Vikas Shah, Thought Economics, January 2013
"...Over 28% of all the 'history' made since the birth of Christ was made in the 20th century." noted the Economist in June 2011, adding "... Measured in years lived, the present century, which is only ten years old, is already 'longer' than the whole of the 17th century. This century has made an even bigger contribution to economic history. Over 23% of all the goods and services made since 1AD were produced from 2001 to 2010..." Google's Executive Chairman Eric Schmidt also notes that, "...every two days now we create as much information as we did from the dawn of civilization up until 2003."
The evident growth in humankind led early economists such as Thomas Malthus to foresee a future of doom for our burgeoning civilisation. "Extermination, sickly seasons, epidemics... and gigantic inevitable famine..." were considered near-certain as a result of an increase in human density on our planet. The truth is that Malthus (and his counterparts) were (largely) wrong. While the astonishing growth of our species' numbers over the past century has come at a heavy price (resulting in hunger, conflict and more)- it has also delivered incredible economic and social growth. As at March 2012, the combined market capitalisation of the 10 largest companies in the world was US$ 2.86 trillion- the equivalent of around 50% the size of the entire world economy in 1960 (and less than 4.5% of the world economy today).
"When conjectures are offered to explain historic slowdowns or great leaps in economic growth, there is the group of usual suspects that is regularly rounded up-prominent among them, the entrepreneur. Where growth has slowed, it is implied that a decline in entrepreneurship was partly to blame (perhaps because the culture's 'need for achievement' has atrophied). At another time and place, it is said, the flowering of entrepreneurship accounts for unprecedented expansion." (Baumol, 1990) There is historic precedent for this... "From the fall of Rome (circa 476 AD) to the eighteenth century, there was virtually no increase in per capita income in the West. However, with the advent of entrepreneurship, per capita income grew exponentially in the West by 20% in the 1700s, 200% in the 1800s, and 740% in the 1900s..." (Murphy, 2006).
Conservative estimates state that over 400 million people in 54 countries are actively engaged in entrepreneurship- (loosely defined as starting and running new businesses). This figure doesn't include the (potentially) hundreds of millions more engaged in forms of pseudo-entrepreneurship in science, medicine and politics- their contributions no-less important to our society's economic, social and intellectual growth.
So what is the role of entrepreneurship in society, economy and the story of our civilisation?
In this exclusive interview, we speak to Sir Richard Branson (Founder of Virgin Group). We discuss the fundamental nature of entrepreneurship, entrepreneurs themselves, and the role of entrepreneurs in society and the economy. We look at the key sources of entrepreneurial ideas, characteristics of successful enterprise and the role of wealth in the entrepreneurial journey. We also look at how entrepreneurship has changed, what the future holds and how entrepreneurs are addressing some of the world's most pressing problems from poverty and economic crises to climate change and health.
Sir Richard Branson is the founder of Virgin, a leading international investment group and one of the world's most recognised and respected brands. The Virgin Group has grown successful businesses in sectors ranging from mobile telephony, travel, financial services, leisure, music, holidays and health & wellness. Across its more than 400 companies, Virgin employs approximately 50,000 people, in 34 countries and global branded revenues in 2011 were around US$21bn.
Sir Richard Branson entered into his first successful business venture as a teenager with the magazine Student. In the late 1960s, he formed Virgin Mail Order Records, and in 1971 he opened the first British discount record store. In 1973 he helped form Virgin Records, which quickly became one of the world's largest record labels, with artists including Roy Orbison, Devo, Genesis, Keith Richards, Janet Jackson, Culture Club, Simple Minds, Lenny Kravitz, The Smashing Pumpkins and Mike Oldfield.
In 1984 he became the majority backer of the airline that he renamed Virgin Atlantic Airways. Beginning with a single aircraft, the airline grew to be one of the UK's largest airlines, now carrying over 5.3 million passengers a year on a fleet of 43 aircraft.
By the 1990s, his Virgin conglomerate had already become one of the UK's largest privately-held conglomerates with Branson receiving a knighthood in 1999 and launching many more successful ventures, highlights including Virgin Mobile, Virgin Media, Virgin Money, Virgin Trains, Virgin Racing and more. In 2004 Branson formed Virgin Galactic, a space tourism company that was working toward offering commercial suborbital passenger flights to paying passengers.
Sir Richard is also well-known as an adventurer. In 1986 he was part of a two-man team that set a record for a powerboat crossing of the Atlantic Ocean. In hot-air ballooning he and Swedish aeronaut Per Lindstrand in 1987 became the first team to cross the Atlantic in a hot-air balloon and in 1991 the first to cross the Pacific Ocean. Branson was also a member of teams that made three failed attempts in the late 1990s at round-the-world balloon flights. On the third attempt, made in December 1998, the pair were joined by American adventurer Steve Fossett, and they travelled some 8,200 miles (13,200 km), becoming the first to fly across the whole of Asia in a hot-air balloon, before being forced down off Hawaii. Branson later helped fund Fossett’s record-setting flight in 2005, in which he completed the first solo nonstop circumnavigation of the world in an airplane.
Branson and his group are also involved in numerous charitable initiatives. In 2006, he pledged an estimated $3 billion to fund environmentally friendly fuel research- and in 2007, the Virgin Earth Challenge was announced. A $25 million prize to encourage a viable technology which will result in the net removal of anthropogenic, atmospheric greenhouse gases. In July of the same year, Sir Richard joined Peter Gabriel, Nelson Mandela, Graça Machel, and Desmond Tutu to announce the formation of The Elders, a group of leaders who have committed to contribute their wisdom, independent leadership and integrity to tackle some of the world's toughest problems. In 2007, in honour of his sustained support of humanitarian and environmental causes, Branson received the Citizen of the Year Award from the United Nations Correspondents Association (UNCA).
Q: What does ‘entrepreneurship’ mean to you?
[Sir Richard Branson] Entrepreneurship is about taking risks, pushing boundaries, and not being afraid to fail.
I tend to go with my gut feeling and by personal experience- if I relied on accountants to make decisions, I most certainly would have never gone into the airline business, most certainly would not have gone into the space business, and I certainly wouldn’t have gone into most of the businesses that I’m in. In hindsight, it seems to have worked pretty well to my advantage!
Q: What is the role of entrepreneurs in an economy and society?
[Sir Richard Branson] It's my strong belief that those with the power to help should be encouraged to do exactly that: It’s important for entrepreneurs to nurture talent, to provide advice and to provide investment where required. Increasingly we are hearing more about how big business needs to play its role in society for the greater good. We all have a role to play and it makes business sense. In fact, consumers demand that business be responsible.
Q: What are the key emotional and psychological drivers for an entrepreneur?
[Sir Richard Branson] It’s a combination of passion, vision, creativity and a sense of adventure.
I have said on many occasions the reason to start a new business should not be about making money! You need to have a passion for the project and want to make a difference.
At Virgin we enter into new markets to stir up the competition and offer a choice and transparency to the consumer.
Q: What are the sources of entrepreneurial ideas?
[Sir Richard Branson] There are many things that can inspire an entrepreneurial idea - for example if you receive poor customer service you may be inspired to create a better product or experience.
Listen to friends and family - they often have great ideas and can offer invaluable advice.
I always carry a small notebook to jot down thoughts, ideas and conversations I have with people when travelling or working. The idea to start an airline came when I was stranded in the Caribbean and decided to charter a flight out - I sold seats to the other stranded passengers to pay for the charter.
Have an open mind as you never know when an opportunity or idea might present itself.
Q: Which sector do you feel are the greatest source of entrepreneurial activity?
[Sir Richard Branson] In the next 10 years, we will all head into unknown territory as we face a vast increase in our demand for energy, yet remain worryingly over-dependent on oil. If entrepreneurs go into the field of renewable energy for the right reasons, along the way they are likely to create some very exciting new technologies and successful new businesses.
Q: What do you feel are the characteristics of a successful enterprise?
[Sir Richard Branson] I believe that success in business can be measured by if you enjoy what you are doing; create something that stands out; create something that everyone is really proud of.
A great company needs to have an excellent product or service at its core; needs strong management to execute the plan and a good brand to give it the edge over its competitors. It also needs excellent people who really believe in what they’re doing. People are at the heart of all Virgin businesses. Often entrepreneurs can create a good product and a brand but need to bring in management to help expand and create a truly great company.
Q: What does wealth mean to you as an entrepreneur?
[Sir Richard Branson] Money is not my first priority - I have always pursued what I am passionate about whether that will make me money or not, my fascination is learning and discovery more than being rich and powerful. I believe that success in business can be measured if you enjoy what you are doing; create something that stands out, create something that everyone is really proud of; be a good leader and be visible.
Wealth may improve aesthetic aspects of life in terms of being able to over indulge and travel to luxurious locations however, true success in life can only be gauged by something which is priceless; how much love you have in your life – I am truly fortunate to be surrounded by extremely loving and fun family and friends and nothing beats spending time with the people I love.
Q: What is the role of entrepreneurship in addressing global issues such as poverty, economic crises, climate change, health, education and more?
[Sir Richard Branson] I’ve always regarded business as a powerful tool for delivering positive change in the world; so in my opinion entrepreneurship has a crucial role in addressing these Global challenges and many others besides. Public funding and open-ended research is absolutely crucial for coming up with better ideas, novel technology and progressive policy, but it seems only the markets are capable of pouring resources into truly scaling things up; and those markets began with entrepreneurship.
Prizes can be a real catalyst for moving an idea along, especially if it’s a novel but profoundly important area. The X Prize foundation are a shining example of how prizes can incentivise innovation, and we liked the concept so much we even have our own equivalents, like the Virgin Earth Challenge, a $25m prize for ways of removing greenhouse gases from the atmosphere to help tackle global warming and help people and the planet.
Q: How does entrepreneurship manifest in the arts?
[Sir Richard Branson] I think within the arts and entrepreneurship you have to show a desire to be creative, to stand alone and follow your passions, even when those around you might not share your idea or vision.
I believe we need to encourage all young people to consider an alternative to the traditional career path, and I think entrepreneurship offers some hope. I identify with these young people. As a young businessman, I faced my fair share of difficulties when I was starting up. Our music mail-order business was almost brought down by postal strikes in the early 1970s, but we adapted, and that prompted me to start Virgin record stores.
Q: What is the role of education and mentoring in entrepreneurship?
[Sir Richard Branson] In 2010, we launched Virgin Media Pioneers, an online community for young entrepreneurs, with the aim of helping young people realise their potential. By championing a cause that is both close to my heart and vitally important to the future of the UK's economic recovery, we are providing easy access to peers, practical advice from experts and tangible support for young entrepreneurs
I still find it strange that you can access money as a young person to go to university but that level of funding or even a fraction of that amount is not available to people with good ideas to set up a company. We must try to make early stage finance more available and ensure the banks do look at micro-financing or low rate long term loans for aspiring business builders. Together with Virgin Media Pioneers, we are campaigning for a fund for young entrepreneurs on similar terms as student loans.
Q: What is the role of government and policy in entrepreneurship?
[Sir Richard Branson] Governments and policymakers usually have an important role to play in creating the fertile grounds for entrepreneurs to succeed. Many of our Virgin businesses wouldn’t be able to operate without the rules and regulations that govern their sectors. Though as with many instances in life, one must generally find a balance between enough policy and regulation and not too much.
An analogy I find useful is to think about entrepreneurship like a game of football. There are certain rules of the game which you must follow, such as there being two halves, running for 90 minutes and not being able to use your hands, but when it comes to how you arrange your team, and what strategies you use to score goals, it’s completely up to you. The same should be true for business: policies and regulation can create the pitch and the rules and then entrepreneurs can play how they like.
Many democracies go hand in hand with entrepreneurship, though I’ve seen many examples of people building successful businesses in less democratic political regimes. Like nature, even if the environment isn’t ideal, entrepreneurship will find a way.
Q: How do you feel entrepreneurship has changed over the last quarter-century, and what do you think the future holds?
[Sir Richard Branson] The big change to entrepreneurship over the past 25 years has been technology. Now, more than ever, anybody can create their own business and be up and running in the time it takes to register a website. The growing start-up community has fostered a spirit of creativity and collaboration where everyone feels they can become a successful entrepreneur. And they’re right – they can! In the future I think entrepreneurship is going to become even more widespread than it is today. More and more people are realising the way to get ahead in the business world is to get out there, be brave and make things happen.
"The essential point to grasp is that in dealing with capitalism we are dealing with an evolutionary process...." wrote Joseph A. Schumpter in his seminal work 'Capitalism, Socialism and Democracy' (1943). He continues to write that "Capitalism... is by nature a form or method of economic change and not only never is but never can be stationary. And this evolutionary character of the capitalist process is not merely due to the fact that economic life goes on in a social and natural environment which changes and by its change alters the data of economic action; this fact is important and these changes (wars, revolutions and so on) often condition industrial change, but they are not its prime movers. Nor is this evolutionary character due to a quasi-automatic increase in population and capital or to the vagaries of monetary systems of which exactly the same thing holds true. The Fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates."
Schumpter also noted that entrepreneurship (as the engine of capitalism) cannot be studied in isolation from time or context.
"First," he identifies "..since we are dealing with a process whose every element takes considerable time in revealing its true features and ultimate effects, there is no point in appraising the performance of that process ex visu of a given point of time; we must judge its performance over time, as it unfolds through decades or centuries. A system—any system, economic or other—that at every given point of time fully utilizes its possibilities to the best advantage may yet in the long run be inferior to a system that does so at no given point of time, because the latter’s failure to do so may be a condition for the level or speed of long-run performance." He continues to explain that "...since we are dealing with an organic process, analysis of what happens in any particular part of it—say, in an individual concern or industry—may indeed clarify details of mechanism but is inconclusive beyond that. Every piece of business strategy acquires its true significance only against the background of that process and within the situation created by it. It must be seen in its role in the perennial gale of creative destruction; it cannot be understood irrespective of it or, in fact, on the hypothesis that there is a perennial lull..."
Humanity is quick to forget the context by which it moves forward ‘on the shoulders of giants’. Our rationalistic and reductionist thinking mean that we see phenomena (such as economies) in isolation, and break them down into components. This process may help an observer understand how a thing or a system works (at any given moment in time), but will give you little indication of what led to its being, or the context in which it exists. Understanding- for example- what makes Sir Richard Branson successful is not a matter of analysing the performance of each component of his businesses now, but rather requires an understanding of the cultural, social and economic contexts leading those businesses to emerge from the abstract space of the mind into reality… in other words, their story.
In much the same way as its biological counterpart, entrepreneurial evolution is a story of the success of good ideas. Billions of iterations occur, and those which add value to the system of humanity flourish, and become part of our culture- and increasingly quickly. The Wright brothers made the first powered flight in 1903 (over a distance of 120ft). Just 66 years later in 1969, two humans were stood on the Moon looking back at earth - and in 2012, almost 3 billion air passengers were carried a combined distance of over 5 trillion kilometres (enough to get to the sun and back over 16 thousand times). In a similar feat, our species progressed in less than 70 years from the first basic digital computer in 1941 to having the total sum of human knowledge in a globally connected amorphous cloud of computers.
Our innate capability to generate ideas is potentially the most powerful faculty our species has at its disposal. Entrepreneurs are simply those who take a gamut of resources (capital, knowledge, tools, infrastructure) and transform their ideas into physical or virtual assets which can then be absorbed into society and wider culture.
Put simply, "We are what we think. All that we are arises with our thoughts. With our thoughts, we make the world...." (Buddha)
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