Ideas in Development

The first of these works is entitled: "The Entrepreneurial Imperative: How America's Economic Miracle Will Reshape the World (and changes your life.")

That says it all, doesn't it? Needless to say, Carl Schramm, the President of the Kauffman Foundation, a major philanthropist in the field of entrepreneurship, is bullish on this subject.

The book covers (and updates) the ground covered by past books on the topic. The author claims that entrepreneurship is America's not-so-secret weapon in the worldwide battle for innovation and market share. If suitably tended to, it will "give America the necessary leverage to remain an economic superpower." In order to survive (much less flourish), other countries must follow in our footsteps. This entrepreneurial imperative reshapes how our other major institutions function universities, larger corporations, and nonprofits.
Et cetera.

Schramm defines an entrepreneur as "someone who undertakes personal economic risk to create a new organization that will exploit a new technology or innovative processes that will generate value to others." He argues that a healthy entrepreneurial economy "rests on four institutions: (1) start-up entrepreneurial businesses; (2) large established firms that increasingly seek to operate in an entrepreneurial manner; (3) university; and (4) to a far lesser extent, government." He calls for tax reform, improved high school based courses in science, math, and entrepreneurship, reformed incentives for university-based research and development, ample venture capital, more small business financing angels, easier access to public capital markets, and a new concentration on reducing our fossil fuel dependence.

Part manifesto, part history of how America "righted itself" and "old Europe" hit the skids, and part guide to how to make it in the new economy, Mr. Schramm includes a number of "letters" to his children, a newly elected US President, and a middle-aged unemployed executive this work dispenses a clear message of optimism, hard work, and tough love. Warning against the evils of socialism, unionization, taxation, and regulation, Schramm offers entrepreneurship as the best route to economic progress for struggling countries in Africa, the former Soviet Union, the Middle East, and Eastern Europe.

Although I am a son of a Horatio Alger-type entrepreneur and a big believer in its cultural and economic importance, I find myself a trifle bothered by the book. The facts he marshals are a bit one-sided, for example, regarding the inferiority of the Western European social democratic model relative to the Anglo-American economic model. The Netherlands and the Nordic countries have appear to have re-positioned themselves as strong economic players without sacrificing too much of their safety net, while, in many respects, the rest of the Europe and the US look, as a whole, kind of like mirror opposites. We offer more lousy jobs and less quality of life for our jobless and working poor, our blue-collar employees, and our lower middle classes, while the old Europe types create too few jobs, especially for young people, immigrants, and other labor market entrants.

Thus, in this world of choice, you can also have your pick of economic dysfunctions. Be sure to select your home or policy system by consulting your naked self-interest. Unfortunately, both old Europe and the US-of-A are having trouble crafting the model where you have it all opportunity, security, and efficiency.

Schramm's screed against the lumbering big business behemoths is a bit over-the-top as well. Dell, Cisco, Wall Mart, and others are doing very well, in fact. Besides you could argue that they have crafted a new corporate strategy the modular, "virtual" corporation that has carved out a good, but controlling position for smaller firms as suppliers. Held on a very short leash, these entrepreneurs are in tough position if the bigger company wants them to "jump." The only conceivable answer is: "how high?" So, the decline of corporate America described herein is greatly exaggerated.

Two decades of de-unionization, out-sourcing, downsizing, off-shoring, deregulation, and increased imports have winnowed out the weaklings among the large. These corporations have already, in their own way, adopted more entrepreneurial approaches to the benefit of their shareholders and CEO's, but to the detriment of many of their employees and communities. Remember what GE's head honcho Jack Welch said was the best place to locate a company today: "On a barge!"

Finally, although "The Entrepreneurial Imperative" seeks to shut up his critics, he does not really answer the critiques offered by books by Steven Davis from the Economic Policy Institute, and Jim Medoff. Although more aimed at small businesses than the wealth-generating, job-creating, fast-growing entrepreneur, these counter views are not engaged to my satisfaction.

Michael H. Shuman's book, "The Small-Mart Revolution: How Local Businesses Are Beating the Global Competition", represents the other world of entrepreneurial advocates the "Small is Beautiful," globalization stinks, grassroots community-based enthusiasts. Like his earlier book, "Going Local: Creating Self-Reliant Communities in a Global Age," reading it makes you wish the author had better appreciated that there is this "thing" called "productivity", which can shrink the local multiplier if you are below average in unit costs, and that local currencies are better for creating new venues for meeting people than making a buck. Furthermore, over thirty years of entrepreneurial failure in the CDC field (and admittedly, much affordable housing and mixed development success), along with the small market share of our remaining cooperative and mutual institutions, do not bode well for committing ourselves to Shuman's anarcho-market agenda.

At best, the Shuman answer is a compliment to the main show held elsewhere. It's too weak as a countervailing force, relative to the clout of big business. (Many of the for-profit owners are political conservatives or libertarians anyway, have no gripes about the big dogs, and buy the free market agenda.) And in most cases, these firms aren't leading edge enough as market competitors to demonstrate that you can make money and be a good steward at the same time. Their profit margins are too tight for them to pay well or adopt precedent-setting high performance, high skill workplace strategies.

Despite the many cool examples of action in the field and checklists for nurturing your homegrown economy in Shuman's book, the latter facts and the weakness of his empirical arguments do not at all convince me that we have a winner here, or that we are even at first base when it comes to "beating the global competition." Regarding the continuum of hopes to realities, Shuman's book is more in the "wish" category.

I have more positive judgments about Bo Burlingham's "Small Giants: Companies that Chose to Be Great instead of Big." An ex-sixties lefty radical and editor at large of "Inc. Magazine", he describes the sorts of businesses and entrepreneurs that look more like Schramm's in their élan, intelligence, and market positioning, but create firms that embody the social values that Shuman extols.

Burlingham's earlier works, "The Great Game of Business" (1992: $16.95) and "A Stake in the Outcome" (2002: $14.95) are also worth a read (especially the first one). They tell the saga of a real business revolutionary, who restored a near dead company and increased its stock value by 18,600 percent in 18 years (17 were profitable)! Sales have grown from $16 million to $160 million and employment from 119 to 900. Once the firm was one company, now SRC Holdings Company boasts 21 companies.

Detailed in these co-authored works is the story of Jack Stack's and co-workers' rescue of their failing motor re-manufacturing firm, its conversion to employee ownership, its adoption of "open book" financial management", the creation of other successful firms and ventures, his guided tours and workshops on how they did it, and his careful succession planning. For those who wish that entrepreneurship could play a bigger role in creating a more family-, worker- and environmentally-friendly economy, and operate at scale capable of fostering systemic change, these other two books have much to offer. They map the course to create a genuinely broad-based culture of ownership.

For in Jack's companies, there are lots of owners and all are entrepreneurs, sharing risks and returns that characterize what Stack calls "the great game of business." He believes that it should not just pay the bills, it should also be fun.