We Must Stop Applying Economic Standards to Political Leadership

Joseph Schumpeter, ironically remembered for glorifying the entrepreneur’s penchant for creative destruction and innovation, actually warned against exalting entrepreneurs as the redeemers of inefficient political systems. Entrepreneurs, by definition, are equipped with traits that are creatively destructive for the political realm.

“I’m not your typical politician. That’s why I got elected,” President Donald Trump proclaimed during the final debate on October 22. Throughout his presidency, Trump fashioned himself as the paradigmatic anti-politician, as the entrepreneur and businessman who could cut through bureaucracy and “get things done” through disruptive, often politically incorrect, means.

Leading up to the election, countless commentators rushed to question Trump’s entrepreneurial record. For both his fiercest defenders and his most ardent critics, the debate centered around whether or not Trump was in fact a successful businessman—specifically, whether he is a successful entrepreneur—with little consideration to whether entrepreneurial credentials are in fact appropriate indicators of political leadership. 

Is the entrepreneur the right model for contemporary politics?

Joseph Schumpeter, ironically remembered for glorifying the entrepreneur’s penchant for creative destruction and innovation, actually warned against exalting entrepreneurs as the redeemers of inefficient political systems. Doing so, he maintained, was not only inappropriate, but could have dire consequences on the health of the polity.  

While it may be tempting to fashion the entrepreneur as an individualistic, fearless risk taker capable of innovating the political realm, Schumpeter maintained that entrepreneurialism constitutes a rather peculiar form of leadership with no applicability in the public domain. Yes, Schumpeter writes, the entrepreneur “leads” the means of production into new channels by creatively combining the existing modes of production. Yet in every other sense entrepreneurial leadership deviates from all other kinds of leadership. Contemporary political commentators and prospective candidates should consider Schumpeter’s actual writing on entrepreneurship—not the ideas which have now been inaccurately come to be known as “Schumpeterian.”

For starters, the entrepreneur may drive production, but he does so not by convincing other people of the desirability of carrying out his plan nor by inspiring confidence in his competence. The only person who the entrepreneur needs to convince is the banker, the provider of capital who finances his ambitions via equity or debt injection—the banker effectively “buys [the entrepreneur] or [his] services”—and then doing with these as he pleases. The stakes involved and the skills required for this sort of “leadership” are quite different than those of a political community.

There is perhaps no better example of this in recent memory than WeWork, whose now-ousted founder Adam Neumann famously convinced SoftBank’s CEO Masayoshi Son to invest billions of dollars in the scope of a twelve minute meeting. Imagine if this type of persuasion was all that was required to direct policy decisions. Had Neumann needed to persuade a greater variety of people, or had Masayoshi considered the implications of “betting the farm” on this single decision, then perhaps Neumann’s “wild eyed” personality would not have been considered an asset.

The charisma that Neumann used to convince the eccentric Japanese billionaire, Schumpeter suggested, has no place in the political realm. The entrepreneur’s ability to sell his vision to the banker does not translate to the political sphere simply because the entrepreneur does not need to convince a wide spectrum of individuals with different needs, values, and ability to bear risk.

To Schumpeter’s mind, the entrepreneur constitutes the quintessential “anti-leader” in that he does not want anyone to follow him —and actively attempts to stop anyone from doing so— for successful imitators will cut into his monopoly profits. The entrepreneur, Schumpeter suggests, will always be unpopular because he neither needs nor wants to lead people—or even engage them, for that matter. He just wants to execute his objectives with little regard for what people think, and he is typically allowed such latitude given the limited scope of his endeavor and the diversified portfolios of his backers.

What happens when the entrepreneur convinces the electorate of the desirability of his plan?

Schumpeter insists that even in this context, the entrepreneur serves as a dangerous archetype because of the incongruence between business and political incentive structures and their accompanying character traits. The competitive and pecuniary instincts that characterize many entrepreneurs are actually destructive when found in political leaders.

For example, take Mark Zuckerberg’s recent foray into global monetary policy with the launch of Libra (since rebranded Diem), a Swiss-based consortium designed to launch a new global currency. Known for his proclivity to “move fast and break things,” Zuckerberg launched Libra with the goal of “empowering billions of people” but with little consideration to valid concerns around privacy, national security, and monetary policy. Central banks quickly neutered this plan, with critics noting the obvious benefits Facebook stood to receive had it been successful. Capitalist entrepreneurs, overly motivated by competition, disruption, and an individualistic conception of agency cannot “lead a nation” because they are unable to curtail overly competitive financial instincts and disruptive behaviors even in the face of existential threats.

Schumpeter argues that the entrepreneur never considers stability or the sanctity of the legal order because he has been trained to prioritize profit chasing and disruption for disruption’s sake without concern for the consequences that cannot be quantitatively measured through economic gain. The business class, and especially the entrepreneurs charged with the ruthless rule-breaking essential to innovation, tend toward a “complete removal of restrains, steadily breaking down those short-run attempts at resistance by which bourgeois society proves itself so incompetent and occasionally so childish a disciplinarian.” In other words, the entrepreneur will childishly remove any barrier in his path to maximize profits, even when such measures risk undermining the authority of congress, law enforcement, or the courts. Entrepreneurs will never be able to exercise the self-restraint required for respecting the other branches of government, fragile democratic political institutions that are in many ways dependent on the respect the executive holds for them.  

We need only look to President Trump’s troubled relationship with the other branches of government for evidence that he too favored disruption for the sake of his own policy proposals over preserving the sanctity of the rule of law. For an entrepreneur, single-minded vision in the pursuit of his profit-maximizing endeavor is an attribute. For a presidential leader, such narrow focus on delivering his policy proposals can ultimately undermine faith in the nation’s institutional apparati.

Put differently, the financial incentives and competitive behaviors that motivate the entrepreneur are usually incompatible with those that ought to motivate someone responsible for the wellbeing of the commonwealth. Against stereotypes about the entrepreneur’s self-restraint and rationalist impulses, Schumpeter contends that an individual so thoroughly dominated by such overly individualized and economized values is incapable of effective political action because they let the competition, disruption, and the profit motive reign all concerns of life. Competition and disruption, in the political sphere, are politically destructive—not the primary virtue that should be cultivated.

Contrary to what his legacy suggests, Schumpeter’s writings on entrepreneurship did not relocate political agency and heroic leadership within the economy nor celebrate the primacy of competition. In fact, the way he described entrepreneurship in functional terms—as economic innovation that can be fulfilled both privately and publicly, through individuals and corporations—should have precluded such a hyper-individualist understanding of his thought. Moreover, not only did Schumpeter reject entrepreneurship as the paradigm of economic leadership, he also worried that careless application of such a leadership paradigm to politics would have pernicious consequences for conceptions of political leadership and even citizenship in liberal capitalist societies. 

The last election returned a career politician to the White House. But this does not mean that we have freed ourselves from the idea that entrepreneurship should serve as the model for salutary political leadership and action. Rather than debating the strengths and weaknesses of a candidate’s entrepreneurial credentials, future political commentators would do well to consider the merits of this idea in the first place. Indeed, following Schumpeter, we might adopt a more moderate approach to entrepreneurship—one that neither glorifies nor vilifies the entrepreneur, but rather one that soberly accounts for his strengths and weaknesses and confines his role to the economic sphere.