When big companies don’t innovate entrepreneurs need to

There are some unusual paradoxes taking place in the world these days.  We see massive unemployment and underemployment coupled with big companies making big profits and build up piles of cash.  But they aren’t using these cash reserves to fund innovation they are sitting on them letting them go idle.  If these companies are aren’t going to use these funds to build value they should distribute them where they can be redeployed.  We need to find a way to get them into the hands of entrepreneurs who will innovate.

That brings us to another paradox.  I often hear that there are more investment funds available than there are good ideas.  Yet we have so many problems in society that entrepreneurs can solve and more people than ever who want to purse entrepreneurship.  Maybe we need to combine those funds with a better support system for entrepreneurs.  An economy full of entrepreneurs creating new ventures, solving problems and employing people is how a market is supposed to function.

It is critical to build this entrepreneurial society for another reason.  When there are few alternatives available excess funds flood into the stock market or real estate where they push up price resulting in bubbles.  When the bubbles burst this value disappears from the economy.  We have to make investing in entrepreneurs more attractive than the alternatives.

As someone that believes in free markets it pains me to suggest that society may need to take steps to free up this idle cash.  If the markets won’t function as they should and allocate capital efficiently then we need to tax it away and redistribute it in other ways.  It is not ideal but if business won’t create value through innovation that benefits the society where they earned the profits then we need to find people who will.

 

Published by Vince Bulbrook

Vince has spent over twenty five years working with entrepreneurs providing financial and strategic advice. Much of this advice has centered on business model design and product development. Issues such as determining how to invest product development resources, pricing options, features, distribution and client requests all come in to play. For much of the past fifteen years Vince has operated a business providing CFO and strategy services to small businesses. In this period he spent three years in the product development group of a software company that had a $26-million development budget. Along with overseeing the development of a product he also worked with senior management and the other product teams to determine how to manage the product portfolio. He has advised clients in software, entertainment, digital media, publishing, retail and distribution on product pricing, feature selection, distribution strategy. Prior to founding the advisory business Vince worked with Price Waterhouse and Ernst and Young. Vince graduated from the Ivey School of Business with an HBA and is a Chartered Accountant.

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