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February 20, 2014

The Economist: A global look at "the entrepreneur".

In his column this month at The Economist, our friend Schumpeter (Adrian Wooldridge) asks "What exactly is an entrepreneur?" The common sense (if dispiriting) point he makes is that entrepreneurs seem to fall generally into two very different groups: (1) the relatively few but highly publicized, celebrated success stories that give the word "entrepreneur" its current cache, and (2) what the piece calls "Mom-and-Pop shops", the countless small businesses across the globe that are viable but never significantly grow. (And as Schumpeter notes, entrepreneurial "success stories" have, of course, put lots of independents worldwide out of business.) An excerpt from the column:

Countries with a lot of small companies are often stagnant. People start their own businesses because there are no other opportunities. Those businesses stay small because they are doing exactly what other small businesses do. The same is true of industries. In America industries that produce more entrepreneur billionaires tend to have a lower share of employees working in firms with less than 20 employees.

This makes sense: successful entrepreneurs inevitably destroy their smaller rivals as they take their companies to scale. Walmart became the world’s largest retailer by replacing thousands of Mom-and-Pop shops. Amazon became a bookselling giant by driving thousands of booksellers out of business. By sponsoring new ways of doing things entrepreneurs create new organisations that employ thousands of people including people who might otherwise have been self-employed. In other words, they simultaneously boost the economy’s overall productivity and reduce its level of self-employment.

Schmidt, Brin and Page of Google. May 20, 2008.

Posted by JD Hull at February 20, 2014 01:52 AM

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