Wednesday, May 1, 2019

The Entrepreneurial State #2

The author often wrote ‘the State’ as another term for government(s). I will follow her practice.

Before commenting on some of her specific narratives, I will make general criticisms of the method of her narrative. I haven’t read all the reviews on Amazon, but all the criticisms I read were at a more specific level.

She bases much of her exaggeration of the State’s role on funding or being a customer, rather than the developing and implementing the basic ideas. She says little about an entrepreneur’s work in implementing new ideas and bringing a new product to market. Sorry, buying, subsidizing, and demanding are not producing. The author blurs the difference between a producer of X and its customers buying X.

True entrepreneurs rely on funding, money for research and producing their products/services. The funding may be from issuing stock, borrowing, revenue from selling their products/services to customers, or, when from the State, subsidy or grant. When the State is involved, the author conflates the last three ways and says funding. Customers aren’t always passive ones; they may give specs to a supplier or otherwise assist the supplier. However, in her narratives the State is never only a customer; it provides “entrepreneurial funding.” She hypes this customer and downplays the role of the true entrepreneur. That’s like shifting most or all credit from those who invented and produced iPhones to the buyers of iPhones.

The author mentions Xerox a few times, but not about the State being a customer for Xerox’s copy machines, toner, and paper. I’m confident that States were a major customer for these things. But does that imply the State played a major entrepreneurial role in Xerox’s growth? I think not.

The author purports to define entrepreneurship (64). She cites Schumpeter: “[A]n entrepreneur is a person who is willing and able to convert a new idea or invention into a successful innovation. It is not not just about setting up a new business … , but doing so in a way that produces a new product, or a new process, or a new market. Citing Knight and Drucker, “entrepreneurship is about taking risks.”

That’s fine, but she falls short of illuminating the nature of this risk. The risk is that the revenues from selling the product are enough to meet or exceed the funds spent in creating the product. I’d like to know how the US or a European government does this. What does it create with a plan to sell it for money exceeding the funds spent in creating it?

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