Sunday, March 06, 2011
CREATING AN ENTREPRENEUR
The recent uprisings in the Middle East North Africa Area (MENA) brought to light a problem facing the entire world. Although the magnitude and intensity of this problem varies from one geographical area to another and from country to country, the underlying causes are similar if not identical. The problem is particularly acute in the West or the so-called Developed countries Countries. This phenomenon might be called “The paradox of education: The fallacy of a false promise.” A casual perusal of the mass communication media content in the last few decades will convince one that the mantra of prosperity via economic growth and competitiveness has become the triad of Technology, Innovation and Education. Americans attribute the loss of competitiveness to the low level of educational achievements of their youth in the international math, science and even simple comprehension tests. By the same token almost everybody in the developed countries attributes the success of the Asian countries to the tremendous educational achievements of their youth.
It is becoming increasing clear that the unintended consequence of this noble goal of the pursuit of making quantitative and qualitative improvements in education has been an unprecedented large number of educated unemployed youth. Lured by the promise of a secure and decent, i.e., office employment by the private and public sector and the comfortable and relatively inexpensive education, the youth flocked to the myriad of educational institutions created by the governments. Alas 4-5 years later this optimistic outlook of the youth turned out to be a huge nightmare. There were no jobs to be had. Disappointed youth hit the streets accusing the establishment, both private and public, of reneging on its contract signed with them that spelled at least an implicit guarantee of a job upon completion of the youth’s end of the bargain of getting a degree.
The basic premise of this proposal is that both parties have kept their own end of the bargain: the youth completed their education and got a degree, and the government kept its promise by providing the means by greatly expanding their higher education system. Where the scheme didn’t work is the failure of both parties and especially the state State to take into consideration the ultimate utilitarian question of the use of the output the educational system would create. The private sector learned soon enough that the exuberant expansion of the “fat” years of ever rising consumption has eventually led to a huge excess of productive capacity. When the “lean” years of ever declining consumption came around, industry stopped producing products that would end up in inventories and sent home millions of workers. In addition whatever they produced they did so using machines. From the proverbial assembly line to the automation of manual and brain tasks, technology replaced humans.
Today the public sector is attempting to implement the private sector’s strategies. The excessive use of public funds for the accomplishment of the stated goal to improve education led to a huge accumulation of national debt. Governments the world over have been for the last few years trying to copy the private sector: minimizing the use of human resources. Starting with modest cuts of benefits granted during the “fat” years, governments eventually moved into the actual reduction of the number of people. The intended aim is to reduce the ranks of the so-called public servants by first not hiring new ones to replace the natural attrition, providing incentives for early retirement and finally firing people using the Last In First Out (LIFO) method. Obviously the youth as the “Last In” bore the brunt of the burden.
In a special report a recent issue of the magazine Bloomberg Businessweek entitled “The Kids are Not Alright: Youth Unemployment Is the Global Economy’s Time Bomb” (February 7- February 13, 2011) describes vividly the predicament facing our society. To drive home the severity of the problem the magazine offers a feature called “Educated and Jobless: A Global Gallery” that provides the pictures, age and educational status of young men and women from all over the world. In Tunisia these youngsters are called hittistes—a French-Arabic slang for those who lean against the wall. In Egypt they are called shahab atileen. In Britain they are the NEETS- Not in education, employment, or training. In Japan they are called the freeters: an amalgam of the English word Free and the German Arbeiter (worker). In the US are the “boomerang” or revolving door kids who move back home after college because they cannot find work. Finally the Chinese have their “ant tribes”—recent college graduates who crowd together in cheap apartments because they cannot find well-paid work.
It would be easy with the luxury of 20-20 hindsight to blame the governments for lacking foresight. One could have for example expected the experts to be able to anticipate the impact of the use of information technology on clerical and middle level managerial jobs. After all they had ample evidence from the previous mechanical technology on the farm and industrial labor. They just didn’t think of asking the question: what will all these college educated youngsters do? The previous technological revolution pretty much took care of its own creations. Horse-driven carriage drivers learned to drive a car and became bus, truck and taxi drivers. Axe swinging lumberjacks learned how to use the chainsaw. Farmers learned to drive a sower, a tractor and a combine. Everything seemed to work well as long as it was aimed at substituting mechanical power for human muscle. Trouble began when the use of technology targeted the human brain at exactly the time when humans began feeling very proud of their brains!
Thus we arrived at a point today where we could unashamedly accuse our post modern society for creating a lost generation of disaffected, unemployed, or underemployed well-educated young people because its economy wasn’t able to create enough jobs to provide for them with a decent, meaningful and challenging opportunity to contribute. It is of course the nature of the economic system to pursue the best allocation of resources that have alternative uses. Its guiding principle is that “the more abundant the resource the lower its price.” So it seems that the youth got caught in vicious circle: to escape abundance they must increase their usefulness by adding via education to their intellectual capital; however by doing so they increase the abundance! In addition the youth got caught in another Catch 22: in order to get a job they must prove that they have have proof of their ability to be useful by showing that they have had experience, that is, i they have had a job already.
A MODEST PROPOSAL
Is there a way out of this dilemma? We believe there is. In one word this way is called “Bootstrap.” This strategy calls for the individual to abandon the up until now habit of expecting and /or demanding somebody else to provide for a place to work, and adopt the habit that the individual must create his or her own workplace. In colloquial language it’s called “Pulling oneself by its own bootstraps.” Society has given these people good boots (knowledge) with equally great straps (skills) the only thing this strategy asks for is the WILL to pull the straps. In a bit more formal language what is required is the creation of myriad of “Micro-Enterprises.” The truth is that the age of mass employment by huge private enterprises and over-bloated governments is gone. Companies have become more capital and technology intensive and now governments are pursuing the same. The factor of production called “labor” is destined to become more and more irrelevant.
The idea of microenterprising isn’t new. Germany has been able to minimize the negative effects of the economic crisis thanks to its Mittelstand, the small highly specialized firms--mostly partnerships of two to three specialists--that produce special products that are use by traditional mass producers in their machines. Finland after catching on to the idea that its flagship Nokia is falling victim to the myriad of small start-ups devoured by Apple that go into its iMac, iPhone, iPad and no end “i’s,” switched its strategy to the promotion of start-ups. Thousands of young Fins are taking advantage of the incentives offered by the Finish Government. Most if not all of these new start-ups are created by young people who are highly educated, ambitious and “gutsy.”
[After Nokia, Can Angry Birds Propel Finland? As the handset giant and national champ flags, Finland looks to startups like Rovio Mobile for growth, By Diana ben-Aaron, Business Week Bloomberg, Dec. 2, 2010.]
It is of course a fact that start-ups have a high mortality rate. Most of them do not make it to the third or fifth year. Nevertheless millions of new start-ups are created daily. It is therefore natural for a large number of them to fail. However the end result to the society is positive. The Ewing Marion Kauffman Foundation in its study “After Inception: How Enduring is Job Creation by Startups?” found that
• Cohorts of firms started each year retain, on average, 80 percent of their initial total employment to age five.
• Older cohorts of firms exhibit increasingly higher employment retention rates over five years, but these rates are not substantially higher than those of new startup cohorts.
• Cohorts that start during a recession hire fewer people in the first few years following their birth, but they catch back up to the same levels of employment at age five.
• Prolonged recessions, on the other hand, appear to lower employment among cohorts. Cohorts at age five that had survived through portions of three recession years had roughly 10 percent less employment (as compared to their startup years) than cohorts of firms that encountered no recessions in their first five years.
There is no question microenterprising is neither easy nor for everybody. It takes a lot of patience, hard work, a healthy dose of uncertainty tolerance and perseverance. But as Margaret Thatcher told her compatriots who complained about her plan to privatize several companies “TINA, There Is No Alternative!”