What Private Entrepreneurs Can Teach Social Entrepreneurs

Bill Easterly writes, “Entrepreneurs that do stick to fixed goals are very good at least at one thing – wasting investors’ money. An idea for an online grocery startup, Webvan, managed to go through $1 billion before finally pulling the plug.”

The advice, “Set a big goal, give all to meet it,” he says is stupid.

Why is entrepreneurship so hard? It is always very uncertain what you can do well that the customers will want. Finding that sweet spot is a process of trial and error and gathering feedback. Research cited by Mullins and Komisar shows it takes 58 new product ideas to develop one successful product.

. . .
Of course, this advice about flexible goals might conflict with previous advice about specialization. Yes, you want to get the gains from specialization, but be flexible about what your specialization will produce for the customers. So you might be a health specialist, but which among many interventions that you could do will pay off? James Grant, a former director of UNICEF, knew he wanted to save children’s lives, but he was open to any way to do it. He and his staff stumbled on oral rehydration therapy, which has since saved millions of babies from dying from diarrheal diseases at a cost of about 12 cents per dose.

As one of the comments to Easterly’s blog post mentions, though, you have to be careful in your definition of what the goal is. The goal is not the tactic used to achieve it. The private entrepreneur has a goal — make money. To achieve that goal, the entrepreneur has to be flexible about which tactic to use. The problem often is that people forget along the way the goal and make the tactic their goal. And then they stick to it. Basically the problem is of substituting the means for the end.

Many of the government of India’s failures arise from this. Examples abound, unfortunately. The goal is poverty alleviation through income generation. The tactic: generate employment. After a while the scheme degenerates into employment generation and the original goal is forgotten. After that, it’s all about employment generation, even though what they do to achieve that new goal is contrary to what the original goal was.

Too many schemes end up this way. Consider the national unique identifier scheme that the government has started. NUID is a means, not an end. But it already shows signs of becoming the goal. The NREGA is another of those. These have to be seriously reconsidered.

One thought on “What Private Entrepreneurs Can Teach Social Entrepreneurs

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