Through the ages, the impact of entrepreneurial activity has often extended well beyond the entrepreneur’s immediate profit-seeking objectives. In some instances, the economic consequences were far more significant than expected and, in others, the impact extended well beyond the realm of commerce to other important facets of life.
“The farther back you can look”, Winston Churchill once observed, “the farther forward you are likely to see.” So, it is instructive for entrepreneurs and even aspiring entrepreneurs to look back at the entrepreneur’s role in momentous social, economic, technological, and other changes — including the evolving nature of entrepreneurship itself. This piece briefly highlights four intriguing historical illustrations.
From Slave to Nobleman: The Entrepreneurial Ladder in Ancient Rome
Ancient Rome bears the distinction of being among the least entrepreneurial civilizations not only of antiquity but of recorded history. Respectable Romans, generally of the patrician class, saw entrepreneurship as a vulgar pursuit that was entirely inappropriate for the nobility. Less respectable residents of Rome, from the semi-respectable equestrian class down to slaves and former slaves (known as liberti, or freedmen), were an altogether different matter. For the Roman elite, such people had just the right moral fiber for the “dirty work” of entrepreneurship.
So, the equestrians happily took the initiative to undertake large privately-owned building projects and then sell shares in them on the Via Sacra, the Wall Street of antiquity. The profits earned from these endeavors propelled many equestrians into the highest echelons of Roman society even though they were plebeians, albeit higher class ones.
More remarkably, a significant number of slaves climbed the ladder of entrepreneurship out of slavery by managing businesses owned by their masters and then purchasing their freedom. Then, as newly freed citizens, some of these liberti would apply their talents to businesses of their own, even establishing enterprises akin to chain stores. In this manner, these mostly foreign-born entrepreneurs made their way into the highest echelons of Roman society, irrevocably altering the social and even ethnic composition of the Roman elite.
“Flying Money”: Tang Tea and Paper Bills
The Tang Dynasty, extending from the early seventh century to the beginning of the tenth, elevated China from a regional power of the Middle Ages to a global one. Among the most active Chinese entrepreneurs of that era were those who established businesses that distributed and resold tea. By the eighth century, the hot drink had already become a national pastime in China and the tea industry enjoyed a brisk business.
In fact, business was so brisk that, by the ninth century, some Tang-era entrepreneurs grew tired of carrying large bags of coins to purchase product from tea growers only to carry even more of these coins back home after a trading expedition. Fortunately, by the turn of the ninth century some of the more innovative “tea merchants”, as the historian Jacques Gernet observed, “played a considerable part in the invention of new methods of transferring credit.”
Among these was the enduring innovation of paper money. Compared to heavy bags of metal coins, this new form of exchange felt so light that it was named fei-qian, “flying money.” The Tang tea entrepreneurs were not seeking to permanently alter the monetary system of humankind with their clever invention. Rather, like many clever entrepreneurs, they sought a creative solution to an immediate problem with no concept of how profound and lasting the ramifications would be.
“Inferior Ranks”: Britain’s Inventor-Entrepreneurs and the Industrial Revolution
For millennia, innovation in the form of disciplined scientific inquiry rarely intersected directly with the realm of entrepreneurship. The British Industrial Revolution that peaked during the seventy-year period of 1760-1830 is when those two once distinct worlds collided. The resulting impact would not only revolutionize industry but the very structure of society in Britain and, eventually, in dozens of other countries as well.
A succession of British inventor-entrepreneurs proceeded to establish businesses around innovations that revolutionized the mechanics of the textile, energy, and metalworking industries. These pioneers included legendary figures like James Watt and Richard Arkwright, along with equally important but relatively obscure innovators like Hargreaves and Crompton. Although some of them attained princely wealth (Watt, for example, was a billionaire in today’s terms), almost all of them were born into very modest circumstances, what a contemporaneous article in the British press described as “the inferior ranks of mankind”.
Yet, in the process of trying to rise above their lowly births, these ingenious upstarts did much more. Due to the steam-powered textile loom, for example, one laborer’s productivity was equivalent to that of two hundred just a few decades prior. Similarly, during the eighteenth century, British coal production tripled and iron production quintupled. More controversially, thousands of Britons were forced to abandon their crafts and their ancestral villages permanently for urban factory work. Although industrialization did raise the overall standard of living, it was still a wrenching transformation for many, one that would soon make its way around the world.
The Flattening of the World: American Tech Entrepreneurs and Globalization
Long before the mass commercialization of the Internet, a Personal Computer (PC) revolution was underway. It was a movement spearheaded by such iconic American entrepreneurs as Steve Jobs and Bill Gates, both of whom founded their respective companies in the 1970s and grew them into global brands during the early 1980s. By the time the Internet became widely available in the mid-1990s, PCs, then the nodes of the network, were ubiquitous around the world, as was the Windows operating system.
These commonalities, in turn, amplified the impact of America’s more successful dot com entrepreneurs, exemplified by Netscape co-founders Jim Clark and Marc Andreessen. Their first web browser, released in October of 1994, enjoyed rapid adoption and, within only ten months, Netscape’s wildly successful IPO was the talk of both Silicon Valley and Wall Street. By 1997, other American entrepreneurs, such as those behind Global Crossing, invested hundreds of millions of dollars in the physical installation of broadband Internet throughout the world (e.g. via underwater fiber optic cable).
Their work, along with that of Clark, Andreessen, and others, all coalesced to bolster the Internet’s international connectivity and ease-of-use. This newly connected world that ushered in large-scale digital outsourcing had become a gateway of opportunity for some and a source of growing vulnerability for others. In the words of New York Times columnist and author Thomas Friedman, the global business world had been “flattened”. That is, a playing field that had once been a fairly exclusive club of developed nations had now been leveled by technology and made open to all.
“Creative Destruction”
These are just a few historical examples of how, in the service of their profit-seeking goals, entrepreneurs disrupt the status quo. This is the disruption that the Austrian economist Joseph Schumpeter famously characterized as “creative destruction.” In other words, high-impact entrepreneurs supplant the old with the new, often unintentionally but permanently reshaping the world in the process.