Sunday, April 5, 2009

Entrepreneurs are the answer, not bureaucrats

The Wall Street Journal ran a great interview Saturday with the president of the Kauffman Foundation, the organization that funds more research on entrepreneurship than any other organization in the world.

Carl Schramm took over as the head of the foundation in 2002, nine years after the death of Ewing Marion Kauffman — who funded the foundation with the proceeds of selling his drug companies to Merrell Dow.

While I recommend reading the complete interview, here are some key excerpts:

Mr. Schramm, who started his own health-care company and merchant bank, believes that the foundation has a duty to foster an environment hospitable to entrepreneurship. And so, for instance, Mr. Schramm brags that Kauffman has "dragged economists into considering the importance of firm formation to the overall growth of the economy." The foundation has commissioned some 6,000 papers on this and related topics in the past several years.

… Conducted last month, the [Foundation sponsored] survey also showed that instead of the government's stimulus package, two-thirds of respondents would prefer "reducing legal barriers and red tape for new business development" as a way to jump-start the economy. Finally, 89% of respondents said that "capitalism is still the best economic system for our country."

Despite this popular attitude, Mr. Schramm worries that there is a tendency on the part of some citizens to want the government to prevent market chaos. Prior to the financial meltdown this fall, "I think we were in full tide of entrepreneurial capitalism and now there's an introspection, where the vocabulary is all about regulation and the importance of the government to restart the economy," he says. While Mr. Schramm believes that the government has a role to play, he argues that "historically through the last seven recessions it's been entrepreneurs who essentially restarted the economy."
Columnist Naomi Schaefer Riley concludes her column:
Despite the fact that the foundation's endowment has fallen by $722 million since the end of 2007, Mr. Schramm sees this as Kauffman's "moment." While "no one hopes for a recession," it's during economic crises that entrepreneurs "challenge companies that have gotten big and lazy." The downturn, he says, will even challenge Kauffman to "think about how we can do our work better, like every business." In fact, Mr. Schramm adds, "The only people immune from thinking hard in moments like this are in government."


Anonymous said...

The funny thing is that Carl Schramm is “too big to fail.” He has invented risk-free entrepreneurship by hijacking a $2.5 billion foundation which does not fund innovators nor entrepreneurs (whom/which Mr. Kauffman expressly left the money for), but which increases the sizes of university administrations, funds sycophantic, socialist bloggers who laud Schramm’s insipid writings, while furthering Schramm’s fruitless campaign for a Nobel Prize for socializing entreprnuership and growing government/foundational/MBA/economist bureaucracies to oversee and manage it. The Kauffman foundation is an innovation-free zone. Don’t believe me? What patents/trademarks/copyrights have come forth form the the Kauffman Foundation? They excel at taking credit for entreprnuership while blaming all the failures on the entrepreneurs–those who take the risks. But without ever risking his own resources, nor innovating, Schramm has navigated himself into a position where he speaks empty platitudes on TV, while drawing a hefty salary from a noble entrepreneur’s foundation, taking personal credit for all the innovations and entreprneurship, while actually opposing the very entrepreneurial spirit.

What has Schramm done that he should deserve millions of dollars for Kauffman to peddle his personal writings? Why does he not become an entrepreneur and go it on his own, risking his own reosurces and taking out business loans himself?

While the Fed nationalized the banks, Schramm nationalized the college band on univeristy campuses, wiring millions to the sycophantic state officials overseeing and managing “entreprneurship,” and a couple thousand dollars to bands in business plan competitions.

The Kauffman Foundation has become a vanity press for Schrammenomics, complete with Web 2.0 technologies (which they were slow to adopt, as they have a socialist mindset) which empower an army of sycophantic policy-wonk bloggers which Scramm funds with millions upon millions–the very antithesis and opposite of true entreprneurship. For Schramm is a jealous god, and there shall be none others before him; and that is why he never cites Hayek, nor Mises, nor Howard Roark, nor John Galt in his book with the juvenile title: GOOD CAPITALISM, BAD CAPITALISM. He wants you to think that he invented entreprneurship. Nor does he cite Ayn Rand nor Richard Branson. One can see that Schramm is hoping to replace the works of Nobel Laureate economists, entrepreneurs, and bestselling authors with his dumbed-down, socialistic views of entrepreneurship, which must be managed by Carl “to big to fail” Schramm on a dead-man’s dime.

Would Schramm have made it on his own as an entrepreneur? The WSJ article states that he founded a Merchant Bank and a Health Care Service. But it gives names for neither. Why is this? And if they were so successful, why does he need Kauffman’s resources to promote and peddle his lackluster books and socialistic philosophies as the economy crumbles because of “too big to fail,” domineering socialists such as himself?

Why doesn’t he launch a venture and create sustainable jobs? And the really funny thing is that the Kauffman Foundation profited immensely from capitalism’s decline–from the bailouts of those “to big to fail.” Why doesn’t Schram divest the Kauffman Foundation of all companies that received TARP money in some way, shape, and form; and give that money to entrepreneurs?

Because he needs to win a nobel prize first–not by entrepreneurship–but by creating an empire of smoke and mirrors on a dead man’s dime.

Check out Deal Breaker and the Kansas City Business Journal:
“It is interesting that Dealbreaker references Carl Shram of the Kauffman Foundation as an authority on ethics. Those of us who live in the Kansas City region know that Carl Schram and been a controversial figure since he was appointed to his post a number of years ago. Board members have resigned in protest of his leadership style and strategic choices. His controversial leadership led to the Missouri Attorney General reviewing the Kauffman Foundation for not staying true to the intent of Ewing Kauffman. The purpose of this review was stated as:

“In light of the public allegations of a departure from Mr. Kauffman’s intent, lack of appropriate oversight by the Board of Directors, and certain instances of conflicts of interest. ” (

See also this editorial from the Kansas City Business Journal (

Ewing Kauffman was famous as an ethical leader. Carl Schramm is not.

Joel West said...

You are certainly entitled to your opinion. I don’t know Carl Schramm, only what the foundation is doing.

I would certainly disagree with you about Schramm’s decision about where to take the KF. I realize this was controversial with the local KC audience, but I am inclined to believe that the current direction is exactly what Mr. Kauffman would have wanted if he wanted his foundation to change the world. (Most billionaires do).

This is the old "give a man a fish" vs. "teach a man to fish" argument. If every penny of KF income was given to entrepreneurs it wouldn't go very far. I happen to think that KF funding of academic research to (directly or indirectly) teach millions of entrepreneurs is essential.

Sure I'm biased. On the one hand, I’m now a university professor and not an entrepreneur. On the other hand, I’ve never received a penny of KF money (and not sure if I ever will).

20 years ago, studying entrepreneurship was not considered a legitimate thing to do in a university. Most business schools outsourced teaching small business classes to part-time instructors who had great experience but tended to tell war stories and had zero influence on their university.

Universities are chronically short of resources — they have enough money to put on classes but (except for the Stanfords of the world) not enough organizational slack to do research.

KF has single-handedly made entrepreneurship legitimate at many business schools. That means there are good faculty, good doctoral students (who will become good faculty elsewhere) and good courses based on real evidence and not war stories.

And I think your output metric is unrealistic. Why should a foundation crank out patents? It shouldn't use copyrights to hoard knowledge, but isntead should be sharing what it knows as widely as possible.

Finally, I don't think any entrepreneur (or entrepreneurship scholar) will give up reading Mises or Hayek for Schramm.