Posted by Preparing for the Drucker Forum titled “The Entrepreneurial Society” a question arose in my mind: is an entrepreneurial society the same as entrepreneurial economy? Are we confusing the State’s role in these two?
This is not a trivial question. An economic system, while certainly complex, can be steered using a relatively structured process. And individual entrepreneurs – even if governments try to depress them – will always find a way to lift their head above water and come up with a great, executable idea.
The role of government through what can be called “economic policy” is pretty straightforward. To facilitate an economy where small, disruptive businesses can grow and operate side by side with large, established enterprises, governments have a standard toolbox:
- Tax policy: encourage investments in entrepreneurial businesses; encourage investments in new product development; facilitate favorable tax treatment for “liquidity events”
- Corporate law: make it easy to establish a new corporation, as well as to liquidate and dissolve a failed one; design bankruptcy laws such that entrepreneurs and their investors can sustain the risk of a failed idea or company; make M&A law practical and simple to follow through
- Labor law: make it easy to hire and even easier to fire; allow for simple and flexible treatment of salary structures and compensation vehicles (such as stock options); allow for a flexible workday and workweek; allow for the mobility of social benefits programs when employees change jobs
- Fiscal policy: subsidize the cost of entry to new industries, or technologies, or new types of businesses, either through lower entry cost or higher realization (“exit”) benefits. The Israeli government Yozma program was an innovative example how to jumpstart a venture capital economic ecosystem.
But society is a different story. Society embodies so many intangible qualities that make it what it is.
In the great ecosystem we’re all part of, society is the earth, the ground which you expect to be fertile. Only on fertile ground can individual trees grow as entrepreneurs, sometimes using the economic and regulatory systems to leverage growth, sometimes finding a way to reach the sky despite them. And while even in the desert of resourceless or restricting economies you’ll find the occasional tree, the more fertile the ground – the more trees will grow.
The essence of this is that laws and regulations, while essential, are not sufficient to foster an entrepreneurial ecosystem. Government must enable and provide a fertile ground, not a stretch of asphalt – and that ground is society itself. And society is driven by subtler things than just laws and regulations.
But how does society become entrepreneurial? How does society become the fertile ground for widespread innovation and entrepreneurship? I argue here that the main aspect of that is culture, and not legislative policy.
You may ask, then: what’s the culture of entrepreneurship and what are the cornerstones based on which can governments possibly design it?
Cornerstone 1: not only is it legitimate to “get rich quick” – it is acceptable, even cherished. In Israel, as in Silicon Valley, China and other places – a young person with a new fashionable car, photos in the “high society” section, as well as a sudden mention of a significant charitable contribution – is a role model, an aspiration.
Not only does the press highlight newly successful entrepreneurs – In Israel the Prime Minister has been photographed calling entrepreneurs whose company has just been sold, or gone through an IPO – and congratulating them. Everyone saw that – and a message was planted.
Cornerstone 2: failure is not a reason to be ashamed – and not a reason to avoid hiring someone. The trivial saying “those who don’t try never fail” is a mantra in entrepreneurial societies. But that saying implies a great truth: you certainly can’t succeed if you don’t try. And if you fail – learn from it and try again. When one observes the press and media in entrepreneurial societies – it’s easy to notice that even as successful entrepreneurs are cherished, those who have failed are mentioned as well, but not in a negative fashion.
And when you apply for a government grant or another type of economic stimulation for your new business, or seek a new job – past failure is not a prohibitive factor.
Cornerstone 3: it’s very acceptable to move quickly from one job to another, in search of the successful entrepreneurial business. Employees are not shy about it; employers almost condone it. Your friends (and your parents) accept it.
All government has to do is signal that’s acceptable by making pension and social benefits very easily transferrable.
Cornerstone 4: challenging the way things are is embedded in the culture. Kids and adults are encouraged not only to ask “why” – but to proactively seek and suggest their alternatives. What in some cultures seems as misbehaving, in entrepreneurial societies is considered a virtue.
In the Israeli military, special forces units are adored not because they can run 50k with 50kg on their backs, but because they’re considered as creative barrier busters, who will find a way to circumvent. That’s another “institutional” way to signal that’s OK, in addition to rewarding such attitude throughout school.
Cornerstone 5: you may not study physics at kindergarten – but you’ll certainly study entrepreneurship! In the public education system in Israel, students from k-to-12-to college-to grad school experiment with entrepreneurship and innovation. You can see first-graders sell their invented merchandise during teacher-parent days; many high schools hold business plan competitions; and the best universities in the country compete on the quality of their entrepreneurship programs and their availability to the entire student body.
Here, the public education system designs the psyche and culture of whole generations.
Imagine such a culture – and you can imagine the fertile ground from which numerous entrepreneurs emerge. Most fail and try again, some succeed and go on, and others are hired by large global corporations in order to foster “intrapreneurship” – disruptive growth from within.
It’s not that the entrepreneurial society is without challenges. Encourage it too much – and it may come at the expense of a solid, profitable, large company-based economy. But the entrepreneurial society is possible, it’s happening, and it – like the economy as a whole – can be steered and encouraged by the state.
The regulatory framework can ease the way for an entrepreneurial ecosystem to emerge. But it is the societal and cultural ecosystem which determines whether a country will have an entrepreneurial society. The State can – and must – encourage that culture.
About the author:
Eyal Kaplan was a managing partner with and Israeli venture firm for almost 20 years. In recent years he has focused on working with companies and investment firms on growth-through-innovation strategies.