The Economist has published an interesting article on the entrepreneur. Perhaps the current Administration would care to read it. Entrepreneurs create jobs, in fact as the Economist state they have been the source of all new jobs in the US of late.
Governments have been trying to use the entrepreneurial world for job creation purposes. As the Economist states:
"The road to the entrepreneurial future is littered with failed government schemes. Malaysia’s massive BioValley complex, which opened in 2005 at a cost of $150m, is now known as the “Valley of the BioGhosts”. Dubai’s entrepreneurial hub is awash in a sea of red ink. Australia has little to show for its ambitious BITS (Building on Information Technology Strengths) programme. The European Union’s European Investment Fund, which was started in 2001 with an endowment of more than €2 billion ($1.8 billion at the time), has failed in its mission to burnish the sorry record of the European venture-capital industry."
The fact is that entrepreneurs are intelligent risk takers who are also leaders into the unknown, individuals who will risk their lives and life styles in the belief that they can create value, wealth and opportunity, and do so in an ultra-competitive environment. The entrepreneur is not a GS 12 Government employee. The venture investor must be a counterpoint to that personality, the investor must manage expectations, cajole and guide the entrepreneur, and be realistic as to the expectations, push when needed and pull the plug also when necessary.
A good venture player is as much interested and motivated by financial rewards as is the entrepreneur. Governments and their employees are not. The typical Government employee is a zero risk taker, like the middle and upper management of large companies. The entrepreneur belongs to a clan of unique individuals, they see where others could never achieve the slightest sight.
The risk for any Government is as the Economist states:
"Too many politicians treat entrepreneurship as yet another gravy train. Norway squandered much of its oil wealth investing in new businesses that were founded by the relatives of politicians and bureaucrats. Policymakers are also lax when it comes to designing venture funds. They try to insulate them from risk or allow public investments to crowd out private ones. The Canadian government’s experiment with venture capital failed because the Canadian Labor Fund Program had so much money that it frightened off private venture capitalists, while earning mediocre returns itself. ..."
I saw this in Canada where I had a few investment over the years. It was especially intense in Quebec where the Government threw money at local start ups with no regard for their viability. They were intended for social engineering purposes and resulted in large financial losses. Governments just have no idea as to how to run a venture fund. It takes intelligence, effort, luck, and ruthlessness. They are not parts of some Government planning effort.
Finally there is the example of Israel. The Economist states:
"Last year Israel, a country of just over 7m people, attracted as much venture capital as France and Germany combined. Israel has more start-ups per head than any other country (a total of 3,850, or one for every 1,844 Israelis), and more companies listed on the NASDAQ exchange, a hub for fledgling technology firms, than China and India combined. It may not have the same comforting ring as “the Swedish model” or “the polder model”, but when it comes to promoting entrepreneurship, “the Israeli model” is the one to emulate."
Having been the CEO of an Israeli company in the early 1990s I saw firsthand how it works. It is pure Darwinian, a ruthless and highly competitive environment of the best of the best and making the social skills learned in the streets of New York look refined by comparison. Yet it works and works well.
The shame is that the current Stimulus program disregards the very engine of our greatness as an economic power. Just look at the broadband program. NTIA as the VC, hardly. Then look at where the Stimulus is going, to teachers, to keep frankly a bloated union even more bloated. Just think what intelligent tax incentives could do to employ people who create value would do both short term and long term. Unfortunately no one in DC seems to have a clue.
Governments have been trying to use the entrepreneurial world for job creation purposes. As the Economist states:
"The road to the entrepreneurial future is littered with failed government schemes. Malaysia’s massive BioValley complex, which opened in 2005 at a cost of $150m, is now known as the “Valley of the BioGhosts”. Dubai’s entrepreneurial hub is awash in a sea of red ink. Australia has little to show for its ambitious BITS (Building on Information Technology Strengths) programme. The European Union’s European Investment Fund, which was started in 2001 with an endowment of more than €2 billion ($1.8 billion at the time), has failed in its mission to burnish the sorry record of the European venture-capital industry."
The fact is that entrepreneurs are intelligent risk takers who are also leaders into the unknown, individuals who will risk their lives and life styles in the belief that they can create value, wealth and opportunity, and do so in an ultra-competitive environment. The entrepreneur is not a GS 12 Government employee. The venture investor must be a counterpoint to that personality, the investor must manage expectations, cajole and guide the entrepreneur, and be realistic as to the expectations, push when needed and pull the plug also when necessary.
A good venture player is as much interested and motivated by financial rewards as is the entrepreneur. Governments and their employees are not. The typical Government employee is a zero risk taker, like the middle and upper management of large companies. The entrepreneur belongs to a clan of unique individuals, they see where others could never achieve the slightest sight.
The risk for any Government is as the Economist states:
"Too many politicians treat entrepreneurship as yet another gravy train. Norway squandered much of its oil wealth investing in new businesses that were founded by the relatives of politicians and bureaucrats. Policymakers are also lax when it comes to designing venture funds. They try to insulate them from risk or allow public investments to crowd out private ones. The Canadian government’s experiment with venture capital failed because the Canadian Labor Fund Program had so much money that it frightened off private venture capitalists, while earning mediocre returns itself. ..."
I saw this in Canada where I had a few investment over the years. It was especially intense in Quebec where the Government threw money at local start ups with no regard for their viability. They were intended for social engineering purposes and resulted in large financial losses. Governments just have no idea as to how to run a venture fund. It takes intelligence, effort, luck, and ruthlessness. They are not parts of some Government planning effort.
Finally there is the example of Israel. The Economist states:
"Last year Israel, a country of just over 7m people, attracted as much venture capital as France and Germany combined. Israel has more start-ups per head than any other country (a total of 3,850, or one for every 1,844 Israelis), and more companies listed on the NASDAQ exchange, a hub for fledgling technology firms, than China and India combined. It may not have the same comforting ring as “the Swedish model” or “the polder model”, but when it comes to promoting entrepreneurship, “the Israeli model” is the one to emulate."
Having been the CEO of an Israeli company in the early 1990s I saw firsthand how it works. It is pure Darwinian, a ruthless and highly competitive environment of the best of the best and making the social skills learned in the streets of New York look refined by comparison. Yet it works and works well.
The shame is that the current Stimulus program disregards the very engine of our greatness as an economic power. Just look at the broadband program. NTIA as the VC, hardly. Then look at where the Stimulus is going, to teachers, to keep frankly a bloated union even more bloated. Just think what intelligent tax incentives could do to employ people who create value would do both short term and long term. Unfortunately no one in DC seems to have a clue.
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