Tuesday, January 31, 2017

Do Republicans See Invisible Capital?

Chris Rabb. Invisible Capital: How Unseen Force Share Entrepreneurial Opportunity. San Francisco, Ca.: Demos. Barrett-Koehler Publishers, Inc, 2010.

This book examines why businesses succeed. For instance, people who are successful in buses tend to be from families in that business. They enter the field with access to existing family connections. An “invisible capital” creates better access to useful connections by being able to tell these connections they are offspring of someone they already know.

Invisible capital includes having made these connections People may find success over a longer time than others because, eventually, their connections give them an advantage over others. These connections may produce insightful or specialized knowledge that competitors might not receive.

“Invisible capital” includes one’s knowledge, skills, experiences, and networks, along with birthrate status. Businesses started by people with prior experiences of starting other businesses last up to 12% longer. The most successful are entrepreneurs working in a family owned business.

Invisible capital does not replace hard work. It does create an unseen force that may create an advantage for improved chances at success.

Invisible capital is not necessarily the advantages that exist due to race, high educational achievement, etc., although such things can be factors.  Invisible capital can exist regardless of advantages due to greater wealth and/or greater education.

“No good deed goes unpunished” occurs when good work doesn't overcome the assumptions regarding invisible capital. If an employer responds to the invisible capital, the employer may be more apt to hire applicants with this invisible capital than the hardest working applicants.

There is an Entrepreneurial - Industrial Complex that falls to help people with lower incomes because it fails to account for invisible capital. Entrepreneurship needs to recognize this in creating more opportunities and innovations. It should, instead, be guided towards using profit along with principles in helping others.

There is a need for better entrepreneurs. More successful entrepreneurs are what is needed, not more enterprises. It is mature businesses that then remain in operation that create jobs. Optimistic entrepreneurs who ignore problems will likely fail. These failing entrepreneurs often lacked invisible capital.

There was a more than quadruple increase in the wealth gap from 1984 to 2007 between White Americans and African Americans, according to research at Brandeis University. Invisible capital helped advance those who started with these advantages. It does help to be a White American and a male. Entrepreneurs tend to hire people who are similar to themselves in class status. A Kauffman Foundation study concluded that the average entrepreneur is a middle aged white male with prior experience in the same field.

90% of business owners were born in the U.S. African Americans, at 13% of the population, are 7.1% of business owners. Latinos, at 15% of the population, are 6.8% of business owners. 64% of business owners had attended college. 56% of business owners had a graduate degree. The author notes “the playing field is not level”.

Invisible capital does not mean that people are excluded due to being a member of a racial minority, having lower income, or being LBGQT. It does mean there are social advantages that exist.

The “richness of community” is improved with increased civic involvement. “Triple bottom line enterprises” make a profit, remain in business, and create positive social impacts. This richness benefits both the entrepreneur and the community as both then connect to help each other.

There is about a one in eight chance that a new venture will last over three years, produce revenues over $25,000, and hire at least one employee, according to a study conducted by the Kauffman Firm Survey. About 75% of businesses have no employees. About 10% of businesses have more than 20 employees.

12 million, or 11% of the 115 million private sector jobs are in venture capital-backed firms. 80% of firms are family owned and operated. Most family owed businesses do not survive to the family’s third generation.

Successful entrepreneurs are not necessarily risk takers. Success tends to come from having the temperament to react correctly to obstacles and opportunities. Success tends to come rom calculating risk, not taking it.

As the author notes, “if…just showing up is indeed 90 percent of success, then some portion of that must be attributed to invisible capital that informs us where, when, how, and why to show up in the first place.”

There is invisible capital that can be accessed through cultural capital. This would include increased education and improves skills  Networking with key people is important. Increasing one’s cultural capital to gain access to people who can help propel the entrepreneur forward is important. Ascribed characteristics can improve entrepreneurial success. These characteristics include education, experience, marital status learning how to properly handle finances, and access to those with wealth who may parter, and access to good employees to hire.

Economic mobility rising from the bottom fifth of wealth to the second or first fifth of wealth is rare.

The value of invisible capital is its ability to be used to obtain wealth. There is no real value to invisible capital.

Homophily refers to the tendency for people to associate with people who are like themselves. Propinquity is the tendency of people to remain in physic or psychological proximity in interacting with people similar to themselves. Homophily and propinquity play roles in invisible capital.

Invisible capital may be skewed in favor of some. It is, though, still open to others.It can be obtained by people who realize what to do. Unfortunately, there is a lot of entrepreneurial illiteracy which often leads to business failure.

There is an inverse relationship between a nation’s wealth and the percent of self-employment within nations. Thus it is a myth that entrepreneurship improves national wealth.

Invisible capital is highly situational. An entrepreneur needs the agility to evade and properly respond to circumstances.

People with the most invisible capital have used it to help increase their wealth. The ratio of compensation to Chief Executive Officers to the average salary has increased from 24 to 1 in 1965 to 262 to 1 in 2005, according to the Economic Policy Institute.

The U.S. ranks as the 25th most entrepreneurial country. The U.S. has one third the proportion of per capita newly formed enterprises as does Thailand. Thailand ranks first in per capita proportion of newly formed enterprises, according to the Global Entrepreneurial Monitor.

In 1948,18.5% of adult employee are self-employed. In 2003, 7.5% of adult employees were self-employed, according to the U.S. Labor Department.

People from India, Japan, China, and Korea who moved to the U.S. have higher entrepreneurial rates that Whites. Further, people from these countries have enterprises that are most likely to be incorporated, hire employees, and have more than 500 employees. Homophily and propinquity play roles in the invisible chapel found within these communities.

Successful entrepreneurship requires making entrepreneurial opportunities dramatically more successful. Access should be based on social impact and shared prosperity. Creating access on social identity and individual acquired wealth is more apt to lead to business failure. Entrepreneurs from disadvantaged groups need to develop intra-group relations to help each other succeed.

The author notes that public programs of creating capital access to disadvantaged groups may improve individual success yet does little to improve disadvantaged communities Rep. James Cleburne once unsuccessfully attempted to address this problem when he proposed that at least 10% of Federal stimulus funds be directed to communities, not corporations, with poverty rates of 20% of more, for 30 years or more.

Successful incubator are those that instruct entrepreneurs in entrepreneurial literacy as well as providing human capital.

Entrepreneurial success relies on factors such as sufficient capital, educational achievement, and relevant work experience. These, though, do not guarantee success. What is needed as community-centered enterprises that are sustainable. Community entrepreneurship creates assets that better foster a community towards increasing the well being of all within the community. What is needed are broad yield enterprises, that help a broader community, rapid scale enterprises, which grow quickly in benefiting stakeholders, and post-flux enterprises, which rehire, retrain, and improve the community labor market.