Entrepreneurs haven’t changed but the world they live in has
Once upon a time,
If you investigate who coined the term Entrepreneur you’ll see Jean- Baptiste Say (1767-1842) widely credited as doing so around 1800. Whilst it’s true he popularised it, he was not the originator. That accolade goes to an Irish economist and financier Richard Cantillon (1680-1734). Is it interesting a French word formed by the two Latin words ‘entre’ (to swim out) and ‘prendes’ (to grasp) would be able to jump into English and increase in usage over the past 262 years?
Let’s give Richard his due here because he didn’t enjoy the recognition for his thinking in his own lifetime. He was murdered by a disgruntled cook 10 days after he was dismissed. Straight after the murder, the cook set fire to the London house, which then burned to the ground. Most of Richard’s work was lost in the fire but his Essai sur la nature du commerce en general (or Essay of the nature of trade in general) was not. It was published posthumously in 1755, over 20 years after his death. Significantly, Cantillon’s thoughts were influenced by his participation in the two major economic bubbles of the time. The South Sea bubble (where prices of the South Sea company were around £140 in January 1720 rising to around £1,000 before collapsing in September back to £200, taking the markets down with them) and the Missisipi Bubble (1718-1720).
It was against this backdrop that Cantillon’s thoughts developed, as the pioneer of the term Entrepreneur?
- What did it mean 262 years ago?
- What relevance, if any, does it have to us now?
- Has it lost its original meaning?
- Is there something to learn by going back to its origin?
Now I know if I go all economist on you here, I risk losing you and myself (as I am not an economist) so how about I make some reasonably bold claims about our Richard that for the sake of brevity, you take on trust? Deal?
Richard has been credited with;
- the discovery of economic theory and writing the first treatise on modern economics
- being the first to describe the critical role of entrepreneurs in the economy and was the first to describe the concept “opportunity cost” (his term was “Intrinsic Value”)
- being ‘the’ original thinker on entrepreneurship
- being one of the very few people referred to in Adam Smith’s iconic – Wealth of Nations (1776)
At this time (around 1735) he described three ‘types’ of people – the landowners, the workers (wage earners) and the entrepreneurs. The main characteristic used to describe entrepreneurs as distinct from the ‘wage earners’ was that they lived on an uncertain income as opposed to the fixed, more certain income of the wage earners. Cantillon’s entrepreneurs bore risk under uncertainty. Their ‘role’ in an economy functioned to reallocate resources to satisfy demand. They created the links (and prices) between farms and markets, markets and cities, cities and other countries.
The unsuccessful entrepreneur will live poorly or go bankrupt, while the successful entrepreneur will obtain a profit or advantage and cause entry into the market, and so it is that the undertakers of all kinds adjust themselves to risks in a state (Essai, pp. 31).
(Note the use of the word ‘undertaker here is the direct but incomplete translation of the word entrepreneur into English and one of the reasons why it took so long for Cantillon to be credited with coining the term entrepreneur, as all the translations tended to have the word undertaker in them. So no wonder the term entrepreneur jumped languages)
So there we go, today’s entrepreneurs have the same form and function as entrepreneurs at the start of the First Industrial Revolution. But whilst being an entrepreneur hasn’t changed something IS changing. And that is the risk and opportunity landscape that is blurring the previously distinct wage earner and entrepreneur distinction. Lets take a look at them individually first:
- Wage Earners – changing jobs more frequently, demanding more autonomy, wanting to contribute more to a higher purpose. Company longevity has declined substantially, and positions are thus less secure with more restructuring, greater disruption creating more risk to the status quo
Summary – bearing more risk under more uncertainty (hmmm sounds more like entrepreneurs)
- Entrepreneurs – people of all ages interested in becoming entrepreneurs, technology advances are facilitating career switching, communication technologies enable smaller businesses in a niche to have access to that niche globally not just locally. Disruption is creating more arbitrage opportunities and prices of everything are falling. Many entrepreneurs are wanting to create social change. Entrepreneurs who are successful are becoming corporations and doing a pretty good job of running them in general.
Summary – the Barriers to Entry of becoming an entrepreneur are falling, the cost of being an entrepreneur is falling
In many ways, it will be somewhat of a competition to keep our wage earner category motivated, engaged and full of productive purpose amidst increasing risk and against a backdrop of their attention being drawn away by the success of entrepreneurs in the gig economy. If risks increase in our larger businesses and some fail, it will make it harder.
One of the solutions to this are more hybrid models where
- the best aspects of entrepreneurship are woven into some aspects of corporation life (Intrapreneurship). Like flexibility, more risk bearing collaborative teams launching new business units, more self-directed teams with more autonomy, different remuneration structures
- the best aspects of corporations are woven into entrepreneurial endeavour. Like sponsored startups (funding), business/financial mentoring, access to distribution channels, people development, optimisation after high growth
How do you build new business units for high growth and integrate that with a more entrepreneurial approach? Start with a Business Model Innovation workshop.
Because our story started with Once upon a time we need to finish up with a moral. So the moral of the story is this – Be nice to the Cook, so they don’t burn stuff, including your house.