Reluctant

Entrepreneurs
Chapter 9
Main Arguments
1. Poor entrepreneurs are not productive
because they are poor.

1. Entrepreneurship is too hard.

1. Aside from providing microcredits as
assistance, secure jobs should also be
provided.
Poor entrepreneurs are
not productive because
they are poor.
Argument 1
Key Points of Poor
Capital
Knowledge
Patience
Dependence
Conservative
Capital
There is no such thing as 100%
Knowledge
There is no such thing as 100%
Patience
There is no such thing as 100%
Dependence
There is no such thing as 100%
Conservative
There is no such thing as 100%
There is no such thing
as 100%
TRICKLE-DOWN EFFECT
Capital
Dependence Patience Knowledge
Conservative
Entrepreneurship is too
hard.
Argument 2
Businesses of the Poor
The poor operate
business but its too
small.
Their businesses
are unprofitable.

Figure 1: Marginal and Average
return
Increasing the
amount invested
increases returns the
most when the initial
investment is small,
and this increase
eventually tapers off.

Figure 2: Two technologies
OP - easy for a very
small firm to grow, but
the growth potential
tapers off quite fast
OZ - The growth of the
firm is slow but there is
much more scope for
growing the business.


S-shaped dilemma
Invest little, make little
money, and remain too
poor to invest much
more, or invest enough
to cross the hump and
then become rich and
invest even more and
get even richer.

Small businesses remains small.

They dont have
enough money to
invest.
Growing their
business would
require higher cost.
It is not worth it.

Aside from providing
microcredits as assistance,
secure jobs should also be
provided.
Argument 3
The availability of secure jobs can
have a transformational effect.
Start a virtuous circle of human capital
investment, and the progression up the
employment ladder.
A stable job can, by itself, change peoples
outlook on life in decisive ways.

The poor dont see becoming an
entrepreneur as something to
aspire to.
Aspiration of Parents for their
Children
Government
Teacher
Non-Teaching
Government Job
Employee in a
Private Firm
A steady and predictable income
makes it possible to commit to
future expenditure.
If a member of a family has a steady job:
schools will accept their children more readily

A steady and predictable income
makes it possible to commit to
future expenditure.
hospitals will give more expensive treatments
knowing they will be paid
other members of the family may be able to
make the investments in their own businesses
that are necessary to allow them to grow.

Conclusion
Trickle-Down Effect
Capital, Knowledge, Patience, Dependence, Conservative
The businesses of the poor will remain
small since they would not be able to invest
enough, therefore they wont be able to
cross the hump and become rich.
Providing a steady income for the poor can
have a transformational effect.