Text 3 Risks in Entrepreneurship

In order for modern production to occur, somebody must decide what products are to be produced. Someone must take the initiative in bringing men, machines and materials together; assign jobs; and organize and direct the operations. The important function of initiating and organizing production is called enterprise, and people who perform this function are called entrepreneurs, or enterprisers.

Skillful, energetic, and imaginative enterprisers are the most valuable of all our productive resources. Without them, resources and labor represent only unrealized possibilities. The more enterprisers there are, and the easier it is for them to assemble effective combinations of workers and equipment, the more rapidly productivity rises. In an economic system like America's, enterprisers organize firms to carry out their plans.

It requires their full attention. Such firms can seldom afford to hire enough employees, even if the firm succeeds, you might work hard for months and not take a penny out except for the salary you pay yourself. Moreover, there always exists a risk of failure. Entrepreneurs generate ideas but of course, not every new idea is a good one. Sometimes expensive equipment and labour are assembled to make something that few people want. Sometimes the enterpriser is less effective as a manager than he thought he would be. Sometimes a better idea, a superior product, or a cheaper process is developed a little later. In each of these cases, the enterpriser has made a mistake. The labour, materials, and equipment assembled by the firm actually have produced something less valuable than they could have in some other employment. Instead of raising productivity, the enterpriser has actually lowered it.

Before it commits resources to new uses, society must protect itself from the consequences of such mistakes by making sure that enterprisers balance the gains possible from successful organization against the losses that will accompany failure. This is done by requiring the enterpriser to finance part of the investment with his own money and to receive, as his reward, only the residual of the value added by the operation, after all claims have been paid. If he is successful in taking labour, equipment, and materials from less valuable jobs and using them to produce a more valuable profit, the profit resulting from the difference in value is his. If he is unsuccessful and puts valuable resources to a less valuable use, the loss is also his. His investment acts as a buffer to the rest of society, protecting it from his mistake.

Read the following related statements and underline the key words that describe the qualities of an entrepreneur. Add to this list the words from text 3 and other relevant vocabulary.

There are two things that entrepreneurs have that others do not. One is a kind of visionary imagination to spot a commercial opportunity where others simply do not see it. And the second is the ability to persevere in the face of skepticism or criticism even the fear of failure.

George Smith, Harvard University

Entrepreneurs perform the function of creative destruction. They rethink conventional assumptions and discard those that no longer apply. They reform or revolutionize the pattern of production by exploiting an invention or an untried technological possibility for production, by opening up a new source of supply for materials or a new outlet for products, by reorganizing industry.

Joseph Schumpeter, Harvard University

Assignments to text 4:

1. Read the following text.

2. Find the factors which contributed to the success of Barbara Proctor.

3. Find the sentences which reveal Barbara’s personal qualities which helped her succeed.

4. Translate the text.

5. Answer the following questions:

· What obstacles did Barbara have to overcome?

· What personal qualities helped her overcome such obstacles?

· Describe some of the experiences she has had in her life.

· Assess Barbara’s entrepreneurial skills.

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