ZAMBIA INSTITUTE FOR PUBLIC POLICY ANALYSIS
JournalJournal
ZIPPA
October - December 2010
Theme: ENTREPRENEURSHIP
Contents
Freeway
Why Entrepreneurship?
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W
hy 'Entrepreneurship'? Instead of using a sixteenletter word, we could call a spade a spade and justsay 'Capitalism'. Today people increasingly use the'C' word, now that Marx, who popularized it, is deadat last, even though his corpse still awaits burial inHavana.But 'capitalism' still stinks. And the word itself ismisleading, for it seems to imply that businessbelongs to the rich as a permanent possession.That's not true. In free economies with open marketswealth is constantly on the move in the game of profitand loss.Who confers benefits on society - the loss maker orthe profit maker? Losses benefit no one, apart fromthieves. But profits reflect benefits provided: for theyare earned through providing products and services.And who does that? The entrepreneur! By doing this -often by dint of much thought and effort - theentrepreneur confers major benefits, for whichcustomers willingly pay.Entrepreneurship has created wealth all over theworld, so we should celebrate it and practice it,especially in Africa,But how to produce successful entrepreneurs? Canentrepreneurship be learned at school or university?Should Zambia throw its door open to entrepreneursfrom abroad? Readers will get some ideas from thearticles that follow. And we invite readers to send ustheir views on this very important subject.
By Johan Norberg
T
he best argument for the market economy is theamazing fact that entrepreneurs and innovators andbusinesses have turned luxuries that two centuriesago not even kings could afford into low-pricedeveryday items at your local store. That is the bestdefence of capitalism.In a very short time, the world has experienced anextreme makeover. History shows us that freedomworks. During 1,000 years of absolute monarchy,feudalism and slavery, mankind's average incomeincreased by about 50 percent. In the 180 years since1820, mankind's average income has increased byalmost 1,000 percent.During the last 100 years, we have created morewealth, reduced poverty more and increased lifeexpectancy more than in the previous 100,000 years.And that happened because of people -entrepreneurs, thinkers, creators, innovators - whohad new ideas, who traveled geographical distancesand, more important, mental distances to create newthings. That is why we have all this wealth. That iswhy our son, born 3 years ago, has a greater chanceof reaching retirement age than children in allprevious eras had of experiencing their first birthday.In the last few decades of globalization, when newopportunities, technologies and means of communicating and producing have spread acrossthe world, we have witnessed an amazingphenomenon: developing countries are growing
ZIPPA Board:
Muyunda Mwanalushi (Chair), Jonathan Chileshe (V/Chair), Murray Sanderson (Exec.Sec.), Wilphred Katoto (Hon. Treas), Moses Banda, Ernest Beele, Mary Kakumbi, Royd KatongoCharles Lungu, Chearyp Mkandawire-Sokoni, Sara Ngulube.
Why Entrepreneurship?Entrepreneurs are the Heroes of the WorldKeeper of the FlameEntrepreneurs Build EconomiesEducation Needs EntrepreneursEducation for EntrepreneurshipQuotations of the MonthThe Ultimate ScholarDelay in Charter ConsultancyTheme for January 2011
Entrepreneurs are the Heroes of the World
truckload of fruit from South Africa to Zimbabwe, itcosts you more in time, bribes, fees to thegovernment, and taxes than it would cost to send thesame truckload of fruit from South Africa all the wayto the United States.What makes it possible for us to buy equipment andgoods from the other side of the world?Entrepreneurs face ancient traditions, politicalobstacles, taxes, and regulations. If they are lucky,entrepreneurs succeed. If not, they learn somethingnew, make it even better the next time and bring tothe community something new that changes livesforever.That is the heroic epic. The entrepreneur,exemplified by Malcolm McLean, is the hero of ourworld. But, as you all know, that is not really whatpopular culture thinks of capitalists andentrepreneurs today. If you go to an averageHollywood movie, the hero is someone quitedifferent; the scientist and the capitalist are theenemies. That is a bit ironic, because we would nothave film technology if there were no scientists, andwe would not have a film industry if it were not for thecapitalists. But they are presented as villains.Some anti-globalizers and people opposed to freetrade are now well-paid consultants who sit on theboards of big companies and tell them that what theydo is really a bad thing and that they must acceptmuch more corporate social responsibility. In theirterms, corporate social responsibility means thatwhat you have done so far is not social. It is notenough to create goods, services and technologiesthat increase our life expectations and save the livesof our children. No, you need to do something more.After making your profit, you need to give somethingback to society. Give something back to society? As if the entrepreneurs and capitalists had stolensomething, that belonged to society that they have togive back.Profit is not something that we have to apologize for.Profit is proof that the capitalist has given somethingto society that it cherishes more than the materialwealth it has given to the businessman.I must emphasize that entrepreneurs should neverbe grateful for a society that gives them license toact, to dream, to innovate and to create. I think thatwe, society, should be grateful to the entrepreneurand to the businessman for what they do.Entrepreneurs are the heroes of our world - despitethe risks, the hard work, the hostility from society,the envy from neighbours, the state regulations,entrepreneurs keep on creating, they keep onproducing and trading. Without them nothing wouldbe there.Author:
Johan Norberg is a Swedish writer and aSenior Fellow of Washington's Cato Institute,publisher of this abbreviated address.
faster than the richest countries on the planet. It tookus in Sweden something like 40 years to double ouraverage income. It takes 10 to 15 years today forChina, India, Bangladesh, and Vietnam to do thesame thing. They can now use the ideas andtechnologies that it took Europe and Americagenerations to develop. That is why poverty in theworld has been cut in half in the last 20 years.All of this is dependent on innovators andentrepreneurs. The entrepreneur is an explorer whotravels into uncharted territory and opens up newroutes along which we will all be traveling prettysoon.Nothing has existed “from the beginning”. Not evennatural resources are natural in any meaningfulsense - something that a lot of governments realizedwhen they nationalized oil and gas resources andother things. They failed to understand that we alsoneed the entrepreneurial spirit - the ability to seehow to use a resource and how to invest in it in apositive way to make sure that it is used efficiently.The OPEC countries grew by about 4 percent everyyear because of their oil resources until 1973, whenmost of them had nationalized their oil industries.Since then they have grown poorer by about 1percent every year.Fifty years ago a North Carolina truck driver, MalcolmMcLean, thought that there must be a more efficientway of transporting goods and components all overthe world. Back then, people would take their trucksdown to the port. The boat would sit there for a weekor so while the unionized work force slowly andsteadily loaded every single piece of cargo on theboat. The reverse would happen in the port of destination.McLean thought, “What if I use wheel-less boxes and just put all the goods in the boxes and hoist themonto trucks, drive down to the port, and then just putthe unopened boxes on the ship?” In one night,McLean created modern container traffic. He reducedthe cost of sending goods and components across theoceans by something like 97 percent. It is possible forus to have a particular kind of computer, withcomponents from all major continents on the planet,the clothes we wear and the food on our platesbecause of one man and his dream, and a culture thatdid not try to stop him but instead encouraged hisvision. And developing countries all around the worldsuddenly have use for their talent and their hardwork - to produce what they can produce best, put itinto containers and send it somewhere else.But technology is not enough. We also need freedomto use new technology. Unless governments step outof the way and allow entrepreneurs to do their thing,none of this will happen. We know that, becausethere are places where modern technologies are notused because of regulations, corruption, andgovernment intervention. If you are sending one
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Tony Hsieh of Zappos.com keeps the dotcomspirit aliveV
ISITING the headquarters of Zappos.com inHenderson, near Las Vegas, is like entering a timewarp that whisks you back ten years to the heyday of the internet boom. There are the outlandishdecorations adorning walls and cubicles, including jungle creepers that hang from the ceiling and amenagerie of toy monkeys and other creatures.There are the boisterous employees, some of whomrattle cowbells, shake pompoms and bellowgreetings as visitors pass their desks. And there arethe accoutrements of a typical dotcom start-up,including a visiting masseuse and generous helpingsof free food for “Zapponians”.But this is no exercise in nostalgia. Instead, Zappos isthe site of an ambitious business experiment led byTony Hsieh, the firm's 35-year-old boss. His goal is tocreate a corporate culture that allows Zappos toprosper by providing world-beating customerservice, no matter what business it is involved in.From its origins as an online shoe-retailer founded in1999, the company has expanded into sellingclothes, consumer electronics and other items. Lastyear it rang up a record $1 billion in sales even asother retailers were struggling. Mr Hsieh muses outloud about the possibility that Zappos might one dayenter the hotel or airline industries, perhaps in theoffline world.As a firm backed by venture capital-Sequoia Capital,one of Silicon Valley's most prestigious investors, hasa stake in the company-Zappos has an interest intalking up its future prospects. But Mr Hsiehgenuinely seems to admire firms such as Britain'sVirgin Group, which has taken its reputation for beingcool, gutsy and disruptive and applied it in manydifferent industries. He reckons Zappos can cultivatea reputation for outstanding customer service to thepoint where it, too, can become a springboard intoseveral markets. He once described Zappos as “aservice company that just happens to sell shoes”.In the flesh, however, Mr Hsieh is the antithesis of SirRichard Branson, Virgin's ebullient founder. WhereasSir Richard is a charmer and a showman, Mr Hsieh isa reserved, soft-spoken computer-science graduatefrom Harvard University. But like Sir Richard he has anose for a deal and a will to succeed. In 1998 Mr.Hsieh sold LinkExchange, an online-advertisingnetwork that he had co-founded, to Microsoft for$265m. He used the proceeds to set up aninvestment fund, and one of the start-ups it backedwas Zappos, a name inspired by zapatos, theSpanish word for shoes. Sensing the firm's potential,Mr Hsieh moved across to become its chief executivein 2000.Since then, he and his team have focused theirefforts on creating a distinctive culture at thecompany. Among other things, Zappos has drawn upa set of ten values, including exhortations always to “deliver WOW through service” and to “create funand a little weirdness”. Zappos publishes an annual “Culture Book” in which many of the firm's 1,400 staff explain what its culture means to them. It may allsound tiresome and gimmicky, but the firm baseshalf of an employee's performance review on howwell each person has lived up to the company'svalues.The firm's recruitment is also geared to identifyingthose with a Zappos frame of mind. Potential recruitsare asked questions such as “Who is your favouritesuperhero, and why?” and “On a scale of one to ten,how lucky are you?” And in their first weeks with thecompany, new employees are offered $2,000 to quit-a significant sum for call-centre trainees who start on$11 per hour. The idea is to weed out anyone withdoubts about whether Zappos is really for them. Lastyear just three people took the cash.Zappos pays a lot of attention to recruitment andtraining because it then gives staff plenty of freedomto get on with their jobs. For instance, call-centreemployees are urged to do whatever they think isappropriate to rectify a customer's problems withouthaving to seek a manager's approval. “You have asmuch power to help a customer as Tony doeshimself,” says one employee. Although this laissezfaire philosophy can cause chaos at times, the resultsare impressive: three-quarters of Zappos's salescome from repeat customers and its revenues arestill growing this year, albeit more slowly than before.All this culture-building comes at a cost, however.After several years of just breaking even, Zappos wasprofitable in 2007 and again last year. But Mr Hsiehsees this “investment” as creating a platform forfuture growth. It is also designed to differentiateZappos from other online retailers such asAmazon.com. His efforts have attracted the attentionof other firms and Zappos is cashing in on this bylaunching a subscription-based service for those whowant to learn about its unusual ethos and methods.Mr Hsieh's willingness to share information does notstop there. An avid user of Twitter, a micro-bloggingservice, he encourages his staff to tweet along withhim (their collective postings are on display attwitter.zappos.com). As well as underlining the firm'scommitment to transparency, the tweeting helpsbring Zappos to the attention of new customers andfurther cements its relations with existing ones, whocan see the people behind what would otherwise bean impersonal online shop. Twitter can also be auseful outlet for employees: there was plenty of tweeting going on when Zappos had to lay off 124staff last November because of the recession, for
Keeper of the Flame
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