Tesla’s CEO Elon Musk has become the world’s richest man, at least in terms of the estimated value of his corporate assets, rather than his nominal net worth. Several articles have delved into Musk’s habit of lounging on the floor or couch while surfing the internet, a stark contrast to the common criticisms of the wealthy for indulging in yachts, numerous mansions, and high-end car collections.
Unlike typical billionaires, Musk is just an ordinary person who works tirelessly. He attempts to work 100 hours per week, rarely falling below 80 hours and sometimes even reaching 120 hours. As for luxurious yachts and mansions, he simply doesn’t have the time to make use of them – he prefers working. This narrative dramatically flips the script from past portrayals.
One might expect this dedication to earn praise, but the reality is quite different. It is now being reinterpreted as a form of masculinity, a way to showcase male prowess. In an article titled “Elon Musk Is the World’s Richest Man. Why Is He Sleeping on an Office Floor?” published in The New York Times, historian Erik Baker points out that these excessively long work hours and focus on productivity serve as a test of one’s merit, a performative rationalization aimed at further exploiting employees to defend their massive income.
The article argues that this ultimately stems from the Austrian-American political economist Joseph Schumpeter’s concept of “creative destruction,” a key force of capitalism. The more disruption they cause, the more they produce, and these entrepreneurs are crucial drivers of progress. To Baker, Schumpeter advocated for industrial instability and super innovation, embodying the mantra of “move fast and break things.”
Over the years, I have been studying Schumpeter’s meticulous works and I believe that this theory misinterprets his thoughts. Firstly, Schumpeter never “popularized” anything. He was a rather low-key scholar, with few colleagues, no true followers, no actual school of thought, and never penned a best-selling book. He was the subject of admiration for a few thoughtful individuals who appreciated his broad vision, non-partisan stance, and ideological seriousness as a historian and theoretician.
Schumpeter began writing about business innovation during a dark period of his life, amidst the turmoil of European wars while teaching at Harvard University. He was born in a time of decline in the late 19th century, and the devastation of his native Germany and Austria, as well as the decline in intellectual culture, left him disillusioned. Isolated at Harvard, he was surrounded by intellectually sharp yet naïve socialists who failed to understand that the struggle between socialism and fascism was not a true battle since they were in agreement on all fundamental issues.
As a young scholar, his groundbreaking book on economic development, “The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle,” caused a stir, but nothing he wrote thereafter had any significant impact. He set out to tackle the key issue of his time – the causes of the business cycle. The old Austrians had a theory, as did Keynesians and many others, yet there was no real consensus in the industry. He began working on his monumental work “Business Cycles: A Theoretical, Historical, and Statistical Analysis of the Capitalist Process,” which was eventually published in two volumes in 1939, but garnered little attention.
His theory of business cycles stood apart from all prevailing theories. He believed that in a static economy, largely in equilibrium, prices, interest rates, and financial markets coordinated the production and consumption sectors. As long as everyone continued doing the same things repeatedly, there would be no major changes in resource usage, including labor resources. The economy would grow steadily in accordance with the rate of return on capital, which was in line with interest rates.
This was the general equilibrium model. If this seems baffling, that’s fine, because it was mainly a conceptual construct. The crux was that stability was Schumpeter’s starting point, drawn from classical economics. He was always on the lookout for sources of disruption, what he called exogenous shocks. He found these sources in the form of innovation. When creative individuals experiment with new ideas in the market, innovation occurs. As these ideas become popular, resources are entirely reallocated, leading to the rise of some industries, the decline of others, and a reshuffling of labor resource utilization.
Schumpeter traced the history of modern business cycles, finding this pattern to be unerringly reliable. Every major innovation was accompanied by significant industry upheaval, old industries dying out, and new industries attracting attention from credit markets, labor resources, and physical capital. The railroads exemplified this. The commercialization of steel also did. The internal combustion engine witnessed this. Aviation, communication, and ammunition followed suit. Whenever we witness groundbreaking practical technologies, we also see drastic fluctuations in output, eventually leading to a stable new state of production.
His works were published during wartime, a timing that severely hindered their recognition. In most cases, scholars had already forgotten about business cycles and the Great Depression, as the war captivated all attention. In the field of economics, his new theory received little support, as mainstream schools of thought had found another theory to rally behind. He believed this would be his immense contribution to the world, but his works were stifled, overlooked, and ultimately forgotten.
Was he right or wrong? Arguments can be made on both sides, but the main issue with his theory is that while it seems capable of explaining significant sectoral transformations in production patterns, it fails to truly elucidate overall economic output declines and upswings, which is precisely what people seek to understand. That’s the crux of the matter. Additionally, his theory leaves too many unanswered questions, such as the role of money and credit in causing prosperity and downturns.
From a broader perspective, history reveals that the greatest and most destructive exogenous shocks do not stem from technology but manifest in the form of governmental upheavals like wars, embargoes, and arbitrary policy moves.
Setting these points aside, Schumpeter indeed offers an interesting perspective on the power and meaning of industrial entrepreneurship and risk-taking. He found a place to reinterpret and encapsulate these views in his 1942 book “Capitalism, Socialism, and Democracy,” one of the most challenging and prophetic works on economic and political economy to emerge in the 20th century.
In this book, he predicted the rise of bureaucracy, overproduction by intellectuals, corporate integration, and the decadence that would lead to the end of capitalism, as prosperous societies would forget the causes of their prosperity.
In this monumental work, we find the following passage, ringing deeply:
“In dealing with the capitalist process, we are dealing with an evolutionary process… [it is] never stationary… The forces which release and maintain the engine of a moving economic society are opportunities and pressures of a kind very difficult to envisage, let alone measure.”
Vibrant capitalism “incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”
Why is this revelation so striking? Because as economists were busy modeling economic forces as if engineers were constructing large machines when he wrote this article. All modeling assumes that the world will not change, or that change will only occur if allowed. But what Schumpeter described is something else entirely, something uncontrollable, unpredictable, unmanageable, let alone inspired from above. It emanates from the market processes themselves, products of individuals willing to venture into disruptive adventures breaking away from the norm.
The capitalist process is a never-ending, no-halftime, no-end-in-sight epic film.
By the way, Schumpeter’s depiction in the book was not a reflection of 1942. His outlook was dim. In his view, the rise of bureaucratic planning and regulation essentially smothered and stifled the entrepreneurial impulse. He foresaw that there wouldn’t be much “creative destruction” in the future because the system wouldn’t allow it. Economists were increasingly collaborating with the state, stifling new ideas, new investments, and new ways of life.
What makes Schumpeter’s theory fascinating is its deviation from traditional theories in identifying entrepreneurial motives. For great innovators, the true purpose of entrepreneurship was never money. It was about dreams, the pursuit of dreams. They didn’t view profitability as a means of accumulation but as a symbol of serving the public.
This is a key point that Dr. Baker overlooks. For generations, the left and center-left’s critiques of the market have centered around the notion that the wealthy are so because of greed. But for individuals like Musk, competition in vibrant markets tells an entirely different story. Truly great entrepreneurs have ample means.
They chase genuine achievements, the chance to leave some mark in the universe, thereby improving the human experience on Earth. This is the motivation Schumpeter expounds on and its impact on social order.
The term “creative destruction” resonates deeply because it cleverly highlights a paradox in economic power. It emphasizes that stability alone is insufficient to sustain ever-growing prosperity. More is needed, entailing work, foresight, risk, and adventure.
This is a beautiful way of rendering entrepreneurship one’s calling, in a vibrant market free from regulations, taxes, and company cartels, it could be an accurate portrayal. The world needs a safe environment for all creators, whether in literature, arts, architecture, philosophy, or commercial life. This is a collective exploration of the true essence of freedom.
Author Bio:
Jeffrey A. Tucker is the founder and president of the Brownstone Institute based in Austin, Texas. He has published thousands of articles in academia and mainstream media and authored 10 books in five languages, with his latest work being “Liberty or Lockdown” (2020). He is also the editor of the book “The Best of Ludwig von Mises” (2019) and writes a regular economics column for The Epoch Times, addressing topics such as economics, technology, social philosophy, and culture. Contact: tucker@brownstone.org.