Much worse than 1929

Startups: what happens when an economy completely collapses?

Startups: what happens when an economy completely collapses?

In places where prosperity has seemingly reigned forever, sometimes all the big employers and retailers can suddenly disappear: welcome to the startup-only economy. We probably need to start looking at places where this already exists

Steve blank identifies six kinds of startup.

One variety, the lifestyle startup, is one of the kinds of startups that, according to Steve, is not usually engaged in a search for a new, scalable business model.

What can we learn from the extraordinarily resourceful sub-industrial entrepreneur?

If an economy collapses from an industrial to a sub-industrial level, there is little reason to believe that it will not eventually (perhaps after an initial period of extreme instability) start to look like existing sub-industrial cultures.

The undoubted resourcefulness of the inhabitants of such cultures may have much to teach startups in industrial economies.

It may be that because the industrial startup culture is so obsessed with scalability, it sees the unarguable capabilities of the sub-industrial entrepreneur as being irrelevant, because they are rarely associated with the effort to discover scalable new business models.

But the kind of resilience and flexibility that permeates the sub-industrial startup ecosystem may be important in two ways:

  • it will potentially give startups in industrial economies inspiration in terms of offering new ways to become more ‘lean’ and get more from less
  • it seems to imply that startups do not merely represent ‘the salvation of industrial economies’, they may in fact represent the residual phenomenon that would be expected to replace ‘modern economic infrastructure’ in times and places where it becomes unsustainable

It’s just there to provide its proprietor with the kind of income and work that suits their lifestyle preferences.

If you compare the lifestyle of the perhaps unambitious but presumably comfortable solo entrepreneur operating in a relatively functional modern economy with that of the impoverished family breadwinner in places which have absolutely no large scale industrial, commercial or municipal infrastructure or employment, then both the parallels and contrasts may be instructive.

Neither has a single ‘boss’. Both are independent of everything but the market and their personal relationships.

Both have to ‘do deals’ to keep things working. Both have to be especially resourceful in order to solve the kinds of problems that are exclusive to entrepreneurs.

Both often come up with solutions which make at least some aspects of what they do pretty unique.

But for the inhabitant of an industrial modern economy, their entrepreneurship is usually a choice, an alternative to getting a job with a larger, perhaps often very large organisation.

However, in places where no large employers exist (and there are countless examples of this in Africa and Asia for instance) the head of a household has no alternative but join what we might call ‘the local startup ecosystem’ if they want to ensure that they and their dependants manage to avoid starvation and continue to live under a roof.

Startup ecosystems in sub-industrial economies

  • the business model is really a range of separate models interlinked by personal reciprocation
  • their business models are often infinitely flexible (often involving personal exchanges of ‘chores’ and ‘favours’)
  • they are absolutely committed to ‘continuous deployment’ of whatever they do, be it product or service (i.e., lengthy, speculative, ‘solution development’ is rarely sustainable)
  • they have no problem with ‘constantly being in discovery mode’: they have little resistance to responding to unfamiliar requirements and are happy to look for new ways to deal with familiar ones
  • they are conscientious ‘deal seekers’: they treat every new resource as an opportunity, every new opportunity as a potential new resource and everything new that ‘enters their orbit’ as a requirement to determine its potential as a resource or an opportunity
  • their supply chains are typically short and ‘close at hand’
  • ‘partnering in order to supply’ emerges almost spontaneously as opportunities ‘appear on the radar screen’ of these individuals

Steve Blank identifies two kinds of startup (other than the lifestyle startup) which are also relevant here:

The Small Business Startup:

the main difference between small ‘family’ business startups in a relatively prosperous industrial culture and those in a sub-industrial culture is this:

The family might not have or be a ‘business’ as such, but it will still be ‘doing business’ every day because no other activity will put food on the table. There may or may not be any ‘consistency of activity’ that would make it a recognisable small business as we would recognise it, but the ‘pooling of family resources’ might make it seem like a ‘collection of family businesses’

The social startup:

There’s a connection here: ‘not for profit but for impact’.

Much of the activity in a ‘startup only economy’ is the activity of an almost cash-free society and therefore quite often doesn’t involve money or profit in the form of currency.

It’s pretty social, but not necessarily in the way that Steve’s category applies to startups outside the sub-industrial world.

 Steve Blank’s six kinds of startup

  1. lifestyle startups: work to live their passion
  2. small business startups: work to feed the family
  3. scalable startups: born to be big
  4. buyable startups: born to flip
  5. large company startups: innovate or evaporate
  6. social startups: driven to make a difference
  • partnership is typically informal, intermittent, often unspoken
  • they are intrepid ‘problem hunters’
  • they are usually good at budgeting
  • they are extremely competent negotiators
  • they tend to live within their means
  • they lead a hand to mouth existence (savings are small, difficult and often impossible)
  • they are often exquisitely sensitive to changing customer requirements (customers are friends, neighbours and occasionally itinerant tourists, or very occasionally, travelling businesspeople)
  • deferred payment is often an intrinsic feature of almost every transaction
  • transactions are almost all tiny, often conducted on a moment by moment basis, often many times a day, as personal and collective needs arise
  • there is rarely an office, shop, or factory: transactions happen at home, in the street or at a cafe

Transactions are often characterised by non-cash aspects:

  • sharing
  • swapping
  • borrowing and lending
  • self-made
  • home grown
  • co-operation
  • re-use
  • re-purposing

The only long term goals in the cultures where these factors prevail are related to offspring, in terms of family perpetuation.

In their economy, almost everyone is either what we might think of as being a startup founder or works in what we might call an SME (small or medium enterprise).

However, their concept of startups/SMEs and entrepreneurs is so inextricably intertwined with everyday activity, that words like ‘startups’ and ‘entrepreneurs’ would be so indistinguishable from words like ‘life’ and ‘people’ that our use of those words would strike them as exclusively applying to our own (predominantly ‘non-entrepreneurial’, predominantly employee-based) economic environment.

These startups/SMEs don’t tend to have names (and thus wouldn’t seem to us to constitute identifiable commercial entities) because they may just be households or individuals who never have any need to ‘brand themselves’ because all their ‘customers’ typically see them every day.

Small farms are sometimes the only conventional ‘businesses’ in such environments, but often even these can be mostly ‘casual labour only’ resulting in ‘freelance’ i.e., intermittent and uncommitted agricultural labourers who have to resort to the rest of the ‘entrepreneurial ecosystem lifestyle’ in between fleeting bouts of temporary and extremely low-paid employment.

Because of the diversity of the transactions and the fluidity of the constituent participants of any one particular deal, the ‘founders’ can be viewed as typically participating in multiple startups simultaneously.

The idea of ‘companies’ or ‘businesses’ in this context sometimes applies and sometimes doesn’t: sometimes things might look like a collaborative project and at other times things just look like a personal transaction between two private individuals.

Many of the collective entities involved are essentially continually going in and out of existence (inside of, outside of and between families, for instance).

 

2 Responses to “Startups: what happens when an economy completely collapses?”

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