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July 31, 2012

Josef Schumpeter’s idea that entrepreneurs drive the economy fails to understand the power of established family firms.

Picture a tired old brontosaurus, big and unwieldy, tottering about the savannah. Now picture a bunch of little voles scampering about under his feet, leaping in to pinch his food every time he reaches down with his weary head. Before long you’ll be imagining the big lizard biting the dust while the voles dance a victory jig. That’s a pretty good way to sum up Austrian economist Josef Schumpeter’s theory of creative destruction. In the economy old businesses are the brontosauruses, and entrepreneurs are the voles.

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