From the March 2002 issue of Entrepreneur

It took us less than 225 years to go from revolutionaries to corporate thinkers. As a nation, we may proudly don a badge of innovation, but in reality, we wear the uniform of a superpower, saluting the corporate dollar. Sad to say, the United States now personifies exactly what it fought against in the Revolutionary War: inflexibility, bureaucracy, arrogance and bloat.

It's time for entrepreneurs to come to the aid of their country. We must prepare not just for recession, but for revolution. Our revolution is not against the corporate world per se, but against a corporate mind-set. In other words, it's time to get entrepreneurial.

This call to common sense may not have happened if September 11 had not shaken us to the core. The ensuing confusion led inevitably to re-evaluations, some of which seemed to steer us like startled sheep even further into a corporate daze. A Los Angeles Times article in late September stated, "The 'new economy,' already tattered before the assaults, is dying. In its place will emerge a shadow war economy."

They aren't the first skeptics to put the term New Economy in quotation marks. But a shadow war economy? The ominous term becomes downright scary as the Times describes it: "The private sector, whose entrepreneurial enthusiasms defined the passing age, will become more corporate and more controlled. And the new economy-the deregulated, wired, just-in-time, globalized new economy of the '90s-will be gone."

This is the attitude we're compelled to fight. It's an attitude that has led to offenses on two fronts: a public bias toward Fortune 500 corporations and a private discouragement among some entrepreneurs starting or continuing with their businesses. This is no time for defeat, or for hunkering down. In Common Sense, Thomas Paine called the verge of the American Revolution "the seed time": "'Tis the concern not of a day, a year, or an age; posterity are virtually involved in the contest, and will be more or less affected, even to the end of time, by the proceedings now."

When since Common Sense's publication has this statement rung so true, both for our national and our personal economies? Let's consider nothing more than simple facts, plain arguments and common sense to determine why the role of entrepreneurs is more important than ever.

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A World Turned Upside Down

"Revolution," according to Webster's, is a complete or radical change of any kind. Our economy has flirted with radical change. But the drop left us smarting, and craving what's safe.

So what's safe? Previously, we equated safety with corporations and invincibility with largeness. But it took just a week after the terrorist attacks to expose the inherent weakness-the high costs and low margins-in the airline industry. And it's taken just six months to see more faltering giants and massive layoffs.

Still, the federal government clings to its misconceptions, counting on goliaths like IBM and Microsoft to pull America out of its economic funk. Their message is clear, whether it's via defending anticompetition practices or granting bailouts in tidy sums.

"The government is giving out huge awards for inefficiency," says William B. Gartner, the Henry W. Simonsen Chair in Entrepreneurship at the University of Southern California's Marshall School of Business in Los Angeles. "Frankly, government policies are anti-entrepreneurial across many industries."

Despite that formidable obstacle, Gartner has faith "our economy is going to be more, not less, entrepreneurial. The information economy is not based on economies of scale the same way. It's based on what's in your head, your ability to exploit ideas and information. That will continue, and even intensify."

The reality is, entrepreneurs have the potential to fortify the economy as never before. "The need for innovation and new ideas has never been greater, and the problems or challenges of a new economy have always been met by rapid-growth firms that find the key to what the country needs," says Howard H. Stevenson, business professor at Harvard University in Cambridge, Massachusetts.

Today, for example, Stevenson says, "it's unlikely to be Eastman Kodak that delivers the best security devices-it'll be some entrepreneur with an image recognition product. And it'll be an entrepreneur, not Oracle, who delivers the security of neuro-network processing."

We must rely on the passionate smaller businesses to fill gaps in creativity, as large companies retreat, shellshocked by the economy. "Big firms are in survival mode," says Stevenson. "And that's not where innovation occurs."

Learn more about working with the government in Falling in Gov.

In fact, the war on terrorism could turn the economic tide toward, rather than against, small businesses. "Just because we're in a war economy doesn't mean small businesses are dead," says Paul Saffo, director of the Institute for the Future, a Menlo Park, California-based foundation that provides strategic planning and forecasting services to corporations and government agencies. "If that was the case, why has virtually every government agency put out requests for creative ideas? The CIA has a VC arm in Silicon Valley called Incutel, and they're busier than ever. Everyone's going to small companies asking questions."

Even outside the wartime realm, Saffo sees us moving into a new era of innovation. Like microprocessors in the '80s and communications and lasers in the '90s, he considers sensors the opportunity of the 2000s. In this field, Saffo says, "a lot of leading-edge work is being done by small companies."

But with this kind of wide-open innovation, as Saffo points out, "there's lots of space for both large and small companies to play. The assumption during the dotcom bubble was that big was bad. That was patently idiotic at the time. But let's now not make the opposite mistake when people say there's no space for small companies. It's not an either/or."

Without the entrepreneurial passion, however, we may not attain this potential. Let's put it this way: It's a new economy. As Stevenson says, "Do you really trust GM to run it?"

Will to Fight

Another disturbing question: Even if entrepreneurs have a role in the New Economy, are they willing? Maybe the harshest entrepreneurial enemy today is fear-the notion that forfeiting your entrepreneurial dreams and returning to the apparently safer fold of employment is the wise thing to do.

Are today's laid-off workers still too wary of the stench of dotcom failure and a cloudy economic future, or will many of them, like their predecessors in the layoffs of the early 1990s, start businesses? "I'd be shocked if they didn't," says Stevenson. "Once most people experience [entrepreneurship] and discover the allure of doing something they like, they can no longer be bribed by a high salary."

Fence-walkers can learn a lot from Ben Occhiogrosso. The 48-year-old entrepreneurial veteran co-founded DVI Communications, a New York City-based IT consulting business, more than 20 years ago. Before DVI, Occhiogrosso was an entrepreneur trapped in a telecommunications worker's body. He and two co-workers were "three workaholics, laboring under the yoke of administrative bric-a-brac," he recalls. "The reward for hard work was more hard work. And we sensed we could do this business ourselves better and faster."

Since then, he's survived a grueling first year, an almost crippling dry spell in the early 1980s, the stock market crash of 1987, the recession of the early '90s and the rise and fall of the dotcom economy. He admits to being envious of the financing falling into the laps of unworthy dotcoms and calls government handouts to large corporations "a sore spot." But of course, all that's minor compared to the trauma Occhiogrosso experienced on September 11. He never would have anticipated his entrepreneurial duties would include tracking down his 40 employees to make sure they were alive, and calling to find out whether his office, a block away from the World Trade Center, was still standing. He used to consider his view of the World Trade Center a perk; now he looks out the window every workday at an empty space. "So much happened in one day," he says. "I've never experienced in all my years in business an effect so sudden, so dramatic, so compressed."

Even with fresh emotional and financial scars, Occhiogrosso doesn't miss the easy life under a corporate ruler. "I'm more convinced than ever of the correctness of that decision I made a long time ago," he says. "I like to be in control of my destiny. I like to know what the real picture is. I don't like to be insulated. I'm convinced this is the right thing for me." General Nathanael Greene's assessment of the American revolutionaries holds true for Occhiogrosso, as well as any entrepreneur who has survived the past few years in business: "We fight, get beat, rise and fight again."

Truths We Hold to Be Self-Evident

Common Sense was a reply, in effect, to George III's speech to Parliament, in which he said, "These Americans, whatever they say, they're trying to be independent." It's not something Paine was willing to disavow.

Today our challenge comes from within. But our hope is that entrepreneurship, like revolution, is at the soul of our nation. And, though we may have strayed toward the corporate, we are fundamentally entrepreneurial.

"Entrepreneurship is becoming much more the norm than the aberration," says Gartner. "We're hugely innovative. That's just the nature of our culture. We're always open to new ideas, and we're not afraid to fail."

Read the full text of Thomas Paine's Common Sensehere.

"We've never had people more highly trained, more information about market needs, and technology more friendly to entrepreneurs," says Stevenson. "Conditions for small companies have probably never been any better. Does that mean it's going to be easy? No, it's never been easy. But the opportunities to succeed and prosper in this environment are huge."

As Paine wrote in Common Sense, "However our eyes may be dazzled with snow, or our ears deceived by sound; however prejudice may warp our wills, or interest darken our understanding, the simple voice of nature and of reason will say, it is right." We'll be that voice: Entrepreneurship, as a driving force in our economy, is undeniably right.

Contact Sources

DVI Communications Inc.
(212) 267-2929, ben@dvicomm.com

Institute for the Future
(650) 854-6322, www.iftf.org

University of Southern California
(213) 740-0648, www.marshall.usc.edu/entrepreneur.

Portrait of an Economic Revolutionary

One of the founding fathers of the current entrepreneurial revolution may be Joseph A. Schumpeter, a former Austrian finance minister, Harvard professor, author of Capitalism, Socialism and Democracy and radical economist who died in 1950. Never heard of him? That's probably because Schumpeter's peer, John Maynard Keynes, was considered the real economic revolutionary of their time. But lately, the lesser known Schumpeter's theories have been getting a lot more play among futurists, economists, businesspeople, professors, even Alan Greenspan. The key difference? Schumpeter focused on entrepreneurs, innovation and change, while Keynes concentrated on government spending and stability.

"Keynes said the key players in the economy were government and big business; Schumpeter said they were the individual innovators," says futurist Paul Saffo. "Schumpeter believed 'stabilized capitalism' was a contradiction in terms. Whereas Keynes assumed capitalism left to its own devices would move to the middle, stable ground, Schumpeter said capitalism would move toward change. And that's exactly what has happened."

Schumpeter's trademark idea was that of "creative destruction," in which innovations introduced by entrepreneurs capsize a sense of stability in the market, thereby compelling existing businesses to either acclimate and compete, or go bust. Eventually, through this process of destruction and creation, the economy grows.

These theories, though underestimated during Schumpeter's lifetime, are now proving to be spookily accurate. But even his supporters admit he did miss the mark in some of his predictions. "He thought we would go through an entrepreneurial phase that eventually would mature, and we would end up with something like socialism with a humane face," says Saffo. "He thought this whole period would be transitional, to a new large company world order. Specifically, he thought the process of invention would become systemized, and that the lone inventor in the garage would be taken over and institutionalized and bureaucratized. And we know it's not quite that simple. Even he underestimated the revolution he identified."

As a credit to the power of entrepreneurs, not many economists are likely to make that mistake today. It's become fashionable for economy watchers to toss around the term "creative destruction," particularly in connection to the New Economy. Schumpeter even has his own association of devotees--the International Schumpeter Society spans 33 countries. "We're living in a Schumpeterian world," says Saffo. "There's no doubt about it."