Adrie's Blog

Keynes, Schumpeter and Plain Common Sense

Sometimes it is good to look at your classics. In this stage of the financial crisis, it is very interesting to review how people viewed the economy and crises then. Many of the great thinkers of the early part of the last century are still watching over us in the sense that many of the decisions taken today are based on the theories of Keynes for instance, one of the greatest economists of the past century. Keynes offered a suggestion to solve the Great Depression. Roosevelt rejected it and tried countless other approaches, all of which failed. Then, applying the theory Keynes had suggested, the US went from the greatest recession it had ever known to the greatest economic boom of its time, all in seven short years. Our various governments, from Obama to Brown to Balkenende, today apply the same theories to the recession of our time - investing in large measures in infrastructure and increasing government spending.

The vision of Joseph Schumpeter and his views on entrepreneurship were what hit a chord with me most this past week. I found this on wikipedia:
"The research of entrepreneurship owes a lot to his contributions. He was probably the first scholar to develop its theories. He gave two theories, sometimes called Mark I and Mark II. In the first one, the earliest of the two, Schumpeter argued that the innovation and technological change of a nation comes from the entrepreneurs, or wild spirits. He coined the word Unternehmergeist, German for entrepreneur-spirit. He believed that these individuals are the ones who make things work in the economy of the country. In Mark II, developed later as professor at Harvard, he asserted that the actors that drive innovation and the economy are big companies which have the resources and capital to invest in research and development. Both arguments might be complementary today"

This is exactly what I wrote in a prior blog. We need the government to stimulate Small and Medium Enterprises by providing financing for starting entrepreneurs. If you look at the whole current recession as something that is not new, that the world has been through a number of times before and that we always have gotten through to the other side - then it is easier to understand that this crisis will also pass. Yes, it may take a while longer yet, but it will pass.

On Plain Common Sense

In this time I receive a lot of question from starting entrepreneurs who get worried and scared by the ongoing negative talk about the crisis. My advice to them is always the same: Use common sense!
Don't spend money unless you can calculate that the ROI is high and relatively short term.
Always have a powerpoint ready about your company and its prospects, so that if you find someone willing to invest - you can immediately provide them with the information and continue the momentum.
Look around you in your own network and on E.Factor for possible investors, in this time it is mostly Angel investors you need to attract. Especially if you are an early stage company.
Large companies are mostly internally focused, looking at cost cutting, savings, lay-offs, reorganisations etc. Analyse and hit home in those areas where you have a better proposition then your competitors. Now is the time you can nibble away and attract new clients.
Do barter deals with other start ups instead of spending cash

In short - common sense will get you a long way. In the end, it will be young, innovative and creative companies that will change the economy for the better.

With thanks to Wikipedia

Adrie Reinders
adrie@efactor.com