Let's try playing favorites to boost Michigan's economy
You may have never heard of Joseph Schumpeter, an eccentric Austrian economist who taught at Harvard in the 1930s and '40s. But to those of us who study the strategic and financial dynamics of innovation, he is far more influential than his peers John Maynard Keynes or Milton Friedman. Schumpeter is the guy who made the entrepreneur the engine of growth for an economy, and several Nobel Laureates since have suggested that he was right on most counts.
Schumpeter’s most famous and controversial work is his disjointed and rambling classic, “Capitalism, Socialism, and Democracy.” In it he warns that as capitalism advances, it becomes more efficient and seeks better and cheaper ways of getting the work done, even if it means replacing jobs with machines or sending them abroad. In other words, corporations use innovation to do more with less. But he warns that capitalism is not sustainable because, in a democratic society, majorities vote for the creation of a planned economy where the wealth is distributed equitably by the state. You need only look to the current European economy as a whole to see what Schumpeter saw 75 years ago. No friend of socialism, Schumpeter cautioned that democracy taken too far will destroy meritocracy, where the best and brightest advance through personal initiative, resourcefulness and innovation -- the essential attributes of entrepreneurship.
What if we are going about jump-starting our economy in Michigan the wrong way? I’m not talking about any political party. I’m talking about our modest Midwestern sensibilities -- our belief that giving our best and brightest special consideration is elitist and wrong. Curiously, there are places in our fair country that don’t share our populist views and many of them have something we don’t: jobs!
In 25 years of teaching at the University of Michigan business school, I’ve had dozens of former students who have gone on to create very successful companies, some worth billions of dollars. The problem is that most of these companies were founded outside of Michigan. They produced tens of thousands of jobs – somewhere else.
The good news is that many of our sons and daughters are indeed the best and brightest. The bad news is that we treat them the same as anyone else, and inevitably they leave for places where they are considered special.
So what’s the Next Idea?
Here’s an oldie but goodie idea: Let’s play favorites. Let’s invite those who have proven themselves to be the best and brightest entrepreneurs and ask them to identify a dozen students from our top institutions of higher learning and other competitive venues where talent and ambition are rewarded. Then let’s give these select students special innovation training, one-on-one mentoring with proven entrepreneurs, fast-track funding and easy access and terms for business work-space development. But before we develop any rewards, how about we try something different this time and ask them what they need to succeed, and then do our best to give it to them. Most importantly, let’s make them feel special, because they are.
Sure Silicon Valley, the Research Triangle and the Silicon Hills of Austin all have their models for accelerating innovation. But Michigan’s economy is more akin to that of western Pennsylvania or upstate New York or Ontario, Canada. So we should take some short trips to quickly learn what works and what doesn’t, and more importantly, why.
Finally, we should learn from the best and create the rest to build our own unique Michigan version.
How will we measure our success? New jobs, of course. How will we make sure these measures are fair? We won’t, because any system of measurement is biased to a particular outcome -- jobs, profits or social equality. But Schumpeter would say that economic growth via innovation is a prerequisite to good jobs and social equality.
With time and a little luck, we will gain momentum and begin to re-establish our creative culture and become more inclusive. Who knows, our best and brightest might just prove old Joe Schumpeter wrong and find a way to balance democracy and meritocracy here in Michigan.
Share Your Ideas:
- How would you identify the best and the brightest in Michigan?
- What kind of help would you give them?
Jeff DeGraff is a clinical professor of Management and Organizations at the Ross School of Business at the University of Michigan.