Wednesday, April 21, 2010

Why Entrepreneurs?

Among all the riddles of economic life, none perhaps is greater than the existence of a market for new cookbooks.

Consider TED prize winner and celebrity chef Jamie Oliver. Last night Skoll Centre Director Pamela Hartigan, her husband Martin Hartigan, and I shared a meal at Jamie Oliver's Italian restaurant in Oxford. (In case you're wondering, it's called "Jamie's Italian.") Martin and I both ordered "fish in a bag" which the menu describes as follows:
The freshest sea bass fillet from Brixham market, Cornish mussels and clams steamed in their own juices with smashed fennel, heritage potatoes, capers, arrabiatta sauce and zesty Amalfi lemon.
To accompany my fish in a bag, I had a glass of Merlot. The meal was delicious and the three of us had a great time.

But here's the point: For how long have human beings been drinking fermented grape juice? For how long have we been steaming fish and mussels--potentially in combination with available fresh vegetables? Answer: A very long time.

Now granted, there is some skill involved in organizing raw materials (sea bass, fennel, lemon, etc.) into a meal--which is to say, cooking. Very good cooks may be able to profit from their skill by, for example, charging for the meals that they prepare. (Ergo, restaurants.) Alternately, they may painstakingly document their techniques so that others can duplicate their skill. (Ergo, recipes.) Yet, even when a recipe is well spelled out, dimensions of discretion that inevitably fall to the cook can lead to very different outcomes. As Joseph Schumpeter observed a century ago in The Theory of Economic Development:
The necessity of making decisions occurs in any work. No cobbler’s apprentice can repair a shoe without making some resolutions and without deciding independently some question, however small.
All is well so far. Where we run into a problem is with Jamie Oliver, as well as with Nigella Lawson, Thomas Keller, and all other celebrity chefs. Indeed, the very existence of cookbooks is a bit vexing. How can it possibly be that, after the trillions of meals that human beings have prepared and consumed over millennia out of essentially the same fundamental set of ingredients, individual people to not only come up with new recipes, but in fact to become famous doing so? A new recipe here and there, sure. But an entire cookbook full of culinary novelty? Such a thing would seem to be a statistical impossibility.

The answer is, of course, that cookbooks aren't impossible. Indeed they are not only possible, they are ubiquitous. That is because there is no limit to humanity's appetite for novelty, just as there is no limit to human creativity. In fact, if Chicago's Moto Restaurant and Disruptive Food are any indication, we're just getting started...and that's just with the recipes.

In economic life, managers are cooks. Some are better, some are worse. Good ones can make money from their skill. Bad ones botch even the easiest recipes. Variance among managers makes it difficult to sort out, when assessing a project (as when eating a meal) whether any shortcomings experienced are due chef's lack of skill, or to the recipe employed. As Bill Easterly tweeted a while back
Nothing works everywhere, depends on how implemented RT @Transitionland: Microfinance meltdown in Bosnia -
Even in medicine, with its highly routinized protocols, over 1 million deaths per year occur as a consequence of medical error. (That number is for the United States alone. Ref. Atul Gawande's Checklist Manifesto. In 1994, that 1 million included my father, who died due to complications in the course of a "routine" surgical procedure.) When surgery fails, is the fault with the surgeon, or the technique? This is a difficult enough question to answer in a medical context, but it is even more difficult when applied to a development project.

That said, the remarkable persistence of markets for cookbooks suggests that nourishment depends on much more than ensuring that existing recipes are properly prepared--as important as that can be. It also, and perhaps more fundamentally, depends on the creation of new recipes.

Or, to get past the metaphor: sustained prosperity depends on more than capable managers. It depends on more than blueprints, manuals, and franchises. It depends on more than projects with goals, targets, and timetables.

Instead, sustained prosperity depends on novelty. It depends on invention in the face of change. It depends on creativity with limited resources.

More fundamentally--most fundamentally--sustained and sustainable prosperity depends on entrepreneurs.