Entrepreneurship – Page 184 – artdiamondblog.com

Another Effort to Explore the Black-Box of Innovation

(p. 210) Schumpeter argues that innovation can happen endogenously and that its main source is the creative entrepreneur. Schumpeterian innovation is still black-boxed, however, because it is the product of the ingenuity of entrepreneurs and cannot be reproduced systematically.

. . .

The reconstructionist view takes off where the new growth theory left off. Building on the new growth theory, the reconstructionist view suggests how knowledge and ideas are deployed in the process of creation to produce endogenous growth for the firm. In particular, it proposes that such a process of creation can occur in any organization at any time by the cognitive reconstruction of existing data and market elements in a fundamentally new way.

Source:

Kim, W. Chan, and Renée Mauborgne. Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. Boston: Harvard Business School Press, 2005.

Anti-Wal-Mart is Anti-Free-Choice

Source of logo/header: http://www.muddycup.com/mudlane/img/header.jpg

The article excerpted below reveals the soul of much of the anti-Wal-Mart movement. It is not anti-big; it is anti-competition and anti-free-choice.

How in the world did a guy who started his first coffee shop on Staten Island six years ago and now runs five others in far-flung Hudson Valley towns become the moral equivalent of Wal-Mart and Starbucks? “Well, it’s now official,” he announced last month on the Web site that promotes his Muddy Cup coffeehouses. “I am now head of the evil empire.”

. . .

And now the talk of New Paltz has to do with something far more important than mere marriage — coffee. More specifically it’s whether Mr. Svetz is plotting an act of entrepreneurial imperialism by presuming to open one of his Muddy Cup coffeehouses next door to the ultimate green icon in town, the funky 60 Main coffee shop operated in conjunction with the nonprofit New Paltz Cultural Collective.

. . .

Little did he know. As word filtered out he began receiving a blizzard of e-mail messages from 60 Main proponents, reacting to an urgent appeal from the collective. The messages threatened a boycott and told him to stay home. “If we can stop Wal-Mart we can stop you,” said one.

“We do not want to become yet another small town taken over by huge corporations,” read another.

. . .

Mr. Svetz is still stunned by the whole thing, particularly his sudden status as a giant corporation. He says that just as lots of bars coexist in town, several coffee shops can too. Maybe he’s right. Maybe he’s not. He’s not Wal-Mart, but maybe it’s fair to ask how many artist-friendly coffeehouses the village can support. But it’s hard to argue when he says that even in New Paltz, businesses generally have to compete to survive, not find a way to build a Berlin Wall around town.

“When a community starts building walls and saying you don’t belong here or you don’t think like we do, that can’t be a good thing,” he said.

For the full story, see:

PETER APPLEBOME. "Coffee Puts Laid-Back Town on Edge." The New York Times, Section 1 (Sun., March 4, 2007): 21.

(Note: ellipses added.)

Immigrant Entrepreneurs Thrive in New York City

Manuel and mother Mercedes of the entrepreneurial Miranda family, inspect the corn flatbread called "arepa." Source of photo: online version of the NYT article cited below.

Immigrant entrepreneurship contributes to the vitality and dynamism of New York and the nation. Note the graphic at the bottom of this entry shows that employment increases in the same areas of the city in which immigrant entrepreneurship is thriving.

Manuel A. Miranda was 8 when his family immigrated to New York from Bogotá. His parents, who had been lawyers, turned to selling home-cooked food from the trunk of their car. Manuel pitched in after school, grinding corn by hand for traditional Colombian flatbreads called arepas.

Today Mr. Miranda, 32, runs a family business with 16 employees, producing 10 million arepas a year in the Maspeth section of Queens. But the burst of Colombian immigration to the city has slowed; arepas customers are spreading through the suburbs, and competition for them is fierce. Now, he says, his eye is on a vast, untapped market: the rest of the country.

. . .

“Immigrants have been the entrepreneurial spark plugs of cities from New York to Los Angeles,” said Jonathan Bowles, the director of the Center for an Urban Future, a private, nonprofit research organization that has studied the dynamics of immigrant businesses that turned decaying neighborhoods into vibrant commercial hubs in recent decades. “These are precious and important economic generators for New York City, and there’s a risk that we might lose them over the next decade.”

A report to be issued by the center today highlights both the potential and the challenge for cities full of immigrant entrepreneurs, who often face language barriers, difficulties getting credit, and problems connecting with mainstream agencies that help businesses grow. The report identifies a generation of immigrant-founded enterprises poised to break into the big time — or already there, like the Lams Group, one of the city’s most aggressive hotel developers, or Delgado Travel, which reaps roughly $1 billion in annual revenues.

In Los Angeles, at least 22 of the 100 fastest-growing companies in 2005 were created by first-generation immigrants. In Houston, a telecommunications company started by a Pakistani man topped the 2006 list of the city’s most successful small businesses.

But even in those cities and New York, where immigrant-friendly mayors have promoted programs to help small business, the report contends that immigrant entrepreneurs have been overlooked in long-term strategies for economic development.

. . .

Now, some children of the early influx are trying to build on their parents’ success — success that itself has increased the cost of doing business, by driving up rents and creating congestion.

One example is Jay Joshua, a Manhattan company that designs souvenirs and then has them manufactured in Asia and imported. Jay Chung, who arrived from South Korea in 1981 as a graduate student in design, started printing his computer-graphic designs for New York logos and peddling them to local T-shirt shops. His company is now one of the city’s leading suppliers of tourist items, from New York-loving coffee mugs to taxicab Christmas ornaments.

Mr. Chung’s son Joshua, 26, who was 3 when he immigrated, joined the company after studying business management in college, and recently helped land orders for a new line of Chicago souvenirs. But frustration mixes with pride when the Chungs, both American citizens now, discuss the company’s growth.

“It’s really hard to conduct a business over here as a wholesaler,” Mr. Chung said in the company’s West 27th Street showroom, chockablock with samples. “We get a ticket every 20 minutes, no matter what. We need more convenient places with less rent, less traffic.”

Thirty years ago their wholesale district was desolate. Now hundreds of Korean-American importers are there, said Jay Chung, who is a leader of the local Korean-American business association. They face a blizzard of parking tickets and high commercial rents — nearly $20,000 a month for 1,400 square feet, he said.

For the full story, see:

NINA BERNSTEIN. "Immigrant Entrepreneurs Shape a New Economy." The New York Times (Tues., February 6, 2007): C13.

(Note: the ellipses are added.)

The author of the New York Times article has contributed to a New York Times digital video clip that is based on the article and is entitled "Immigrant Entrepreneurs: A Tour of One Bustling Ethnic Enclave."

Entrepreneur father Jay and son Joshua own a firm that supplies New York City souveniers. Source of photo: online version of the NYT article cited above.

Source of graph: online version of the NYT article cited above.

Middendorf “Studied Under Joseph Schumpeter”

Source of book image: http://basicbooks.com/perseus/book_detail.jsp?isbn=0465045731

William Middendorf was important in the Goldwater campaign for president. Here is a brief excerpt from his recent book about the campaign:

(p. 8) . . ., I became a disciple of the Austrian libertarian school of economics, having studied under Joseph Schumpeter (an odd-man-out at Harvard, later named by the Wall Street Journal as the most important economist of the twentieth century) and Ludwig Von Mises (at New York University). Schumpeter and Von Mises saw entrepreneurship as a major driving force in economic development, considered private property—protected by an independent judiciary—essential to the efficient use of resources, and held that government intereference in market processes was usually counterproductive.

The reference to the book is:

Middendorf, J. William, II. Glorious Disaster: Barry Goldwater’s Presidential Campaign and the Origins of the Conservative Movement. New York: Basic Books, 2006.

International Trade Helps Poor African Cotton Farmer

Left photo shows Dennis Okelo in the grocery store that he opened with savings from growing cotton, and selling it to Dunavant. Right photo shows a Dunavant cotton gin in Zambia. Source of photos: online version of the NYT article cited below.

(p. 1) WHERE is he?” the old woman asks. “Where is he?”

Finding Dennis Okelo used to be easy. The old woman — and most other people in a village outside of Lira, the provincial capital of northern Uganda — went directly to Mr. Okelo’s fields. He was always in one of his “gardens,” with his slacks rolled up above his calves and a short hoe close by. Or he was seated outside of his mud-brick house under a banana tree.

Then cotton growing revived in Uganda, and Dunavant Enterprises came to town about five years ago, paying cash on delivery. After three seasons of growing cotton for Dunavant, the world’s largest privately owned cotton broker and one of the biggest family-owned agribusinesses in the United States, Mr. Okelo, who owns less than three acres and has two wives and a passel of children, had saved $300, about double his annual earnings before Dunavant started buying his cotton.

Last summer, Mr. Okelo opened a grocery store, which is where the old woman finally found him: smiling, standing behind the wooden plank that serves as his service counter in a shop the size of a utility shed. The grocery, one of two in the village, carries dried foods, cooking oil, matches, cosmetics, batteries and candy.

“Before Dunavant, no one came to help us,” says Mr. Okelo, 40, who has farmed a variety of crops in these parts for about 20 years.

. . .

(p. 7) IN his small shop, Mr. Okelo knows nothing of global developments in the cotton trade even though he is a direct beneficiary of them. He started farming during the lean years in Uganda, after the ouster of the country’s notorious dictator, Idi Amin, when the cultivation of cotton lagged so badly that production nearly ceased and farmers treated the crop like a weed.

A few years ago, as Uganda’s production began to revive, Dunavant’s trainers taught Mr. Okelo to grow cotton in straight rows and to use a string to measure precisely the distance between rows, to maximize plantings. Mr. Okelo’s new methods are basic, but in a part of Africa where farmers work the land chiefly with a hoe — and tractors, fertilizer and pesticides are rarities — even basic improvements can lead to large gains in production.

“Cotton is the crop that gives farmers the best money,” Mr. Okelo said. “I want Dunavant to be even closer to me.”

For the full story, see:

G. PASCAL ZACHARY. Out of Africa: Cotton and Cash." The New York Times, Section 3 (Sun., January 14, 2007): 1 & 7.

(Note: ellipses added.)

William B. Dunavant, Jr. Source of photo: online version of the NYT article cited above.

Evan Williams Spurns Bad Money

Evan Williams (on left) with Noah Glass, co-founded Odeo. Source of photo: http://www.nytimes.com/2005/02/25/technology/25podcast.html?ex=1267419600&en=b80f1d3808f556cc&ei=5088

Evan Williams’ story illustrates Christensen and Raynor’s advice that disruptive innovators need to seek good money, and spurn bad money. Good money is patient for growth, but impatient for profit. Bad money is the opposite.

EVAN WILLIAMS recently bought his freedom. It cost him a bit more than $2 million, and he says it was worth every penny.

I’m not talking about paying off a big debt to one of Tony Soprano’s loan-shark underlings. Mr. Williams is a serial entrepreneur, one of those Silicon Valley characters who start company after company. And he purchased his freedom from the venture capitalists and others who financed his company, Odeo. Mr. Williams dug into his pockets and gave them back their money. He got to keep his struggling podcast company and renamed it the Obvious Corporation.

In the process, Mr. Williams, who is 34, has become something of a cause célèbre among a small group of mostly young entrepreneurs who seem determined to turn their back on venture capitalists. They say they yearn for a new entrepreneurship model. They talk about building ”sustainable companies” suggesting something idealistic in their quest. With comments on blogs urging Mr. Williams to ”keep up the goodness,” it feels a bit like the birth of a mini-movement in the Valley.

. . .

In candid posts on his blog, Mr. Williams chronicled Odeo’s story, warts and all. He admitted to making mistakes. Getting too much venture money too early was one of them. It made it harder to persuade the board and the company’s 14 employees to change course when, for example, Apple Computer introduced a competing product that cut into Odeo’s prospects. ”It’s a bigger ship to turn,” Mr. Williams said.

For the full story, see:

MIGUEL HELFT. "STREET SCENE: VC NATION; Yearning for Freedom From Venture Capital Overlords." The New York Times (Fri., November 24, 2006): C5.

(Note: ellipsis added.)

The reference for the Christensen and Raynor book is:

Christensen, Clayton M., and Michael E. Raynor. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.

Silicon Graphics’ Jim Clark Understood Disruptive Innovation

There’s a great passage in The New, New Thing about Jim Clark trying to convince Silicon Graphics to produce a PC. Clark talks about how hard it is for a company to create a product that competes with itself.

Shades of Clayton Christensen:

Clark thought that Silicon Graphics had to "cannibalize" itself. For a technology company to succeed, he argued, it needed always to be looking to destroy itself. If it didn’t, someone else would. "It’s the hardest thing in business to do," he would say. "Even creating a lower-cost product runs against the grain, because the low-cost products undercut the high-cost, more profitable products." Everyone in a successful company, from the CEO on down, has a stake in whatever the company is currently selling. It does not naturally occur to anyone to find a way to undermine that creative destruction, and he was prepared to do the deed. He wanted Silicon Graphics to operate in the same self-corrosive spirit. (p. 66 of hb edition)

The reference to The New, New Thing is:

Lewis, Michael. The New New Thing: A Silicon Valley Story. New York: W. W. Norton & Company, 2000.

Christensen’s most important book is:

Christensen, Clayton M., and Michael E. Raynor. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.

The Entrepreneur Versus the Government

A great story about Jim Clark, who founded Silicon Graphics:

(p. 46) Just a few years back, before the Internet boom, Clark’s house in Atherton had been surrounded by empty fields. Now he was surrounded by new houses, many of them bigger than his own. One morning he looked up from his kitchen table and saw the neighbors looking (p. 47) back. He requested, and was denied, a permit to build a fence tall enough to screen them from his view. The city of Atherton, California, had strict rules about fences, and the fence Clark wanted to build was declared too high. So Clark built a hill, and put the fence on top of the hill. It did not occur to him that there was anything unusual about this.

(page numbers above are from the Norton hardback edition; the full quote is on p. 31 of the paperback edition)

The reference to the hardback edition, is:

Lewis, Michael. The New New Thing: A Silicon Valley Story. New York: W. W. Norton & Company, 2000.

“If Everyone Were Patient, There’d Be No New Companies”

Source of book image: http://www.austinchronicle.com/gyrobase/Issue/review?oid=oid%3A74686

Michael Lewis’ book provides some interesting stories and insights into the important information technology (IT) entrepreneur, Jim Clark, who founded Silicon Graphics, and had a hand in many other IT startups, such as Netscape.

For example, here is more evidence against Buddhism; dissatisfaction drives improvement:

Impatience might be a social vice but, to Clark, it was a commercial virtue. "If everyone was patient," he’d say, "there’s be no new companies." (p. 42 of hardback edition; p. 26 of paperback edition)

The reference for the book is:

Lewis, Michael. The New New Thing: A Silicon Valley Story. New York: W. W. Norton & Company, 2000.

Bush on Entrepreneurship

Source of book image: http://www.harpercollins.com/harperimages/isbn/large/8/9780060841638.jpg

At lunchtime today (11/27/06) I heard part of a C-Span broadcast of a Heritage Foundation event in which Carl J. Schramm gave a presentation based on his new book (see above). It sounded as though Schramm has some useful thoughts about the impact of entrepreneurship, and on how the institutions of higher education are very unentrepreneurial.

I smiled when Schramm mentioned that George W. Bush had once said that: "The problem with the French is that they don’t know the meaning of the word "entrepreneur." To those who don’t "get" the joke: it is another of those Bush-is-stupid jokes, based on the word "entrepreneur" being of French origins.

A web site devoted to "urban legends" identifies the Bush quote as one of these legends:

Yet another "George W. Bush is dumb" story has been taken up by those who like their caricatures drawn in stark, bold lines. According to scuttlebutt that emerged in the British press in July 2002, President Bush, Britain’s Prime Minister Tony Blair, and France’s President Jacques Chirac were discussing economics and, in particular, the decline of the French economy. "The problem with the French," Bush afterwards confided in Blair, "is that they don’t have a word for entrepreneur."

The source was Shirley Williams, also known as the Baroness Williams of Crosby, who claimed "my good friend Tony Blair" had recently regaled her with this anecdote in Brighton.

Lloyd Grove of The Washington Post was unable to reach Baroness Williams to gain her confirmation of the tale, but he did receive a call from Alastair Campbell, Blair’s director of communications and strategy. "I can tell you that the prime minister never heard George Bush say that, and he certainly never told Shirley Williams that President Bush did say it," Campbell told The Post. "If she put this in a speech, it must have been a joke."

The main reference relied on by the Urban Legend web site for this entry, was:

Grove, Lloyd. "The Reliable Source." The Washington Post. 10 July 2002 (p. C3).

The most obvious interpretation of the joke is that it is ridiculing W. But, more subtly, it could be taken to be giving just a bit of a jab to the French too. (Just because the French invented the word, doesn’t mean that they couldn’t have forgotten its meaning, through lack of use.)

The reference on the Schramm book is:

Schramm, Carl J. The Entrepreneurial Imperative: How America’s Economic Miracle Will Reshape the World (and Change Your Life). New York: Collins, 2006.

“Atlas May Actually Decide to Shrug”

(p. A16) During the recent off-year elections, the president repeatedly pointed to the booming economy and noted that his tax cuts were responsible. With growth strong and unemployment low despite the ending of the stock-market bubble, terrorist attacks and the war in Iraq, he had every reason to be proud. Moreover, both economic theory and the actual timing of the economic revival support his claims regarding the tax cuts.

That is why it is so odd that rumors swarm around Washington that the president may be willing to raise taxes as part of a "deal" on entitlement reform. In particular, the rumors suggest the president might be willing to get rid of the provision that caps the income level used to compute Social Security taxes and benefits. These rumors aren’t without substance; last year the president would not rule out raising the cap when asked.

Doing so would raise the marginal tax rate on the entrepreneurs that Mr. Bush credits for having led the economic recovery by more than 10 percentage points. The new effective rate would be five percentage points above the level when he took office. Moreover, in 2011, the rate would go up a further 4.3 percentage points to an effective 53% marginal rate on entrepreneurial income. The president would thus be not just raising taxes on entrepreneurs to well above the levels that prevailed in the Clinton administration, but to a rate higher than that which prevailed in the Carter administration. Most of the improved incentives for entrepreneurship and work brought about under Reagan would be repealed.

. . .

Last year an entrepreneur similar to me would have paid federal taxes equal to 33.9% of total income.

. . .

Don’t make it too tough on him, or Atlas may actually decide to shrug.

For the full commentary, see:

LAWRENCE B. LINDSEY. "Compromised." Wall Street Journal (Mon., November 20, 2006): A16.

(Note: the ellipses are added.)

The last line of the commentary is a not-so-veiled allusion to:

Rand, Ayn. Atlas Shrugged. New York: Random House, 1957.