By Maggie Bohlander and Ricky Chen
With every holiday season, we have witnessed that annual ritual of families and friends gathering to watch those heartwarming yuletide films, Love Actually, It’s a Wonderful Life, and A Charlie Brown Christmas. One that may not get so much play time is John Landis’s Trading Places, a dark 1983 social comedy starring Eddie Murphy, Jamie Lee Curtis, and Dan Aykroyd.
In the film, two ageing millionaires, the Duke brothers, engage in a bet over whether — given the right environment and upbringing — any disadvantaged person can blend in as a member of America’s upper echelon. Or whether, on the other hand, given the wrong circumstances, a member of the 1 percent can fall off the social ladder as easily as the disadvantaged can climb it. This is the timeless debate: nature vs. nurture.
The same debate plays out in entrepreneurship. Are entrepreneurs born or are they made? Why do some countries boast many startups and small- and medium-sized businesses while others do not?
As CIPE has found, and, believe it or not, as Trading Places suggests, environment plays a significant role in the success or failure of a new business, as well as the vitality of the small and medium enterprise sector as a whole. Preparing for the bet against his brother, millionaire Randolph Duke asks panhandler Billy Ray Valentine (Murphy) about his upbringing:
“You come from a broken home, of course?…You have a history of juvenile arrests, I presume?…Reform school?”
Valentine is a poor man from the wrong side of Philly, but he’s smart and he understands how people think, a valuable skill in his new position as a broker at the Dukes’ firm. Valentine excels in his new environment, while Aykroyd’s character, a Harvard graduate, is at a loss to handle his sudden plunge into poverty. In the end, it’s Valentine who concocts the plan to get back at the Dukes for their cruel-hearted trick. Nurture triumphs over nature as the clear determinant for individual success.
In the nature vs. nurture debate of entrepreneurship, “nature” is intelligence, a knack for leadership, creativity, or business savvy. “Nurture” is, among others, education, supportive social and professional networks, and access to finance. Natural abilities certainly help an entrepreneur to start his or her business, but no matter the quality of the business plan, it needs a supportive environment in which to grow.
A crucial component of the entrepreneurship ecosystem is education. Despite significant improvements in the educational sector around the world, 17 percent of the global adult population is still not literate. Two-thirds of illiterate adults are women, and Sub-Saharan Africa still witnesses extremely low literacy rates. Beyond closing the literacy gap, the emphasis on theoretical knowledge and rote memorization in educational systems around the world has severely undermined the employability of youth and their ability to establish innovative companies. The three C’s of entrepreneurial skills – critical thinking, creativity, and communication – must be taught alongside science and mathematics. In Lebanon, CIPE has successfully worked with local partner Development of Nature and People Association (DPNA) to catalyze a national coalition of civil society leaders, local chambers of commerce, and financial institutions to integrate entrepreneurship curriculum into the Lebanese educational system.
Once an aspiring entrepreneur has identified an opportunity and come up with an idea, he or she needs to drum up the capital to fund their business. In the United States, venture capital is now a well-known part of the larger private equity industry, and there are government mechanisms in place to help small businesses in particular. But in some developing countries, access to finance is an obstacle to budding businesses.
In places like the Philippines, applicants may need to provide significant collateral or extensive documentation that, in the initial phase of their businesses, they simply cannot provide. In Tunisia, there are no mechanisms to fund projects that banks deem too risky. Tunisian entrepreneurs who are denied credit are forced to either give up entirely or join the informal sector. In order to create a thriving entrepreneurship ecosystem, governments need to expand access to finance, whether through their own mechanisms or by protecting traditional credit sources from the risks associated with backing new businesses.
At the 8th annual World Chambers Congress, CIPE Executive Director John D. Sullivan argued that an entrepreneurship ecosystem must encompass property rights protection, access to finance, tackling corruption, and addressing the issue of the informal sector. But more importantly, we must instill in our societies a deeper culture of entrepreneurialism and garner the support of families and friends. As CIPE Regional Director for Middle East and Africa Abdulwahab Alkebsi noted, “We need to break the taboo of failure that prevents people from undertaking the role of entrepreneur.” By building a supportive network of families, friends, and business leaders who can serve as mentors, we can encourage people to become entrepreneurs and start their own businesses.
Outside the elite club where Trading Places’ Duke brothers started their nature vs. nurture debate, the plaque exhibited a contradictory notice: “The Heritage Club – With Liberty and Justice for All – Members Only.” Even if some people are natural risk-takers and innovators, these business-savvy people cannot achieve their full potential if the business environment remains “members only.” However, entrepreneurialism need not be an exclusive club. By removing entrepreneurial barriers and leveling the playing field, more people are likely to choose the path of entrepreneurship and contribute to the vitality of their economy.
Maggie Bohlander and Ricky Chen are Program Assistants for the Middle East & North Africa at CIPE.