In June Professor Stephen Hicks participated in a discussion on the Canadian Broadcasting Corporation’s “The Current” radio program, which according to its website is “Canada’s Most Listened-to Radio Program.”
The topic was whether power corrupts. The journalistic context included the recent FIFA scandal, scandals in the Canadian Senate, and the ongoing scandals in politics, business, and so on around the world.
Audio of the discussion can be found here at CBC Radio’s site.
Professor Stephen Hicks gave a talk in June at a conference sponsored by Fundación para la Responsabilidad Intelectual (FRI), Junior Achievement Argentina, and the John Templeton Foundation. When he was in Buenos Aires, FRI also did three short videos of him addressing questions.
Here is a 12-minute video of Stephen Hicks on “How Do You Explain the Great Enrichment of the Modern World?”:
More information on Fundación para la Responsabilidad Intelectual can be found at their Facebook page.
Call for papers: The 3rd Annual Interdisciplinary Symposium: Free Market Systems: Teaching and Research is being held in Pawleys Island, South Carolina on March 18, 2016. The deadline for submissions is January 13, 2016 or until filled. More information can be found here.
Idea: “Your income rarely exceeds your personal development.” Jim Rohn
See you next time with our digest of new and interesting items in entrepreneurship, ethics, and political economy. Here are the previous editions of CEE Review.
Hicks: Hi, I’m Stephen Hicks. I am executive director of The Center for Ethics and Entrepreneurship here at Rockford University, and my two guests today spoke at Rockford University on the themes of entrepreneurship and ethics. With me is Michael Strong, who is educated at Harvard, St. John’s College, and at University of Chicago. He is the author of a new book last year called Be the Solution, and the theme there is conscious capitalism and entrepreneurial solutions to major world problems and social problems. My other guest is Magatte Wade, who is a serial entrepreneur, originally from Senegal, Africa. She founded a business there that is quite successful and is now engaged in a new entrepreneurial venture here in the United States.
So, Michael, I will start with you. One of your provocative opening lines was an account of entrepreneurship as a kind of magic, as creating something out of nothing. What do you mean by that?
Strong: Well, you know, Magatte and I went to Rwanda this summer, and Rwanda is all subsistence agriculture, meaning it’s nothing but little tiny patchworks of people growing corn and potatoes, and so forth. In 1800 the whole world was full of basically people who lived in subsistence agriculture. Whenever we walk around the world and we see airports, computers, buildings, and chairs — all that stuff had to come from somewhere, and my point is that science and technology made certain discoveries that contributed to all of the stuff around us. When we walk around, we should be aware of the fact that if it were not for entrepreneurs creating profitable businesses that marketed goods and services that people wanted made from inventions and designs and so forth, we would all still be living at the level of subsistence agriculture. So we need to have some realization that, without the entrepreneurs, we might have scientists in labs, if, you know, maybe the kings could have a few scientists in a lab, and we would have subsistence agriculture, but we would not have the extraordinary life we have. I think we should bow down to the Industrial Revolution every day. This extraordinary life is entirely due to the fact that millions of entrepreneurs for the last two-hundred years have created millions of businesses that provided innovative goods and services, month by month, year by year, and have created and are still creating the world we live in today.
Hicks: Okay. The cultures that have become rich in the last two-hundred years beyond the normal standing point for humans for most of human history, what were they doing differently that hadn’t been done before? I mean, you mention the Industrial Revolution, but what were the components that were there?
Strong: A great question. And there are controversies in this. There is certainly a legal part and there is a cultural and intellectual part, but one thing that is becoming increasingly clear is that the legal structure is crucial. In particular, you need a secure and transferable property rights, you need rule of law, contract enforcement that is reliable and fair, and you need economic freedom, the freedom to create things. In my book I talk about this as the entrepreneur’s toolkit, where just as an artist can’t paint a painting if she doesn’t have a canvas and paints, so too an entrepreneur can’t create if they don’t know what they own, if they can’t exchange what they own if other entrepreneurs or other businesses and finally produce things freely for the market. So economic freedom, property rights, and rule of law are crucial. When you look at countries of economic freedom, every nation with economic freedom is wealthy; every nation without economic freedom is poor. It’s complicated, but in general as countries increase at levels of economic freedom they become wealthier. Hong Kong and Singapore are the two most economically free entities. For the last 50 years, they have been the fastest growing entities; they went from approximately African levels of poverty in the 1960s to now to the wealthiest sovereign entities on Earth. Hong Kong is not quite sovereign, but, still, has higher GDP per capita than Britain. They are both former British colonies.
Hicks: So, if you look at the continuing problem areas, the parts of the world that are still consistently poor, this then will indicate that the problem that needs to be dealt with is the economic freedom issue primarily including the legal component?
Strong: Absolutely. Africa is the most over-regulated region on Earth. It is easier to open a legal business in Denmark than any African country. It’s easier to fire an employee in Denmark than in any African country. Now I just mentioned Denmark because lot of anti-capitalists think of Scandinavia as a socialist haven. What they don’t realize is that Scandinavia is more free-market than the developing world. That’s why regions like Africa are poorer. African entrepreneurs need to be liberated so that they can create legal businesses, create wealth and jobs, and thereby have Africa become as prosperous as the developed world is.
Hicks: You mentioned one anecdote about having documents notarized to make them legal if you want to start a legal business. How expensive, on average, is that for an American entrepreneur compared to, say, a Mexican entrepreneur?
Strong: That’s huge. Mexico has a problem. In general, Mexico is not nearly as free market as the U.S. One of the specific ways in which there are obstacles to legal business creation are the notary publics. In the U.S., most of us can get a document notarized for less than ten dollars, often for free. And if you want to create a legal business, then you need a notarized document. No big deal, we don’t even think about it. In Mexico, notaries charge between 500 to 1000 U.S. dollars. Many business documents that will be required to create a legal business there cost so much money that unless you are already at upper-middle class or wealth Mexican, you don’t stand a chance of creating legal business in Mexico. As a consequence, it’s easier for a poor and uneducated Mexican to cross the border illegally into the U.S., create a legal businesses here, become wealthy, and go back to Mexico. They just don’t have that opportunity in Mexico.
Hicks: Now, I am going to turn to your experience in Senegal. What was your entrepreneurial venture there?
Wade: Well, my company basically is a company that is a U.S.-based company, but most of our main providers of the supply that we need are from Senegal. But the problem we had there was it that we had to create an entire supply chain from scratch. So, in a way, it’s already hard enough to start a company, but on top of that, if you have to create your entire supply chain, you can see you have an additional issue there. And what happened is that in Senegal we needed hibiscus because our main flagship drink was the hibiscus drink called Bissap from Senegal. So, there what we really had to fight was this notion that a lot of African women, Senegalese women, had. They had all of these NGOs come and tell them to grow hibiscus, and now it’s rotten in all of these warehouses. And so, by the time I arrived, none of them wanted to get into that anymore. And that’s in a way how the aid business has really tweaked, in the most negative way, a lot on the ground.
Hicks: You mentioned the supply chain issue had also been, in part, due to Coca-Cola coming into the country. You had the traditional drinks that were very popular and successful, but they were replaced by successful soft drinks. How can the smaller businesses in Senegal compete with a large corporation? How did you do that?
Wade: I think what we did is we really benefited from what I call a convergence of trends, but these are all really trends that are here to say. And what it is all about is that around the world we’re going back to a global consciousness. We’re going back to global consciousness meaning that, I think, all of us realized that something is not working, from the way we eat to the way we exercise. Our lifestyles, a lot is not right. And the type of wave that I am riding on is a wave that has to do with people wanting to go back to authentic and indigenous things, whether it is in drinks and foods and beverages or if it’s the type of lifestyle that you try to adopt. And so, a type of demographic I am going after is for us to say, you know, Coke is doing whatever Coke is doing, but we also know that there is a part of the population that is really interested in going back to our cultures and to the roots of a culture. Also, no one is interested in products that are not elaborated or sophisticated. So, if you can use authenticity and indigenous assets as a base foundation of a new brand you are about to build, but you surround that with modernism, you then have a brand new product that a whole group of people are looking for, and that’s where we’re going. And it turns out that that type of trend is actually contagious. Even the classical Coke drinkers are now interested. They are going away from Coke classic towards a drink that we’re creating, and that’s how we’re winning.
Hicks: So part of your solution is a marketing strategy that plays on innovative trends and what people are interested in as consumers. Your big challenge, in part, was destruction of supply chains that had been brought on by foreign competition. But your argument is that if you have a passion for your product as you do, then a supply chain can be rebuilt. That’s good for you and is also good for the indigenous farmers in Senegal. And the little guys, so to speak, can compete against larger corporations. You are now doing a second start-up business here in the United States. Are the entrepreneurial challenges easier or greater for you here?
Wade: I think it’s about different trade-offs. First of all, what happens is a lot of the supply chain, if I wanted to do my businesses and keep it in America, it would be so much easier, let’s be frank. But, if I find a way to get the Senegalese part involved again, it helps me build equity in my brand. And we also have found that if you are able to set up the right type of supply chain, eventually the cost will go down and be actually less than if I were just relying on an existing supply chain here in America. So it’s worth it, but the transition is not an easy one.
Hicks: Toward the end of the talk you were speaking more directly to the students here at Rockford University, and you had asked how many of them were considering being entrepreneurs and very few were. Most are considering a traditional career path, going to work for someone else. And it might be that they just don’t know very much about it or they find it a bit intimidating. Well, how do I become an entrepreneur, so to speak? What is the best advice you can give to young people to get them maybe to think more seriously about entrepreneurship as a career? Why should that be attractive to them? And if they are going to do that, how best should they go about it?
Wade: What I tell everybody is that entrepreneurship, first of all, is not for everyone, because it should be okay for everyone to know it’s not for everyone. It’s a small percentage of the population that are entrepreneurs, so that’s the number one thing I want to get out there. And then, the next thing now, let’s say you are amongst that small percentage. You have the type of personality that fits it and the type of guts to go with that. And there is nothing right, there is nothing wrong, it’s just who you are. So, if that’s who you are, what I would tell people is, you know, as I was saying earlier, people have to pay attention. We’re in a world in which everything moves so fast, so quick, that people have to pay attention especially to moments of superb enlightenment. Sometimes you’re dreaming of something completely new, but it’s in the world of dreams. That’s something worth writing down, wherever that finds you. Sometimes it is in a plane. Everybody else is sleeping in the cabin, and it happens to me all the time. I mean the plane is flying over the Atlantic, going from one place to another in the globe. I have no idea where I am going, but up there in the altitude while everyone is sleeping around me, I’m dreaming up a better world here or dreaming up new types of this or that. So I write it down. Sometimes something really frustrates you. Why does every seat in a plane have to be this stiff? So, there are also moments to think about what could solve your problem right now. And if you are seeing it systematically everywhere that this doesn’t work for you, if you are feeling that away, chances are most of the people feel that way. What happens is there’s just a small percentage of us who are capable of saying, this is not working or I dreamt of something and go after it. What happens is the masses, the rest of the population, they are going through these frustrations all the time. They are going through these dreams all the time, but never will it cross their minds to act on it. And I feel it is our job to do it, and when we come up with a solution or we make those dreams real, we’re finding that a part of the population are adhering. They are coming to us and then becoming consumers.
Hicks: So, you come up with a really good idea that you get excited about or, by contrast, you have a thing that’s really frustrating, a problem that you think really needs to be solved. Then, what’s that trigger that gets you and other entrepreneurs off the sofa so to speak and actually doing something about it? There must be many people with good ideas, but they don’t follow through. How can you encourage people to take that step?
Wade: That’s why I try to go back to the passion thing. Because, for me, I look at what makes me quit. With my first company, I quit my job, a very comfortable job, to go into this world of unknown. People were like, what are you going to do, a beverage company? You know nothing about beverages. I told them, excuse me, I know a lot about beverages because I am a huge consumer of beverages. It’s my passion. I make these beverages in my kitchen. I know how to tweak them. I know all of that. So that gives me the right to do what I have to do. So I think at some point it is just this attitude. It’s an attitude of criticizing by creating. I think that when Michael first told me that saying from Michelangelo, it just made so much sense. And I think that if people really want to stick to that, it will lead them to the right thing. It will lead to them jumping in. I know that for me it was a feeling that I wasn’t able to express, but it sums up the way I felt. To say, you know what, to heck with this. I am going do it.
Hicks: It strikes me listening to both of you that it’s a perfect teamwork going on here. You are focusing on the entrepreneur as an individual, finding your dream, finding your passion, and doing that makes you come fully alive, who you are. You are emphasizing that to the extent that entrepreneurs follow their dreams and passion, that works out best for all of us.
Hicks: It’s to the social benefit, so it’s win-win all around.
All right, thanks for being with us today. Wonderful talk.