Our Entrepreneurial President?

Based on recent statements and actions, Jonathan Ortmans, Senior Fellow at the Kauffman Foundation, asks if President Obama might just be a champion of entrepreneurs (entrepreneurship.org). He lists a number of good statements and actions and seems hopeful and optimistic that this Administration will fulfill its promise to foster an entrepreneurial economy. The President's own words serve as a rallying cry:

I believe that jobs are best created not by government, but by businesses and entrepreneurs who are willing to take a risk on a good idea. I believe that our role is not to disparage wealth, but to expand its reach; not to stifle the market, but to strengthen its ability to unleash the creativity and innovation that still make this nation the envy of the world.

Source. I too will remain optimistic and hopeful, but a Kauffman survey from last March found, among other things, that entrepreneurs and the general public felt the stimulus bill reflected the wrong approach to recovery:

Several key themes emerged from the findings, providing insight into the American psyche following the economic crash and resulting stimulus package. First, entrepreneurship is gaining recognition as more important than the stimulus package in creating long-term economic stability. Close to half of Americans say that an entrepreneurship initiative is as important as the stimulus package in creating jobs, while only a quarter disagree (Slide: 25). Americans rank innovation and entrepreneurship above free trade, big business, and labor unions in terms of importance to the nation’s economic health (Slides: 3, 4-7). They also see entrepreneurs as more important in creating jobs than big business, scientists, and the government (Slides: 8-11).

But Americans have their doubts that the stimulus package will spur the entrepreneurship that they hold as so important. In fact, a full third of Americans feel that the stimulus package will hurt entrepreneurial activity, while only 21 percent feel it will support entrepreneurs (Slide: 20). And 72 percent think that the government could do more to encourage entrepreneurs (Slide: 22).

There is a clear sense among Americans that the stimulus package in-and-of itself is not going to resolve the serious economic problems facing the country. When asked what would lead us out of the economic crisis, two-thirds favored an alternative, less-costly course of the action: reducing legal barriers and red tape for new business development (Slide: 12). Two-thirds say encouraging new business development and other entrepreneurial activity (Slide: 13). And 63 percent say that giving incentives to individuals is the way to improve the economy, as opposed to only 23 percent who think that allowing the government to create jobs is better (Slide: 16).

While the President's statements reflect these views, he still must work with Congress to get his policies through. The reason I used the David Brooks quote in my previous post is because there is an interesting debate going on about how aggressive the Administration should be in drafting its own legislation. Tim Kane ably sums up:

Rather than specify a solid framework for legislation (on immigration, on Social Security, take your pick), the new way to kill your own agenda is to talk up general principles and leave Congress to craft actual legislation. Without clear leadership (and not just behind the scenes), the modern result is acrimony. Inside the beltway, the Clinton health care experience remains a searing lesson in the "wrong way" -- overly strong presidential specificity. But the lesson has been overlearned. What the Clintons did wrong was to hijack the legislative process with a massive semi-secret commission. That wasn't leadership. Somewhere between being a control freak and a mere rhetorician is the golden mean of presidential leadership.

We are looking at creating a number of sweeping policy changes while already engulfed in record budget deficits (I am not suggesting these are the President's fault). The Administration's economic forecasts call for a significant recovery and commensurate surge in revenue. By contrast, most private forecasters are expecting a much slower rate of recovery. When revenues do not materialize, we will have to find revenue from alternative sources. Congress has found that its rhetoric in the "rates vs. base" debate resonates with many voters and will likely go after big business and high income individuals to meet its revenue shortfall. Whether you think this is good or bad, there are limits to what can be accomplished simply by raising rates or creating new taxes like a VAT. More importantly, these debates do not bring us any closer to reducing barriers to entry, encouraging new business formation, and creating a more dynamic and prosperous economy. Here's hoping the President's message about the importance of innovation, creativity and our entrepreneurial spirit will not be lost along the way.

Public Choice

David Brooks writes (NYT):

The great paradox of the age is that Barack Obama, the most riveting of recent presidents, is leading us into an era of Congressional dominance. And Congressional governance is a haven for special interest pleading and venal logrolling.

Philanthropy and Markets

Alex Tabarrok reviews The Blue Sweater by Jacqueline Novogratz. I had reservations about the book based on a few reviews, but Alex changed my mind. This part perfectly captures the work of Zoltan Acs and coathors:

[...] but by investing in entrepreneurs who must listen to their customers a charitable venture-capital firm can multiply the effectiveness of its philanthropy.

There is a powerful role both for the market and for philanthropy...Philanthropy alone lacks the feedback mechanism of markets, which are the best listening devices we have; and yet markets alone too easily leave the most vulnerable behind.

New Issue of Innovations Journal

The Spring 2009 issue is out. It is focused on "Resilience in a Turbulent World." You'll find it here, and several articles are online for free.

Table of Contents: Resilience in a Turbulent World

Lead Essays

• The Upside of the Downturn: How Sustainable Banking Can Deliver a Better Future, by Peter Blom


• Collective Leadership and Overlapping Vital Interests: The Unrealized Power of Megacommunities, by Reginald Van Lee, Mark J. Gerencser, Chris Kelly, Robin Portman

Cases Authored by Innovators

• Changing the Landscape of Power (Innovations Case Narrative: Amazon Conservation Team), by Mark J. Plotkin


• A Conservation Ethic in Practice: Preserving Cultural and Biodiversity by Bridging the Generational Knowledge Base (Innovations Case Discussion: Amazon Conservation Team), by Norka Ruiz Bravo


• Kiva at Four (Innovations Case Narrative: Kiva), by Matt Flannery


• Building on Kiva's Success: Can Kiva Lenders Influence U.S. Foreign Aid Policy? (Innovations Case Discussion: Kiva), by Sam Daley-Harris

Analysis

• The Economics of Branchless Banking, by Ignacio Mas


• Designing Mobile Money Services Lessons from M-PESA, by Ignacio Mas and Olga Morawczynski


• Best Responders: Post-Katrina Innovation and Improvisation by Wal-Mart and the U.S. Coast Guard, by Steven Horwitz


• Identifying Disruptive Innovation: Innovation Theory and the Defense Industry, by Peter Dombrowski, Eugene Gholz

Perspectives on Policy

• Creative Discovery: Reconsidering the Relationship Between Entrepreneurship and Innovation, by Dane Stangler


• Insure to Assure: A New Paradigm for Nuclear Nonproliferation and International Security, by Erwann O. Michel-Kerjan, Debra K. Decker

Regulations and Mandates

A look at the new mandates and regulations from the climate change bill (HT). Apparently it was produced yesterday, before another 300 pages (roughly) were added to the bill text. Only special interests can love charts like this.

Crisis Timelines

Both the NY Fed and the St. Louis Fed have excellent interactive timelines of the recent credit crisis and recession (worth pointing out since the NY Fed has received more love from bloggers). Printed, the SLF timeline is 28 pages, so you might just browse through it online.

For a view from inside the Fed itself, Chairman Bernanke's Jan 13, 2009 speech, The Crisis and Policy Response, provides an overview of where the Fed's been and what it plans for the future. As I write this the Fed's balance sheet is just under $2 trillion (up about $1.1 trillion from a year ago) and banks are still keeping their money safe with the Fed. To get a sense of this, look at the Fed's H.3 release, Aggregate Reserves of Depository Institutions and the Monetary Base. Banks are required to hold just over $56 billion with the Fed but instead currently have over $790 billion in reserves (down a bit, which is good). Normally they would have around $2 billion in excess reserves.

We are starting to see more details of how the Fed will unwind, but until we see how it actually goes, and how quickly they respond to growing threats of inflation, the markets will likely remain on edge and talk of "green shoots" and such seems really premature. The upcoming nomination for the Chairman of the Fed will be an important signal. Despite being "their guy," a vote for Bernanke is a vote for price stability while a vote for Summers (or whoever else) is really a vote for inflation and easy money. Lots to watch for in the coming months.

International Benchmarking

Gary Philips, an education specialist at the American Institutes for Research (AIR), has been to the Department of Education and on Capitol Hill briefing committee staff about a new international grading index that measures local performance against the world. His briefing is based on a new research paper (pdf).

From last week's press release:

This new approach to benchmarking simplifies international comparisons by grading the countries, states and school districts with a comparable system that is more familiar to policymakers – grades of A, B, C, D, or BD (below a D). The study assumes that the international benchmark, against which we should calibrate our expectations and monitor our success, is a grade of B.

The report, issued today by the American Institutes for Research (AIR), based on international performance benchmarks in math for 4th and 8th grade students concluded that only 4th graders in a handful of states – among them Massachusetts, Minnesota, New Jersey, New Hampshire, Kansas and Vermont – are learning at B or B- levels when compared with students internationally.

At Grade 8, only Massachusetts achieves a grade of B.

There is little support for any such benchmarking at the school district level, since administators don't want to admit how their schools are actually faring, nor do they wish to "bow to indernational standards." That doesn't mean it's a bad idea.

You can compare how your state does here.

Twitter for Social Entrepreneurship

The Edge, a blog at social edge, lists the top 100 twitter authors you should follow if you want to keep up with social entrepreneurship news and analysis by the minute. There are a bunch of bonus twitter folk to follow as well. It is a thorough list, so it's good they list the top 20 you really need to follow.

Assorted Links

1. More on Low-Profit Limited Liability Companies. Larry Ribstein (ideoblog) believes you can accopmlish the same thing as an L3C under the existing LLC statutes by altering the operating agreement. I believe transactions costs are high however, but his points are important. Professor Bainbridge has some thoughts as well.
2. 5 common problems with business plans and how to fix them (WSJ).
3. President Obama's approval rating, as judged by small business entrepreneurs (Business Week).
4. Andrew Gelman in American Scientist, writing about Sex, Beauty and Power. And yes, statistics. It is of interest because of its focus on how exaggerated claims get amplified by the news media (article, blog post).

The Flaw of Averages

I am currently reading The Flaw of Averages by Sam L. Savage, on a friend's advice. Savage is a CS professor in Stanford's Engineering School. He wrote a piece for the San Jose Mercury News in 2000 with the same title that gives a good sense of what the book is about. Here is the Amazon page as well.

"Shrinking Cities"

Ed Glaeser and Richard Florida both have interesting things to say about the Telegraph piece, "U.S. Cities May Have to Be Bulldozed to Survive."

The Low-profit Limited Liability Company

BusinessWeek continues its excellent coverage of social entrepreneurship with a profile of Bikestation, a bike transit station management company. Like many nonprofits, Bikestation ran into some financing problems at the end of 2007.

Bikestation's board decided the best way to meet growing demand and expand the venture was to turn it into a for-profit company. "We just didn't have the resources to expand the mission and the vision further," says Andréa White-Kjoss, who joined the nonprofit as CEO in 2004.

The article goes on to discuss the complicated licensing arrangements that the for profit company ended up reaching with the old nonprofit, which exists now mostly as a holding company; it's a complicated relationship that only a lawyer could love. This brings up the really fascinating part of the article. Because many nonprofits are having financial trouble because of the credit crunch (see this excellent piece, which links to a Johns Hopkins survey of foundation lending patterns), there is a growing demand for hybrid business models that allow for a greater range of financing options. Going the for-profit route has clear benefits because of our developed institutions of entrepreneurial finance, but many nonprofits fear their credibility will be damaged along the way.

While there is a tendency to view the world in binary terms, entrepreneurship creates both private gain and social value. However, there is a general resistance to this view and many believe that only nonprofits create social value. Our legal code reflects this separation and has not kept up with the rise of social entrepreneurship. One recent exception is the creation of the low-profit limited liability corporation (L3C). From BW:

One new form, known as the Low-profit Limited Liability Company (or L3C), is intended for companies that put their missions before profits. The structure lets them qualify for "program-related investments" from foundations—loans or investments that further a foundation's goals and also may yield financial returns. First adopted in Vermont in April 2008, the L3C is now also on the books in Michigan, Utah, and Wyoming. There are 53 L3Cs in Vermont and a handful in other states so far.

There are several good discussions of L3Cs around the web. As always you can try Wikipedia, but also see the Nonprofit Law Blog and Gaebler's Resources for Entrepreneurs. L3Cs are currently limited to a handful of states and the Crow Indian Nation, but several other states are moving in a similar direction. An interesting complement to this legislation is B Lab, which certifies, through standards, that companies do indeed have a social mission that is embedded in corporate governance documents. This certification is meant to differentiate firms from the growing number of green and cause marketing campaigns.

Corporate governance is becoming a vibrant field and it would be good to see the Office of Social Innovation put out a white paper on some of these changes and new movements.

I find all of this fascinating and have been doing some research on the organizational structure of firms and the implications for social entrepreneurship, so this article captured much of what's been on my mind lately. Any thoughts?

Recent NBER Research

The most recent issue of the NBER Reporter was just released and has a wealth of information and great summaries of recent work. Readers of this blog might be interested in two sections of the Reporter that list papers presented at recent conferences and meetings . Each page has a summary of the papers that were presented or discussed. Some that readers of this blog might find interesting:

Innovation Policy and the Economy: The NBER’s tenth annual Conference on Innovation Policy and the Economy took place in Washington on April 14. The conference was organized by NBER Research Associates Adam B. Jaffe of Brandeis University, Joshua Lerner of Harvard University, and Scott Stern of Northwestern University.

Cities and Entrepreneurship: An NBER Conference on Cities and Entrepreneurship, organized by Edward L. Glaeser, NBER and Harvard University, Stuart Rosenthal of Syracuse University, and William Strange of the University of Toronto, took place in Cambridge on May 1 and 2.

Program on Technological Progress and Productivity Measurement: The NBER’s Program on Technological Progress and Productivity Measurement met in Cambridge on March 20. Ernst R. Berndt, NBER and MIT, and Christopher R. Knittel, NBER and University of California, Davis, organized the meeting.

Education Program Meeting: NBER’s Program on Education met in Cambridge on April 30. Program Director Caroline M. Hoxby of Stanford University organized the meeting.

Higher Education: The NBER’s Working Group on Higher Education met in Cambridge on May 1. Director Charles T. Clotfelter of Duke University organized the meeting.

The full list of conferences and the full list of meetings. There is much more to explore and far too little time.

The Economics of Networks

I think this is a pretty cool looking car. Here's Engadget's description:

A little car from up-start Riversimple looks set to deliver the equivalent of 300 mpg, running on hydrogen and utilizing a network of small fuel cells to power four motors, one per wheel. The recently unveiled prototype manages 240 miles on just 2.2 lbs of hydrogen, has a top speed of 50 mph, seats two (reasonably) comfortably, and looks a little like a smiling, new-age Citroen 2CV -- but will hopefully be a more enjoyable to drive.

Pretty exciting right? Well, it might be nice if they would trade off some efficiency for more power (50 mph?!!), but in general it's pretty cool. But we are unlikely to see it anytime soon, for reasons Bhaskar Chakravorti makes clear in Innovation Without Borders:

[...] it is highly unlikely that hydrogen powered vehicles will become the standard anytime soon. A key challenge will be the absence of a system of re-fueling stations that such automobiles can use to replenish the hydrogen used up. But such stations will not be built and the distribution networks will not be in place until there is a strong expectation that there will be sufficient demand. In the absence of the stations, the demand will not materialize, and the automakers will not accelerate their plans for rolling out hydrogen powered vehicles. This circular dilemma is a natural outcome of any “two-sided market”, where each side must wait on the other. The challenge gets exacerbated when there are many sides to the market.

That's just a basic economic analysis, and since the Riversimple isn't even for sale yet, if it ever will be, I guess I shouldn't be disappointed. Yet I am. Sometimes the diffusion of innovation takes way too long.

The Value of Business Plans

A while back David Miller did a post on the value of business plans based on some research out of the University of Maryland (Campus Entrepreneurship). From a NYT piece about the research:

Researchers found that venture capitalists, who screen hundreds or thousands of solicitations each year, pay little or no heed to the content of business plans. Instead, the study said, because they make decisions “under conditions of high uncertainty,” venture capitalists rely on instinct and their expertise in ferreting out information by other means to evaluate the prospects of a business.

David pointed out correctly, I think, that this study looks at how VCs use the plans, not on the value of the plans to entrepreneurs, bankers, potential partners, and others. There is a clear value to entrepreneurs because the bplan forces them to think concretely about the potential business. A good plan is really the culmination of hours spent doing market research, thinking about potential profit streams, identifying the target audience, and so on.

An interesting new study in the Academy of Management Journal by Xiao-Ping Chen, Xin Yao, and Suresh Kotha looks at the role of entrepreneurial passion in securing funding from VCs. The summer issue of the Stanford Social Innovation Review has a good write up of their findings:

"There are different levels of passion," explains Xiao-Ping Chen, a professor at the University of Washington's Foster School of Business and the study's lead author. "On the surface level - affective passion-you see whether people are excited, whether their faces light up. A deeper level is their cognitive processes - how much and how deeply they think about their idea. An even deeper level is behavior: Did the entrepreneurs, say, quit their jobs to start their own business? How much of their own money did they invest?"

To test whether and what kinds of passion win venture funding, Chen and her colleagues first created scales that observers could use to rate other people's cognitive and affective passion. (The scale does not measure behavioral passion.) They then asked 55 investors hailing from venture capital firms, banks, and financial companies to use the passion scales in rating 31 presentations at a university business plan competition. The researchers found that the more prepared - that is, cognitively passionate - the entrepreneurs, the more likely they were to win funding from the judges. Affective passion, however, did not lure the lucre.

I think this really captures the value of business plans. VC's can tell whether someone really put in the time and due diligence when preparing a plan, and I think this is what they're looking for when vetting potential companies. So be wary of skipping over this important step. To be fair, you could argue that as long as you really know what you're talking about, the BP may not matter as much, but the write up is still a demonstration of determination and will to succeed. Putting in the time really could make the difference between getting funded or not.

I couldn't find any free copies around, so I'll just include the relevant citations:

Xiao-Ping Chen, Xin Yao, and Suresh B. Kotha, "Entrepreneur Passion and Preparedness in Business Plan Presentations: A Persuasion Analysis of Venture Capitalists' Funding Decisions," Academy of Management Journal, 52(1), 2009.

Alana Conner. "Think Passionate," Stanford Social Innovation Review, 7(2) 2009.

For a discussion of the UMD research, check out this page, which contains a synopsis and video interview with lead author Brent Goldfarb.

The Limits of Control

Leonard Mlodinow's recent book, The Drunkard's Walk: How Randomness Rules Our Lives, is a look, as the title suggests, at how the mathematical laws of randomness affect our lives. It covers probability theory in the first half and statistical inference in the second, all while giving a whirlwind tour of the history of mathematical ideas. All of this is done with little actual math and at an accessible level. More important, the book is engaging and fun to read.

William Easterly dedicated several posts to the book, and in one he relayed this interesting story (aid watch):

Laboratory experiments show that rats outperform humans in interpreting data, which is why we have today the US aid agency, the Millennium Challenge Corporation. Wait, I am getting ahead of myself, let me explain.

The amazing finding on rats is described in an equally amazing book by Leonard Mlodinow. The experiment consists of drawing green and red balls at random, with the probabilities rigged so that greens occur 75 percent of the time. The subject is asked to watch for a while and then predict whether the next ball will be green or red. The rats followed the optimal strategy of always predicting green (I am a little unclear how the rats communicated, but never mind). But the human subjects did not always predict green, they usually want to do better and predict when red will come up too, engaging in reasoning like “after three straight greens, we are due for a red.” As Mlodinow says, “humans usually try to guess the pattern, and in the process we allow ourselves to be outperformed by a rat.”

Yesterday Mlodinow had an interesting blog post at the NYT's Happy Days blog about our need for control, especially during temultous times. It's worth a quick read. On a more offbeat note, Mlodinow, who is a physics professor at CalTech, was also a writer for Star Trek: The Next Generation. Here is a recent Newsweek article about that experience and Hollywood economics more generally.

Below is his book talk at Google:

Group Versus Individual Microfinance Lending

Group lending was one of the mechanisms that got microfinance off the ground, so we shouldn't dismiss its importance, if only it historical importance. But a new paper by Xavier Gine (World Bank) and Dean S. Karlan (Yale and MIT) takes an interesting look at its impact, using modern randomized trials and all that. The authors find that repayment rates do not vary in their trials between group and individual liability, but that groups are harder to form under the latter regime.

It's worth noting that groups do increase social capital and facilitate new forms of social entrepreneurship because they provide an infrastructure that outside groups can utilize. This can help target an innovation and also lead to a faster and wider diffusion of new technologies. Below is the abstract for the paper, Group versus Individual Liability: Long Term Evidence from Philippine Microcredit Lending Groups.

Group liability in microcredit purports to improve repayment rates through peer screening, monitoring, and enforcement. However, it may create excessive pressure, and discourage reliable clients from borrowing. Two randomized trials tested the overall effect, as well as specific mechanisms. The first removed group liability from pre-existing groups and the second randomly assigned villages to either group or individual liability loans. In both, groups still held weekly meetings. We find no increase in default and larger groups after three years in pre-existing areas, and no change in default but fewer groups created after two years in the expansion areas.

What a Difference a Day Makes

The blog Knowing and Making has two posts dedicated to Paul Krugman's recent lecture at the LSE. Among much good commentary, I thought this part was interesting:

Yesterday, this link read:

June 8 (Bloomberg) — The U.S. economy probably will emerge from the recession by September, Nobel Prize-winning economist Paul Krugman said.

“I would not be surprised if the official end of the U.S. recession ends up being, in retrospect, dated sometime this summer,” he said in a lecture today at the London School of Economics. “Things seem to be getting worse more slowly. There’s some reason to think that we’re stabilizing.”

Today, the very same page reads:

June 9 (Bloomberg) -- Nobel Prize-winning economist Paul Krugman said damage from the U.S. recession may persist “for a very long time,” with no clear engine for renewed growth.

“I’m really quite scared that we could muddle along,” Krugman said in a lecture today at the London School of Economics and Political Science. “I really do see the possibility of a global version of the Japanese ‘lost decade’ without the prospect of an export-led recovery. This could be unpleasant for a very long time.”

Transforming Math and Science Education

From Carnegie's Institute for Advanced Study:

In a new report, The Opportunity Equation: Transforming Mathematics and Science Education for Citizenship and the Global Economy, the Carnegie-IAS Commission on Mathematics and Science Education challenges the nation to mobilize for coordinated action to:

• Establish common standards for the nation in mathematics and science—standards that are fewer, clearer, and higher—along with high-quality assessments

• Improve math and science teaching—and our methods for recruiting and preparing teachers and for managing the nation’s teaching talent

• Redesign schools and systems to deliver excellent, equitable math and science learning

A shorter executive summary is here, and Inside Higher Ed has more info here. On a related note, apparently President Obama has become despondent over the state of American education. You can see all the details in the video below.

How Many Fortune 500 Companies Were Started During A Recession?

That's the question that drives a new research paper (The Economic Future Just Happened) from the Kauffman Foundation, written by Growthology blogger Dane Stangler. Dane finds that about half of future Fortune 500 companies were founded during a recession. As he writes:

This, in and of itself, is remarkable. But it also turns out that the Fortune figure, when broken down by decade and when looked at in the context of recent Census papers that Kauffman has helped fund, fits neatly into a narrative of the American economy moving from the bureaucratic capitalism of Galbraith's New Industrial state to the entrepreneurial capitalism of the past two or three decades (and the entrepreneurial capitalism of a prior era). The composition of the companies on the Fortune list is rather dynamic (surprisingly, I think), but even more importantly, startups have been enormously important in terms of job creation. Without startups, we would have had only a handful of years in which overall net job creation in the economy was positive.

You can find additional coverage at RealClearPolitics, which is teaming with Kauffman to cover entrepreneurship.

The Death of the Big Three

I posted this earlier but it is worth revisiting given recent events with Chrysler and GM:

Richard Florida on the inspiration for his concept of the Creative Class:

I have long said that the inspiration for my theory of the creative economy isn’t hip cities, or gay neighborhoods, or even Apple or Google. It comes from my early, ground-level studies of Toyota where top management essentially told me more than 25 years ago: “We will win and the Big Three will lose. The problem is in your heads and the way you manage. You think the key to success is having a big-shot CEO, lots of engineers, and scads of high-priced MBAs. We know better. The key to our success lies in mobilizing the collective knowledge, intelligence, and creativity of our factory workers.” [emphasis added]

From an excellent post.

On a more humorous aside, P.J. O'Rourke's been all over the media (NPR, WSJ) about the end of our love affair with the automobile. He is also promoting his new book, Driving Like Crazy, which sounds like a wonderful summer read.

The Global Spread of Mobile Phones

From Techcrunch:

A new report from Juniper Research forecasts that by 2014, annual sales of low-budget mobile devices will rise to north of 700 million units, up 22% from this year. The report goes into the various schemes that have been implemented to help ‘connect the unconnected,’ or the estimated 3 billion people on the planet that do not own mobile phones.

According to Juniper’s report, of which you’ll find a summary in this free whitepaper, entry-level devices (Nokia’s definition for phones that sell for less than $60) accounted for 45% of total global shipments in 2008, which translates to 535 million units. However, Juniper also says ULC devices (ultra low-cost or devices selling for $5 on average) were only a fraction of those but growing in importance quickly. By 2014, Juniper forecasts low-cost devices to account for over 50% of all devices sold worldwide each year. Of the 700 million low-cost handsets expected to be sold in 2014, Juniper Research believes around 24% will be sold in Africa and the Middle East.

We've talked about this a few times but mobile phones serve an important role in development and are not spreading just in the developed world. It may be difficult to get away from thinking about the iPhone and hyper-tech savvy Japanese teenagers, but a whole generation of poor entrepreneurs are creating new markets through the use of mobile telephony. See the recent issue of Innovations on "Mobilizing Markets" for more (link will take you to pdf).

Elderly Entrepreneurship

BusinessWeek chronicles the rise of elderly entrepreneurship:

A combination of economic volatility as well as the growing number of baby boomers with time, energy, and money on their hands has redefined the starting age for new startups and has led to a surge in senior citizen entrepreneurs. This is a category that is only recently being studied. Five years ago, Boston's Putnam Research reported that some 7 million previously retired Americans had returned to work. Similarly, a 2005 study by the Center on Aging & Work/Workplace Flexibility at Boston College found that workers 50 and older are more likely than younger folks to own their own businesses.

Ting Zhang, a former PhD student at GMU was awarded a Kauffman Fellowship as a student to study this topic. She completed her dissertation and graduated in 2008. Since then she has successfully published her dissertation as, Elderly Entrepreneurship in an Aging US Economy: It's Never Too Late.

I've meant to recommend it, but now seems like the perfect time. I would say this remains an understudied area and her work is an important contribution. You can read the first chapter here (pdf). Hopefully BW continues work on this area and they certainly could do no better than by getting ahold of Ting's book and interviewing her.

The abstract:

The study of elderly entrepreneurship and its potential impact on labor, Social Security funds and regional economic growth is of significant importance, particularly for the US economy where population aging coincidentally intersects with the economic shift to a “knowledge economy”. On the one hand, aging, combined with a declining average retirement age, is expected to result in labor force shortages and Social Security fund exhaustion; yet on the other hand, the “knowledge economy” could elevate the value of elderly human capital as the “knowledge economy” is less physically demanding and more human-capital- and knowledge-based.

Building on the utility maximization theory, economic growth theories and social theories of aging, this timely book addresses the old-age effect on entrepreneurial propensity; the sources of seniors' entrepreneurship, including the social and policy variables affecting seniors' entrepreneurship; and the economic, fiscal and labor impacts of elderly entrepreneurship.

Memorization

Intern 1: I'm not good with numbers.
Intern 2: Oh, I'm really good with numbers. Just not the times tables. I gave up on those.
Intern 1: That's okay, memorization is for baby boomers.
Intern 2: I know, right? I had to go to some research seminar last year. It was total bullshit. I mean, maybe back before the internet...
Intern 1: But you can just look stuff up on Wikipedia now. I mean, I can learn more in twenty seconds than I could from reading books.
Intern 2: I totally agree.

Intern 1 was also quoted as saying her History of Mass Media class was really targeted towards 'older people' as she already knew the history of TV.

On the bright side I guess it's good Wikipedia is constantly improving (HT).

The President and Microfinance

Social Earth points out that the President's speech also included a section on the importance of human capital and how wasteful it is that some of us do not give women a choice over whether they would like to become educated. Along the way he mentioned his support for microfinance:

Our daughters can contribute just as much to society as our sons, and our common prosperity will be advanced by allowing all humanity - men and women - to reach their full potential. I do not believe that women must make the same choices as men in order to be equal, and I respect those women who choose to live their lives in traditional roles. But it should be their choice. That is why the United States will partner with any Muslim-majority country to support expanded literacy for girls, and to help young women pursue employment through micro-financing that helps people live their dreams.

The Future of Education

Singularity University starts classes towards the end of the month (June 29). From the FT:

More than 1,200 applicants have expressed interest in attending; 40 will be selected for the first term; $25,000 a person covers tuition, room and board. The inaugural class will be a mix of graduate students and businessmen and women with time to spare. Classes are eight hours a day, six days a week.

David Miller has a must-read post over at Campus Entrepreneurship that delves into more detail about the program. Also see Ray Kurzweil's Ted Talk from 2006.

Hopefully this serves as a model for future experimentation. How many people would be willing to pay $25,000 for 10 weeks of entrepreneurship education? Any takers? What if it were arranged by KKR or another Sand Hill Road venture capital firm in conjunction with Stanford? Since venture capitalists don't seem to be doing any IPOs these days, this might not be a bad option.

Could you imagine being taught how to prepare a business plan by a venture capitalist? Or learning about growth theory from Paul Romer? The possibilities quickly boggle the mind. How about a program focused on social entrepreneurship taught by academics and experts like Bill Drayton? So much potential and we're only seeing the very beginning of what promises to be an exciting series of innovations in education.

A New Beginning

As part of the President's speech in the Middle East, he discussed the role of science and technology and of entrepreneurship and social entrepreneurs:

On economic development, we will create a new corps of business volunteers to partner with counterparts in Muslim-majority countries. And I will host a Summit on Entrepreneurship this year to identify how we can deepen ties between business leaders, foundations and social entrepreneurs in the United States and Muslim communities around the world.

On science and technology, we will launch a new fund to support technological development in Muslim-majority countries, and to help transfer ideas to the marketplace so they can create jobs. We will open centers of scientific excellence in Africa, the Middle East and Southeast Asia, and appoint new Science Envoys to collaborate on programs that develop new sources of energy, create green jobs, digitize records, clean water, and grow new crops. And today I am announcing a new global effort with the Organization of the Islamic Conference to eradicate polio. And we will also expand partnerships with Muslim communities to promote child and maternal health.

Innovations had a case study of an Egyptian social entrepreneursip venture (Sekem) earlier, but in general there are not a lot of organizations that really fit this mold (see this special issue of Innovations focusing on the Middle East). Perhaps a partnership will help. We will have to follow these initiatives closely.

In case you haven't seen the speech or read the text:

Fewer Placements in Finance

Via Greg Mankiw, fewer Harvard seniors heading out to finance and consulting careers and are instead looking towards non-profit and public service oriented careers (the Crimson):

More seniors indicated that they would be working in the fields of education and health care. The large increase in the number of seniors entering education—from 10 percent to 15 percent in the past year—likely reflects the popularity of programs like Teach for America, which received applications from a record-setting 14 percent of Harvard seniors, according to data released by the organization. Similarly, the number of people entering health care doubled, rising from 6 percent last year to 12 percent this year.

[...] When asked what career they would choose if finances were not a concern, a plurality of Harvard seniors chose the arts, with 16 percent indicating it as their “dream” field. Similarly large numbers of students chose public service (12.5) and education (12), while finance and consulting trailed with five percent each.

Creative Destruction

This was too great to pass up. Flickr photo from misanthropicnic used under CC license.

The Social Value of Microsoft

We talked about an earlier version of this paper a while back, so now it is good to see that GMU Professor Zoltan Acs and PhD student Joseph Sany have published “The Cases of Muhammad Yunus, Grameen Bank and Bill Gates, Microsoft” in the book Measuring the Social Value of Innovation, volume 19 of the Advances in the Study of Entrepreneurship, Innovation, and Economic Growth series, edited by Gary D. Libecap.

Talk About Well Deserved

At Yale University's commencement services this week, Ashoka founder and creator Bill Drayton was awarded an Honorary Doctor of Humane Letters, an honor that he shares with previous recipients Steven Spielberg, Cole Porter and Robert Frost to name a few.

From the newly redesigned Changemakers site. Beyond being a recognition of his career's work, this is also a recognition of the growing importance of social entrepreneurs.