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May 02, 2008

Solving the Entrepreneurship Puzzle

Glenn Hubbard
Dean and Russell L. Carson Professor of Finance and Economics
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The highlight of my year at CBS is teaching Entrepreneurial Finance. I enjoy interacting with students, putting together the cases and bringing in speakers from the entrepreneurial and venture capital communities.

But what I enjoy most as an economist is the opportunity to think deeply about entrepreneurship. To many, entrepreneurship calls to mind the path-breaking motivation envisioned by Schumpeter’s “creative destruction.” But much of entrepreneurship — and much of what we can teach in business school — is more akin to “nondestructive creation,” in which the entrepreneur puts the pieces of a puzzle together in a way others haven’t seen before.

And many examples bring these economic insights to light: CBS ’01 grads John Londono and Zohar Yardeni discussing how they turned listening to corporate calls into a multi-million dollar business. Ben Rosen ’61 recognizing great potential in Lotus. Russ Carson ’67 taking insights from the healthcare industry to transform a modest hospital contract-management business into a major hospital chain, collecting billions of dollars in value.

The combination of a compelling profit model at a disruptive time by the right entrepreneur can be a winning one. This critical feature of entrepreneurship — identifying and capturing opportunity — is teachable, and is integral to the efforts of many faculty members at CBS. Instead of saying “no” whenever an opportunity has problems (as it always does) one can learn to ask: “What can go right? What can go wrong? And how can I tilt the odds toward success?”