Category: Entrepreneurship

The Meaningful Work of Immigrant Sweatshop Entrepreneurs

(p. 141) “To me the greatest wonder in this was not the mere
quantity of garments–although that was a miracle in
itself–” Borgenicht would write years later, after he
became a prosperous manufacturer of women’s and children’s
clothing, “but the fact that in America even poor
people could save all the dreary, time-consuming labor of
making their own clothes simply by going into a store and
walking out with what they needed. There was a field to
go into, a field to thrill to.”

Borgenicht took out a small notebook. Everywhere he
went, he wrote down what people were wearing and what
was for sale–mens wear, women’s wear, children’s wear. He
wanted to find a “novel” item, something that people would
wear that was not being sold in the stores. For four more
days he walked the streets. On the evening of the final day
as he walked toward home, he saw a half dozen girls playing
hopscotch. One of the girls was wearing a tiny embroidered
apron over her dress, cut low in the front with a tie in the
back, and it struck him, suddenly, that in his previous days
of relentlessly inventorying the clothing shops of the Lower
East Side, he had never seen one of those aprons for sale.
He came home and told Regina. She had an ancient
sewing machine that they had bought upon their arrival in
America. The next morning, he went to a dry-goods store
on Hester Street and bought a hundred yards of gingham
and fifty yards of white crossbar. He came back to their
tiny apartment and laid the goods out on the dining room
table. Regina began to cut the gingham–small sizes for
toddlers, larger for small children–until she had forty (p. 142)
aprons. She began to sew. At midnight, she went to bed
and Louis took up where she had left off. At dawn, she rose
and began cutting buttonholes and adding buttons. By ten
in the morning, the aprons were finished. Louis gathered
them up over his arm and ventured out onto Hester Street.
“Children’s aprons! Little girls’ aprons! Colored ones,
ten cents. White ones, fifteen cents! Little girls’ aprons!”
By one o’clock, all forty were gone.
“Ma, we’ve got our business,” he shouted out to Regina,
after running all the way home from Hester Street.
He grabbed her by the waist and began swinging her
around and around.
“You’ve got to help me,” he cried out. “We’ll work
together! Ma, this is our business.”

Source:
Gladwell, Malcolm. Outliers: The Story of Success. New York, NY: Little, Brown, and Co., 2008.
(Note: italics in original.)

Entrepreneurs, Not MITI, Decided Japan Outcomes in ’60s, ’70s and ’80s

(p. 164) Ishibashi’s regime was followed in the early 1960s by the “income-doubling campaign” of his associate Hayato Ikeda, who assumed power in 1961 and continued the supply-side thrust. The result was a steady upsurge of domestic growth, with firms and industries rapidly gaining experience in intense rivalries at home before entering the global arena as low-cost producers, and with government cutting taxes and increasing revenues and savings.

It is from this domestic crucible of intense competition with normal rates of bankruptcy far above those in the United States, with scores of rivals in every field, that the great Japanese companies have emerged. At various times during the last three decades, for example, there have been 58 integrated steel firms, 50 motorbike companies, 12 auto firms, 42 makers of hand-held calculators, 13 makers of facsimile machines, and 250 producers of robots. Overlooking this welter are always the crested bureaucrats of MITI, sometimes offering useful aid and guidance–but at the center, deciding outcomes, have always been the entrepreneurs.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

“Dynamism Has Been Leached From Our System,” But Not from Our Brains or Our Hearts

Sometimes one of Peggy Noonan’s columns reminds us that she was once one of Ronald Reagan’s best speech writers:

(p. A11) I heard a man named Nathan Myhrvold speak of a thing called Microsoft. I saw a young man named Steve Jobs prowl a New York stage and unveil a computer that then we thought tiny and today we’d call huge. A man named Steve Wozniak became a household god as my son reported his visionary ways. It was a time so full of genius and dynamism that it went beyond words like “breakthrough” and summoned words like “revolution.” If you were paying attention, if you understood you were witnessing something great, the invention of a new age, the computer age, it caught at your throat. It was like hearing great music. People literally said what had been said in the age of Thomas Edison: “What will they think of next?” What a buoyant era.
. . .
And for a moment, as I sent and received my first airborne Wi-Fi emails, I was back there. And I was moved because I realized how much I missed it, how much we all do, that “There are no walls” feeling. “Think different.” “On January 24th, Apple Computer will introduce Macintosh. And you’ll see why 1984 won’t be like ‘1984.’ ” That was 25 years ago. The world was on fire.
It has cooled. And the essential problem with the crash we’re in is no one can imagine quite feeling that way again. People can remember it, but they can’t quite resummon it.
. . .
I end with a hunch that is not an unhappy one. Dynamism has been leached from our system for now, but not from the human brain or heart. Just as our political regeneration will happen locally, in counties and states that learn how to control themselves and demonstrate how to govern effectively in a time of limits, so will our economic regeneration. That will begin in someone’s garage, somebody’s kitchen, as it did in the case of Messrs. Jobs and Wozniak. The comeback will be from the ground up and will start with innovation. No one trusts big anymore. In the future everything will be local. That’s where the magic will be. And no amount of pessimism will stop it once it starts.

For the full commentary, see:
PEGGY NOONAN. “Remembering the Dawn of the Age of Abundance; Times are hard, but dynamism isn’t dead.” Wall Street Journal (Sat., Feb. 21, 2009): A11.
(Note: ellipses added.)

Gladwell Misses His Own Central Message: Long Hard Work Matters Most

OutliersBK.jpg

Source of book image: http://bharatkhetan.com/akanksha/?p=19

Malcolm Gladwell is on a roll. His three recent books have been best-sellers: The Tipping Point, Blink, and now Outliers. All three books are well-written, and deal with important issues.
I suspect that sometimes Gladwell over-simplifies and over-generalizes. But he often makes plausible, thought-provoking claims, and he presents academic research in a clear, painless way.
In the Outliers book, I enjoyed his examples: the NHL hockey players who are overwhelmingly born in the same three months, the entrepreneurial immigrant Jews entering the clothing business, silicon valley superstars having access to computers at an early age.
To Gladwell, the main point of the book is that over-achievers owe their success to lucky circumstances. But to me, the main point was a different one: in case after case, the successful put in a huge number of hours (about 10,000) of practice to achieve the mastery of their activities.
To use the memorable analogy from Collins’ Good to Great: hour after hour, day after day, year after year, they all kept “pushing the flywheel” to reach the threshold of excellence.

The reference for Outliers is:
Gladwell, Malcolm. Outliers: The Story of Success. New York, NY: Little, Brown, and Co., 2008.

The reference for Collins’ book is:
Collins, Jim. Good to Great: Why Some Companies Make the Leap. And Others Don’t. New York: HarperCollins Publishers, Inc., 2001.

Government’s Terrible Track Record Running Businesses

John Steele Gordon, the author of the sagacious commentary below, has also written a wonderful book called A Thread Across the Atlantic, which tells the story of how entrepreneur Cyrus Field persevered in his attempts to lay telegraphic cable across the Atlantic Ocean.

(p. A17) The Obama administration is bent on becoming a major player in — if not taking over entirely — America’s health-care, automobile and banking industries. Before that happens, it might be a good idea to look at the government’s track record in running economic enterprises. It is terrible.

In 1913, for instance, thinking it was being overcharged by the steel companies for armor plate for warships, the federal government decided to build its own plant. It estimated that a plant with a 10,000-ton annual capacity could produce armor plate for only 70% of what the steel companies charged.
When the plant was finally finished, however — three years after World War I had ended — it was millions over budget and able to produce armor plate only at twice what the steel companies charged. It produced one batch and then shut down, never to reopen.
Or take Medicare. Other than the source of its premiums, Medicare is no different, economically, than a regular health-insurance company. But unlike, say, UnitedHealthcare, it is a bureaucracy-beclotted nightmare, riven with waste and fraud. Last year the Government Accountability Office estimated that no less than one-third of all Medicare disbursements for durable medical equipment, such as wheelchairs and hospital beds, were improper or fraudulent. Medicare was so lax in its oversight that it was approving orthopedic shoes for amputees.
. . .
It is government’s job to make and enforce the rules that allow a civilized society to flourish. But it has a dismal record of regulating itself. Imagine, for instance, if a corporation, seeking to make its bottom line look better, transferred employee contributions from the company pension fund to its own accounts, replaced the money with general obligation corporate bonds, and called the money it expropriated income. We all know what would happen: The company accountants would refuse to certify the books and management would likely — and rightly — end up in jail.
But that is exactly what the federal government (which, unlike corporations, decides how to keep its own books) does with Social Security. In the late 1990s, the government was running what it — and a largely unquestioning Washington press corps — called budget “surpluses.” But the national debt still increased in every single one of those years because the government was borrowing money to create the “surpluses.”
Capitalism isn’t perfect. Indeed, to paraphrase Winston Churchill’s famous description of democracy, it’s the worst economic system except for all the others. But the inescapable fact is that only the profit motive and competition keep enterprises lean, efficient, innovative and customer-oriented.

For the full commentary, see:
JOHN STEELE GORDON. “Why Government Can’t Run a Business; Politicians need headlines. Executives need profits.” Wall Street Journal (Weds., MAY 21, 2009): A17.
(Note: ellipsis added.)

The wonderful book, I mentioned, is:
Gordon, John Steele. A Thread across the Ocean: The Heroic Story of the Transatlantic Cable. New York: Walker & Co., 2002.

An Environment Where Long-Term Hunches Could Thrive

An environment in which long-term hunches can be pursued, is important not just to science and invention. I speculate that it is also important to entrepreneurship.

(p. 74) If great ideas usually arrive in fragments, a partial cluster of neurons, then part of the secret to having great ideas lies in creating a working environment where those fragments are nurtured and sustained over time. This obviously poses some difficulty in modern work environments, with deadlines and quarterly reports and annual job reviews. (The typical middle manager doesn’t respond favorably to news that an employee has a hunch about something that probably won’t see results for twenty years.) But Priestley had created an environment for himself where those long-term hunches could thrive with almost no pressure, and his habit of simultaneously writing multiple documents (on multiple topics) kept the fragments alive in his mind over the decades. In the final pages of his memoirs, he mentions a lifelong habit of writing down “as soon as possible, every thing I wish not to forget.”

Source:
Johnson, Steven. The Invention of Air: A Story of Science, Faith, Revolution, and the Birth of America. New York: Riverhead Books, 2008.

Stagnation Caused by “Depriving Creative Individuals of Financial Power”

(p. 164) The key to growth is quite simple: creative men with money. The cause of stagnation is similarly clear: depriving creative individuals of financial power. To revive the slumping nations of social democracy, the prime need is to reverse the policies of entrepreneurial euthanasia. Individuals must be allowed to accumulate disposable savings and wield them in the economies of the West. The crux is individual, not corporate or collective, wealth.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

System of Capitalism without Capitalists Is Failing in Europe

(p. 164) The reason the system of capitalism without capitalists is failing throughout most of Europe is that it misconceives the essential nature of growth. Poring over huge aggregations of economic data, economists see the rise to wealth as a slow upward climb achieved through the marginal productivity gains of millions of workers, through the slow accumulation of plant and machinery, and through the continued improvement of “human capital” by advances in education, training, and health. But, in fact, all these sources of growth are dwarfed by the role of entrepreneurs launching new companies based on new concepts or technologies. These gains generate the wealth that finances the welfare state, that makes possible the long-term investments in human capital that are often seen as the primary source of growth.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

Frazer Institute Seeks Better Measures of Policy Variables

George Gilder emphasizes that the importance of entrepreneurship to economic growth has been missed by many economists, in part because of the difficulty of measuring both the inputs of entrepreneurship (e.g., courage, persistence, creativity, etc.) and the outputs of entrepreneurship (e.g., happiness from more challenging work, greater variety of products, etc.).
Unfortunately this is not just an academic problem, because economists’ policy advice is based on their models, and their models focus on what they can measure. If they can’t measure entrepreneurship, then policies to encourage entrepreneurship are neglected.
Now the Frazer Institute, is seeking proposals to improve the measurement of important poorly measured policy-relevant variables. This initiative is in the spirit of the good work that the Frazer Institute has done in correlating measures of economic freedom with measures of economic growth.
I have been asked to publicize this initiative, and am pleased to do so:

Dear Art Diamond,

The Fraser Institute is launching a new contest to identify economic and public policy issues which still require proper measurement in order to facilitate meaningful analysis and public discourse. We hope you can help promote this contest by posting it on your weblog, artdiamondblog.
The Essay Contest for Excellence in the Pursuit of Measurement is an opportunity for the public to comment on an economic or public policy issue that they feel is important and deserves to be properly measured.
A top prize of $1,000 and other cash prizes can be won by identifying a vital issue that is either not being measured, or is being measured inappropriately. Acceptable entry formats include a short 500-600 word essay, or a short one-minute video essay.
Complete details and a promotional flyer are available at: http://www.fraserinstitute.org/programsandinitiatives/measurement_center.htm.
Entry deadline is Friday, May 15th, 2009.
Sponsored by the R.J. Addington Center for the Study of Measurement.

Enquiries may be directed to:
Courtenay Vermeulen
Education Programs Assistant
The Fraser Institute
Direct: 604.714.4533
courtenay.vermeulen@fraserinstitute.org

The Fraser Institute is an independent international research and educational organization with offices in Canada and the United States and active research ties with similar independent organizations in more than 70 countries around the world. Our vision is a free and prosperous world where individuals benefit from greater choice, competitive markets, and personal responsibility. Our mission is to measure, study, and communicate the impact of competitive markets and government interventions on the welfare of individuals.

An important source of Gilder’s views, obliquely referred to in my comments above, is:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

The Most Fertile Margins of the Economy Are Always in People’s Minds

(p. 151) The most fertile margins of the economy are always in people’s minds: thoughts and plans and projects yet unborn to business. The future emerges centrifugally and at first invisibly, on the fringes of existing companies and industries. The fastest-growing new firms often arise through defections of restive managers and engineers from large corporations or through the initiatives of (p. 152) immigrants and outcasts beyond the established circles of commerce. All programs that favor established companies, certified borrowers, immobile forms of pay, pensions, and perquisites, institutionally managed savings and wealth, against mobile capital, personal earnings, disposable savings, and small business borrowing, tend to thwart the turbulent, creative, and unpredictable processes of innovation and growth.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

The Policy Agenda to Euthanize the Entrepreneur

(p. 151) The agenda is simple: the stealthy and unannounced euthanasia of the entrepreneur. It can be accomplished easily by following two seductive themes of policy: lowering tax and interest costs for large corporations and a few other favored institutions, while shifting the burden increasingly to individuals and families. By reducing corporate taxes, subsidizing corporate loans, sponsoring a wide range of favored borrowers, institutionalizing personal savings, and discreetly allowing taxes to rise on personal income, government can painlessly extinguish the disposable wealth of entrepreneurs.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.