Reputation and Social Entrepreneurship

Economists know a lot about entrepreneurship and have more or less even settled on a defition for the field. Auerswald (2009) writes: "For all the different notions of entrepreneurship that have been floated over the past century, the most fundamental and enduring is the definition of the entrepreneur as the “residual claimant” in a new venture—the person who walks away with, or (alternately and importantly!) is liable for, whatever is left over when the accounting is done—plus or minus."

He then goes on to define a social entrepreneur as the residual claimant for an enterprise, but that in this case one prime residual is reputation and not financial gain. He cites some good examples and goes on to flesh out the idea more fully. Along similar lines I was just reading the Cathedral and the Bazaar (yes, my geek credentials are weak) and one section on Linus Torvalds and the creation of Linux really seemed to capture this point:

The "utility function" Linux hackers are maximizing is not classically economic, but is the intangible of their own ego satisfaction and reputation among other hackers. (One may call their motivation "altruistic", but this ignores the fact that altruism is itself a form of ego satisfaction for the altruist).

Voluntary cultures that work this way are not actually uncommon; one other in which I have long participated is science fiction fandom, which unlike hackerdom has long explicitly recognized "egoboo'' (ego-boosting, or the enhancement of one's reputation among other fans) as the basic drive behind volunteer activity.

[...] We may view Linus's method as a way to create an efficient market in "egoboo"—to connect the selfishness of individual hackers as firmly as possible to difficult ends that can only be achieved by sustained cooperation.

[...] Many people (especially those who politically distrust free markets) would expect a culture of self-directed egoists to be fragmented, territorial, wasteful, secretive, and hostile. But this expectation is clearly falsified by (to give just one example) the stunning variety, quality, and depth of Linux documentation. It is a hallowed given that programmers hate documenting; how is it, then, that Linux hackers generate so much documentation? Evidently Linux's free market in egoboo works better to produce virtuous, other-directed behavior than the massively-funded documentation shops of commercial software producers.

I'm sure this is all really well known to people by now, but I still find it fascinating and certainly worth sharing and talking about during Global Entrepreneurship Week.

Godin on Upside vs Downside Risk

Seth Godin has a good post about the change that occurs when a firm achieves economies of scale and ceases to be entrepreneurial:

A new restaurant might rely on fresh vegetables and whatever they can get at the market. The bigger, more established fast-food chain starts shipping in processed canned food. One is less reliable with bigger upside, the other—more dependable with less downside.

Here's a rule that's so inevitable that it's almost a law: As an organization grows and succeeds, it sows the seeds of its own demise by getting boring. With more to lose and more people to lose it, meetings and policies become more about avoiding risk than providing joy.

This is another way of saying that firms become less entrepreneurial and it's the reason scholars care so much about hi-growth firms, or so-called gazelles - those companies that go from zero to IPO faster than Tony Stewart's stock car gets up to speed. Once they hit the IPO stage they face a whole different set of problems and usually become more risk averse and boring, as Godin says.

This is also one of the reasons it's been so difficult to find good reprenentation for entrepreneurs in Washington. The people running the most entrepreneurial firms are very busy and are focused on bringing their dreams to reality. They simply do not have time to come to DC to talk to politicians about the cancellation of indebtedness issue, or some other specific and arcane bit of tax policy. Several initiatives from the Kauffman Foundation have tried to alleviate this problem, but it remains. Nevertheless, their latest initiative, Build A Stronger America, will hopefully broaden the audience and stir up the debate about the importance of entrepreneurhsip. And let's not forget that next week is Global Entrepreneurship Week.

Tools not Stuff

PopTech 2009 Social Innovation Fellows from PopTech on Vimeo.

Reimagining the Smithsonian

A call to action: given new ways of learning, how can the Smithsonian Institution be more relevant in a digital age?



Much more on their wiki.

The Pay Pal Wars

I read The Pay Pal Wars upon Tim Kane's recommendation. Radley Balko at Reason wrote a favorable review as well. Do check it out. It's a wonderful look at entrepreneurial individuals and their experiences as they went from startup to IPO. Fascinating reading.

Perhaps I should mention, in order to comply with the FCC and all, that I either purchase books myself or get them from the library, but do not receive free copies or have other incentives to recommend any readings.

Startup Nation

At a recent event Robert Litan of Brookings and the Kauffman Foundation strongly recommended Dan Senor and Saul Singer's Startup Nation. I haven't read it, but it seems promising. If you have an interest though, Dan Senor is speaking next week as part of Politics and Prose speaker series at the Sixth & I Historic Synagogue in Washington, DC. Note that there is a fee associated with the event ($6). Some details about the book from P&P:

Senor, a business analyst, wanted to know how it is that Israel—a country of just over 7 million, only 60 years old, with no natural resources—produces more start-up companies than large, peaceful, and stable nations like Japan or the UK. He and Saul Singer, editorial editor of The Jerusalem Post, attribute Israel’s success to the social networks and leadership training afforded by the nation’s mandatory military service, and to an open immigration policy that continually restocks Israel’s population from people around the world. They note that the Jewish tradition of questioning also fosters openness and self-criticism. Publishers Weekly says this is a book “not just for business leaders and policy makers, but for anyone curious about contemporary Israeli culture.”

Interested readers may also find Innovation and the State: Political Choice and Strategies for Growth in Israel, Taiwan, and Ireland, by Dan Breznitz to be rewarding as well, if a bit more academic.

Impatient Optimists

Bill Easterly is skeptical.

Post hoc, ergo propter hoc

It's also worth recommending this Wired article about Scott Adams.

A Web Database of Social Entrepreneurs on Twitter

Help create a big list of Social Entrepreneurs that use twitter. TweepML aggregates lists of twitter users and are setting up one for social entrepreneurs. You can enter yourself or your group or nominate others. Please participate and make the service more valuable. (HT)

Information Overload

Lots of wisdom in that FT piece. Here's a bit more (FT):

Those under 30 tend to consume media and entertainment in a different way to their older peers: they refuse to pay for content, they like interaction, and they use electronic screens rather than paper. They also use various devices at once, and they want everything accessible via their mobile.

And Tyler Cowen, writing for a special feature in The Wilson Quarterly about "The Future of the Book," touches on similar themes:

The arrival of virtually every new cultural medium has been greeted with the charge that it truncates attention spans and represents the beginning of cultural collapse—the novel (in the 18th century), the comic book, rock ‘n’ roll, television, and now the Web. In fact, there has never been a golden age of all-wise, all-attentive readers. But that’s not to say that nothing has changed. The mass migration of intellectual activity from print to the Web has brought one important development: We have begun paying more attention to information. Overall, that’s a big plus for the new world order.

It is easy to dismiss this cornucopia as information overload. We’ve all seen people scrolling with one hand through a BlackBerry while pecking out instant messages (IMs) on a laptop with the other and eyeing a television (I won’t say “watching”). But even though it is easy to see signs of overload in our busy lives, the reality is that most of us carefully regulate this massive inflow of information to create something uniquely suited to our particular interests and needs—a rich and highly personalized blend of cultural gleanings.

The word for this process is multitasking, but that makes it sound as if we’re all over the place. There is a deep coherence to how each of us pulls out a steady stream of information from disparate sources to feed our long-term interests. No matter how varied your topics of interest may appear to an outside observer, you’ll tailor an information stream related to the continuing “stories” you want in your life—say, Sichuan cooking, health care reform, Michael Jackson, and the stock market. With the help of the Web, you build broader intellectual narratives about the world. The apparent disorder of the information stream reflects not your incoherence but rather your depth and originality as an individual.