Productive versus unproductive entrepreneurship


Great article describing how the societal contribution of entrepreneurship should not be measured in through the act of being an entreprenuer itself, but instead the contribution of activities.*

"...productive entrepreneurs focus first on growing the pie; unproductive entrepreneurs are focused first on dividing the pie; and destructive entrepreneurs are really only interested in stealing the pie."

What is shocking is just how plainly prevalent of unproductive and destructive entrepreneurship is in most communities, and how resigned most of us have become to the idea that any change is going to benefit the few, rather than our communities collectively. The ever evolving ‘Watergate’ scandal is a seemingly good contemporary example, with the recent banking royal commission providing a myriad more.

Some characteristics of unproductive/destructive entrepreneurship include:

  • Established legacy industries expending significant time and resources to pressure decision-makers into ensuring a continuation of favourable operating conditions into the future despite obvious market trends/negative impacts for communities. This includes lobbying, regulatory capture or in the extreme blackmail/bribery;

  • The use of technical legal avenues to ensure the perpetuation of existing activities despite regulation (e.g. leveraging legal loopholes to bypass environmental and planning regulations);

  • Use of market power to dissuade/drive off new market entrants/technological disruptions;

  • Use of public relations activities to manage the consequences of negative PR;

  • Realisation of profits far exceeding the value created via monopolies, privileged connections, tax loopholes and/or use of complex financial instruments;

Importantly, unproductive entrepreneurship may often not be illegal and may be considered prudent business for those invested in preventing or slowing change. As a society however, we must recognise the opportunity cost to productive entrepreneurship. Unduly distorting the playing field to the benefit of the incumbent, the connected, and the entrenched disincentivises development of new solutions, to realise new opportunities, that grow the pie for many. This can only make our communities and economies more fragile into the future.  

* The article references a 1990 study