Monday, September 14, 2015

The Entrepreneur Myth - And How To Surmount It

It seems just about everyone wants to be an entrepreneur these days, whether operating one's own business or acting as an agent for the "sharing economy" (Uber, Task Rabbit, or whatever other gig aspect is available).

One cornerstone principle of conservative economics is that if more entrepreneurs were created, there'd be much less dependence on government: fewer welfare "queens", fewer oldsters on "entitlements" and fewer families on food stamps. Thus "individual initiative" is hailed as some kind of panacea to solve the nation's economic and growth problems.

Of course, this is doubtful. First, as I already noted regarding growth, it is tied to the quality of energy sources and these are degrading year by year, e.g. going from light sweet crude oil to kerogen or oil shale. Thus, as energy degrades - determined by lower and lower EROEI (energy returned on energy invested) GDP falls-  and with it economic growth, re-investment, jobs, etc.  See e.g.

Second, entrepreneurship isn't all it's cracked up to be. Barely one third of newcomer entrepreneurs remain in business, via positive earnings,  after two years.  Only ten percent are still thriving after five years, meaning their profits are exceeding overhead and they've emerged from debt.

Stephan Chambers, in a perceptive Financial Times column ('Does It Pay to Train People To Set Up Their Own Business?') puts a lot of the blame on entrepreneurial education - which let's admit - is needed to launch successful businesses. So, unless you get a big break on a reality TV show where a big wig will put up the $$$ for you, you need to be educated on the details of what it means to be an entrepreneur. As Chambers puts it:

"Of course we would like programs to demystify entrepreneurship, to harness the creativity of humankind to grow our economies and solve our biggest problems. We would like our economies to be dragged out of stasis by driven people with great ideas, and for intractable problems - poverty, migration, public health failures etc. - to be solved by shiny -eyed visionaries...We would also like the millions on Facebook to be encouraged."

These aspirations - which are also central to conservative dreams- are why entrepreneurial ideations are embraced.  The problem, as Chambers notes, is that there are precious few solutions or answers to the questions raised.  As Chalmers goes on to emphasize:

"The largest randomized control experiment ever done on entrepreneurship education concludes that, on average, training increases short term business ownership and employment, but there is no evidence of broader or longer -run effects on ownership or performance."

Chambers goes on to observe that there is evidence that exposing children to entrepreneurship education "does increase their perseverance and self control" but alas, it "does not increase their entrepreneurial intentions"

Chambers solutions are humble but may be more practical than what's hitherto been on offer. These include these educational guidelines:

- Be clear about what you mean by entrepreneurship and its personal, social and economic effects.

- Be clear what you mean by teaching (supporting, encouraging, incubating) and by success i.e. companies that last longer and grow bigger

- Shift the focus from financing early stage ventures to the performance of those ventures over 10 years

- Craft educational strategies for specific national and business contexts.

- Shift attention from "heroic" individuals who start successful businesses to the problems they actually solved to achieve their renown.

Chalmers' point is that we need to ask better questions of entrepreneurship education, and not "Does it work?' Meanwhile, he advises we should "craft entrepreneurial initiatives specifically for girls and women" while also "channeling incentives to create businesses where other policy interventions have demonstrably failed."

One of the most successful entrepreneurial initiatives I recall occurred in Barbados in the late 1970s and 1980s when a member of the Barbados Astronomical Society realized not all tourists would be able to visit the Harry Bayley Observatory. So he packed his own telescope in a van along with star maps and traveled around the island to conduct viewing and education sessions for $10 per person. Within a year his business had burgeoned, and he had to hire others to help out.

Probably then, beyond education, one would like prospective entrepreneurs to see the need for something in their own communities - then marshal whatever resources are needed to bring it to fruition.

But let's be serious, the objective of 100 percent entrepreneurship remains largely a pipedream.

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