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Steve Jobs and Joseph Schumpeter

Aug 27, 2011 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic History, Economic Thinkers, Households, Innovation, Thinking Economically • 222 Views    No Comments

Henry Ford once said that consumers would have requested “a better horse” if he had asked them what to produce. Similarly, Steve Jobs told a reporter, “It’s not the consumers’ job to know what they want.”

The result?

For Henry Ford it was the Model T, the moving assembly line, and a plethora of products and processes that upset the status quo.

For Steve Jobs, the computer industry, the music industry, mobile phones, all were revolutionized by Apple. Steve Jobs’ name is on 313 patents ranging from the iPod to Apple’s glass staircase. As Andy Kessler says in WSJ, he did it “by figuring out what he wanted and controlling the process until he got it.” He knew how to “give customers what they want before they knew they wanted it.”

According to a 2008 Wired article, Steve Jobs’ leadership style has been characterized by autocracy and charisma. He is hard to please, inspirational and usually right. Talking about the iPod, during 2004, he said, “We want it to make toast. We’re toying with refrigeration too.” Actually, and secretly, Apple was developing video.

The Steve Jobs story is about a lot more than Apple. It is about an American entrepreneur. Very different from other visionaries, he is also similar. They destroyed the past as they moved us onward. They took advantage of an economic system that rewarded their talents.

Here is a past post about Apple’s patents.

The Economic Lesson

In Capitalism, Socialism, and Democracy (1942), Joseph Schumpeter (1883-1950) described what propelled capitalism and what would destroy it. Explaining the march of new ideas as creative destruction, Schumpeter said that entrepreneurs fueled capitalism’s ability to grow.

(In this Teaching Company/History of Economic Thought course from Dr. Timothy Taylor, Lecture 8 on Schumpeter is excellent.)

An Economic Question: Thinking specifically of Apple and iTunes, how was the music industry transformed?

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