Entrepreneurship Books and Training

In The Venturesome Economy Bhide refutes the generally held conviction that R&D results in workable products that sell in the real economy. He knows that 60% of most R&D efforts don’t result in workable products in the real market place. Besides that, he understands that patents and product development efforts actually are quite egalitarian. The knowledge is easily available through licensing agreements and royalty situations and fairly cheap as well, considering the available profits that accrue when a successful launch reaps available profits. This has been well known for years though as the Japanese have actually made money using American R&D developments and the sharing of technological developments has occurred throughout the high tech industry. Apple did not develop the computer interface that is so popular right now, Xerox PARC did, and that is why Apple lost its suit against Microsoft–it was not Apple’s to begin with. That is a very apt analogy. Bhide understands that it is a company’s willingness to do the hard slog work of development, marketing and manufacturing that allows good products to enter the marketplace and the knowledge work itself is useless unless applied to the real world of end users and real applications. Often the companies that do the significant R&D work never reap profits from this. There are the exceptions, Apple being one of them and of course 3M and other great companies. They understand the pipeline to real applications.
Rating: 5 / 5

I was able to speak to Professor Bhide in person after a lecture I attended on this book. Here are some of the thoughts from my notes of the lecture combined with my reading of the book, and my critique. Note that Professor Bhide and I have very different views of things – so my critique is a bit stinging. It was, however, a very well organized book, and put forth some well thought ideas. I would recommend it to be read even if you disagree with its premise or its propositions, as I enjoyed it reading and critiquing it myself.

I

Professor Bhide’s is essentially attempting a rebuttal to people he terms “Techno-Nationalists”. Techno-Nationalists are considered people who are concerned with the United States’ decline in leadership vis-à-vis other states in the realms of science and engineering, and who foresee dire consequences for the United States in the future due to this relative lag. Professor Bhide attempts to attack this view by claiming that states should not be concerned about being “leaders” of scientific research and innovation, and subsequent government intervention to boost the sciences is counterproductive. His defense of this is can be captured thus: 1. Because of a highly interconnected world, scientific advances will be diffused throughout the world so that it does not matter much who performs innovations. Even if the know-how is lacking, he claims, it will essentially be contracted out. Additionally, according to his economic logic, so called supply of scientific output in state A should not rise to meet the supply of more scientific output from state B, but fall in proportion to the amount that state B has added to the global pool of science; 2. Growth and innovation is not fostered through funding of scientific research, but through entrepreneurship. This entrepreneurship is not limited to the developers of a new product, but the “venturesome” consumers who “take their chances” with new products and provide feedback to the process of innovation accordingly; and 3. Combining the former two points, Professor Bhide then proceeds to show his venturesomeness by modifying Schumpeter’s “Creative Destruction”, adding “Non-Destructive Creation”. This is essentially the notion that, though the process of transformation that accompanies innovation destroys older methods to usher in the new, as Schumpeter argued was the principle cause of cyclical downturns, this process does not necessarily cause a net loss in employment, but a net gain through the creation of new jobs.

II.

I disagree with all three of the above mentioned, however I will deal mainly with Professor Bhide’s handling of science. It seems that he believes the progression of the sciences has contributed little to improved standards of living relative to his evasively defined profit seeking, risk taking entrepreneur. This is mainly done through a perverse handling of technological advancement in isolation – isolated in the sense of a closed loop in which innovation begins and ends with “entrepreneurs”. The question of how this is done remains unclear, as the entrepreneur essentially does not produce any tangible item, but generally serves as an intermediary through which applied scientific progress is disseminated through the market. Exceptions to this general role of the entrepreneur, such as a scientist or inventor marketing his or her invention, may appear from time to time. However, I highly doubt that Professor Bhide’s lectures at Columbia Business College touch upon advanced physics and engineering.

Professor Bhide thus creates the illusion that technological innovation begins with the individuals whose societal role is the marshaling and exploitation of productive forces, failing to capture that, in reality, the extent of their innovation pertains mainly to their specialization – the production process. Even the recognition that large firms which have extended their innovative capabilities to actual introduction of new products have large sectors devoted to research and development is beyond Professor Bhide’s analysis. He chooses not deal with the question of where technology actually comes from. Instead, he takes this fundamental question as given and focuses on the role of entrepreneurs and consumers, the “venturesome economy”, in its dissemination. Ultimately, even if Professor Bhide’s venturesome economy holds an active role in growth and innovation, it is one piece of a much larger puzzle. Focusing on a single tree does not change the fact that you are standing in a forest.

Rating: 3 / 5

I found Bhide’s new book excellent on a number of levels. He makes quite convincing overall cases for his leading theses: first, that ‘venturesome’ actors throughout the US economy –including especially businesses as customers willing to try out new technologies offered them– have been the key to the US distinctive productivity performance and second, the related and surprising proposition that fundamental research –so long as it gets done somewhere–has not been and won’t be the driver of relative growth performance for the US in the future.

Bhide does a good job with the supporting lines of his inquiry. He provides a first-rate description of the whys and hows of venture capital-supported enterprises. He also carries the argument that many, even large-scale investments in new processes and techniques in the services sector and elsewhere that have turned out to be fundamentally important to productivity advances were done, not with a fine economic calculus of costs and benefits, but rather in an entrepreneurial, venturesome spirit in the face of ‘Knightian,’ unquantifiable uncertainty.

I found the book rich with nuanced and illuminating business examples taken from his research for the book. Nice to have a bold set of propositions built from a real-world, fact- based approach.

Rating: 5 / 5