Entrepreneurs are made, not born

Here is a nice piece by Vivek Wadhwa in TechCrunch.  Some excerpts:

Entrepreneurs aren’t born, they’re made. And they aren’t anything like you think they are. My team surveyed549 successful entrepreneurs. We found that the majority didn’t have entrepreneurial parents. They didn’t even have entrepreneurial aspirations while going to school.

 VP of Research, Bob Litan, says that Kauffman has learnt conclusively that entrepreneurship can be taught. The key is to provide education at “teachable moments” — when the entrepreneur is thinking about starting a venture or ready to scale it. What entrepreneurs need isn’t the type of abstract course they teach in business schools, but practical, relevant knowledge.  

One of the findings of Kauffman research is that of the appx. 600,000 businesses that are started every year, less than a fraction of 1% become high-growth “scale” businesses. These new firms, especially the “scale” firms, have added all of the net incremental jobs to U.S. economy since 1980 (about 40 million), and probably account for about 1/3 of GDP growth since then. So the key to boosting economic growth is to increase the number of successful high-growth startups. 

But *WHY* is aid expertise not scalable?

My last post, "Aid Expertise is Not Scalable," drew a surprising amount of reaction.  Two former World Bank colleagues said "Amen!"   However, two people I respect a lot (they are leading experts in their field, in fact) replied along the lines of "Maybe, but why not?"

That is a fair question, and the full answer would be a great subject for a book.  

But here are a few thoughts that come to mind:

1. First, expertise in some fields is inherently more scalable than in others.  Civil engineering, for example, is much more scalable, because the technologies to build a bridge are: (a) known with a high degree of confidence; (b) effective in a wide range of contexts, with relatively minor adaptions; and (c) transmittable to other potential experts using a commonly accepted language of mathematical symbols, standards, and procedures.  
2. Economic development is more a social rather than civil engineering challenge.  And the problem is that we don't know very well how to effect the social changes we seek.  To the extent that we do know how to address a certain social challenge in one context, it is often much more difficult to transplant that solution to another context in another country. And even if the solution would work in other contexts, we usually don't have a good and commonly accepted "language" to enable that expertise to be transmitted quickly and effectively to other potential experts.
3. The sheer number of topics on which we need expertise is enormous.  And if we multiply the number of topics by the number of different countries/contexts aid agencies work in...well, you get the picture.  A head hunter called me the other day to say that an international agriculture commission had hired her to find the best one or two "agricultural experts" in the world to act as advisors.  I explained, much to her disappointment, that agriculture covers a huge number of sub-specialities, ranging from seed breeding to soil science, to harvesting and processing.  She needed to pick a speciality, and I would try to deliver the expert.  (Believe it or not, in the late 1980s, I was one of the World Bank's experts on rubber processing in Indonesia, and I knew a lot about that topic but virtually nothing about seeds or soils.  And, to top it off, rubber processing in Asia was at that time different than rubber processing in other countries, so my expertise was of limited use in those places.)

The so-called bloated official aid agencies are not all that big anyway.  IBM has about 400,000 employees worldwide, and HP has about 325,000. What they do is complex, but not compared to the challenges of economic development.  The World Bank, by contrast, has roughly 10,000 employees and is constantly under pressure to shrink rather than grow, based at least partly on the perception that the marginal hire there is not adding value.  Even if the Bank were able to convince its stakeholders that it had figured out how to scale expertise, it is  highly unlikely that it would be able to grow to anywhere near the size of an IBM.

The only practical way to proceed is to abandon the idea that expertise is scalable within aid agencies,  and thus that aid agencies must have the top experts in every field. The current conceit of "expertise-ism" gives aid experts the power (and even responsibility) to decide on the allocation of very large amounts of resources.  This forces them to make judgements about many things about which they possess insufficient information and insufficient expertise.  Deep down, most conscientious experts at big aid agencies feel that this is a heavy and unmanageable burden for them personally, and naturally it leads to a lot of mistakes, even by smart, motivated, and caring experts.

Instead, the aid industry needs to embrace the idea that expertise is only scalable in a highly distributed and localized way within the countries that are trying to develop.  As part of this, we must abandon the idea that each expert must (a) be the creme-de-la-creme in terms of education and qualifications, and even ability; and (b) be correct every time.  Development will occur best if a lot of reasonable smart people experiment with a lot of different things in a decentralized way.  Many experiments will fail, and instead of piling on the criticism and critical evaluations, the system itself must focus its attention and efforts on the things that work, and take those to (the appropriate) scale for the contexts in which they are effective.

The information, feedback loops, and incentives needed for such a change to occur are a topic for another post.  But I will end here by observing that those needs will require a different skill set at aid agencies -  one that helps their experts become the equivalent of orchestra conductors rather than solo performers (or first-chair violins.)  And that is actually an exciting an energizing idea that some of the best aid agency leaders are starting to explore now.

Aid Expertise is not scalable

Someone got frustrated with me the other day for being too "down" on experts in international aid and development. She said she considered herself an expert, since she had worked twenty years on a certain topic. She also pointed out several other people who we both agreed were really smart, and to whom we both look for advice and insights.

I realized that the problem is not that there are no experts - there *are* some real experts out there, and I have worked with many of them. The problem is that expertise is not reliably scalable.

Many aid agencies are structured and staffed based on the assumption that they can reliably find experts who know about each topic and each country the agencies operate in. And then they can rotate these experts among different departments and regions over time to keep them from getting "clientitis."

No agency that I know of has done this effectively. Instead, of every 100 people hired, maybe half are real experts in their field. What happens is that, over time, the agencies convert most of their staff - including their "subject-matter experts" - into "agency experts," which are people who are very good at the arcane procedures and processes needed to move a loan or report through the agencies' own systems.

Mr. Splashy Pants

This is a great Ted video of Reddit's Alexis Ohanian illustrating the challenges - and rewards - of giving up control, even when working on serious issues. Watch it:

Innovation is a Team Sport

Make the first move. Share critical information with others even if they have not given anything to you. Make sure the information is meaningful and customized to that specific individual so that they feel especially obligated to return the favor.

That is from a nice piece by Drew Boyd of Johnson & Johnson titled Reputation and Innovation.  He makes the point that innovation is usually a team sport.  Being effective means you need to share your own information and get others to do the same.

Where innovation comes from

The ideas that power our next generation of growth are just as likely to originate in a coffee shop as in the laboratory of a big corporation.

That is Eric Schmidt in today's Washington Post.  Though he is talking about the US economy in general, the points are perhaps even more compelling for the global development sector, where innovation is exceptionally slow.  Schmidt goes on to say:

[I]nnovation is disruptive and messy. It can't be controlled or predicted. The only way to ensure it can flourish is to create the best possible environment -- and then get out of the way.

Top-down, expert-driven approaches that predominate in much of the aid world cannot tolerate such messiness, and experts find it very hard to "get out of the way."  What are some of the other critical ingredients in innovation?

First, start-ups and smaller businesses must be able to compete on equal terms with their larger rivals.

This is key, too, for international aid, where large contractors and non-profits receive the vast majority of funding. During the 1990s, for example, seven out of the top ten non-profits not only stayed in the top ten but increased their share of the market during the decade.  And the top six percent of non-profits account for four-fifths of the revenue.  But that's not all:

Second, encouraging risk-taking means tolerating failure -- provided we learn from it.

Failure is something that most international aid organizations cannot tolerate.  When I left the World Bank in 2000, pressure from the board of directors led my unit to shoot for an 85% success rate for projects. This target was unrealistic, given the challenges of doing good aid projects. Consequently, many units spent a lot of energy and resources hiding failures or massaging them to make them look like reasonable successes. Worse, such targets discouraged everyone from being innovative, since the likelihood of failure was much higher.

The goal of aid marketplaces such as GlobalGiving and others is to provide access to those in the "coffee shops" as well as the big aid agencies. And we try to provide an environment where success is rewarded but where people who learn from failures are encouraged by donors to keep working at it.

Schmidt's full article is here.

Pepsi's Refreshing Campaign

Our theory of social change is that new ideas are born from optimism, a curious mind and a creative spirit. We can make a difference by equipping people with the means to bring their ideas to life.

If you think the above comes from a leading foundation, that would be a good guess.  But it would be wrong. It comes from a 100-yr. old company: Pepsi.  They have just launched an innovative and maybe even pathbreaking initiative called Refresh Everything. As described in a post by Bonin Bough on Beth Kanter's blog," Pepsi is giving away an unprecedented $20 million in grants and inviting the public to rank the best ideas in an open vote."  


Read the whole thing here.

(We at GlobalGiving are happy to be assisting Pepsi with this program.)