From these places where time is money

Benjamin Franklin’s famous quote “time is money” summarize very well what I observe when exposed to places such as New York, Amsterdam or London. It was in those cities, among few others, that the monarchs, politicians and entrepreneurs of the last centuries “invented” capitalism. I am spending this weekend in London due to an MBA fair and a couple of meetings and again, as usual, I always get surprised to see how this quote is intrinsically present around these places.

Just a stupid example: do you remember when, during hotel check outs, you had to wait for somebody to verify what you consumed from the refrigerator in your room? Some hotels just ask you about it so they can avoid this “verification” cost. Well, in this Hilton I’m staying, they’re using an automatic refrigerator that counts the things you consume so nobody needs to verify any consumption or to ask you anything about it. The curious thing – for me – is that I always see something like this when I visit one of those places where “time is money”.

In most of the so called emerging markets and even in some developed markets this is not the case yet. Things are changing fast, but usually, still, time is definitely something else than money. Just ask a Brazilian during carnival or a Spaniard or an Italian during summer. I remember the case of an American entrepreneur who moved to Bahia – in the Brazilian Northeast – during the 1960’s. Since salaries were so low and everything was so cheap, he had the idea to build a factory over there and export something I don’t remember now. According to his memories, he started paying little money to the employees but they didn’t perform well and couldn’t keep coming to work for more than two weeks. So, he started a productivity bonus, paying bonus to employees in the case they reached some objectives. It didn’t work either. He raised the bonuses and dropped objectives but employees still didn’t show up or were not committed to the work. So he gave up bonuses and simply raised the salary of everybody. Still, after few weeks or months people would get tired of the work and would abandon the job. The conclusion was that people didn’t really need money to live relatively well in the coast of Bahia at that time. They preferred to have their time to sleep, play cards or whatever without money than struggling to get a salary, whatever it was. I think you see what I mean: time was not money at all in Bahia back then. The funny thing is that I read this story while staying in a ryokan – little hotel – in Japan. Do you know why I found this book there? Because this guy decided to leave Brazil and go to Japan to start his business. He ended up being a successful entrepreneur in Japan and I was reading his memories.

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Innovation in Emerging Markets

When I started to study entrepreneurship a bit more critically some years ago I came up with a simple question that would take me to Haiti in 2007: Are there innovative entrepreneurs in places where stability is often put in jeopardy by political and socioeconomic adversities? How do they emerge and survive? This question annoyed me because I wanted to know if innovative people inventing new marketable services and products could exist in the worst slums of Brazil, South Africa, India or Morocco.

By visiting Haiti in the end of 2007, one of the 15 poorest countries in the world (this was before the disappointing earthquake of 2010), I could see that yes, despite of their incredible difficult situation, either politically, socially or economically, there were amazing people creating new forms of doing business that no one, even in a world top MBA could ever imagine. It was hard to find, but I found at least 5 cases in which entrepreneurs had to overcome all the adversities present in their market and developed an innovative business that could be probably replicated in any developed, developing and underdeveloped region of the world even today, in 2010. Olivier Barrau was one of those cases, creating an innovative Insurance Company that soon became one of the largest in the country.

Olivier Barrau, founder and President of AIC Alternative Insurance Company (Haiti).

Olivier Barrau is founder and President of AIC Alternative Insurance Company (Haiti).

This sort of finding take you back to one of the first economists to perceive the key role that entrepreneurs played in market-oriented societies: Joseph Schumpeter. Schumpeter is a classic reference in the academic literature on entrepreneurship. This gentleman perceived, still in the first half of the 20th century, that some specific people in societies had the ability to come up with innovative ways to produce and market products and services in such a manner that the capitalism itself evolved and kept existing due to his actions.

It is important to notice, however, that not everybody who starts a business can be considered an entrepreneur. I said that in a previous post and would like to reinforce this position. As the term gains legitimacy, most of the press around the world classify anybody who starts a business as an entrepreneur. This is not true even in the classic definition of the term because an entrepreneur HAS TO BE innovative by definition, either in a very poor country or in highly developed one. In my case, for example, I have taken part or started different businesses in my life but I do not consider myself an entrepreneur because none of the businesses I was involved were innovative neither tried to be. It does not matter, I believe, because most of the entrepreneurial ventures you come across in life were born from a non-innovative previous business experience. So, by exercising starting and running a traditional business you gain experience to start an innovative one someday or right after. But the issue of innovation has to be connected to entrepreneurship either in an emerging market or a developed one, in the past of in the future.

The role of luck in entrepreneurship

When I was still an accounting undergraduate student at PUC-SP the Pontifical Catholic University of Sao Paulo I had a Professor of Performance Measurement called Jose Carlos Oyadomari that used to finish his exams with these words:

Good Luck!!!
Observation: luck favors those who are prepared to receive it.

I always thought his sarcasm brilliant and I never forgot the final objective of his words. As much as I study entrepreneurship in emerging markets (or emerging countries as some people like to call it) more I think that luck play probably the most important role in the establishment of successful business ventures.

For my Ph.D. dissertation I had interviewed more than 20 entrepreneurs, very much successful in their sectors and publicly recognized by that. I am not saying that they were just lucky people. Most of them were in the right place in the right moment. Besides, due to my work in a Business School known by its commitment with entrepreneurship, I meet many entrepreneurs from different countries quite frequently. When asked, most of them answer that a good amount of people in their situation and in their place at that time would have taken similar decisions in the first years of the venture.

The implication of that is that entrepreneurs should not be as praised as unique visionaries as they often are. As Schumpeterian theory always reminds us, nobody is entrepreneur forever, just for the short period of time when they are innovating and succeeding in promote that innovation. They are just regular people that had the “luck” to be in the right place in the right moment, being, of course, “prepared to receive this luck”.