GerardoA few weeks ago, despite its substantial girth, I added the new Kaufmann Foundation volume, Invention of Enterprise: Entrepreneurship from Ancient Mesopotamia to Modern Times to the black hole that is my reading list.  The reason for my excitement was the extra-ordinary group of volume editors.  David Landes is a pioneer in entrepreneurship and development, having written the highly-regarded The Wealth and Poverty of Nations. Joel Moykr is the author of a classic in the economic history of technology, The Lever of Riches. And William Baumol has written the seminal article on productive and unproductive entrepreneurship, as well as The Free Market Innovation Machine. Those of you embroiled in our burgeoning I&E curriculum will certainly hear from these gentlemen.

So, with these three pulling together a volume on entrepreneurship for the Kaufmann Foundation, this seemed like a can’t-miss deal.

But, according to Reuven Brenner, it missed.

It doesn’t take much time for him to find fault, either.  He starts out:

Carl Schramm, who wrote the Foreword to this book, and who, through the Kauffman Foundation, paid for it, states clearly that the book is about “entrepreneurship” as people — entrepreneurs in particular — understand the term: Someone who creates a business that, in some respects, differs from existing ones.

Yet, just two pages later, William Baumol writes in his Preface that the book is about both “redistributive” and “productive” entrepreneurship, the former covering warfare, crime, bribes, lobbying — any innovative ideas. Since this covers just about everything from Napoleon and his Code to Robin Hood, and from Muhammad, the merchant and one of the very few of Heavens’ intermediaries on this Earth to 35,000 registered lobbyists in Washington — it is little wonder that most of the 18 chapters, written by 18 different academics are all over the map, and provide little illumination on Schramm’s targeted subject matter.

Brenner spends a good deal of time talking about entrepreneurial finance, a topic I’m sure is near and dear to some of you reading this right now.  This seemed particularly pithy to me:

There is nothing more threatening to an established order — any order — than opening up, deepening, democratizing capital markets — accountably, allowing people to leverage their inventive, enterprising spirit. True, this would also disperse power — political power in particular. The deeper capital markets would also threaten established industries and commerce. Entrepreneurs, brilliant and ambitious as they might be, are not a threat. They can be sent to Siberia, forced into complacency by the Maos of this world, and the opportunistic ones will channel their ambition through the established powers.

But entrepreneurs with access to different, independent sources of risk capital — now that’s threatening, be they Brin and Page, Jobs or Milken at the time (quickly taking away much of the banks’ bread and butter of providing loans). Understanding this, even if not wanting to articulate it, provides enough incentives for those in power to subsidize, spread, and promote ideas and institutions inhibiting the deepening of capital markets under a wide variety of jargons, and thus inhibiting the invention and reinvention of enterprises. With time, people get accustomed to these institutions, their origins lost in the mist of time, inhibiting entrepreneurship and business for centuries. Today this may be happening a bit before our eyes. Suddenly, everything becomes a “bubble” — Internet, oil, houses, gold, bonds. Guess what: if everything is — why have capital markets to start with? If pricing no longer offers guidance to allocate capital; if stock and bond markets are not there to help correct mistakes faster — why should they continue to exist? And if they do not exist, who else remains but politicians, bureaucrats and the academics surrounding them — none of whom ever worked in a business even one day in their lives — who would then tax and borrow and subsequently allocate capital and “invent enterprises” based on — well — whatever.

The review convinced me to keep this book off my stack, which is probably good.  Still, I’m disappointed that the effort by Landes, Mokyr and Bamoul isn’t more exciting to its audience.  But the topic is certainly exciting and there is clearly plenty of ground left to plow.

For a slightly less pessimistic view, see the review from Mansel Blackford.