A contrarian definition of entrepreneurship

This review of Daniel Isenberg’s Worthless, Impossible, and Stupid sounds promising enough to consider the book for addition to The Library in St.Pete, but in the meantime the review covers some favorite subjects.

Mr. Isenberg defines entrepreneurs as contrarian value creators who see economic value where others see heaps of nothing and who combine the self-confidence to defy conventional wisdom with the determination to overcome obstacles.

As the book’s title suggests, Isenberg believes some of “the best entrepreneurs are distinguished more by their ability to achieve the impossible than by the originality of their thinking.”

He also argues that entrepreneurship may be “a type of modern-day philosopher’s stone: a mysterious something that supposedly holds the secret to boosting growth and creating jobs” but governments are confused as to how to encourage it.

They assume that it must mean new technology; so they try to create new Silicon Valleys.  Or that it is about small businesses; so they focus on fostering start-ups.  Both assumptions are misleading.

Silicon Valley has certainly been the capital of technology-based entrepreneurship in recent decades. But you do not need to be a geek to be an entrepreneur.  George Mitchell, the Texas oilman who pioneered fracking, did as much to change the world as anybody in the Valley.  Nor do you need to be a conventional innovator.  Miguel Dávila and his colleagues built a huge business by importing the American multiplex cinema into Mexico. Their only innovation, says Mr. Dávila, “was putting lime juice and chili sauce on the popcorn instead of butter.”

The review also makes the distinction, frequently cited here when we’ve written on the topic of job creation, between lifestyle companies and high-growth start-ups.  The bulk of job creation comes from VC-backed versions of the latter:

Equally, there is a world of difference between the typical small-business owner (who dreams of opening another shop) and the true entrepreneur (who dreams of changing an entire industry).  Jim McCann, the creator of 1-800-flowers.com, is an entrepreneur rather than just a florist because, when he opened his first shop in 1976, he looked at the business “with McDonald’s eyes”, as he put it, and laboured for years to build the world’s biggest flower-delivery business.

These misconceptions matter because they produce lousy policies. The world is littered with high-tech enclaves that fail to flourish. Malaysia’s biotech valley has been nicknamed “Valley of the BioGhosts”. The world is also full of small-business departments that fail to produce many jobs. The Kauffman Foundation, which researches such matters, has shown that the bulk of new jobs come from a tiny sliver of high-growth companies.

The review is found in The Economist, in the magazine’s Schumpeter column, and it closes by invoking its namesake:

Politicians and bureaucrats do not just confuse entrepreneurship with things they like—technology, small business—they also fail to recognise that it entails things that set their teeth on edge.  Entrepreneurs thrive on inequality: the fabulous wealth they generate in America makes the country more unequal. They also thrive on disruption, which creates losers as well as winners.  Joseph Schumpeter once argued that economic progress takes place in “cracks” and “leaps” rather than “infinitesimal small steps” because it is driven by rule-breaking entrepreneurs.  It might be nice to think that we could have growth and job-creation without a good deal of Schumpeterian cracking. But, alas, some thoughts really are worthless, impossible and stupid.