The Young Shall Reign

WHO ARE A NATION’S LEADERS? In conventional terms, it is the head of state or head of government and her or his council of ministers. They reflect the authority of the state and, in democracies, the will of the people. In somewhat unconventional terms, in an alternate framing, entrepreneurs must be leaders of their nation. It is their success which empowers people. It is their success which provides resources to the state. Two things matter more than others in the advance of civilisation and people: the creation of wealth and the unlocking of creativity which leads to innovation. The state may have a monopoly over (legitimate) violence, but it rarely delivers either wealth or innovation. Only capitalists do. Something that even communists (in China and Vietnam) recognise but a democratic market economy like India remains ambivalent about. Of course, capitalism and entrepreneurship have a short history, 200 years in several thousand years of civilisation. Were there not glorious and wealthy periods of history in different parts of the world that predated capitalism? Not if measured by the wealth creation of the last 150 years. The economist William Easterly famously plotted a graph of world GDP, normalised for price variations over time. It was a flat line for hundreds of years before the late 19th century when it took off. And it hasn’t stopped. There has never been a period in history as prosperous as the one we are living in. For all its flaws, capitalism has delivered. Or let’s state it as it is, entrepreneurship has. In that context, it is not surprising that the most successful and wealthy country of the world is the US. Britain may be the intellectual home of modern capitalism as well as its pilot case, but it is the US which has demonstrated both its potential and outcomes. And this isn’t simply about America’s GDP or per capita income or the number of billionaires and millionaires it has, although each of those is impressive in its own right. It is about the mindset of a nation. Some years ago, at the World Expo in Dubai, where over 190 countries displayed their might or potential or significance to the world, the pavilion of the US stood out. Because it primarily showcased its entrepreneurs and inventors from Benjamin Franklin to Elon Musk. A majority of pavilions showcased their respective nation’s political leadership and achievements of government with entrepreneurship a relatively minor showcase—particularly true of emerging economies like India. The US embraces entrepreneurship, respects it, and elevates it. In other places, India included, there is reluctance. And therefore, a wide gulf exists between our economic aspirations and our present reality. Entrepreneurs posses certain qualities. Perhaps the most important one is risk-taking. Profit is a reward for it. They are usually undaunted by failure. Because that is one side of risk-taking. They have the persistence to bounce back. The second quality is the ability to think differently, come up with a new idea/innovation and then be able to take it to the market with success. That is where they are different from intellectuals or academics. Those are categories of people who have originality in thinking. They may even come up with path-breaking innovations which can help advance societies. But to take those from the classroom, lab or book to the market is a skill only entrepreneurs possess. They can marry a breakthrough idea (either their own or someone else’s) with the logic of the market. By its nature, entrepreneurship is a young person’s domain. Nobody becomes an entrepreneur if they are already wealthy (they may inherit a business but are unlikely to start from scratch). It is the pursuit of wealth and appetite to take risks in that quest that motivates entrepreneurs. The ability to bear failure is also higher the younger one is, without too many obligations. You might argue that all of that may amount to nothing if a person doesn’t have capital. Isn’t that the core of capitalism after all? But in today’s world, that is not a constraint. Possessing sufficient capital in the first place may make a person risk-averse. If an idea has originality and has market logic, there is plenty of capital available. The challenge for countries like India isn’t in finding capital. It is in unleashing the entrepreneurial spirit of its people. India may not have a history of modern entrepreneurship of the American kind but it has a long history of trading and private business. And a present of the youngest population in the world. A perfect pool for entrepreneurship. Independent India did itself a disservice by being pessimistic about entrepreneurship, a negativity that hasn’t left the country even nearly 35 years after economic liberalisation. For too long, the state stood at the commanding heights of the economy. In fact, the state remains the biggest promoter of enterprise in India with more than 250 functioning public sector companies. But the state doesn’t possess any of the qualities to be a successful entrepreneur. India’s experience is also clouded by perceptions of cronyism but that is also a consequence of the state’s towering presence. The more the regulations, the harder it is for those without connects to enter the world of business. Even exit is not easy. For successful capitalism, it should be easy to enter any business and equally easy to exit. Firms must be continuously born and frequently die to keep up the process of “creative destruction” which is what advances an economy and society. Those entrepreneurs who do business better, more innovatively than incumbents must replace them. The good news is that the last 10 years have seen an exponential growth in India’s startup system which is being powered by young entrepreneurs, in their 20s and 30s. These are people who do not come from privileged backgrounds but have shown it is possible to create billion-dollar businesses (unicorns) in quick time. India is the third-largest startup ecosystem in the world. The sobering news is that most of India’s startups, like legacy businesses, are focused on the Indian market. There is also a bias towards the services industry with only a handful venturing into manufacturing. Most are based on ideas developed elsewhere but adapted to India. India isn’t at the frontiers of innovation. Ultimately, if India is to become a rich country, its entrepreneurs, companies and products must think big—global markets must be the destination—and think smart—cutting-edge product development has to be the goal. It will happen. Societal mindsets have already begun to change with an acceptance of failure and an appreciation, even if not wholehearted, of wealth creation. Young entrepreneurs are changing public perception. The government can lend a helping hand by deregulating and making it simple to enter and exit business. It should also exit doing business. India is much more like America than China with its diverse, open society and democratic debate. Even state-dominated China has accepted the importance of its entrepreneurs. Many of China’s world-class companies like Alibaba or BYD are run by homegrown entrepreneurs. India should shed its inhibitions. The government should shed its control. Let young entrepreneurs take the driving seat. Indians have already proven themselves outside India. Now allow them to achieve similar or greater success at home. Set them free to take risks, innovate and become wealthy. India will become rich. And the state more influential in the world.

The Young Shall Reign

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