant stream of new consumers’ and producers’ goods— and which, instead of resisting, accept it as a matter of course. The resistance which comes from interests threatened by an innovation in the productive process is not likely to die out as long as the capitalist order persists. It is, for instance, the great obstacle on the road toward mass production of cheap housing which presupposes radical mechanization and wholesale elimination of inefficient methods of work on the plot. But every other kind of resistance—the resistance, in particular, of consumers and producers to a new kind of thing because it is new—has well-nigh vanished already. Thus, economic progress tends to become depersonalized and automatized. Bureau and committee work tends to replace individual action. Once more, reference to the military analogy will help to bring out the essential point.

Of old, roughly up to and including the Napoleonic Wars, generalship meant leadership and success meant the personal success of the man in command who earned corresponding “profits” in terms of social prestige. The technique of warfare and the structure of armies being what they were, the individual decision and driving power of the leading man—even his actual presence on a showy horse—were essential elements in the strategical and tactical situations. Napoleon’s presence was, and had to be, actually felt on his battlefields. This is no longer so. Rationalized and specialized office work will eventually blot out personality, the calculable result, the “vision.” The leading man no longer has the opportunity to fling himself into the fray. He is becoming just another office worker—and one who is not always difficult to replace.

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.

But this affects the position of the entire bourgeois stratum. Although entrepreneurs are not necessarily or even typically elements of that stratum from the outset, they nevertheless enter it in case of success. Thus, though entrepreneurs do not per se form a social class, the bourgeois class absorbs them and their families and connections, thereby recruiting and revitalizing itself currently while at the same time the families that sever their active relation to “business” drop out of it after a generation or two. Between, there is the bulk of what we refer to as industrialists, merchants, financiers and bankers; they are in the intermediate stage between entrepreneurial venture and mere current administration of an inherited domain. The returns on which the class lives are produced by, and the social position of the class rests on, the success of this more or less active sector—which of course may, as it does in this country, form over 90 per cent of the bourgeois stratum—and of the individuals who are in the act of rising into that class. Economically and sociologically, directly and indirectly, the bourgeoisie therefore depends on the entrepreneur and, as a class, lives and will die with him, though a more or less prolonged transitional stage—eventually a stage in which it may feel equally unable to die and to live—is quite likely to occur, as in fact it did occur in the case of the feudal civilization.

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. The true pacemakers of socialism were not the intellectuals or agitators who preached it but the Vanderbilts, Carnegies and Rockefellers.

This result may not in every respect be to the taste of Marxian socialists, still less to the taste of socialists of a more popular (Marx would have said, vulgar) description. But so far as prognosis goes, it does not differ from theirs.