Being Entrepreneurial (1)
Wikipedia offers a very unsatisfying definition of entrepreneurship: “the process of starting a business, typically a startup company offering an innovative product, process or service.”
This series of articles aims to offer a more useful one. The topic is one that I spend a lot of time thinking about, as I’m always looking to hire or collaborate with entrepreneurial individuals, and it would be nice to have a checklist of elements to look out for. That’s the actual goal of this series of articles.
Is it true that anybody who has ever sold a product or service is an “entrepreneur”? Jumping around is not equivalent to dancing…does renting a shop to sell provisions in Idumota automatically make one an entrepreneur? Does starting a business (being a founder) automatically make one an entrepreneur? Does the register of companies in CAC define a register of entrepreneurs? Does being innovative automatically make one an entrepreneur, or are the two mutually exclusive?
Here is a not-so-random sample of views from a number of central figures in economic and business history:
· Richard Cantillon coined the term “entrepreneur” (c. 1730) and he used it in the sense of “risk bearer”. The entrepreneur has to bear some upfront costs (e.g. salaries) and he/she bears the risk that the products of his/her team’s labour may go unsold in the market.
· J.B. Say opined that the entrepreneur is not merely a risk bearer, but an individual whose “peculiar characteristics” can drive above average capital returns (c. 1800) i.e. the entrepreneur bears risk and also has some “gift” or “skillset” that sets him apart in the marketplace.
· Joseph Schumpeter posited (c. 1911) that economies evolve in a disruptive manner (rather than a steady evolution towards some form of equilibrium), and that the agent of this “disruptive disequilibrium” is the entrepreneur who responds to change, or causes change, through innovation. For Schumpeter, innovation and entrepreneurship go hand in hand.
· Frank Knight provided (c. 1921) a distinction between risk and uncertainty (in his definition the former is quantifiable and therefore insurable, the latter is not) and in so doing he highlighted the fact that Say’s “peculiar characteristics” would make the entrepreneur willing to accept some irreducible level of uncertainty in return for securing above-average profits.
· Sometime around 1972 Bill Drayton invented the term “social entrepreneur”. Ashoka (Drayton’s organisation) defines a social entrepreneur as an individual with an innovative solution to society’s most pressing problems. The difference between the “economic entrepreneur” and the “social entrepreneur” is that they they capture value in different ways — the traditional/economic entrepreneur captures it in economic form, and the social entrepreneur in some other way defined by the problem he is solving.
From the above, it would appear that most thinkers on the subject would agree that an entrepreneur is any individual who seeks to use innovation to bring about disproportionate change under conditions of uncertainty, and in so doing bears risk.
The entrepreneur may be of the “economic” type or the “social” type. The “innovation” could be on several different levels. The “change” in question can be economic or social (or both). The “risk” being considered could be economic or personal, or both.
In Part 2 we pick the definition apart to see what it tells us, and perhaps whether it is actually a more useful definition than some of the more common ones.