Entrepreneurship at Home and Abroad

Why Donald Trump should listen to two visionary businessmen who didn’t support him.

Last spring, after ISIS-linked suicide bombers killed thirty-two innocent people in Brussels, NPR’s Dina Temple-Raston interviewed members of the Muslim community in that city and discovered something fascinating. The main suspects in the bombings were from Moroccan immigrant families, as are most of 500-plus Belgians who have traveled to Syria. But Brussels also has many Muslims of Turkish descent, whose families immigrated to Belgium at about the same time. Very few of the Turkish youth have become radicalized, and none have traveled to Syria. The difference, Temple-Raston was told by representatives of both communities, is entrepreneurship. Turks in Belgium are far more likely than Moroccans to start their own businesses. These businesses provide jobs for young Turkish men. Lacking such opportunities, young Moroccan men drift into lives of crime and, in some cases, terrorism.

The Third Wave: An Entrepreneur’s Vision of the Future by Steve Case Simon & Schuster, 240 pp.

The Third Wave:
An Entrepreneur’s Vision of the Future
by Steve Case
Simon & Schuster, 240 pp.

Peace Through Entrepreneurship: Investing in a Startup Culture for Security and Development by Steven R. Koltai, with Matthew Muspratt Brookings Institution Press, 240 pp.

Peace Through Entrepreneurship: Investing in a Startup Culture for Security and Development
by Steven R. Koltai,
with Matthew Muspratt
Brookings Institution Press, 240 pp.

Donald Trump, a self-described entrepreneur, ran a successful presidential campaign to “Make America Great Again” based on promises to rebuild the U.S. economy and fight Islamic terrorism. Exactly what his administration will to do on both fronts is—in keeping with his ever-changing campaign rhetoric—still somewhat hazy. His major domestic aims involve infrastructure and cuts in taxes and regulations, while on the foreign policy front, he promises a registry for Muslim Americans and bans on immigrants from Islamic countries.

If Trump wants to pursue a more constructive and inventive path, however, he might want to consult two people who likely didn’t vote for him. One is Steve Case, the billionaire cofounder and former chief executive of AOL, and a supporter of and adviser to President Barack Obama. The other is Steven Koltai, a veteran investor-entrepreneur who served as a senior adviser to Secretary of State Hillary Clinton. Both have books out that argue for a stronger federal role in spurring entrepreneurship, something Trump himself has talked little about.

At State, Koltai was given the job of creating and running a new initiative, the Global Entrepreneurship Program. Launched in support of President Obama’s 2009 speech in Cairo, the program is aimed at the right target: encouraging entrepreneurship in Muslim-majority countries. But in practice, Koltai writes in Peace Through Entrepreneurship, the GEP has accomplished close to nothing.

Never a priority for the department, the GEP was relegated to a storeroom for office space and forced to scrounge for funding scraps. For someone who has started and run companies, this was a shock: “The path from policy idea to funding to execution can prove impassable,” Koltai writes. He compares the State Department to Soviet bureaucracy, calling it the “Anti-christ of entrepreneurship.” Most of the activity that passed for entrepreneurship promotion in the Obama administration, he writes, amounted to marketing and public relations. The focus was more on “convening” and managing the brand than on actually helping entrepreneurs. Koltai seems to think that by “raising expectations” about helping entrepreneurs in other countries, and doing little more than “convenings,” we may have actually made things worse for ourselves.

His experience at State, bitter as it was, hasn’t dissuaded Koltai from the belief that there is a great deal the federal government can do to encourage entrepreneurship around the world in ways that enhance American security. Only about 0.01 percent of the entire federal budget is spent on entrepreneurship promotion overseas. For the price of one Apache helicopter and one Predator drone, the GEP budget could have risen ninefold, increasing the effectiveness of foreign policy in places like Egypt and Indonesia as well.

The federal government spends a fortune on contracts for international economic development, but the procurement process is so complicated that the firms who are bidding “are less experts in economic assistance than they are experts in how to win a government contract,” writes Koltai. Three firms accounted for 30 percent of USAID contracts in 2012, for example. The scope for new ideas or better execution is rather narrow.

Koltai proposes a four-point “business plan” to influence the development of entrepreneurship ecosystems in countries around the world. First, reallocate money from existing foreign aid programs to entrepreneurship promotion. Second, create a new entrepreneurship agency or expand the mission of the U.S. government’s existing development finance agency, the Overseas Private Investment Corporation. Third, grant that agency broad leeway to experiment with new (entrepreneurial) approaches to procurement. Finally, enhance the flow of talent into the agency with more attractive salary structures and improved fellowship programs.

There is, no doubt, massive room for improvement in American foreign aid programs. But we also don’t really know much about the effectiveness of the various entrepreneurship programs that Koltai highlights, such as accelerators and business plan competitions. Koltai admits that “the jury is still out about what works.” We all believe that they are beneficial for entrepreneurs (myself included), but so far there is very little evidence one way or another.

Declaring entrepreneurship a foreign policy priority is not enough: we need structural reorganization within government to actually deliver and help develop vibrant entrepreneurship ecosystems in other countries. Will it always work? No. But Koltai is surely correct that the comparative payoff, in terms of budget and national security, is likely to be higher than the current approach to international development.

Steve Case, on the other hand, would have the new president declare entrepreneurship to be a major domestic priority. Case sees an assertive role for the federal government in making sure that the United States successfully navigates the “Third Wave” of the internet revolution.

The First Wave, in Case’s telling, involved “building the infrastructure and foundation” of the internet, populated by companies like Cisco, Microsoft, and America Online, which Case founded. The Second Wave “was about building on top of the Internet,” defined by Google, Facebook, Amazon, eBay, and the emergence of smartphones. We are now entering the Third Wave, “the moment where the Internet transforms from something we interact with to something that interacts with everything around us.” It will be the “Internet of Everything,” personal, individualized, and driven by data.

Case uses the wave metaphor in three ways. His book is a plea for entrepreneurs and large corporations and government to “ride the wave” by capitalizing on the opportunities the Third Wave is creating. He surveys the sectors that the Third Wave is beginning to flow through, including health care, education, food, and others. But his book is also a warning that the United States could get swept under the Third Wave if the federal government doesn’t adapt and better support entrepreneurs.

Drawing on the story of his own entrepreneurial journey—from director of “new pizza development” at Pizza Hut to chairman of the doomed conglomerate AOL Time Warner—Case offers advice for the approaching Third Wave. For entrepreneurs, successfully riding the wave will require partnerships with decisionmakers and “gatekeepers” in sectors like education and health. Silicon Valley entrepreneurs and investors love to talk about “disruption,” but Third Wave success will require working together with the incumbents you’re looking to disrupt.

Likewise, public policy will be a major factor in entrepreneurial success or failure in the Third Wave, because these sectors are so heavily regulated. Policy presents both a big risk to entrepreneurs and an opportunity for innovation. If we don’t adopt the right government posture, however, America itself might be disrupted by other countries.

Case, who has been heavily involved in the Obama administration’s entrepreneurship efforts, wants to see the appointment of a “Third Wave czar.” This person would lead a concerted strategy for the federal government to overhaul regulations and adapt policy in favor of Third Wave entrepreneurs. He calls for more federal investment in research and development, and the adoption of a “startup visa,” intended to attract more immigrant entrepreneurs. (President Obama’s new immigrant entrepreneur rule is seen by many as one step in this direction, but it’s doubtful Donald Trump will keep it.)

The most compelling part of Case’s book is his description of Third Wave entrepreneurs in places outside of start-up hotbeds. In places like Cincinnati, Atlanta, Kansas City, New Orleans, and Fort Lauderdale, entrepreneurs are building businesses and solving problems. Here, Case has put  his money where his mouth is, taking several “Rise of the Rest” bus tours to various parts of the country and investing in several entrepreneurs he has met.

For both Koltai and Case, the world of entrepreneurship is much larger than Silicon Valley. By adopting entrepreneurship promotion as a dedicated foreign policy goal, and matching it with requisite resources, the United States will be safer and more secure. By adopting entrepreneurship support as a dedicated domestic policy goal—seeing government as a key partner with entrepreneurs in surfing the Third Wave—the United States will enjoy a healthier economy. It’s good advice. Let’s hope the new president is willing to listen.

Dane Stangler

Dane Stangler works at the Kauffman Foundation in Kansas City, is a senior fellow at the Progressive Policy Institute, and is a senior adviser at GEN Global.