Is Entrepreneurship Enough to Overcome Communism?

I just read an interesting article written by an American entrepreneur and former banker who has started a college loan company in China called Qifang. His name is Calvin Chin and he's a Yale grad who, after banking, worked a couple start-ups before this latest venture into P2P lending. He has an interesting perspective on government intervention into the market, to say the least.

If you're expecting an American entrepreneur to view Chinese communism with disdain, you'd be wrong. Chin looks at what the government has been able to achieve through managing a free-ish market, and he believes that national stability is a greater priority than total freedom.

He makes an interesting point about how nimble Chinese entrepreneurs must be, and how accustomed they are to the government putting massive roadblocks in their way. They seem to view it as a challenge to figure out how to get around said roadblocks and recreate their companies in some new iteration in record time. It definitely makes for a resilient breed of entrepreneur.

When I think about how easy it is to start a company here, how far the barriers to entry have dropped (to be almost non-existent today), it makes me wonder why more people don't do it. Can it really all be chalked up to a herd mentality? I find that hard to believe. And yet, looking at how hard it is to get something on solid footing in China, it doesn't seem to be dissuading Chinese entrepreneurs.

What gives, people?

 
Edmundo Braverman:
he believes that national stability is a greater priority than total freedom.
Hmm.

As for why there might be more Chinese entrepreneurs than American ones: China = 1300m people > US = 300m people

 
Best Response

I doubt China has more entrepreneurs than the U.S. In spite of the population disparity, I would be surprised to find that the sheer number of Chinese entrepreneurs exceeds that of the U.S.; I know for a fact that they don't on a per capita basis.

If you want to really compare apples to oranges, compare the barriers to entry into small business between the U.S. and China. Here, pretty much any doof with an Internet connection can start his own company tonight and be earning money immediately. There, entrepreneurs face a leviathan bureaucracy and a game where the rules change at halftime regularly. Still they press on.

I'm not pointing the finger at anyone; as someone who has started several businesses over the past 20 years, I know how government does its dead level best to get in the way. I've even fought city hall a couple times, with mixed results.

My point is that entrepreneurship in America has become such an open field that it is no longer the all-or-nothing proposition that it used to be. It is a fairly simple matter to start a side business that brings in a reliable $5,000-$6,000 a month, and that's enough for the vast majority of the country to live comfortably. Hell, that's enough to make you one of the richest people on Earth when you compare average incomes globally.

 

Agreed, I shot that out of the blue, though it has to play a part ceteris paribus.

I concur with jnl83. People in Asia might be greedier as the (family) pressure to succeed is very high and failure means third-world living standards. Just look at who works hardest at Oxbridge and in the good old Ivy league.

 
Edmundo Braverman:
When I think about how easy it is to start a company here, how far the barriers to entry have dropped (to be almost non-existent today), it makes me wonder why more people don't do it. Can it really all be chalked up to a herd mentality? I find that hard to believe.

I think there are generally two reasons why people are reluctant to start up their own business. First off, they might not have sufficient liquidity to sustain few months of no cash inflows. I think this is one of the biggest barriers facing many middle income people why they won’t be able to be entrepreneurs. Same as why many investors cannot be like Warren Buffet. They simply just can’t wait as long as they can until the market catches up with their estimated intrinsic value of the firm they are willing to invest in. For this reason, they will be a lot more hesitant, and this is why many middle income class people just end up as middle income class, because they are not taking risks. Second, it is likely that the rich has done experiments successfully in the past. Otherwise, they won’t be rich. During their past successes, they gain knowhow. As a result, they become more competitive in terms of accumulative knowledge they have gained, making other ordinary people less likely to succeed in the competition.

 
sanjose04:
Edmundo Braverman:
When I think about how easy it is to start a company here, how far the barriers to entry have dropped (to be almost non-existent today), it makes me wonder why more people don't do it. Can it really all be chalked up to a herd mentality? I find that hard to believe.

I think there are generally two reasons why people are reluctant to start up their own business. First off, they might not have sufficient liquidity to sustain few months of no cash inflows. I think this is one of the biggest barriers facing many middle income people why they won’t be able to be entrepreneurs. Same as why many investors cannot be like Warren Buffet. They simply just can’t wait as long as they can until the market catches up with their estimated intrinsic value of the firm they are willing to invest in. For this reason, they will be a lot more hesitant, and this is why many middle income class people just end up as middle income class, because they are not taking risks. Second, it is likely that the rich has done experiments successfully in the past. Otherwise, they won’t be rich. During their past successes, they gain knowhow. As a result, they become more competitive in terms of accumulative knowledge they have gained, making other ordinary people less likely to succeed in the competition.

I agreed with most part, but you missed an important fundamental mechanism for entrepreneurship--copy rights and good business law enforcement for protection of innovative ideas. Without those even if you have the idea for next Apple it wont happen. Nevertheless, there is hope, the next gen Chinese leader, Li Keqiang seems to be a very pro-business politician http://www.cnbc.com/id/35143517.

 

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