Why Americans Make The Best Entrepreneurs…For Now
At least three important factors separate the best from the rest.
Why is America so entrepreneurial? It boils down to a confluence of money, empathy and culture. We will explore whether we will be able to stay a world leader in a minute, but first a closer look at those three important factors.
Idea First, Money (An Extremely Important) Second
While starting a business doesn’t require money, often scaling a great idea does. In fact, it is often the only way to really solidify the First-Mover Advantage, which allows the entrepreneur to tie up assets—e.g., natural and technological resources—that others would need to be competitive.
The U.S. ranks second overall in venture-backed capital as a percentage of GDP. It’s no surprise that we are wedged right between two other innovative powerhouses: Israel at No. 1 and Sweden at No. 3. And both have a higher start-up rate than the U.S., according to the Organization for Economic Co-operation and Development (OECD), whose mission is to “promote policies that will improve the economic and social well-being of people around the world.”
Innovation Requires Empathy
Many new companies start with a “big idea” or an innovation. The difference between invention and innovation is insight. Inventors start with an idea and then look for someone (anyone!) who needs it. Innovators start with a large, unmet need and then, and only then, search for a unique solution to that need.
Americans are naturally empathetic. The World Giving Index lists America as the fifth most generous when it comes to donating to organizations, volunteering time and helping a stranger. This empathy means we are naturally attuned to looking for an unmet need—a talent that is essential in order to be innovative.
A second advantage of this generosity is financial support. Many small businesses are built on the backs of the three F’s: Friends, Family and Fools (otherwise defined as people who really want to assist you even when the professional investors say they won’t get a substantial financial return).
If you want to visit a country full of people willing to help you out when the chips are down, try Australia, New Zealand, Ireland, Canada and Switzerland. They all finished high on the charts.
Show of hands, how many of you have seen a friend try and fail at starting a new business? Now think for a second, how do you feel about that friend? Chances are you admire their courage, creativity and inventiveness.
No surprise there. Americans relish risk-taking and often celebrate the underdog who persists at all costs. From Rudy to Rocky to Jerry Maguire, we can’t seem to get enough of underdog movies and their theme that if you work hard enough for your idea or ideal, you will win in the end.
This isn’t true in many other cultures where failure is seen as an embarrassment to yourself and family—a fact that keeps many from taking the painful and necessary risks new businesses require.
America is also uber connected—and getting more so. Our Millennial—people born between the early 80s and the early 2000s—are the driving force behind the sharing or collaborative economy. It should be no surprise that a generation that shares their cars and homes is also willing to share ideas and business strategy. Many believe that because of Millennials, there will no longer be traditional business competition, just willing and unwilling partners.
How The Mighty Might Fall
Entrepreneurship is at least a three-legged stool. As soon as we forget to care about others first, fall deeper into a deep recession (which will dry up available funding), or lose our will to celebrate risk-taking, America will lose its ability to innovate.
But if we remember the importance of these three things, our future should be bright.
Article originally published September 25, 2013, on Forbes.com