First Day Of The New Major

Yesterday was day one of the new major – Social Entrepreneurship. I had twelve students in the class, and all seemed to be engaged with the topic. I explained the format of the class, and all seemed to be enjoying the discussion and structure of class.

SE101 is an introduction to the subject of Entrepreneurship that focuses on social revolution. As a major it fits the ethos of our school as I mentioned previously. I explained yesterday that when they get to their senior capstone project they will be creating a business plan and introducing it to an Entrepreneurial Advisory Board (EAB). This board will then choose which student will win a cash award to help start the endeavor. The students seemed very impressed.

I also told the students that Warner Pacific received a $120,000 grant from Miller Trust to help start this major. The students seemed to be very impressed by this, as they should be. Ted Miller has been very engaged with this concept, and has supported us.

The EAB currently has six members. They represent the best of business in the Portland/Vancouver area. Tom Mears, chairman of Burgerville, is on the board, as is financial advisors and business owners from the community. These individuals have committed to helping our students become successful entrepreneurs.

One of my early lessons while on this entrepreneurial road is the importance of selling an idea that is scalable to investors. These are people who are willing to financially partner with you to implement your idea. Miller Trust believed in us, and anyone that is starting their own business will need to find those friends, family, and investors who believe in them. Most of the time free marketers will say keep the government out of this process. But, that may not be a wise move in this modern age.

R&D Magazine has tracked the top 100 innovations over the last ten years. Two Economic Sociologists wanted to explore the details associated with these events. They explored the data by asking a question “where did these award winning innovations come from?” One of the reasons for doing this was to see who funded these innovations.

Fred Block and Matthew Keller found seven different categories of innovators. Fortune 500 companies, small and medium enterprises, collaborations among private entities, government laboratories, universities, spin offs, and a category they called other. This meta-analysis identified two very interesting data points, innovation in Fortune 500 companies has steadily declined, and innovations in federal laboratories has dramatically increased. William Galston concludes in his article discussing this process that the government may be a good venture capitalist.

“Lawrence Summer once called the government a crappy venture capitalist,” but this may not be the case anymore. It appears that the government is getting better at funding new innovation. Although I am a free marketer I do recognize the role of government in the market. When there is an asymmetric condition within the market where one party has more information than another, then yes the government needs to be an arbitrator. There needs to be fairness within the market. I also recognize the importance of government supporting an economic system that supports innovation, which it appears they are doing.

Is this anything new? Industry in the past has been positively affected by NASA research and military contracts. Boeing especially has benefited from this capital investment by the government. Innovations garnered by the military work that Boeing has done was then transferred to its commercial side. This is the essence of Airbus’ complaint against Boeing at the World Trade Organization. Airbus calls this a government subsidy.

However, the concern one should have with strong government funding of innovations is the possibility that government would then choose winners and losers.  This warning was very clear in William Galston’s article in the WSJ this morning. “It is one thing for government to correct market failures, and to reflect economic externalities in its policy judgments, quite another for government to pick winners and losers. Government may intervene to save particular companies and industries, but only when the alternative is unacceptable systematic risk. There is a case for this view, especially when the political risk of crony capitalism is taken into account.”

Government investment in entrepreneurism is critical for our country to maintain its competitive edge, but it often comes with a price. We need to wise about this, and proceed cautiously.

And that is my thought for the day!

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