FT.com
August 27, 2013 4:37 pm
Luke JohnsonBy Luke Johnson
In the 19th and 20th centuries, Britain and the US were
dynamic and open to novelty
Are entrepreneurs freaks of nature? Jim Clifton thinks so.
He is the boss of research firm Gallup, and recently wrote about studies it is
undertaking to find those especially talented individuals who can build the
next Google, Ryanair or Bloomberg.
Gallup estimated that such “super-entrepreneurs” number just
three out of 1,000 across a sample population. These are the risk-takers
capable of founding so-called gazelle companies: the fastest-growing
breakthrough organisations that create a high proportion of the new jobs and
genuine innovation in an economy.
Identifying these prime movers is incredibly difficult. It
is not like spotting brilliant footballers or pianists, where there are exams,
courses, teachers and systems to discover and cultivate rare prowess. However,
the skills displayed by the next Steve Jobs or Sir James Dyson are more complex
and less well understood. They involve an ability to organise and promote a
business, make a commercial idea concrete, hire and lead a team, generate sales
and add value. There can be no academic qualification for attributes such as
inventiveness or a spirit of enterprise.
It is a tragedy that the economics profession almost ignores
this subject, and that business schools have done so little useful work to
identify key character traits of the vital few. Venture capitalists would have
much to gain by undertaking serious scientific studies into the personalities
of winners in business. But they seem resigned to the idea that there are few
rules or systems for finding the right ones to back.
Scott Shane, a prolific writer on entrepreneurship,
postulates that genetic factors are powerful determinants of whether someone
will develop a successful business. His book Born Entrepreneurs, Born Leaders
suggests innate, inheritable predispositions really matter.
A survey of entrepreneurs at Northeastern University
supports his view: 61 per cent of respondents said innate drive was the main
reason they started a business: only 1 per cent said their higher education was
a significant factor.
Not everyone buys the idea that a small number of
extraordinary risk-takers are the ones who make a difference, however. Mass
Flourishing , an important new book by Nobel prizewinner Edmund Phelps,
suggests individuals matter much less than overall culture and social values.
The subtitle of his text is “How grassroots innovation created jobs, challenge,
and change”. His thesis is that most industrial discoveries were not pioneered
by a few isolated visionaries, such as Henry Ford. Instead, he argues that
progress was driven by huge numbers of citizens empowered to create and sell
thousands of incremental improvements, from craftsmen and farmers to traders
and factory workers. Together they generated an extraordinary period of
prosperity, starting in the 1820s in Britain and petering out in the 1970s in
the US.
Now, in the west, Professor Phelps believes there is a sense
that the “glorious history of desire and dreams” has run out of steam.
Unquestionably, there is an unholy alliance of conservatism and socialism that
impedes economic and technological advances by resisting innovation.
In Britain, for instance, whether it is fracking,
immigration, reforming the state or genetically modified foods, we suffer from
neurotic environmentalists and Nimby elements who object to change and are deaf
to rational arguments. They defy modernity, and seek to embrace what they
imagine are “traditional” values. So they resent wealth creation, cling to
bloated welfare and pension systems, resist new developments and so forth. By
contrast, Prof Phelps shows how in the 19th and 20th centuries Britain and the
US, among other nations, were dynamic and open to novelty – and that the good
life was surprisingly inclusive then.
I agree with him that all entrepreneurship is important, not
just the famous names. I also think that government, industry, regulators and
institutions must be more venturesome if a nation is to compete successfully in
a global marketplace. Meanwhile, educators, mentors, universities and
philanthropists should explore much more deeply why certain entrepreneurs have
such an impact, how to breed more of them, and how to encourage surroundings
that will enable them to flourish.
lukej@riskcapitalpartners.co.uk
The writer runs Risk Capital Partners, a private equity
firm, and is chairman of StartUp Britain
