The Entrepreneurial Process by Alfred Marshall

While working on my book (in which I will talk about the global status of entrepreneurship and innovation today) I came across this extraordinary passage, from the economist Alfred Marshall (1842-1924) in the beginning of the last century. He describes the Entrepreneurial Process brilliantly, in just one paragraph, talking about the role of trust, resources, capital, credit, scale, marketing and innovation on it. Even luck (“assisted by some strokes of good fortune”) is covered, passing almost unnoticed at the beginning of the epic reported:

“An able man, assisted by some strokes of good fortune, gets a firm footing in the trade, he works hard and lives sparely, his own capital grows fast, and the credit that enables him to borrow more capital grows still faster; he collects around him subordinates of more than ordinary zeal and ability; as his business increases they rise with him, they trust him and he trusts them, each of them devotes himself with energy to just that work for which he is specially fitted, so that no high ability is wasted on easy work, and no difficult work is entrusted to unskillful hands. Corresponding to this steadily increasing economy of skill, the growth of his form brings with it similar economies of specialized machines and plants of all kinds; every improved process is quickly adopted and made the basis of further improvement; success brings credit and credit brings success; success and credit help retain old customers and bring new ones; the increase of his trade gives him great advantages in buying; his goods advertise one another and thus diminish his difficulty in finding a vent for them. The increase of the scale of his business increases rapidly the advantages which he has over his competitors, and lowers the price at which he can afford to sell.”

The bourgeoisie has disappeared!

During my whole childhood I had to grow up listening to this word: bourgeoisie (burguesia in Portuguese). As long as I remember it was a very common word in our vocabulary. What happened to these “horrible” people? Did they suddenly disappear during the late 1990’s and early 2000’s?

The King versus The Bourgeoisie

The King versus The Bourgeoisie

Let’s just check current online dictionaries and see what they have for us: the Wiktionary states that bourgeoisie “is a class of citizens who were the wealthier members of the Third Estate”. But what is this “Third State”? The Wikipedia says it was the common people of the pre-revolutionary France (read here), that is, people not directly involved with the ruling classes: aristocrats, clerics or members of the monarchy.

Briefly speaking, they were the early businessmen! At that time entrepreneurs didn’t exist yet (well, at least they were not called this way).

The case is that I was listening to some 1980’s Brazilian Rock music and this word caught my attention by being mentioned in different songs. Here you go, one example: Geração Coca-Cola, from 1985, by Renato Russo (Legião Urbana Band). I translated the lyrics. Unfortunately the only original version I found was an acoustic one (it is not a good version, I prefer the original one in punk rock version).

Quando nascemos fomos programados
When we were born we had been programmed
A receber o que vocês
To watch what you
nos empurraram com os enlatados
forced us to watch (the TV series)
dos U.S.A., de nove às seis.
from the U.S.A., from 9am to 6pm.

Desde pequenos nós comemos lixo
Since childhood we eat junk food
comercial e industrial
commercial and industrial
Mas agora chegou nossa vez
But now it is our turn
Vamos cuspir de volta o lixo em cima de vocês
We will spit back this garbage on top of you

Somos os filhos da revolução
We are the children of the revolution
Somos burgueses sem religião
We are bourgeois without religion
Somos o futuro da nação
We are the nation’s future
Geração Coca-Cola
Generation Coca-Cola

Depois de 20 anos na escola
After 20 years in school
Não é difícil aprender
It is not difficult to learn
Todas as manhas do seu jogo sujo
All the dirty tricks of your game
Não é assim que tem que ser
It doesn’t have to be this way

Vamos fazer nosso dever de casa
Let’s do our homework
E aí então vocês vão ver
And then you will see
suas crianças derrubando reis
your children overthrowing kings
Fazer comédia no cinema com as suas leis
Doing comedy films with your laws

Somos os filhos da revolução
We are the children of the revolution
Somos burgueses sem religião
We are bourgeois without religion
Somos o futuro da nação
We are the nation’s future
Geração Coca-Cola
Generation Coca-Cola

Geração Coca-Cola
Generation Coca-Cola
Geração Coca-Cola
Generation Coca-Cola
Geração Coca-Cola
Generation Coca-Cola
Geração Coca-Cola
Generation Coca-Cola

Capitalist and socialist stupid debate

I just enjoyed holidays on Workers’ Day. It was great.

If we compare the capitalism practiced in most of the current developed economies of the World with capitalism practiced in the beginning of the 20th century we can clearly see the achievements of those unionized movements still in place today. People often had to work 12, 14 or even 16 hours per day just to get a miserable salary, while vacations practically didn’t exist. Capital was just as wild as current Chinese 21st century “pro-market-communists” (what a weird combination of words!) where people currently work 12, 14 or 16 hours per day without vacation (!).

If Karl Marx and Friedrich Engels were standing in the same place where Chinese officials built a statue for them in Shanghai, I’m sure they would go crazy :-).

Statue of Marx and Engels downtown Shanghai

With the statue of Marx and Engels downtown Shanghai

I always thought it strange – almost humiliating, let’s say – to see the statue of a Prussian philosopher and a German-English philosopher in the middle of the “World’s Central State” (China in Chinese) telling them what to do with their destiny (“Couldn’t they figure out by themselves?!?” I wondered).

So now, instead of private-capitalists making slaves out of Chinese people, Chinese Communist Party public-capitalists do it better, and systematically (much more efficient this way). Looks like we are lead to believe that this is the price that Chinese people have to play before they can exercise opinions about their destiny (a kind of “slave first, voice later”).

More non-sense hypocrisy is seen when you visit (I did it) the headquarters of the Chinese Communist Party in Beijing and read the founding plaque at the Party:

Sign at the entrance of the Chinese Communist Party founding place.

Sign at the entrance of the Chinese Communist Party founding place: “The founding of the Communist Party of China is the inevitable outcome of the development of China’s modern history”.

You can almost taste a scary Vendetta kind of Chinese movement coming someday, don’t you think? I’m sure the first deep economic problem the Communist Party face, they will evoke this “history” to blame somebody from abroad.

But for me, much more non-sense than all of that Chinese bullshit together is the current debate about right and left-wing parties in Europe (France, Germany, Greece and Spain, for example) and in Latin America (Argentina, Bolivia, etc).

Every time I see a stupid debate between #Sarkozy and #Hollande or between #Rajoy and #Rubalcabar I’m sure they are just playing roles to put people against each other for their own – or their Party’s own – joy or sake. After all, they will all have to play the capitalist game.

Some days ago I saw some flags of the old Soviet Union defending more socialist actions from European governments. I was thinking: “- Are you kidding me? Tell me, who the hell think that a hammer and a sickle still represent European workers these days?!?”

Flag of the Soviet Union

Flag of the Soviet Union

If these leftists Santa-Claus-believers think that socialism or capitalism are still something to debate about these days, at least they should update their flags with something that would make more sense to people in this continent. I even came up with a suggestion to these dinosaurs:

Newton's proposal for a new flag for vintage leftists

Newton's proposal of a new flag for nostalgic leftists

Should I still explain why I made myself a member of the Green Party?

Is technology helping us to fight hypocrisy and irrationality?

I am sure about that. This current accelerated process of globalization of capitalism is not only making millions and millions of people to leave poverty worldwide these days but also rapidly changing the way we spread ideas and new ways of interpreting old dogmas.

As computers become indispensable home appliances and internet connections as basic as water or electricity (even in poorer economies), people start exercising different ways to make the difference in this intense exchange of ideas, fighting hypocrisy and irrationality everywhere.

These latest developments in Egypt, triggered by Aliaa Magda Elmahdy (@aliaaelmahdy) in November 2011, for example, made me realize again that we still didn’t fully comprehend the real power of mankind’s increasing interconnectivity.

Aliaa Magda Elmahdy changing the world.

Aliaa Magda Elmahdy changing the world.

For those of you not aware yet about this case, Aliaa is an Egyptian young elite student, trying to make herself heard through this very “unconventional” way for an Islamic country: showing herself as female human requesting more voice and rights in the new post-Mubarak-dictatorship Egyptian society. She started this spontaneous movement in late 2011. As threats and reprisals against her increase, other Egyptians do the same, taking the focus away from her.

Aliaa and all young men and women following her protest by publishing “unconventional” self-portraits around that region are not only making people around the world to re-think about the role of women in society. They are also showing how Egyptian youths are leading the way towards a less hypocrite and irrational 21st century.

I am sure these young people growing up in current Egypt and neighbor countries will help the world to become a better place when they start assuming responsibilities in the near future. As I heard someone saying this week – probably quoting somebody important: “Only those who lived without freedom realize the price of it, all the others tend to forget its costs”.

And that is the problem with many Western societies these days: having things like freedom for granted is producing a massive number of idiots in these societies, probably incapable to lead anything in the future.

That’s is why I’m also optimist about this current economic crisis befalling over some developed European countries. It’s true it is making some young people simply to runaway to another countries but at the same time it’s making some other young people to question societies and its old practices.

Welcome youth’s critical thinking, from Egypt to Spain, we need you!

What does religion have to do with Entrepreneurship?

Well, why is all of that religion discussion so important to me? Because you can’t understand most of the underdeveloped or developing economies of the world – and be able to dialogue with people living there – if you don’t consider under which social standards or value systems their logic are based on (I’m assuming you were raised in a western developed country).

What motivate their/our efforts? (I include myself here in the group of developing nations) What makes people to start profit-based or non-profit-based ventures there? If you simply rely on the fact that they/we are as capitalist as you, you will be incurring in a tremendous initial mistake. You won’t get their/our trust, and if you don’t get their/our trust you won’t make good business with them/us.

Here I show few superficial differences in starting ventures in emerging economies. Please, remember that these entrepreneurs were raised in the countries they started their ventures and therefore they were embedded in their local social systems. As an out-comer you would have to interpret their realities, something they did more naturally:

Do you believe in God? Part II: The unexplained does not justify blind faith.

Like anybody that enjoys thinking, I like to talk about polemic things like religion, football or politics. Especially because when there is no right or wrong, I can exercise my brain with fellow humans. Unfortunately we can’t talk to dolphins, whales or chimpanzees yet, to get their opinion about it. I’m sure someday we will be able to do so.

Always when I talk about this God issue, some people tell me that I’m dumb because there are many unexplained things around us, and therefore God exists. Well, I definitely believe that there are many unexplained things around us, but what’s the connection between those things and God? I don’t see it. Let’s take just a simple example: the “recent” case of Ram Bahadur Bamjan (the “Buddha Boy”, from Nepal). Discovery Channel could not explain how he can keep alive after being completely immovable for days:

Another constant question: Is it possible that spirits or souls exist? Definitely. Actually, I think that when a person or an animal dies, part of their energies stays present around us and even talk to us or influence us. Can that be called soul? Yes, why not? Spiritism, Voodoo, Yoruba or Candomble are really amazing and powerful things and I do think that they are based on natural phenomena that can be perceived by many of us in different ways but still can’t be explained.

“I’ve got you!” many believers then tell me, “so, you believe in God!”. What the heck! Does that justify the existence of God? Of course not. If God(s) exist(s) just because we can’t explain something, then we are screwed: there is no reason then to look for new discoveries whatsoever. Penicillin? What for? Lets all gonna die at the age of 35 due to a group of stupid bacteria just to make our God(s) (and priests) happier!

Silicon Valley with IE Business School: Part III

This is the last post about the trip I did last year to the Silicon Valley with IE students.

During the last day of the visit we moved to San Francisco and had some different workshops with local professors, organizations that support “wanna-be” entrepreneurs and “wanna-be” entrepreneurs themselves. Just to make it clear, I call “wanna-be” entrepreneurs those people who want to get to the stage to be considered entrepreneurs. Those of you who follow my posts know that I just consider “entrepreneurs” people who exercise their theoretical (or Schumpeterian) function in society of finding new – and innovative – ways of trading something. People who are still trying to get there I call them just as “business people”.

San Francisco

San Francisco

In San Francisco we had the opportunity to meet the businessman Brandan Wallace, co-founder of Identified.com, a tool developed to compete with LinkedIn in a more junior – and facebook-like – job market (among other things, they found out that LinkedIn’s demographics achieves much more the senior profiles). Together with Prof. Blake Winchell of IE Business School, partner of Partner Ventures, and investor in the venture, they developed together some thoughts I not only share with them but would like also to debate with you:

1) In the market, usually, most of the people think that the entrepreneur (or the “wanna-be” entrepreneur, under my perspective) is the passionate guardian of the venture while the investor is “barely” the financial-minded part of the formula. In fact, quite often, the situation is the opposite. Think about it: there are a lot of investors out there with pretty much limited resources (let’s say, few millions). If they will put their money in something, they do have to believe in it, be passionate about it.

I met an investor in Brazil once that built his initial “venture capital” by selling part of the company he helped to build throughout some 15+ years of hard work. Me (and the local market – friends, press, etc) estimated he raised some 10 to 20 million dollars in that operation. He was explaining to me that he had only about 10 “shots” in his gun. So, he wanted ideas from IE students to consider investing on them. Imagine the emotional cost for this guy in believing in those 10 ideas. What if none of them worked? His whole fortune would be gone…

2) The myth of the great idea: Most of the “wanna-be” entrepreneurs think that their key contribution to the project is the “wonderful” great idea they had. I tell you something: the idea is not as important as people think. There are A LOT of hard work, appropriate networking connections and accumulation of positive outcomes from business decisions involved before the original idea become something really hot.

With years of accumulated experience, Prof. Blake estimates that nowadays the idea is responsible for about 5% of the success of a venture while proper execution about 95%. I not only strongly agree with him but also think that the tendency is that this proportion will considerably change in favor of execution as ideas become more and more available worldwide. Ideas will only keep relevance when deeply connected to “hard” intellectual property (patents) such as those for new materials.

3) In fact, “pivot” became the magical word of the moment in California. According to the Wiktionary, the word “pivot” comes from the French and Italian word for a very specific tool, usually made of metal, that allow us “to turn something using the same point of support”, like the base that allow the arm of a LP Player to move around (and reach different ideas):

A way of seeing the "famous" pivot

A way of seeing the "famous" pivot

According to this way of thinking, ventures can turn mediocre ideas into billion-dollar companies. To get more information about this interest trend read Eridc Ries book “The Lean Startup”. I have not read yet it sounds interesting.

I had so may other hints from this last day but I do not want to make this post too long. Let’s get back to these issues soon…