A news item popped up in my feed reader the other day, about Cuba laying off more than a half-million people with the expectation that they move into business for themselves. It made me reflect on what makes an entrepreneur, and what society needs to provide to help them succeed.
We normally talk about entrepreneurs as a bloc, encompassing the multinational CEO to the owner of the corner store. Or we group by size: Big Business or Small Business. But I think it is more useful to look at entrepreneurs as a spectrum that we can classify by their motivation:
– Situational entrepreneurs (or reluctant entrepreneurs): Self-employed people forced by circumstance to make the transition from “employee” to “entrepreneur” and who would go back to being an employee given the choice;
– Lifestyle entrepreneurs: Self-employed people who seize the opportunity to transition out of “employee” mode and into business for themselves so they can better practice their craft or profession. Their motivation is to create sufficient cash flow to meet their personal needs and maximize their enjoyment of what they do. Lifestyle entrepreneurs make up a large proportion of solopreneurs and micro-business (up to ten employees or so) and help the economy remain on a stable footing;
– Venture entrepreneurs: Entrepreneurs who build a business focused on growth (size, revenues, market share, capitalization). Venture entrepreneurs may be small to start with, but they have dreams of becoming big. Or they may be business that are already big and who want to stay big especially from the view of market share or market cap. The common motivation is the entrepreneur’s personal financial gain;
– Social entrepreneurs: Entrepreneurs who aim to meet a social need (usually not-for-profits). The primary motivation is to provide services to better the community.
Each of the above categories is not necessarily better or worse than the other, and all are part of the spectrum of entrepreneurship.
Entrepreneurs are an essential component of society, as an engine of progress and prosperity. They are willing to take what they would call “a leap of faith” and others would call “risks”, in return of being able to receive the rewards of doing so. In return, for all these types of entrepreneurs to succeed, society needs to provide the right conditions so that entrepreneurs feel confident to take the initiative:
– Basic needs are met (shelter, safety and security): this provides a safety net that gives them confidence to focus on their business;
– Basic values of trust, fairness and justice: conditions essential to create agreements and contracts they can rely on;
– Encouragement and support systems, enabling the sharing of knowledge and experience, and reassuring the entrepreneur that what they are doing is “worth it”;
– Freedom to communicate and to lead: Entrepreneurial success means being attracting the loyalties of all stakeholders – clients, employees, partners, investors, suppliers, etc. Leaders from outside the political class must be encouraged;
– Fair access to capital: Business is a process where the entrepreneur invests time, money and effort now to create a return in the future. Entrepreneurs have to be able to borrow from the future in order to build the present.
These are the elements of a “level playing field” required so that an entrepreneurial culture can grow. It takes time and resources to build a solid social infrastructure that ensures the success of an entrepreneurial class succeed, but it can also be destroyed in an instant by greed or power.
I believe the role of government is not to “create jobs” but to create the right conditions so that entrepreneurs can prosper, which creates the jobs and the wealth that the rest of society wants and needs. However, I do not agree with the extreme-right’s push for “laissez-faire” capitalism in the US and in Canada, neutering the government’s role in the economy, because it threatens the level playing field required for nano, micro, small and big business to succeed.
An extreme case of laissez-faire capitalism is illustrated by Russia’s transition to a market economy in the 1990s. Greed and power severely damaged the foundation of trust, and the lack of support systems, a safety net, and fair access to capital prevented almost anyone but venture entrepreneurs from having a shot at success.
In the case of Cuba, my concern is that they fall into the same trap: wanting to create a market economy without doing the groundwork of shifting society’s values.
If a society really wants to prosper, it needs to ensure that it provides the right conditions so that entrepreneurs are willing to let go of the present and invest the effort to build the future. Not all entrepreneurs want to be rich, but we all want to be successful. To do so requires a social infrastructure that fosters an environment of trust which allows smart risk-takers to seize the opportunities to create wealth, for themselves, for their stakeholders, and for society as a whole. And to build this takes time… and trust.
For more information
The articles that got me thinking, on NYTimes.com:
- Cuba’s Public Sector Layoffs Signal Major Shift
- Cuba Resets The Revolution
Other articles on this blog about the entrepreneurial mindset:
- The Delightful Insanity Of Being Self-Employed
- You Gotta Be A Bit Crazy
- A Thought About Hard Work
- What Comes First: The Idea Or The Vision
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