Wednesday, April 11, 2007

Recognizing Creative Destruction

If Joseph A. Schumpeter were alive on commencement day, he would no doubt be surprised: The sight of Bill Gates speaking from the steps of Memorial Church to a sea of crimson would puzzle the Austrian economist and former Harvard professor. Schumpeter had predicted that entrepreneurs like Gates, though the lifeblood of a market economy, would only find hostility in halls of academia.

Schumpeter’s diagnosis of capitalism’s ills missed the mark, yet his remarks on the academy’s disdain for entrepreneurs were dead on. From the Trotskyite editors of the Partisan Review to Lawrence H. Summers’ recent detractors, self-styled intellectuals and academics have long bristled at market principles. For them, admiration for entrepreneurship is no more than vulgar hero worship, straight from an Ayn Rand novel.

Then it’s hardly surprising that commencement has long served as a soapbox for statesmen, academics and the occasional man (or woman) of letters; corporate titans have been consciously excluded—including from the list of honorary degree recipients. Since 1950, the only corporate leader to address departing graduates has been IBM president Thomas Watson Jr. in 1981. In light of this, Gates’ selection is somewhat of an anomaly.

Of course, the senior class chose Gates for his giving, rather than his earning. The Bill and Melinda Gates Foundation, both in scope and reach, has revolutionized philanthropy. Yet his conversion is no different from the type of reputation redemption mastered by monopolists like Andrew Carnegie and John D. Rockefeller—neither of whose avarice was dignified with an honorary degree. What has changed?

Part of it is the softer edge of technology. Few people believe that Microsoft’s dubious dealings in the 90s were truly acting against the public interest. Google founders Sergey Brin and Larry Page unseated MSN and Yahoo with a mere algorithm—proof of the economy’s democratic nature. Tech fortunes just seem less exploitative, built on mainframes and lines of code rather than the backs of unskilled laborers.

Another is the growing realization that money talks—in all languages. Private foundations can often avoid the bureaucratic mess that plagues public funds, and more effectively stomp out developing world maladies. Even NGOs extol the virtue of profit through microfinance. Social enterprises ensure that each dollar of goodwill can go further. For do-gooders and techies alike, entrepreneurship is almost a religious calling.

This hasn’t always been the case, at least at the College. Indeed, Harvard Student Agencies (HSA) was founded in 1957 to employ scholarship students, not train startup founders. A September 1967 Crimson article cited “the average Harvard student’s apparently natural disdain for business” as the source of campus antipathy to HSA. Budding entrepreneurs had hurdles to jump through trying to innovate. Gates, for one, allegedly went before the Administrative Board for commercially using University computers. And HSA, with its tight monopoly of campus services, rather than fostering innovation, only ended up stifling it.

Things have started to change for the better. In 2000, the Harvard College Dean’s Office lifted its ban on students operating for-profit businesses on campus. Prior, startups had to keep day-to-day operations out of dorms or their founders would face the Administrative Board. The wild successes of Sparknotes and Facebook proved that students had a knack for Internet novelties. Just this fall, the University allowed Dormaid’s laundry service to compete with HSA’s.

Yet these developments occurred with little infrastructural support. The Harvard College Entrepreneurship Forum (HCEF), founded last fall, is trying to fill this gap. HCEF co-founder and vice-president Michael Segal ’09, who is also a Crimson editor, cited the need for a “culture of entrepreneurship” to match the likes of Massachusetts Institute of Technology and Stanford. Segal said that there is no shortage of ideas or interest—noting the attendance of up to 60 undergraduates at the club’s inaugural events—just one of support for their realization.

Purists might scoff at entrepreneurship, saying it has no place at a liberal arts college, and that undergraduates should wrestle with life’s big questions now, and later scheme how to make a quick buck.

Such a view, however, is silly. Harvard is right to uphold pedagogical purity—forcing students to take accounting at MIT, for example. Yet students cannot live on Plato and Proust alone. If the hordes of economics concentrators are any sign, there is no lack of interest in the market. So, just as campus publications hone the skills of budding journalists, similarly should seed grants or non-interest loans from the administration nourish students’ brilliant ideas.

You don’t need Steve Jobs, the flamboyant founder of Apple, to convince you that entrepreneurship is primarily about creativity. With some more institutional support, aspiring venture capitalists might try the exciting (though precarious) world of self-employment before turning to the world of high finance.

And market-skeptics, those who despise their I-banking peers, should take heart that entrepreneurs are revolutionaries of sorts, who shun conformity and yearn for the “creative destruction” that Schumpeter saw at the heart of capitalism’s dynamism. Hopefully, that is what the Class of 2007 will take away from this year’s commencement.