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.”

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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”.