Chocolate and Gold Coins

Friday, November 04, 2005

Entrepreneurs Needed

There is a classic economists’ joke that goes:

Two economists are walking down a sidewalk.

First economist: “Is that a $20 bill on the sidewalk?”

Second economist: “Couldn’t be. Otherwise someone would have picked it up by now.”

They walk on.

Economists often puzzle why there is no market for X. The answer may be that no one thought of it before. Or the people who did think about it were not in a position to pursue the idea. Entrepreneurs are needed to get markets going. And sometimes a market can wait many years for that special person.

I came across an excellent example of this very phenomenon just this week. Monday was Halloween, and on that day people traditionally set out jack-o-lanterns, which are hallowed-out pumpkins with a design (usually a face) and a candle to make it glow. Here is my son’s jack-o-lantern.



It may be a bit difficult to make out exactly what the design is but it is done very well if you take a close look. It is a picture of two bats flying in front of the Moon. It is extremely detailed and no one would have attempted such a design 30 years ago. But new technology has made this a very nice art project for kids (with some help from parents).

What is the new technology? Well the old technology was basically a felt pen and a knife. The new technology is a pattern on paper that the child cuts out and a hand jigsaw. This new technology is not very high-tech. It could have existed 100 years ago. Admittedly, the cost of producing tools has come down dramatically over the century but there was little reason why this technology could not have existed 35 years ago when I was a kid (I’m dating myself here). Here is a picture of the kit (with a link to the company - a free advertisement I might add).








But this product required an entrepreneur. It seems easy to believe that this was an obvious winner now but there are always a lot of questions to answer before a person with an idea becomes an entrepreneur:

  1. Is there a market here? In this case the market is extremely seasonal – this makes it risky.

  2. Do I have the lowest cost technology? If a competitor can make hand jigsaws for one-half the cost your supplier charges, you will be out of business quickly.

  3. Do I know how to market this product? Will supermarkets stock this item? You might produce a quality product that languishes in obscure shops for years until some bright fellow sees it, sees no patent, and makes a knock-off that he successfully markets in every supermarket.



So in this case, a nice product never came to market for a generation. The entrepreneur was needed. And maybe a million dollars was left on the sidewalk that no one bothered to pick up. It makes you wonder what money is left lying around us right now.

14 Comments:

  • What, nobody wanted to compliment my 7-year-old son's beautiful pumpkin?

    By Blogger Michael Higgins, at 3:55 PM  

  • LOL! Sometimes you have to wait for comments...the best posts never get any.

    Beautiful pumpkin but honestly I wouldn't have known if you hadn't explained it :)

    By Blogger Patrix, at 4:03 PM  

  • Hi Patrix
    Thanks Patrix, it was a nice pumpkin but it is a little hard to see the details from a distance. Maybe we'll try a different design next year. Anyway, my son had a lot of fun doing it and I was really glad that he wasn't using a knife - for obvious reasons.

    By Blogger Michael Higgins, at 4:14 AM  

  • What, nobody wanted to compliment my 7-year-old son's beautiful pumpkin?
    I think a lot of your regular readers are away for the festival season. (I just had a 7-day vacation.) Hence probably the silence.

    Good stuff that, by your son! It must have been fun working with tools. The first time I used "real tools" to make something was in the carpentry workshop sessions in my engineering bachelors.

    By Anonymous Srikanth, at 11:29 AM  

  • ah....so that's what that carved pumpkin is...

    last year, while carving pumpkins...i got a little ambitious.....and carved from first principles (didn't use the kit, with a design). I tried to carve out a howling husky face (the dog's the UW symbol), and triumphantly finished my product.

    "is that a christmas tree?", asked my friend, and i went to a corner and sulked.....bemoaning the group's lack of ability to recognize art.......

    By Blogger Sunil, at 9:51 PM  

  • Hi Michael,

    That is quite impressive, especially for a 7-year-old. I remember carving some weird looking pumpkins in school when I was younger.

    Vikram

    By Blogger Vikram A., at 10:39 AM  

  • Yup. The pumpkin is beautiful. (In my defence, I have been behind on my blog reading because of the holiday and no net connection at home.)

    I am wondering about how an economist and a business guy - say a management consultant would analyse the same issue differently. I'd guess the economist would look at the aggregate picture while the business guy would look at the details...

    By Anonymous Ravikiran, at 2:46 AM  

  • I quite like the pumpkin carving. But I like the economist joke at the beginning of the post the best!

    By Blogger Mojotek, at 7:46 PM  

  • that was a real great creation by ur kid.i wonder how a 7-year old could get such an idea..i appreciate the way u moulded it to make my first lesson on entrepreneurship so full of imagination and life.good work..keep it up!

    By Anonymous chaitanya, at 12:25 AM  

  • that was a real great creation by ur kid.i wonder how a 7-year old could get such an idea..i appreciate the way u moulded it to make my first lesson on entrepreneurship so full of imagination and life.good work..keep it up!

    By Anonymous chaitanya, at 12:26 AM  

  • that was a real great creation by ur kid.i wonder how a 7-year old could get such an idea..i appreciate the way u moulded it to make my first lesson on entrepreneurship so full of imagination and life.good work..keep it up!

    By Blogger chaitz, at 12:31 AM  

  • You have just provided such a great analogy concerning new ideas. I am somewhat surprised that your economics story only received comments on the pumpkin.

    There really is no puzzle to the economists query about why the $20 was not picked up. There are simply two choices. To do or not to do. It is definitely not that no one has ever thought of "picking up the $20". Instead, they either did not take action on picking it up... or they truly did not recognize it.

    Remember the old adage "There is nothing new under the sun." If this observation is true, then someone has already thought of the same "new" idea that many other people have. The only question is, "Who sits on it and who takes action?" The one who takes action first, wins the prize.

    For example, how many people would have ever pursued marketing the "Pet Rock"? Assuredly, someone, somewhere over the ages surely had a "pet rock". They just never considered marketing such a "silly" idea and making so much money in the process.

    Think of an example where you thought of an idea, chose to "sit on it" or "take action", why you made the choice, and what the outcome of the choice was. I know that I have a few of my own ideas that "I wish I would have marketed it first"!

    Of course, some ideas can be repeated and still become profitable. That is obvious in all the movie "remakes" Hollywood puts out. So it is never to late to take an idea and launch it.

    The final question is: "How many people reading your analogy did not recognize the "wealth" of knowledge you shared with them concerning acting on their own fresh ideas as an entrepreneur, and instead, just "walked on by"... leaving money on the table!

    By Blogger Cheryl Delzer-Horton, at 7:47 PM  

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