Crisis is another word for opportunity.
Question: Is the recession good news for entrepreneurs?
Saras Sarasvathy: Well, absolutely. In fact, if we have to come off the recession who is going to get us out of it? If entrepreneurs stay home and wait for the recession to end, right? The worldview on entrepreneurship is what you do matters and if you don’t do anything it is not going to change. So when things don’t go well, it’s even more the time to act. That’s part of the entrepreneurial worldview and this is something that seems very simple when you actually come to realize it, but it’s not intuitive to think about. Now, there are lots of articles written and stories about companies that started during recession but one of the things people haven’t written about as much is the idea that there are more opportunities than there are problems. For example, there are more opportunities today I would bet in sub-Saharan Africa than anyplace else just because that place needs so much because it’s simple economics that where does demand come from? It comes from needs, it comes from necessities, it comes from wants. It comes from people who have problems and that’s were opportunities come from.
I had a student from Nigeria who took a class with me in the first year and he had the same issue that a lot of my students have: “Oh, I would love to be an entrepreneur someday but you know, I don’t have any idea. I don’t think I’m the entrepreneur type”. And, by the time we finished the course and we had talked about this notion that ideas are a dime a dozen, opportunities are strewn everywhere, what makes something really a viable opportunity is you’re acting on it and you’re finding ways to kind of implement it. By the time we were done with it I think he was ready to at least try something so he goes back to Nigeria during the holidays and then he comes back with a book of 20 ideas all of which he absolutely are doable and he wants to do now! And so the problem became, you know, kind of what to do next or rather what not to do next because you cannot do all 20 at once. So from a person who thought that he didn’t have an idea, that opportunities are rare, he suddenly realized that he could see a lot of opportunity, that he could see a lot of opportunities back home where everything was new.
I have kind of the same experience when I go back to India. Everything is new there in some ways and the excitement of development is exactly that. That is a basic level of course if you are in the bottom billion or if you are really, really poor that you do not have food to eat, that’s a different story but the moment that we come out of that absolute basic necessity out of life, almost immediately life is filled with opportunities because now the human being has time to think and actually do something and human beings create things and human beings start wanting things which is a very good thing. So, I do believe that the environment for opportunities has to be, if there is a measure of it, higher today during a recession than we when we had all the money floating around on Wall Street. And just to give you one example, one of the classic examples of a company that started during a recession is Sony. And, Sony decided during the recession in Japan and they started trying to make rice cookers. And it’s amazing apparently if you go to Sony headquarters today, they still have these steamers on the wall because that was, that was the original business model for the company. So it goes to everything that we say A. You can start a company like Sony during a recession and B. You don’t need to know what the heck it’s going to be. It could be a bunch of steaming baskets and it turns out to be something very different down the road.
Recorded on: May 19, 2009