My Special Theory for Economic Revival

Ok. Let us make this very clear from the start. I am not a long lost relative of Albert Einstein. And I am certainly not a physicist, or an economist.

No, I am an international entrepreneur and venture developer; schooled in business marketing, history and philosophy; experienced in building better people, projects and places.

I have also had the honour of being a past quest speaker for the Thomas Edison Foundation in North America, trainer for the Young Entrepreneurs’ Organisation across Asia, and advisor/ambassador for Australia’s National Innovation Council, to name just a few.

As a result, I think I am in a position to share some of the things I have come to understand about enterprise, prosperity and what’s required now to revive the economy. Or what I fondly call - my special theory for economic revival: P=(we)2

ENTREPRENEURSHIP – THE RIGHT SPIRIT

The Global Entrepreneurship Monitor (GEM) researches themes about entrepreneurship in participating nation economies. Some of the key highlights that come through are as follows:

Countries with higher levels of entrepreneurial activity also had significantly higher levels of economic prosperity.

Variations in the levels of entrepreneurial activity explain as much as half of the differences in economic growth for developed nations.

New firms (those less than 2 years old) account for ALL (100%) of new jobs created. All older lager companies studied always experienced net job losses.

In America on average 16 million new jobs are created each year and 15 million are lost.

The conclusion is, start-ups not only create almost all of the new jobs in modern economies but they produce the net amount of ongoing jobs, directly stimulating the economy through employment taxes and market consumption.

Professor Petr Sedlacek of Oxford University (who is an economist) outlines the important role start-ups play. He says, even though only a small percentage of start-ups survive, they are the ones that become the high-growth firms (gazelles), which are the ones responsible for new economic growth. Believing they alone represent about 40% of aggregate growth in productivity, 50% in aggregate output growth and 60% of aggregate employment growth. That’s a lot of aggregate that requires a lot of respect.

WOMEN – THE RIGHT ANIMAL SPIRITS

Amongst the many organisations I have supported over the years, one of my more fascinating ones has been advisor for the International Women’s Federation of Commerce and Industry (IWFCI); a non-profit organisation dedicated to supporting women doing business, with national chapter representation around the world.

With this association I have come to understand and appreciate the strategically important role women play in the success of a nation’s economy; and fully aware of the constant struggle women face in each culture, in each industry and in every country.

Why? I think it is called being taken for granted, which breeds a lack of respect and gratitude; But woe to the country that does not embrace and release the female ‘animal spirits’ into their economy.

The Boston Consulting Group (BCG) in a study on female start-ups discovered women raised half the amount of capital as men did, yet those that did generated twice as much revenue than their male counterparts, and an impressive 10% more accumulative revenue over 5 years.

This is a startling and important observation. But in the words of a famous American physicist and Australian television personality, Professor Julius Sumner Miller, we should also ask - why is it so?

The team from BCG discovered women when making pitches to investors were subject to more challenges and pushback then their male counterparts; interrogated more on subjects like their technical knowledge and basic justifications.

They also found men exaggerated more than the women with bolder predictions, which seemed to resonate better with the male dominated venture capitalists panels.

And lastly, women pitches were mainly based on their personal experiences, which as you can imagine was alien to the male dominated venture capital firms.

SPECIAL THEORY FOR ECONOMIC REVIVAL: P=(we)2

As a result of all these clear observations and facts I have come up with a very practical ‘special theory’ for a country’s economic revival. The formula goes like this: Prosperity = women x entrepreneurship, multiplied: P=(we)2

P represents the prosperity, which we measure in GDP of a given nation. GDP is an economic measurement for gross domestic product and could be measured as volume x value squared per dollars squared [v x v2/d2]. All this essentially means is that a GDP of prosperity is equal to the motivation used to trade a specific object valued at 1 dollar in the same direction as the value.

W represents the women of the specified market. For this equation, we measure women in capacity (or natural instincts to succeed).

E represents the entrepreneurship in a given market; entrepreneurship creates wealth over time at the amount of human initiative and risk per day. 

I am no physicist or economist, but it doesn’t take Einstein to realise women entrepreneurs are a critical key for success in the pursuit of economic revival. 

So where to next

POLICY PRINCIPLES FOR ECONOMIC REVIVAL

If your country wants true prosperity, economic revival and to generally realise your maximum GDP potential; you’re national economic policy settings need to recognise and respect; firstly, the role entrepreneurs and a vibrant entrepreneurial culture must play; and secondly, the strategically important role female entrepreneurs’ will need to play as part of this revival culture.

Such policy settings will require lots of juicy carats and NO big sticks - Incentives to try, not penalties if you fail. For example, no start-up company tax for the first two years. They don’t make any profit anyway, so to take away the yoke of tax will be a huge psychological motivator to go for it. If you survive the first two to five years, you are on your way and the revenue rewards will come.

The World Economic Forum (WEF) also recently concluded the following policy recommendation for governments to help this revival.

Firstly, abolish red tape. It costs billions to administer and in the process stops the economic initiative and growth to make more billions.

Secondly, reform industrial relations. Excessive enterprise and work place regulations not only suppresses the entrepreneurial spirit but also heightens the risks and as a result stifles any economic growth.

Thirdly, cut company taxes. Why, because excessive taxation lowers company returns which discourages any one from starting a business in the first place.

So it seems the message to government is no longer ambiguous, the need for true entrepreneurship and fiscal incentives has never been more clear, in this present danger. Without commerce there is no wealth generation, without income there is no tax revenue, without revenue reserves there are no social services.

So what balanced principles should guide governments when formulating revival policies? Let’s look at history and let wisdom speak.

Abraham Lincoln said..."Governments cannot do for man what he can and should do for himself"

True entrepreneurship is not Government control but individual initiative and cooperative enterprise. The role of government is to create an environment conducive to freedom of enterprise, the right to property and the protection by law. 

From the citizen, the spirit of entrepreneurship requires necessity, pressure, and personal drive and motivation to manifest itself.

Too much Government handouts and sponsored programs will go against this. It will breed a culture of reliance and not assist cultivation of individual initiative and the business savvy that follows.

Remember the saying..."you can lead a horse to water but you can't make it drink"

Governments may initiate programs and provide money, but that will not ensure effective engagement and successful transactions. Why? Because what makes the horse drink is not that the water is there - it’s because it is thirsty!

Studies have shown that the key to successful outcomes is not money, connections and education - but persistence. This is the key. All the rest do naturally play a significant part. But it is the individual that is the key and their ability to learn, adapt and push to try again and again (if they miss the mark the first time).

This is why governments can’t penalise failure. They must encourage instead resilience and the courage to overcome the fear of failure. Fear paralysis, we don’t want paralysis. We want creative juices to flow; we want movement and motion, the wheels of industry to turn. 

Zig Ziglar said…”The only difference between the big shot and the little shot, is that the big shot is the little shot who just kept on shooting”

Most successful entrepreneurs are innovators, not creators! To innovate an already proven way is the most cost effective and least risk adverse course to take. For there is always a market looking to do things better. This is human nature.

Harry M. Miller said…”Opportunities pass us by 50 times a day, but few have the eyes to see them”

Successful achievers are just ordinary people, who do extraordinary things. They are average people who simple won’t let go of the dream and become servants of a greater destiny with no excuses, no self-doubt and no pity.

Strike him down with infantile paralysis and you have a Franklin Roosevelt. Call him a slow learner and you have an Albert Einstein. Dare to create in a communist country and you forge a Jack Ma. Break an empire and you birth a Manduhai - The Wise Mongol Queen.

THE CHALLENGE

We have outlined here the importance of harnessing entrepreneurship, the importance of women and the importance of the right government policy settings to fully realize a nation’s prosperity. However, there still remain some monumental challenges that only the wise and courageous may grapple with successfully.

In an open platform, over connected, block-chained, internet-of-things, world playing field; that is now more than ever complex, ambiguous, vulnerable and uncertain; all nations are being challenged for their very security, relevance and purpose. 

As a result, to survive we have come to learn governments must build diversity into their institutions and initiatives: Diverse in their thinking, diverse in their skills, diverse in their products and services, and diverse in their markets. For such a mixture in any economy’s policy infrastructure will be their best weapon to adapt, evolve and survive.

Sometimes the biggest questions are best answered with the simplest of ideals. To survive nations must ask them-selves: what do they fundamentally believe in, what are their core values to guide decision making. Without these answers no people can endure, little lone prosper; for it is the faith and hope that follows that will sustain.

This means your country’s national culture becomes your single most important human capital issue. And your national culture is a direct reflection of its history, characteristics of its foundation and the guiding principles and motivations of its institutional heritage.

So that’s it, my special theory for economic revival.

I may not get a Nobel Prize for it, but I thought it mighty noble to share.

Phillip P Fusco

Copyright ? May 2020