In praise of accidental entrepreneurs and permissionless innovation

There's a difference between those who jump into entrepreneurship and those getting there through government grants. The former is the better bet. Here's RIWI's Neil Seeman in the Globe and Mail:

Around the world, accidental entrepreneurs create hundreds of thousands of jobs and the necessary prosperity that fuels government coffers to pay for public health care and public education. But politicians of all stripes appear to love a different kind of entrepreneur – let’s call them co-created entrepreneurs.

An accidental entrepreneur is someone who brings to bear a vision to change the world and possesses a rare combination of risk tolerance, charisma, empathy and demonstrable skills. My own anecdotal experience puts the average age of this special subset of entrepreneur at about 40, meaning that they have real-world experience and are motivated to solve real-world problems.

A “co-created” entrepreneur is someone, perhaps a taxpayer-funded post-doctoral student or academic, who is seduced into entrepreneurship by a government program, by a “centre of excellence funding grant” or by something entirely different – such as being unemployed. The great rolling global recession, about to hit Canada like a boxer’s uppercut, will be a boon for start-ups. Some in the co-created group can enjoy great success, but any sober seed investor with experience would put all their chips on the accidental entrepreneur.

And yet, we are often told that risk must be underwritten by government or debt. A recent taxpayer-funded lottery commercial features a young gambler dreaming that she would start her own business if she won. Seriously? In Silicon Valley or Haifa or St. Louis (which is on overdrive with bootstrapped startups), that logic would seem bizarre.

Apple, Facebook, LinkedIn and Huffington Post – such companies always had the ambition to win market dominance in every region of the world, not just in Silicon Valley. By contrast, taxpayer-support programs for co-created entrepreneurs often have as one of their major goals an overtly political agenda – irrelevant to shareholders’ interests – of “showcasing” the innovation brand of the host city or region.

The whole piece is excellent. Some sound advice too:

Entrepreneurialism is about failure; ask any early-stage investor. But it’s better to fail fast and, if you succeed, to scale quickly. And you are vastly more likely to succeed without top-down government support. It’s not just me saying this – it’s every objective economic analysis from every part of the world. If you asked entrepreneurs, they would tell you the same thing. Yet in Canada, few soi-disant taxpayer-funded experts talk to real entrepreneurs.

So what should we do?

Kill the incubators and accelerators

Josh Lerner, author of Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed – and What to Do About It, has decimated the idea that there is any evidence to suggest direct government aid can help entrepreneurs. From Dubai to Jamaica to Taiwan to Singapore to the United States, the co-created entrepreneur model has flopped. You just don’t find accidental entrepreneurs in government-funded policy slush.

Throw away the white papers

Many reports on entrepreneurialism are stacked with insights from professional executives, academics and venture capitalists – entrepreneurs themselves are conspicuously not leading the discussion. Publicly funded academics figure prominently.

All of this white-papering is well intentioned. But it cartoons innovation and assumes, wrongly, that entrepreneurialism needs to be “nurtured” with the help of public money and policy advisers. For the taxpayer’s sake, let us please rid ourselves of this cognitive bias.

Learn to find accidental entrepreneurs

I keep being reminded of one difference between Canada and New Zealand: the culture of permissionless innovation. In New Zealand, a whole ton of microbreweries and some distilleries started in somebody's garage. After the brewer found that there was a market for the product, he or she could scale up. Canada's state monopoly buyers and licencing regimes, at least in some provinces, make that awfully hard (though it has gotten a bit better in Manitoba).

Let's hope New Zealand doesn't get too far down the track of incubators and accelerators and instead keeps a sharp eye on the system of permissionless innovation that lets entrepreneurs get ahead. It's too easy for the tangle of regulations to stymie it.

HT: Christian