Regulation, education and ‘high impact entrepreneurs’: Q&A with Anthony Farr

Entrepreneurship cannot thrive if it is not given the right environment to do so. That’s according Anthony Farr, CEO of the Allan Gray Orbis Foundation — a non-profit organisation that looks to assist young entrepreneurs through learning programmes and educational scholarships.

“Entrepreneurship is a skill that can be learned, and is not entirely dependent on natural ability or talent,” he says, “However of equal importance to the skill of the entrepreneur is ensuring an environment that encourages and rewards high-impact entrepreneurial leadership and is tolerant of mistakes and failures”.

Memeburn caught with Farr and spoke to him about regulation, creating the right kind of environment for startups and educating the next wave of tech entrepreneurs.

Memeburn: You say that South Africa needs to support “high impact” entrepreneurial leadership. What exactly do you mean by this?

Anthony Farr: High impact or alternatively high growth entrepreneurship are those individuals that have expectations for high growth and for building significant businesses. These are the businesses that create jobs and economic growth. I use the term high impact to contrast against those survivalist type entrepreneurs, which while playing a role, do not create sustainable businesses or growth. It is the high impact entrepreneurs that are going to transform our economy.

MB:You seem to place a fair amount of credence in Daniel Isenberg‘s prescriptions for creating a high-functioning entrepreneurial system. His first suggestion is “stop emulating Silicon Valley”. Is that formulation not a little simplistic?

AF: Perhaps, and most likely what he intended by this is your formulation in question 3 below. It is clear that Silicon Valley is the gold standard of entrepreneurial ecosystems in the world, but any country setting out to copy Silicon Valley is destined to fail. Even Silicon Valley couldn’t emulate Silicon Valley — it emerged out of unique set of circumstances and the various causes are still not fully understood. Further it then reached a level of being a global magnet for international startups which has driven its success to an even higher level. It is hard enough for any country to succeed in creating an ecosystem, let alone create a target destination for start-ups. For these reasons, it is important to emphasise this difference between adapting the lessons in a context appropriate manner rather than simply copying the lessons, as there are many regions and places that try to do the latter and they will fail.

MB: Is it not more accurate to say something along the lines of “adapt the lessons of Silicon Valley to your own environment”?

AF: Isenberg’s main thrust is exactly this, that a region should adapt its entrepreneurial response to the specifics of its own environment.

MB: Government has tasked the established business sector with creating jobs in South Africa, is this position untenable? Should it be focusing on creating the right conditions for new businesses to thrive instead?

AF: It is very clearly documented that established businesses do not create jobs, in fact they shed jobs in their drive for efficiency. I completely agree that this position is untenable and government should absolutely be focusing on creating the right conditions for new businesses to thrive. One example, of many possible supporting examples, is that recent U.S. Census Bureau data showed that companies less than five years old created nearly two-thirds of net new jobs in 2007 in the US.

MB: Much of the criticism levelled at government by the established business sector in South Africa has revolved around over regulation. Are some of the same issues stifling entrepreneurship?

AF:The essential purpose of business is to create value. This applies as much to established businesses as it does to new businesses. Thus if there are factors such as labour market inflexibility that are stifling established business in this country, they will have an equally, if not more significant impact on new businesses.

MB: Are there instances of over-regulation stifling entrepreneurial innovation in the tech sector?

AF: The most evident are where regulation is stifling innovation is the arena of access to broadband, where regulation has resulted in South Africa, not only lagging internationally, but also in Africa.

MB: What are some of the things you think the South African government is doing wrong when it comes to providing a tenable environment for tech entrepreneurship?

AF: There are two important factors, specifically around tech entrepreneurship, namely the reality that the failure rate of tech entrepreneurship will be even higher than the already high rate of failure in entrepreneurship, and secondly that tech entrepreneurship is driven by very scare skills. With regards to the high failure rate, government needs to appreciate this as a reality and provide more aggressive funding, that accepts higher risk and focuses more on R&D. In so doing government will serve as a bridge for the more commercial opportunities that will emerge from this in the future. (The Israeli government has demonstrated how successful this type of approach can be in the tech industry)

In terms of the second point, our government must realise that as a country for a long list of reasons we do not have a sufficient quantity of these scare skills and therefore must in the shorter term, allow these skills to come into the country through immigration and in the longer term sort out our educational system.

MB: All over the globe, there’s a lot of talk about placing entrepreneurs and small businesses into centralised clusters. Are there any examples of this working in South Africa?

AF: There are probably a few, but the they are not well know, and therefore by implication are not yet having a big impact. I would be nervous about artificially creating clusters, rather create the conditions for clusters to emerge organically and then support those that do start and achieve critical mass heavily.

MB: What areas in South Africa do you think are ripe for tech clusters?

AF: Probably the two usual suspects: Cape Town, because tech is about talent and therefore you must have an environment that is extremely desirable and capable of attracting the right level of talent. Cape Town is such an environment and when one combines this with the potential intellectual capacity generated by the University of Cape Town, the highest ranked university in Africa, these is a powerful opportunity for a tech cluster.

The second might be Johannesburg. Innovation is driven by huge amounts of diversity. Secondly, real creativity emerges when one is able to combine both science and humanities. As Steve Jobs admitted much of his success was in bringing an understanding of humanities, of art, to the field of technology. This is largely how the magic of Apple was created. Johannesburg has incredible diversity and a strong comparative advantage in humanities. Combining this with the right scientific input, would create the opportunity for an exciting tech cluster, uniquely shaped to the needs of the developing world.

MB: Do you think there’s enough state support for NGOs who look to support entrepreneurship in South Africa?

AF: I think there is an over proliferation of support for entrepreneurship in South Africa. The problem is that it is un-coordinated and largely focussed in the wrong direction, often collapsing the distinct activities of poverty alleviation and entrepreneurship development into one and the same thing. So it seems the problem is not so much of quantity of support but more in terms of quality and the direction of the support.

MB: You and the Allen Grey Orbis foundation advocate teaching entrepreneurship at all educational levels. What kind programmes would you suggest at high school and tertiary levels? What would they entail?

AF: This is a complex subject, but in terms of key points of focus for each level, I would suggest the following:
At High School level, the focus should be on entrepreneurial mindset development. The sooner we activate this learning the better for our learners. All aspects of high school education, its methodologies and content, should activate an awareness of opportunities. They have to be built into every school activity and not planned as another subject on the curriculum. In this information age, schools should create endless opportunities for activating information through developing children’s ability to have insights which are then converted into permanent habits.

At the tertiary levels, focus should be on incorporating opportunities for experiential learning with the particular objective of lessening the fear of failure. Universities should create compulsory practical “projects”, for teams of individuals drawn from different faculties. These projects could vary in length from a week to a semester, but they would give those involved an opportunity to start something or solve an interesting problem, and at the same time show students whether the entrepreneurial journey is one for them.

MB: To what level, do you think IT should play a part in this kind of curriculum?

AF: It plays a key role, particularly in the mindset development in high school. When one also looks to include mobile technology, it is an incredibly cost effective means of distributing world-class content.

MB: You cite Ireland and Chile as examples countries which have successfully changed their attitudes toward entrepreneurship. Given the economic troubles Ireland in particular has faced in recent times, do you stand by this assertion?

AF: Developing entrepreneurial capacity in any country is not going to protect it from the cyclical nature of the economy – America has the best entrepreneurs in the world, the country still has recessions. However over the long-term a country’s economic potential is maximised through the embracing and fostering of entrepreneurship.

MB: Do the issues in Ireland and other Eurozone not suggest that the kind of looser regulation business is continually seeking leaves economies open to the vagaries of the market?

AF: Controlled economies have not proved themselves to be more effective at generating the value creation that economies need. There may need to be careful thought given to the type of incentives one creates in order to avoid unintended consequences and instability, but a free market approach, with properly considered checks and balances, still has a far better prospect for economic progress than any other system.

MB: Are those worst affected by these forces not the same early level, high-impact entrepreneurs we should supposedly be encouraging?

AB: The nature of the high impact entrepreneur is about managing risk and capitalising on an opportunity. It is never an easy road, but more volatile markets most likely will create more opportunity in that volatility — not necessarily a bad thing for an alert entrepreneur.