![]() A few months ago I was taking our dog, Chelsea, for a walk in the local park. The park has a sizeable playground, and as we entered, Chelsea, who loves kids, trotted over and licked the leg of a little boy who was standing near the sandbox. The boy immediately smiled, turned around, put down his toy bulldozer and dump truck, and petted Chelsea enthusiastically. As we went on our way, I noticed the boy was watching three bigger kids in the sandbox. Given that he obviously wasn’t shy (at least with animals) I wondered why he looked reticent about joining the others, since his toys were clearly intended for the sand. When we returned back the way we came, we saw the boy playing by himself in a large park garden that had been excavated and filled with topsoil, but not yet planted. He had clearly decided that the sandbox was too crowded, and, although it was unconventional, the much larger, unoccupied garden was the perfect place to play. He smiled and waved to us. That, I said to myself, is the very picture of an entrepreneur. Not to strain the analogy too far, the kids in the sandbox had three competitive advantages over the enterprising boy: They were bigger than him, they were there first, and they appeared to know each other and be playing together. The economy that has emerged in the last generation looks very much like this sandbox. Size counts, being first into a market counts, and oligopoly (a few large ‘players’ cornering the market for some product or commodity) creates a nearly impossibly high entrance barrier for new players. I often feel sad for new immigrants to the West who invest their money in franchises that are cookie-cutter imitations of each other, in saturated markets, because they don’t understand the rules of the new economy. It’s capitalism, and you still can beat the odds and succeed, but it’s a closed system, heavily biased in favour of those with great wealth and influence. The best, simplest road to success for the entrepreneur is to make your own sandbox. In a previous chapter, I pointed out the critical differences between what I call Natural Enterprise and the traditional business:
The economy is always changing, always evolving, and the New Economy, the one that was supposed to be powered by information, ‘intellectual capital’ instead of physical and financial capital, is still a work in process. Two overarching economic trends of recent years have largely stalled its evolution: Globalization, which accelerates the concentration of power in the hands of the oligopolies which control most industries in the economy, and privatization, which views the dismantling of government as a positive step towards efficiency, free markets and individual enterprise, but which is in fact a sell-out of essential public assets to large oligopolies, an abandonment of the responsibility of government to regulate irresponsible corporate behaviour, and a huge disincentive for innovation. As Adam Smith said, “the real purpose of government is to protect those who run the economy from the outrage of injured citizens”. This has become discouragingly true over the past half-decade, at least in North America. So here are the grim facts facing entrepreneurs at this mid-point in the evolution towards a new economy:
That’s the bad news. Here’s the good news:
So what are the rules for entrepreneurs to succeed in this new, still not-fully-formed economy? Here are some of them:
It’s important that the entrepreneur understand the economy — how it works in theory, how it works in practice, and what are the trends right now. The business press is generally focused on the needs of the investor, rather than those of the entrepreneur, and when they actually talk about what’s happening in business, it’s almost always about large corporations — information and advice that’s often not translatable, and sometimes even dangerous, in the entrepreneurial world. There are some excellent entrpreneurial magazines, the best in my opinion being Fast Company (which also has an excellent blog), Business 2.0, and Wired. There are some good blogs by economists too, like Globalize This and MaxSpeak. What every entrepreneur needs, though, is someone to help them think through what these changes in the economy mean to their business, and to their customers’ needs and buying habits. Intelligent, informed conversations on this subject — with customers, with network colleagues, and with advisors, paid and unpaid — can provide this context and this insight, and help entrepreneurs understand and navigate the economy — the old one, the new one, and whatever is coming next. |
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Hi Dave, A great chapter. I look forward to the finished book. To me it makes perfect sense, as I believe I think like you. As a matter of fact I am modeling my business concept around this philosophy. In the mean time, us simple folks that use our brains still have to communicate with the old world, living in the MBA age. Many official procedures still only work by abbiding to outdated rules and regulations. Any thoughts on how to bridge that gap. To some extend you can’t blame the folks with less creativty, although they can be the cause of lack of progress.CheersBen
Thanks, Ben. The chapter on Day to Day Operations will have something on bridging the gap, and working with ‘old economy’ businesses and thinking.