This is my third post about global entrepreneurialism based on a special report published in The Economist (the first two posts were entitled Entrepreneurs as Heroes and The Rise of Entrepreneurialism). Long before The Economist‘s special report was published, I had been stressing that successful entrepreneurs are optimistic by nature. One of the articles in the special report underscores the unquenchable spirit of entrepreneurs [“All in the mind,” 12 March 2009 print issue]. The article is about a retired Indian military officer named Captain G.R. Gopinath who started India’s first helicopter company.
“Even in his darkest years he never had any doubt that he was destined for success. ‘I knew this could not go wrong. I knew the money would come,’ he says. And sure enough his business eventually took off. That allowed him to pursue a new vision—cheap flights. Why should Indians travel the length and breadth of their huge country on trains when Americans got on planes? He established India’s first low-cost airline, Air Deccan, pushing the government to relax regulations and using the internet to cut booking costs.”
True entrepreneurs see opportunities in good times and bad. They’re driven to succeed when others other fear failure. My assertions about the optimism of entrepreneurs have primarily been based on my experiences and associations. The article, however, confirms my suspicions.
“A growing body of evidence suggests that entrepreneurs have certain distinctive psychological traits. Noam Wasserman, of HBS, suggests that many entrepreneurs are unusually, sometimes excessively, confident. They are convinced that, against all the odds, they will be able to turn their dream into reality. This sometimes allows them to do something at which most people fail, but it also means they hardly ever hit the forecasts in their business plans.”
Describing someone as “excessively confident” is just another way of saying that most entrepreneurs are Type A personalities. They have to be. If they don’t believe in their dream, why should anyone else. I’ve always shored up my enthusiasm and confidence with a sound business plan. Many entrepreneurs fail because they don’t have the necessary business skills to accompany their other positive attributes. A good business plan is what makes a confident entrepreneur excessively confident. The article also points out the obvious — entrepreneurs are highly tolerant of risk.
“A group of scientists at Cambridge University studied the brains of 16 entrepreneurs, chosen because they had started at least two high-tech companies, as well as 17 regular managers. They found that when making rational decisions, the two groups produced the same results. But when making ‘hot’ or risky decisions, entrepreneurs were consistently bolder.”
I’ve known a lot of bright people with good ideas who simply had too low of a risk tolerance to become successful entrepreneurs. The article notes that a surprising percentage of entrepreneurs struggled in school. Some struggled because they were dyslexic (e.g., Richard Branson, Charles Schwab, Ted Turner, John Chambers and Henry Ford). Researchers speculate that entrepreneurs with learning disabilities are forced early in life to trust certain people with helping them complete tasks that, because of their disability, are particularly challenging. These individuals are also driven to succeed in business to compensate for lack of success in school. The article doesn’t indicate whether these conclusions (which were drawn from studies of entrepreneurs in the U.S. and Britain) apply more broadly to entrepreneurs elsewhere around the globe. Another article [“The more the merrier“] reports that emerging market countries like India and China “are creating millions of entrepreneurs.”
“The global slowdown will no doubt pose serious problems for India. But the country’s mood has changed fundamentally since the government began opening up the economy in 1991: fatalism has been replaced by can-do optimism. … India has now begun to reverse the brain drain, summoning its prodigal children back home. In 2003-05 some 5,000 tech-savvy Indians with more than five years’ experience of working in America returned to India. Such people have helped to fill some of the skills gaps created by the country’s recent boom. They have also reinforced India’s already numerous links with high-tech America. India’s other advantage is its higher-education system, the top end of which is very good at discovering and developing first-class brains. The British introduced the ideal of meritocracy to India; Jawaharlal Nehru gave it a technocratic twist by launching the Indian Institutes of Technology; and India’s natural love of argument did the rest. These institutes, so oversubscribed that only one in 75 applicants gets in, are now as bent on producing entrepreneurs as they were once determined to produce Fabian technicians.”
For those unfamiliar with the term “Fabian,” it comes from a political movement whose purpose was to advance society through gradual reforms rather than revolutionary means. The movement had a profound effect on Indian policies as it emerged from British colonial rule. The movement takes its name from the Roman general Quintus Fabius Maximus (nicknamed “Cunctator,” meaning “the Delayer”), who favored tactics of harassment and attrition rather than head-on battles against the Carthaginian army led by Hannibal Barca.
The Economist asserts that the emergence of entrepreneurs in India is not as surprising as their emergence in China. It reminds us that China’s Cultural Revolution destroyed its intellectual and managerial base. The government has been much more prone to sponsor grandiose projects than small start-up companies. Adding to the challenges, few Chinese speak English. But like India, China had a large cadre of expatriates living abroad, especially in America, and they have been the backbone of China’s entrepreneurial success.
“Since the late 1990s they have been doing everything they could to tempt expats back, upgrading their universities, often working with foreign institutions, setting up science parks and welcoming foreign companies. So many Chinese expats have returned in the past few years that Valley-slang has given them a special name, B2C (back to China). Many of China’s most successful entrepreneurs have done little more than produce knock-offs of American companies, mostly those they studied when they first went to America. … [But] China is also producing some genuinely innovative entrepreneurs. Jack Ma uses a website, Alibaba, to sell goods from China’s thousands of corner shops to other businesses. Mr Ma has also created a college for entrepreneurs. Jeff Chen has developed an internet browser which has attracted venture capital from Denmark and is available in 20 languages. Some of the most innovative entrepreneurs are working with mobile telephony, which is even more important in China than it is in the West. Liu Yingkui is selling insurance, mutual funds and bank services over the mobile internet. Charles Wang is trying to get subscribers addicted to his free text-messaging service, PingCo, so that he can start signing them up for premium services such as backing up address books, selling astrological charts and providing weather updates.”
The article concludes that both India and China have a long way to go if they want to compete with other “lands of opportunity” like the U.S., Denmark, Singapore, and Israel. India’s government is infamous for its bloated bureaucracy and favoritism while China’s ruling party is more interested in remaining in power and exercising control than in promoting innovation. The good news, according to the article, is that regardless of the challenges faced by entrepreneurs in India and China they are succeeding. More importantly, their success is having an impact on the governments. It concludes:
“The opening up of China and India is releasing millions of new entrepreneurs onto the world market. Many of them have already shown themselves able not just to translate Western ideas into their local idioms but also to drive technological advance of their own. The world has only just begun to feel the effects.”
As that paragraph implies, the rise of entrepreneurs in India and China is important for their domestic economy as well as the global economy. The jobs created by entrepreneurs at home will help strengthen the emerging middle class and promote consumerism (which is especially needed by China to help shift its economy away from a reliance on exports). The world will benefit as ideas imported from emerging market countries are implemented elsewhere creating new opportunities and jobs and global interdependence is strengthened. There are still a couple of articles in The Economist‘s that I would like to discuss and I’ll address them in two future posts.