Entrepreneurs: The economy’s essential ingredient

By WILLIAM H. STEWART
Special to the Saipan Tribune

First of a two-part series

A few years ago, MIT economist Lester Thurow wrote an interesting article describing his thoughts as to how some entrepreneurs make their fortunes. I believe his observations have relevance to the Commonwealth considering that there are not too many indigenous entrepreneurs in spite of the many businesses that are operated by so many different nationalities. How is it that so many others—not originally of the islands—saw investment and business opportunities that seem to have mysteriously escaped the attention of many islanders, particularly those who had the capital to invest as a result of leasing land?

It’s a subject that has been of interest to me since the halçyon “boom” years of the late ’80s, early ’90s, a period during which there were probably more local millionaires per capita than anywhere else under the American flag.

In my judgment, the CNMI government at that time did not make a dedicated, concerted effort to entice those with newly acquired wealth to invest in the local economy or to enter business. If it did happen it was largely happenstance. And even so, many that did invest later “sold out” judging from the proliferation of the numerous small businesses now in evidence and operated by off-island investors.

Don’t get me wrong. I’m not opposed to foreign investment. In fact, I was very active in programs to encourage it. I simply think it unfortunate that more local people didn’t rise to the occasion and enter business when the time was ripe and the opportunities abundant.

Obviously, when local people don’t rise to the occasion the needs of the market must still be met by someone; otherwise the consumers are deprived of such activities as barber shops and beauty salons, shoe and automobile repair facilities, and other small enterprises provided by foreign-owned establishments.

We have all heard the expression, “The rich get richer and the poor get poorer.”

Lester Thurow points out that the wealthy see opportunities for investment where there are imbalances in the economy, often created by new technology, which open up possibilities for new products or processes. The MIT economist observed that the acquisition of great wealth often involves the ability to “produce more with less—to generate goods and services without having to sacrifice something else of equal value. Among many populations in most times and places, entrepreneurs don’t exist. The investment opportunities existed but they were not recognized as such. The education to see them was deficient, or the fear of risk-taking was too prevalent.”

During periods of technical change, as we now witness with outsourcing and the capabilities of the Internet, Thurow observed that successful societies handle the friction between order and turmoil (old concepts and new challenges) without either becoming unmanageable. He opined, ”New ideas are easily frustrated if societies are not receptive to the turmoil that results from change, but societies must maintain a level of order to take advantage of innovative breakthroughs.”

Does the above appear a bit academic?

The following isn’t: It is becoming obvious to many, and as our dedicated governor recognizes, that the condition of the economy can no longer sustain a government as an employment agency. More and more people are going to have to exhibit creative, risk taking entrepreneur skills and develop their individual means of livelihood. The key word here is “creative.” Here are a few examples:

Tell me why a serious commercial fishing industry has not developed on the islands since the Japanese period? Why hasn’t an export cut flower industry developed? Cut flowers have high value in relation to bulk and can be flown to market. Cultured pearls in the Northern Islands is another possibility. These are not new ideas; they have been talked about for 30 years that I am aware of.

I have always been interested in the creativity of entrepreneurs and the varied ways people make money in business. All one has to do is think of a project, determine the financial feasibility and market potential and then, hopefully implement the idea by qualifying for financing either from CDA, commercial sources or joint venture.

You never know where you will find a lucrative business opportunity but you do have to look. Once, when driving down the Florida Keys, I encountered a business that trained porpoises for aquariums throughout the world. These mammals were sold to places like Berlin and Saudi Arabia and transported in sealed boxes half filled with water and shipped by air freight. “How much does a trained porpoise cost?” I asked. “From $2,500 to $5,000 (1969 dollars) depending on the length of time to train” was the response. I then asked, “How much does a dumb porpoise cost?”

“We don’t graduate dumb porpoises,” the proprietor snapped with great disdain.

Still another project concerns the feasibility of a particular type of health spa in the Marianas and its possible market in Asia, one suitable for the treatment of the medical condition known as psoriasis which is non-contagious and, I’m told, caused by a nervous condition. I would think that the resurrection of the sugar train should be of interest to some entrepreneur as a great tourist attraction. The route for this miniature rail-line could run from the vicinity of the Nikko Hotel north to the monuments and cenotaphs around to Bird Island. An underwater marine observatory; a Suicide/Banzai Cliff observation elevator; manufacturing or assembly of leather sandals, belts, wallets, etc.; ceramic products; beachwear (bathing suits); candy; Hafa Adai island shirts and mu mus and souvenir candles. These items are manufactured elsewhere for the tourist. Why not also in the NMI rather than import these items for resale?

The list is by no means exhaustive and the ideas aren’t new, but if you sit around trying to figure out why something should not be done, you will never accomplish anything.

I must admit I don’t know how to instill the entrepreneurial spirit in people.

The absence of the necessary traits within some in a society is one reason, but not the only one as to why underdeveloped economies or those less diversified remain so year after year. I hold that there must be some innate need in the entrepreneurial spirit to accomplish a goal, to achieve success. A need often greater than the drive for profit. The need to accept a business challenge and prevail must be part of it.

I grant that some things are easier said than done, but others do them who don’t depend upon the government for their livelihood. Change is coming—in fact it’s already here—and the islands had better get out in front of it.

We must get young people involved. Perhaps a “special loan program” can be set up at the Commonwealth Development Authority to provide enterprising young adults with “seed capital” to get started. We should not be astonished if some loans go bad—it’s the price for establishing a new entrepreneurial class.

To be continued.

Editor’s note: The author has been an observer of the local economy for almost 35 years and arrived at a time when there was only 55 licensed businesses with total assets of less than $2 million. He is the author of the books Business Reference and Investment Guide To The CNMI, Investment Opportunities In The Commonwealth, a Business Information Map and has written more than 200 essays on economic and social issues in the islands and has recorded the economic history of the Northern Marianas from the pre-war period to the present. His insight is based upon the universal truth: “You can observe a lot just by watching.”