Sunday, November 19, 2006

Self employment: an 'innate survival skill'?

Nobel Peace Prize Laureate Muhammad Yunus, Yale's Dr. Robert J. Shiller and others blew me away last week when I heard them speak on microcredit and financial innovation. My perception of poverty in developing countries has bloomed. One thing that struck me in particular from their lectures was the reoccurring theme of self employment.

It's often been repeated that one of the virtues of microcredit is that it's a 'hand up', not a 'hand out.' Essentially, the Grameen Bank offers loans to would-be entrepreneurs, or entrepreneurs who need a supportive push.
The Grameen solution: “...jump-starting self employment, providing the capital for poor women to use their innate ‘survival skills’ to pull themselves out of poverty” (Neff).
Innate survival skills. I like that. This survival concept surely isn't restricted to developing countries. At the risk of sounding like a monomaniac, I'll point out one last time that in periods of recession and poor job growth in Canada, self employment rises. More precisely, low productivity, unincorporated self employment rises.
So why then do we categorize all self employed individuals similarly? Why not group them in the same spirit of methodology that labour economist's use to draw a distinction between economic refugees (those who migrate for jobs), and war refugees (those who arrive only to flee from war and thus have a relatively lower likelihood of perseverance -- ie. if they are met with opportunities or choices which provide them a higher utility level, say, returning home after a war, they'll take it).
My new terminology (subject to change as brighter ideas hit me):
'Economic' entrepreneurs: individuals whose decision to enter business may be influenced by such things as taxes, IT, geography, etc. Such individuals demonstrate the self interest motive at work in the market place and are valued in developed countries.
'Spurious' entrepreneurs: individuals whose drive to be self employed is manufactured by recession or poverty. They tend to depend on heuristic means; they may have little business know-how. Further, after hearing Dr. Shiller speak I would also add (although this is not his idea) that these individuals don't tend to be lured by the profit motive to the extent that economic entrepreneurs are. Tax structures, for example, have little influence on them. Thus, market inefficiencies increase, ceteris paribus, as the ratio of spurious entrepreneurs to economic entrepreneurs increases.
While 'spurious' entrepreneurs offer promise in developing countries, we tend to ignore their potential in Canada because we see the market inefficiencies and low productivity that a high spurious-to-economic entrepreneurship ratio creates. Although, the ratio seems to be declining since the late 1990's and Canada's self employed are doing increasingly well.

I know, I know. It's awfully perverse of me to have absorbed the wisdom of Messrs. Yunus and Shiller with only my self styled ideas to show for it on this blog. For the record, both are doing amazing work and are having a profound impact on people all over the world.
For Dr. Shiller the proof is in the pudding. See here, and here for an interesting read on behavioural finance (Oh, D.R., I've crawled from my rock and I see that you really are on to something good with behavioural economics!).

For Dr. Yunus, the proof is in The Prize. See here and here (in the latter link he suggests that the term 'do-gooders' be replaced with 'social entrepreneurs').
More terminology:
Terms used by GEM (h/t D.R.): opportunity entre­preneurs, necessity entrepreneurs.

Terms used by CIBC economist Benjamin Tal: seniorpreneurs, lifestylers, superachievers


amphimacer said...

Another term that needs definition is "microcredit." When Yunus began, he began with the equivalent of twenty-seven dollars, which covered several loans (I forget the exact number; he was interviewed on the CBC last week, and he mentioned it). The essential, however, is not that the loans were too tiny for a bank to do -- the paperwork is too costly -- but that the borrowers had no collateral. That's the most important point. On the same show, and generally in shows about him last week, they were touting extremely small business loans in Canada (under ten thousand dollars) as microcredit. That's not microcredit; after all, my bank lent me a mere $1000, in 1984, which I paid back over six months. But I did provide collateral. So "microcredit" is a term now being misused and even abused. Let's define it, please.

true dough said...

I heard a bit about this.
Apparently a woman from a Canadian native reserve received "microcredit" to open a retail store. It wasn't a "micro" loan but there was no collateral so they called it microcredit.
Still, if it's helping Canadians and reducing government hand outs, the nomenclature issue is no skin off anyone's back, with the exception of English graduates. :) Oh, sir, I couldn't resist.
Seriously though, I agree with you that we're being asked to stretch our perception of what "microcredit" really is. I'll have to read more on this. If you've come across any good reading on Canadian "microcredit," please share.

amphimacer said...

Sir? When I was teaching, oh so briefly, not even my students called me that. I must be old...

true dough said...

Okay, I'll cut it out. Bad habit.

In fact, I'm guessing from our earlier conversation that you're not so old that you should be using italics AND bold in that statement. Perhaps you can reserve the italics for five more years, at least? :)

Padmanaban said...

There are plenty of jobs in Hyderabad, so why not apply for those jobs to succeed in your career

kaleen said...

How to Make Pemmican The Ultimate Survival Food

Invented by the natives of North America.

Pemmican was used by Indian scouts as well as early western explorers.
These people spent a great deal of time on the go and depended on having portable, high-energy, highly nutritious, and filling foods that would last for long periods of time without refrigeration.

Click HERE to Learn How to Make Pemmican The Ultimate Survival Food !

People really should avert their gaze from the modern survival thinking for just a bit and also look at

How folks 150 years ago did it!

These guys were the last generation to practice basic things-for a living-that we call survival skills now.

Survival Things Our Great Grandfathers Did Or Built Around The House!