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Enterprisers Matter

It is entrepreneurs who are the enzymes animating the complex process that engenders innovation

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It has become modish to celebrate the success of entrepreneurs.  We can all feel good at the news that a youngster from a small town has pocketed a cheque for a billion by selling the company he founded only a few years earlier. Successful entrepreneurs are now celebrities on a par with cricketers and actors.

The dynamism of the entrepreneurial ecosystem in an economy matters at a much deeper level.  The Prime Minister is entirely right to seek to boost entrepreneurship through Startup India and other initiatives.  When young entrepreneurs say they want to make the world better, they articulate a truth.  There is a strong correlation between GDP per capita and the intensity of entrepreneurship in any economy.

We humans are programmed to believe that things are worse than before and to fear that more bad things are likely to occur.  However, objectively, the world is now a better and safer place than it ever has been historically. We are living longer, on average. The quality of our lives is demonstrably better.  Women are having fewer babies, because children have a much better chance of survival and education levels are higher. Globally, the proportion of humanity living in absolute poverty has tumbled in the past century.  There is less violence than ever before.
   
The underlying cause of this positivity is economic growth. While of course there remain challenges, as societies become richer, our lives, on average, improve.
Economists can argue over what causes growth and, of course, a number of factors play a role.  Over the long term, however, what drives growth is rising productivity. In turn, productivity growth is the outcome of a number of factors but, at heart, continued higher output can only be sustained by constant innovation.

We don’t fully understand the process of innovation.  Why did China, the home of so many innovations for so long, cease innovating some five hundred years ago?  What caused the spurt of innovation in England that triggered the industrial revolution?  Advances in scientific research play a role, as do culture, levels of investment, competition and necessity in times of war.

What we do know is that innovation tends to be the result not of the actions of government or large companies, but that of individuals and small teams, usually outsiders.  In other words, entrepreneurs.  

Hence my earlier claim that it is entrepreneurs who make the world better, because it is entrepreneurs who are the enzymes animating the complex process that engenders innovation, productivity and thus economic growth.  
 
Further, it is entrepreneurs who create jobs.  Research shows that the vast majority of new jobs are created by new, small and growth companies. Large organisations tend to shed jobs as they try to remain competitive.  In the world of robotization and AI this will only become more true.

So, entrepreneurs matter hugely.  The policy challenge is how to boost the number of entrepreneurs trying new things. Most will fail, hopefully to try again, but the minority will achieve breakthroughs, scale up, and create jobs and wealth.

Government policy cannot dictate an increase in entrepreneurship. But good policy can support entrepreneurs by investing in education and research, building excellent infrastructure, fostering competition and making it easy for businesses to be created, financed, sold off and closed down. The netas and babus should trust entrepreneurs to do the rest, to innovate, disrupt, and make the world better.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


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Alan Rosling

The author is an entrepreneur and strategic adviser. He co-founded Kiran Energy and was earlier an Executive Director of Tata Sons. He was a Special Advisor to the British Prime Minister during 1991-93. He now lives in Hong Kong but is frequently in India. He is the author of Boom Country? the New Wave of Indian Enterprise.

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