Is Entrepreneurship for Everyone?

Algernon Austin presents an excellent, concise, and wonderfully read scholarly examination of the complicated landscape of race, class and popular perception. Besides the prison industrial complex, black strides in education, poverty rates, crime and other indices contradict claims that blacks are “moving backward.”
--Jeffrey O. G. Ogbar, Director, Institute for African American Studies, University of Connecticut and author of Black Power: Radical Politics and African American Identity (The Johns Hopkins University Press), 2004 and Hip-Hop Revolution: The Culture and Politics of Rap (University Press of Kansas), 2007.

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I recently came across yet another call for black entrepreneurship as a means to black economic development. I think this is a big mistake. I see this idea on par with recommending that people buy lottery tickets to achieve wealth.

Now, I do think that having a successful business is a supreme way to build wealth and income. I also believe that there should be more successful black businesses.

So, why am I not big on entrepreneurship?

The simple reason is that most businesses fail. There is a high reward to having a successful business because it is a high-risk venture. If it were easy to have a successful business everyone would have done it already.

Some people have a brilliant idea and those people should start a business. Some people have a great passion to own their own business and they should probably do it. Some have the wealth so that if they lose their investment they can easily continue with their lives. These folks can do it if they have sufficient interest. But even when you tally up the numbers of people in these three categories, you still end up with a small minority.

There are many pitfalls in the way of business success. According to Patricia Schaefer, starting a business just to make money is one of the top wrong reasons to start a businesses. Schaefer sees the singular-focus on getting rich as one of the leading reasons businesses fail.

Starting a business is like becoming a professional athlete or a skilled musician. It’s not for everybody. Some people—a small number—have what is necessary and most people don’t.

A better solution for most people is to find the best job they can, save and invest wisely. People should also support government policies that lead to a broadly shared prosperity. There are investments that the government can make to improve people’s job and educational opportunities. There are investments that would make America a stronger country economically. These policies are as important as any personal action one can take.

There is somewhat of a compromise position. Michael E. Gerber, author of The E-Myth Revisited, points to franchising as an easier path to business success. How does a small-businessperson compete with gigantic businesses like McDonalds, Toyota and Starbucks? She doesn’t have to. She can open a McDonalds or a Toyota dealership or a Starbucks. Now, this path is not easy either, but it can be easier than starting from scratch.

Entrepreneurship for the right people is a great idea. For the wrong people, it can lead to disaster. In many ways homeownership is different from entrepreneurship. Homeownership, for one, is a policy for a wide range of people; entrepreneurship is not. But even a wise general policy like homeownership, when engaged under the wrong terms, can lead to disaster. See what the subprime housing crisis is costing black America. If we can’t tell every black person to go out and purchase a home, we have to realize that we also cannot tell the masses of black people to go out and start a business.

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--Algernon Austin, Ph.D.

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