still an egomaniac. Partly for the same reason. They make too much money too soon. It spoils you, you know, to get $450,000 in stock options at age twenty-three. It's a very dangerous thing. It's too much excitement.
Q: This entrepreneurial society that you write about in the book, how did it develop? And are you absolutely persuaded that it's not just a fad?
A: Certainly, demographics have had a lot to do with it. You go back thirty years, twenty-five years, and the able graduates of, let's say, Harvard Business School all wanted to go into big business. And it was a rational, intelligent thing to do because the career opportunities were there. But now, you see, because of the baby boom, the pipelines are full.
Another reason we have an entrepreneurial society, and it's an important reason, is that high tech has made it respectable. The great role of high tech is in creating the climate for entrepreneurs, the vision. And it has also created the sources of capital. When you go to the venture capitalists, you know, most of them are no longer emphasizing high tech. But all of them began in high tech. It was high tech that created the capital flow. And how recent this is is very hard to imagine. In 1976, I published a book on pension funds in which I said that one of the great problems in making capital formation institutional is that there won't be any money for new businesses. That was only ten years ago and at that time what I said was obvious. Today it would be silly.
The third thing promoting the entrepreneurial society perhaps is the most important, although I'm not sure whether I'm talking chicken or egg. There's been a fundamental change in basic perception over the past, make it, fifty years. The trend was toward centralization—in business, in government, and in health care. At the same time, when we came out of World War II we had discovered management. But management was something that we thought could work only in large, centralized institutions. In the early 1950s, I helped start what became the Presidents' Course given by the American Management Associations. In the first years, until 1970, for every hundred people they invited, eighty wrote back and said: “This is very interesting, but I'm not GE. What would I need management for?” And the same was true when I first started to work with the American College of Hospital Administrators, which gave a seminar in management. Hospital administrators needed it, but invariably we got the answer, “We have only ninety beds; we can't afford management.” This has all changed now. Don't ask me how and when. But nowadays, the only place left where you still have the cult of bigness is in Japan. There, bigger is better and biggest is best.
So, in part, the entrepreneurial society came about because we all “learned” how to manage. It's become part of the general culture. Look, Harper & Row—who is the publisher for [Tom] Peters and [Bob] Waterman—half of the 2 or 3 million books they sold were graduation presents for high school graduates.
Q: Your book or In Search of Excellence?
A: Oh, no, no. Not my book. My book would be hopeless. They couldn't read it, much less master it. The great virtue of the Peters and Waterman book is its extreme simplicity, maybe oversimplification. But when Aunt Mary has to give that nephew of hers a high school graduation present and she gives him In Search of Excellence, you know that management has become part of the general culture.
Q: Does the arrival of the entrepreneurial society mean that we should be rejoicing now because our national economic future is assured?
A: No. It's bringing tremendous change to a lot of vast institutions, and if they can't learn, the changes will be socially unbearable.
Q: Has any of them started to change?
A: My God, yes. The new companies are the least of it, historically. The more important part is what goes on in existing institutions. What is far more important is that the American railroad has become innovative with a vengeance in the last thirty years. When I first knew the railroads in the late 1940s, there was no hope for them. I was quite sure that they would all have to be nationalized. Now, even Conrail, the government-owned railroad, makes money.
What has happened in finance is even more dramatic. In, make it, 1960, some smart cookies at General Electric Credit Corporation realized that commercial paper is a commercial loan, not legally, but economically. Legally, in this country, it's a security, so the commercial banks have a hard time using it. Our number-two bank is not Chase and not Bank of America. It's General Electric Credit.
The most robotized plant in the world is probably the GE locomotive plant in Erie, Pennsylvania. Twenty years ago, GE didn't make a single locomotive in this country. It was much too expensive. They were all made by GE Brazil. Now, the U.S. plant is far more automated than anything you could possibly find in Japan or Korea.
That's where the innovation has been, and that's where we need it, because if we don't get the changes in there we will have one corpse after another, with enormous social danger.
Q: Is that why you wrote Innovation and Entrepreneurship?
A: I wrote the book because I felt the time had come to be a little more serious about the topic than most of the prevailing work was and also in part because, bluntly, most of the things you read or hear seem to me, on the basis of thirty years of work and experience, to be misunderstandings. The entrepreneur—the person with George Gilder's entrepreneurial personality—yes, there are such people, but they are rarely successful. On the other hand, people whom Gilder would never accept as entrepreneurs are often very successful. Entrepreneurship is not a romantic subject. It's hard work. I wanted to dislodge the nineteenth-century folklore that holds that entrepreneurship is all about small business and new business. Entrepreneurs range from the likes of Citibank, whom nobody has accused of being new or small—or General Electric Credit—to Edward D. Jones & Co. in St. Louis, the fastest-growing American financial-services company.
But there's another reason. When I published Practice of Management thirty years ago, that book made it possible for people to learn how to manage, something that up to then only a few geniuses seemed able to do, and nobody could replicate it. I sat down and made a discipline of it. This book does the same with innovation and entrepreneurship.
Q: Well, you didn't invent the stuff.
A: In a large part, yes.
Q: You didn't invent the strategies. They were around before you wrote them down.
A: Not really.
Q: No? What I'm trying to say is that people were doing these things—finding market niches, promoting entrepreneurial behavior in their employees—before your book came out.
A: Yes, and everybody thought it required genius and that it could not be replicated. Look, if you can't replicate something because you don't understand it, then it really hasn't been invented; it's only been done.
When I came into management, a lot of it had come out of engineering. And a lot of it came out of accounting. And some of it came out of psychology. And some more came out of labor relations. Each of those was considered separate, and each of them, by itself, was ineffectual. You can't do carpentry, you know, if you have only a saw, or only a hammer, or you never heard of a pair of pliers. It's when you put all those tools into one kit that you invent. That's what I did in large part in this book.
Q: You're certainly one of the most accessible of the serious writers on management topics.
A: Well, I'm a professional writer, and I do not believe that obscurity is a virtue.
Q: Why do you work alone? No staff?
A: I don't enjoy having to do work to
