Wednesday, March 21, 2012

Haitian Entrepreneurship (Days 3 and 4) - Sean and Alex

On Monday and Tuesday, the group met with three Haitian entrepreneurs: a budding restaurateur, a baker, and a designer of painted silk fabric and garments. In getting to know each person, we were struck by the similarities between Haitian and American entrepreneurial professionalism. Each entrepreneur expressed the hopefulness and sense of purpose upon which Haitian microfinance and American venture funding, alike, are intended to capitalize. However, we noted an important difference between the mentalities of our hosts in Port au Prince and those of the entrepreneurs who come to Earle Mack’s Entrepreneurship Law Clinic looking for advice and assistance. The difference revolves around a distinction: Does the entrepreneur view “entrepreneurship” as an individual attempt at (1) sustainability or (2) scalability? Mark Zuckerberg and Steve Jobs approached entrepreneurship as an attempt at scalability. They designed products that could be provided to ever increasing numbers of consumers at the cost of only marginally increasing amounts of effort. The tin artists we visited on Day Two, on the other hand, seek sustainability, the ongoing provision of a living wage in return for a consistent output of effort, because their surroundings and capabilities necessitate it. This begs a question: How can Haitian microfinance operations incentivize the conceptualization of entrepreneurship as an effort toward scalability?

Our trip to the bakery typified the sustainability approach. The baker manufactures, packages and sells assorted baked goods out of her home, employing a staff of five to ten people, depending on market conditions. Her business model gives her control of production but requires her to continually seek out new purchasers of her goods, purchasers who hold a disproportionate level of control over the terms of the relationship. For instance, grocery stores will only take her goods on credit, and will only pay her for the items they sell, forcing her to shield those stores from the risks associated with retailing her goods. Further, her profits per unit can be expected to increase only marginally with increased sales, due to Haiti’s lack of infrastructure and precariously unsteady supply chain. Though the baker has done something truly amazing in creating a consistently profitable business in Port au Prince, her business model incorporates unnecessary risks in return for an unpredictable reward.

The restaurateur, on the other hand, possesses the germ of a scalable product. He began with an idea, the low-cost provision of breakfast, lunch and dinner in a vibrant, if impoverished, neighborhood. The nature of his product, cooked pasta, points to one of the most interesting lessons we learned in Haiti. As Chef Anthony Bourdain has noted, considering the evolution of cassoulet in France and Hopping John in the American South, national delicacies have often arisen from the necessities of poverty. Because dry pasta is cheap, calorically dense and capable of long periods of safe storage, the distinctively un-Hatian combination of spaghetti, hot dogs and ketchup has become a staple of modern Haitian cuisine. The restaurateur intends to develop a customer base by providing this and other locally popular meals at a low price point. His business model gives him control of a brand and of a market, for low-cost dining, which he has a hand in promoting and which the Haitian market can support, in terms of both supply and demand. As his base of purchasers grows, his profits will depend chiefly upon his management and maintenance of the brand, rather than on the number of hours he and his staff are able to spend in the kitchen. Thus, his business model is scalable.

The clothing designer presents the starkest contrast between the scalability and sustainability entrepreneurial mindsets. She is an artist, a painter of distinctive silken fabric designs. In transferring her skills to profits, though, she’s rejected a scalable approach, perhaps without knowing she had an option in the matter. For instance, the designer was approached by a well-known, upscale women’s clothing brand interested in marketing her clothing and fabrics. Rather than consider licensing her designs to the larger company and allowing them to manufacture reproductions, the designer failed to follow up with their buyer, on the supposition that she would have otherwise born the impossible task of hand painting each of the garments sought to be sold. As in the baker’s example, the designer’s business model is not scalable. As with the restaurateur, however, the scalability of her product really only depends on the mindset of its producer. If her sales and profits are to grow, which seems eminently possible considering her talents, we believe she’ll require (and we know she'd like to receive) training and mentorship in business administration.

In meeting these entrepreneurs, we’ve learned that the difficulties inherent to their context - the poverty and seeming desperation of post-earthquake Port au Prince - might be mitigated through a combination of business training and continued, but far more focused, financing. The purpose of microfinance should be to provide incentives for entrepreneurs in developing countries to change their focus from sustainability to scalability. The Haitian market does not need more wood and tin artisans, it needs more entrepreneurs of all sorts who have the training and assistance necessary to create growth oriented businesses. At present, the mentalities of the baker and clothing designer make absolute sense, as each entrepreneur is forced to focus, above all else, on procuring life’s most basic necessities. If, however, the sources of Haitian microfinance hope to allow recipients to dream bigger, as the restaurateur has thus far succeeded in doing, success will only become attainable by providing them the tools necessary to achieving scalability. As has been noted in many contexts, there is a soft bigotry inherent to low expectations. The provision of further micro-financing, without more in the form of business training and mentoring, seems unlikely to provide the sort of long term results Haiti needs most.

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