Cedric Wilson More than a few people you meet toady will tell you that Jamaica has more than its fair share of entrepreneurs. And it's no joke. The ferocious higglers of the 1980s who travelled to Curaçao, Panama and Miami in search of consumer goods and sold them at competitive prices which challenged the business models of the opulent air-conditioned uptown, stores; the young men who used to hang out in the parking lot opposite the former home of the U.S. Embassy on Oxford Road, New Kingston, who harnessed digital technology to produce photographs for visas in less than 15 minutes; the itinerant music shops in MoBay, where a youth on the street with a lap-top computer can burn you a CD with virtually any song you want in a flash. Like it or not, these are outstanding examples of grass-roots entrepreneurship.
Vision, creativity, enthusiasm, flexibility, risk taking and opportunism - these are the characteristics of the entrepreneur, and this is what exists in abundance.
Entrepreneurship is one of the factors that drive economic growth. The ability to transform an idea or invention into something that reconfigures market patterns and changes established consumer behaviour is the life blood of any economy.
'Creative destruction'
Entrepreneurship produces what is called 'creative destruction'. This is a process in which the introduction of innovations, new products and new business models lead to the demise of the old ways of doing things, which works to the benefit of consumers. Creative destruction causes dominant firms to experience the shrinking of their market share and profit decline, while competitors introduce new product designs and slash manufacturing costs.
Kodak, the world's largest supplier of photo-film, for instance, lost almost $1.4 billion in 2005, as they tried to adjust to changes in the 'industry', while smaller, nimbler firms increase their revenues from the new digital photography. Closer home, Cable & Wireless seems to be in a perpetual state of restructuring as the one-time monopoly grapples with the presence of Digicel in the mobile phone market.
Creative destruction is a blow against the old order and creates space for the ascendancy of the new. So then, why with all of this potential entrepreneurial energy, is performance of the economy so disappointing?
There are two causes: one is institutional the other is related to the individual. However, let us focus this time on the institutional factors.
First, the education system, from the primary to the tertiary level seldom encourages entrepreneurship. A part of the hidden curriculum taught in our schools is the idea that the ultimate aim of an education is to be a good employee.
Years ago, my neighbour's son, Jomo, then a nine-year-old kid at prep school, discovered that the children on the school bus were always thirsty on their way home from school. Jomo seized upon the opportunity and started to sell the other kids ice cubes from his igloo. Soon his teacher heard about his entrepreneurial exploits and put an end to it. Later, he figured out that he could make money by renting his schoolmates comics. Not long after, he had a little business going. But once again, the teacher got wind of it and he had to lock down the shop. No attempt was made to create a structure to encourage this initiative in way that would not detract from the business of education, if that was the concern. It was just stopped.
It is no wonder that the people who have excelled as entrepreneurs in Jamaica either did not do well at school, for whatever reason, or got a part of their education outside of the Jamaican education system. Carlton Alexander of GraceKennedy fame was a high-school drop-out and Butch Stewart, tourism mogul, is not known to brag about his academic achievements. On the other hand, Michael Lee Chin, who rules an impressive financial empire and Dr. Paul Chen-Young, who in his day was a colossus on the Jamaican financial landscape, received their tertiary education in North America. However, this is not to say that there are not notable exceptions to the rule. But the education system is geared towards a mindset that constrains entrepreneurial creativity rather than ignites it.
Second, there is very little scope outside of the traditional financial framework to facilitate people with business ideas which are novel and risky. Institutional lenders are not particularly disposed to entrepreneurs with the biggest ideas and the best projects because the emphasis is on early repayment of loans, which frequently is not consistent with the initial revenue flows from innovative projects. In addition, it is often said "in order to get a loan, you must first prove to the bank that you don't need the loan", and many entrepreneurs fall short when it comes to collateral.
Committed venture capitalists
Therefore, what Jamaica really needs at this stage is a committed bunch of venture capitalists that would give investments a completely different orientation from that of institutional lenders. What a venture capitalist does is to inject equity into new enterprises rather than to provide loans to entrepreneurs. Thus, venture capital company invariably becomes a partner in the arrangement and is involved in the management and strategic direction of the business. Indeed, there are many people with brilliant ideas who would be dismal managers - and Jamaica is full of them. Hence, the involvement of a venture capital company brings certain synergies to business that makes them more likely to succeed.
For sure, it is not for lack of the entrepreneurial spirit why we do not excel, but to a large extent, it is our institutional deficiencies that keep us back.
Cedric Wilson is an economics consultant who specialises in market regulations. Send your comments to: conoswil@hotmail.com.
