Mastering the Game
HAZLETT, THOMAS W.
Mastering the Game The business of America is small business— and entrepreneurship. BY THOMAS W. HAZLETT Entrepreneurs are the rock stars of the business world. Politicians fl atter...
...capital chases smart people connected to other smart people...
...Or somewhat more ambitiously, create a Stanford University and let the graduate students fi gure out the rest...
...There, the textbook drearily focuses on land, labor, and capital as the economy’s basic ingredients...
...This sleek, nifty volume of essays seeks to pursue the beast—and if not to capture it, then, at least, to triangulate its position...
...why tax cuts may (or may not) encourage entrepreneurial risk-taking...
...Overcoming Barriers brings highlevel analysis to entrepreneurship, and its breadth—from investment banking, to tax policy, to immigration, to retirement programs—underscores how far the pursuit ranges...
...and why larger fi rms are more likely to offer workers pension plans...
...For instance, the chapter on Silicon Valley’s venture capital hub offers a fascinating window into the sociology of entrepreneurial nurturing...
...ugly failures are inputs into spectacular successes...
...Sadly, none of this fl ash is likely to make it into your college economics class...
...These capitalists operate like bankers, but they know more...
...And pursue objectives energetically...
...There is no doubt that innovation and risk-taking—the contributions of these master chefs of the economic stew—drive progress...
...It shows that the vast majority of business owners in the United States pay taxes as individuals, not corporations...
...But the book is, caveat emptor, not a cheerleading manual: Neither Henry Ford nor Sam Walton nor Bill Gates is mentioned...
...That your “luck” improves with the skill, foresight, and strategic subtlety of the risk-taker is capitalism’s very special gift...
...The authors are social scientists at prominent institutions who probe substrata economic formations looking for clues as to what factors drive the self-employed to leave their wage jobs behind, and how public policies impact this migration...
...Fortunately, the seven essays are well organized and nicely edited, communicating the basic narrative even to those who are not in it for the “t statistics...
...The answer seems to lie in the commercial culture...
...Edited by labor economist Diana Furchtgott-Roth, it teaches us why venture capitalists cluster in places like Silicon Valley...
...The best strategy is to eliminate the underbrush of tax and regulatory disincentives that inhibit productive economic activity generally...
...In the essay on tax policy, written by Donald Bruce and Tami GurleyCalvez, an interesting body of research is presented...
...And think hard...
...In the concluding essay, a real-life entrepreneur fi nally makes an appearance...
...Either due to this, or the other way around, start-ups there outperform those elsewhere, on average...
...workers...
...Eric Meltzer is a University of Chicago MBA and the son of a famous economist, but otherwise he is perfectly normal—and enterprising...
...The social networks that form are key...
...The studies are written for both serious and more casual readers, although the latter will want to breeze past thickets of analysis only an economist could love...
...Economist Junfu Zhang, the author of the VC chapter, concludes that the mission launched by many local or state governments—to replicate the Silicon Valley experience—is a fool’s errand...
...Venture capital investments in Silicon Valley appear to be made differently than elsewhere: They come earlier to startups, and lavish more capital on fi rms...
...Soaking the rich sinks this ship...
...He counts passion and knowledge as primary inputs, with dumb luck perhaps dominant...
...Why is this...
...Which may account for the more frequent huge payoffs in Silicon Valley and a higher wipeout rate...
...Entrepreneurship is all about creating new wealth while tax redistribution is premised on the assumption that resources are static and the collateral damage from tax hikes is no more than the cost of ear plugs to block out the whining at the country club...
...Unlike investment bankers doling out highrisk, early-money investments on the East Coast, Northern California fi nancial sources are run by technical experts possessing business experience—entrepreneurs funding entrepreneurs...
...No irony here: Risk is hardwired into the entrepreneurial economy, and Thomas W. Hazlett is professor of law and economics at George Mason University...
...why Mexican immigrants are less likely to go into business for themselves than other U.S...
...Politicians fl atter them, investors clamor to discover them, and corporate executives claim to be them...
...Wealth is created when those dollars and networks combust...
...The entrepreneurs who stir the pot in brash and productive new ways are a mysterious force, diffi cult to chart with PowerPoint bullets...
...This means that rate increases for high-income taxpayers reduce pay-offs for the start-up entrepreneur...
...And tax hikes on capital reduce the pool of risky funds that these new ventures seek to tap...
...He invests in highly risky wireless communications plays, often at the frontier of technology...
...But to capture that fortuitous return, you have to enter the game...
...But they are elusive, and will not hold still for measurements...
Vol. 13 • June 2008 • No. 39
