Towards an Untrepreneurial Economy? The Entrepreneurship Industry and the Rise of the Veblenian Entrepreneur

Reading it now. Enjoying some of the comedy in this research paper:

In such a skewed distribution, entrepreneurial ventures typically end up as marginal, undersized and poorly performing ‘Muppets’: “(M)arginal because they lack the ambition or capability to grow or innovate, have high death rates, and are poorly captured in statistics or academic...

[U]ndersized because they lack the minimum efficient scale needed to perform on par with incumbents in their sectors and industries. As a result, they are (P)oor (P)erformers: they have low productivity and low levels of innovation, and generate churn rather than economic growth.

My note: And, talking about the "shovel sellers":

In this sense, the Entrepreneurship Industry is perhaps best thought of as a ‘Muppet Factory’: an industrial-scale manufacturer of products and services that contribute to excess entry into poorly performing ventures.

Interesting view. Derogatory labels. Maybe author has a grudge. Interesting that similar arguments can be levelled against academia. And has the battle of funding had any influence here.

I keep thinking about this paper as I go through my day this past month. @rosiesherry

The VC model is a big part of the problem. They encourage "unicorns" by dumping cash into tons of startups, throwing them in the deep end, and seeing which ones survive. The ones that get billion-dollar valuations end up making the firm look like astute investors when really they were cynically investing in whatever they thought could turn into a capital B. As VCs escalate this predator investing behavior, the quality of folks applying for funding gets lower because VCs will seemingly back any idea!

"The second finding is that the skewed distribution of outcomes seems to be decreasing over time. Positive outcomes are becoming less common"

I wonder if this isn't why we see more efforts put into me-too projects? The low hanging fruit has been picked off the tree?

Or maybe not. I was reminded of a Sept. 2014 MIT Technology Review interview with Peter Theil who said, "I would argue that there was never any low-hanging fruit; it was always of intermediate height and the question was, were people reaching for it or not?" https://www.technologyreview.com/2014/09/18/171322/technology-stalled-in-1970/".

What I do believe is happening is the industry could be hitting a local maxima because of the inertia around it's present technology stack. Greedy algorithms get stuck at local maxima locations.

I like to ramble sometimes.

What is driving the declining quality of innovation-driven entrepreneurship? In this paper, we argue the growing entrepreneurship industry is an important yet overlooked explanation. This rapidly growing industry has transformed the nature of entrepreneurship and encouraged a particular form of low-quality entrepreneurship. It has done so by leveraging the Ideology of Entrepreneurialism to mass-produce and mass-market products that make possible what we term Veblenian Entrepreneurship. This is entrepreneurship pursued primarily as a form of conspicuous consumption. Aside from lowering average entrepreneurial quality, Veblenian Entrepreneurship has a range of (short-run) positive and (medium and long-run) negative effects for both individuals and society at large. We argue that the rise of the Veblenian Entrepreneur has contributed to creating an increasingly Untrepreneurial Economy. That is an economy which superficially appears innovation-driven and dynamic, but is actually rife with inefficiencies and unable to generate economically meaningful growth through innovation.