China and the New Entrepreneur

Allan Kupetz sent over this very interesting article from the Economist on entrepreneurship in China, titled, Let a Million Flowers Bloom. I used to travel a lot in China, and even a number of years ago, you could see the very early stages of the growth of the entrepreneurial enterprise. I remember walking through an area just outside of Shanghai, called Pudong, which at the time was just a lot of mud, and not much else. Now, as testimony to its growth, over 1.3 million square meters of prime office space was completed in Pudong in last few years.

From the article:

China’s state-controlled entities are not particularly profitable. A study by Qiao Liu, a professor at the University of Hong Kong, concludes that the average return on equity for companies wholly or partly owned by the state is barely 4%, despite the benefit of cheap leverage provided by government-controlled banks. According to a recently published paper by Mr Liu and a colleague, Alan Siu, the returns of unlisted private firms (my note: this is how the article is referring to the Chinese entrepreneurs) are no less than ten percentage points higher.

Start-Up Nation Israel

When you hear about something once, you take note of it. When you hear about it a few days later while in a different city, you start thinking about it. And when you read about it the following week in the Wall Street Journal, you decide that you better seriously pay attention.

Two weeks ago, one of our Whitman School of Management professors walked into my office and told me about a new book called, Start-Up Nation by Dan Senor and Saul Singer. Then a week later, when Mike and I were visiting the Small Business Administration in Washington DC, Bill Ellmore mentioned the book. And then today, in the Wall Street Journal there is a very favorable review. What caught everyone’s attention was the author’s comments about the startup culture in Israel and its relationship with their military. The authors contend that Israel has a very unique entrepreneurial culture that leads to entrepreneurial success. Where does that culture come from? Read from the review:

Mainly, the Israeli military."You have minimal guidance from the top," Messrs. Senor and Singer write, "and are expected to improvise, even if this means breaking some rules. If you're a junior officer, you call your higher-ups by their first names, and if you see them doing something wrong, you say so." High-school stand-outs are recruited into elite military units and trained intensively, with an emphasis on technology. When they're done, everything required to launch a start-up "will be a phone call away. . . . Almost everyone can find some connection to whomever he or she needs to contact to get started." Israel is a country, it seems, where everyone knows everyone.

It is also a country with mandatory military service before college. For nations that want to emulate Israel's start-up success, Messrs. Senor and Singer advocate similar mandatory service, military or otherwise, to get "something like the leadership, teamwork, and mission-oriented skills and experience Israelis receive." The trick is to combine what's learned in the Israeli Defense Forces (or its non-defense equivalent elsewhere) with an almost abrasive individualism and the kind of self-reliance that occurs in a country that has to go it alone to survive.”

Here is the link to the entire review by James Glassman: Where Tech Keeps Booming.