2/15/11

Are the Poor Really Entrepreneurial?



Interesting article I got from http://www.nextbillion.net  
[Exploring the connection between development and enterprise through blogs and analysis]




Are the Poor Really Entrepreneurial?
 http://www.nextbillion.net/blog/2009/02/11/are-the-poor-really-entrepreneurial 
Key highlights from the author ...



  • "It's just wrong to assume that the majority of those living at the BoP are entrepreneurial. Recently, I spoke to a friend who is working on a BoP project that seeks to help the poor start microenterprises.  The project selects a handful of people from a poor community and puts them through an entrepreneurship training program.  I asked her what was one of the biggest challenges of the project.  She responded, "That we're trying to train a lot of people to be entrepreneurial who are simply not."
  • "I think that one of the best things that we from the developed world can do for the poor is to help cultivate an entrepreneurial environment for them.  One such group that is trying to do this is TechnoServe."
  • "I think more resources should be spent towards building this entrepreneurial environment in poor communities. Some people will create new ventures.  The majority will not.  And that's okay"





What do I think?


 I do believe that "entrepreneurial genes" can be found anywhere, even in the most "hostile" contexts. It might look exaggerated to build the following analogy, but to me affirming that entrepreneurial individuals are easier to be found in X or Y environment is like saying that "women" or "men" are easier to be found  in X or Y environments. People with "entrepreneurial genes" are just born everyday, everywhere, the same way as are humans with "female/male sex chromosomes" are born everyday and despite the environment they happen grow in, they never lose their natural gender.  I am not trying to do a scientific dissertation on "entrepreneurial genes" because I have clearly no knowledge or evidence to support that (although there are studies like the ones of Scott A. Shane author of Born Entrepreneurs, Born Leaders: How Your Genes Affect Your Work show that), but if the question that is being asked to me is "Are the poor entrepreneurial?", in my mind it´s  like asking "Are human beings  entrepreneurial?"

HOWEVER, I do believe that ENTREPRENEURS, specially HIGH IMPACT ENTREPRENEURS, can´t  be found anywhere. 

We - people that are part of the HIGH IMPACT ENTREPRENEURSHIP MOVEMENT -  tend to be very firm in positions such as: 1) Self-employment does not equal entrepreneurship, 2) Subsistence Entrepreneurship and Opportunity Entrepreneurship are two completely different worlds and 3) Even Opportunity Entrepreneurship is not enough: we need high potential ventures and to be more specific, high impact ones.  The conviction of such affirmations do not really intend to treat "non high-impact entrepreneurship" as  a "second class - or -  not worth to take care of entrepreneurship", as few friends have told me. Yet this awareness is a powerful input to answer such questions as "Are the poor entrepreneurial?", which in the context of this reflection I will rephrase as:  "Are there more Entrepreneurs in the BoP, and which kind of?"

Coming from a country like Colombia I feel comfortable saying that poverty is in some cases a legitimate engine of entrepreneurship, and to be more exact, of SUBSISTENCE entrepreneurship. What concerns me more, rather than the fact that majority of the entrepreneurs/endeavors that flourish in the  low income environments are subsistence ones, is the fact that many of those subsistence entrepreneurs don´t  realize (or even care of realizing) that there are other kinds of entrepreneurship that their "entrepreneurial genes" could serve, and that through those other levels of entrepreneurship a bigger impact in the world can be made.  And in the end of the day, it´s too complex to expect and induce them to realize that. Thinking big is one of the most complicated things.

In this context, I find one of the the GEM´s 2010 conclusions extremely wise:  "In terms of Entrepreneurship, Facilitate Necessity (=subsistence), Encourage Opportunity".  I think nowadays we are pretty unbalanced:  there is more necessity being encouraged and on the other hand, Opportunity is hardly facilitated.

The article that invited me to write this reflection concludes in its last paragraph that more resources should be spent towards building an entrepreneurial environment in poor communities, no matter if the majority of the people in such communities  will not create any ventures - and that this is okay. To me, this is simply a non-strategic approach.  Who would like to waste resources investing in something that will have no/low return?

Don´t get me wrong. My invitation is not to ignore poor communities as a breeding ground of entrepreneurs, because being coherent with what I stated at the beginning of this post, people with "entrepreneurial genes" are just born everyday, everywhere. But what I challenge are the types of approaches through which some organizations/governments expect to make entrepreneurship flourish in poor communities.  Let me give an example: What approach would be more effective to "create" real entrepreneurship, to "teach entrepreneurship" (whatever that means!!) to 30+ year old people that  who by that age and life moment, as I previously say,  don´t understand and don´t care for understanding that there is a new way to create impact OR to focus on providig high quality K-12 and technical/professional education to youngsters, specially if this education has also the clear goal to nurture  AWARENESS of high impact entrepreneurship as a life option? If I were an investor (call it philantrophist, government, NGO, academic) I would totally go for the second option. There is a direct correlation between education and the capacity to identify opportunities/networks, the ability to lead/execute and the skill to think holistically/big  [any similarity with BABSON´s definition of entrepreneurship is pure coincidence :-) ]. And you can´t build easily these abilities when you are 30+ and you brain is not conditioned to absorbe those abilities.

But here is where the big dilemma of "short term vs. long term impact comes":  are we willing to wait 10+ years to see companies blossom out of those youngsters whose entrepreneurial genes we nurtured? Many organizations just don´t feel like doing it and prefer to go for non-strategic programs to promote entrepreneurship - which in the short term can display cool numbers (such as "1.000.000 people trained!" or "1.000.000 USD in loans!" or "1.000.000 trainning hours!") - but whose bottomline effectiveness is very, very questionable.  I think that if what social investors look for is rapid, short term impact in terms of high impact entrepreneurship development (because entrepreneurship development does not only equal venture creation!!!) the "poor communities" (assuming the High Impact entrepreneurship does  NOT concentrate there) is not the most effective segment to focus on.  

The BoP is an amazing source of opportunities for the world. But forcing programs to desperately foster entrepreneurship is nothing else than barking up the wrong tree, if what we look for is high, short term and sustainable impact.



What do you think?

3 comments:

Oriana Torres said...

THIS IS A COMMENT BY MY SISTER (http://ltorresn.blogspot.com/), WHO FOR SOME REASON SENT IT TO MY INBOX :-)

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Great food for thought. I have some comments:

1. The BoP project's intention is very good, however I would name it (to avoid discrepancies) and structure it differently. If the program shows evidently its utility and relevance for poor communities, they would react positively and join. In these order of ideas, I would make it selective so only the very best can access to the trainings and generate more impact.

2. It doesn't matter what kind of Entrepreneurship it is, as long it encourages people to build ventures and enhance economic development. I would waste less time trying to define this practice which from its most primitive conception, means a way of survival.

3. I believe that the "entrepreneurship spirit" is acquired throughout life. It depends on the context of each individual and involves all kind of variables such as: people (family, friends), education, personal characteristics. So, I am skeptic in saying, that one has "entrepreneurial genes". I simply consider that we could have personal characteristics which can be used for entrepreneurship.

Juliana said...

What do I think?

In Colombia, entrepreneurship has gained strength over the past 5 years. Today there are different players that support entrepreneurs as the government, educational institutions, businesses and even nonprofit organizations. There are many actors involved, but at the same time many, supporting different types of endeavors and working disjointedly. This is why I consider a responsibility of the people involved in this eco-system to make a distinction between the different types of entrepreneurs.

To the question: Are the Poor Really Entrepreneurial? My answer is YES. I agree that in the BoP you can find many entrepreneurs… subsistence entrepreneurs. Subsistence, as well as Opportunity and High Impact entrepreneurship is needed.

My Twitter profile description says: "I believe in the power of role models" and it's true. When you say that one of the most difficult tasks is to make entrepreneurs think big, again I agree. The government can support entrepreneurship by giving tax exemptions, banks could provide specialized credit lines to SMEs, large corporations could support entrepreneurship programs and even schools could have programs focused on this subject that nothing is as effective as the POWER OF ROLE MODELS to inspire other entrepreneurs to THINK BIG! (All types of entrepreneurs)
In Colombia, there are many successful athletes, actors and singers that are rol models for younger generations. This is why it is common to hear young people aiming to be the next Pibe, Juanes or Sofia Vergara. What we need is that this same group, adds to their role models people as Rafael Molano owner of Ramo, Gigliola Aycardi and Nicolas Bodytech Loayza founders of Bodytech (www.bodytech.com.co) or Kenneth Mendiwelson founder of Refinancia (www.refinancia.com.co). These people are responsible of inspiring new generations of entrepreneurs to think big and hopefully in a medium term high impact entrepreneurs will increase in Colombia.

As mentioned earlier, there are many players involved in Colombia’s entrepreneurship eco-system and I believe that being this topic increasingly "sexy" more organizations will join this effort. Should the support be massive or high impact? This is where I differ because I personally consider that both are necessary. The effort should be that all the organizations work in a stepwise process with the objective of supporting entrepreneurs and guide them to reach the next level. This means that informal enterprises (another issue, which is a reality in our country) should become formalized companies and SMEs should become large or high-impact companies (This is a simplified scenario).

A few days ago my former boss compared high-impact entrepreneurs to the tallest, largest and greener tree. He said that if this tree were to be planted in a desert (The desert being an inadequate entrepreneur ecosystem), it would not last a year. On the other side, if this same tree was planted in a rain forest (The rain forest being an adequate ecosystem for entrepreneurs), surrounded by many smaller trees (subsistence or opportunity entrepreneurs), water, insects, animals, plants (Different actors involved in the ecosystem); This tree would become THE high-impact entrepreneur that all the others would want to imitate.

PS: This doesn´t mean I agree that it is correct to waste resources (Time and money) on ventures that have a low return or in the worst scenario no return at all. The stakeholders should be able to find ways to support a specific niche of entrepreneurs and come across the more effective ways of supporting them. Low returns do not equal effectiveness.

Jose said...

Liked the article ;) I agree with Lucia's skepticism on the "entrepreneurial genes" rather than an "entrepreneurship spirit" that of course could come from within but could also be cultivated (It’d be a “are leaders born or made?” situation... all over again).
The question introduces two issues as I see it. The thought of considering poor people unable to actually be entrepreneurs because of their socio-economic context, level of education or cultural environment, and considering Poor-Entrepreneurship like some sort of second-class entrepreneurship for being probably most likely to be the Subsistence kind.
If things were like that only wealthy, “innate” entrepreneurs were able to succeed in their ventures, which is not entirely accurate. In the other hand, there would be no real entrepreneurship since I consider neither Subsistence Entrepreneurship nor Opportunity Entrepreneurship to be the real deal.
I believe TRUE entrepreneurship prevails over need or opportunity, it comes from inside. Is that “spirit” (or who knows, probably genes) what drive people forward into creating a business and we should encourage it regardless of the context.
There should be no discrimination when it comes to embark on a venture and a lot of efforts must be devoted to “nurture that awareness” like you say. I agree with you that those efforts (and financial resources) should focus, but not be limited, on the younger generations in order to have more results on the long-term.