The Stifled Flowering of Entrepreneurship in a Post-Soviet Culture
If you are a Westerner who has grown up in a predominantly free society, you have had your paradigm for interacting with the world formed primarily by the opportunities afforded to you by your and your neighbors’ abundant liberty. It’s something often taken for granted: The freedom to, in large part, determine your own values, your own philosophical identity, your own role in society, the information and activities you will fill your own life with, and how you will pursue your own highest sense of happiness and purpose. It might be difficult or even impossible for you to imagine what life would be like if such essential choices were withheld from you, determined for you by a centralized authority that claimed the right to make them on your behalf and enforce your compliance through threats of imprisonment, forced labor, or execution.
That bleak depiction is precisely what life was like for millions of people living in one of the 15 nations under communist rule in the Soviet Union until just thirty years ago in 1991. The communist system collapsed after 71 years, and the citizens of previously dictatorially controlled nations were free again to do what they saw fit with their own lives, according to whatever best served their interests. Despite the fundamental economic, educational, and political changes that have emerged since those dark and directionless early days of independence, the methods many such people learned to live by continue to be carried over in their lives (and the lives of their children and grandchildren) now, even long after they gained the freedom to make those choices for themselves. Concepts related to business, wealth accumulation, self-fulfillment, and the conscious pursuit of meaningful goals that might seem to be common knowledge and in the best interests of all people continue to be overlooked—not because people are too unintelligent or oblivious to understand them, but because they have been conditioned by generations of restricted freedoms and fear-based incentives away from such proactive ideas. In the oppressive world they grew up in, such concepts were irrelevant or even dangerous to consider, so it’s no wonder that there is still lingering reluctance in post-Soviet cultures to think about entrepreneurship proactively.
In the command economy of the Soviet Union, control over providing the basic necessities of life was taken out of the hands of individuals, so those individuals never developed paradigms that would have empowered them to take care of their own needs. Whatever they needed was provided for them in a bare minimum fashion without any possibility of disagreement or choice about what was proclaimed the best possible manner for the good of Soviet society. And when the State inevitably failed to adequately deliver the necessities it promised, there was no recourse or alternative avenues available to acquire what was needed. Even if individuals were clever and ambitious enough to devise alternative means of production and economic exchange outside the tyrannical rule of their Soviet leaders, they faced harsh and violent treatment from the penal system for doing so. It was illegal to even think or speak ideas that were counter to communist ideals, as an anti-Soviet mentality was classified as a mental disorder by the State. Contributing to “propaganda” that weakened Soviet authority or defamed the Soviet State was punishable by up to a decade behind bars.
Why was it inevitable that the centralized planners running the show and determining who needed what goods and services and in what quantities would fail integrally at their task? Why was the Soviet Union doomed to collapse from the outset? The answer is simple, and it is the same answer that explains why any intentional effort can fail to produce the intended outcome: The methods employed were incompatible with the reality being dealt with. No one can ignore the laws of economics because they seem unfair or inconvenient and expect a positive outcome. They likewise cannot ignore the laws of physics, even if being stuck to the ground or the inability to phase through solid objects is a bit inconvenient, or that two and two make four just because they prefer the sum to be five. They cannot succeed in these defiances against reality even with the full might of the Red Army to support their opposition.
If the ideal outcome of the economy is to meet the maximum amount of its participants’ needs for the minimum costs required from them, only the millions of individuals participating in the Soviet economy could have adequately expressed what those needs were and how much of their time, labor, capital, and other assets they were willing, as individuals, to invest in acquiring them. The authorities forcefully commanding the Soviet economy made the same mistake that all authorities trying to make people behave in prescribed manners make: They ignored the actual priorities of the people and attempted to override them with their own under threat of violence for non-compliance and utopian indoctrination that required utter dependence on appointed leaders.
The fatal flaw was that the Soviet economic machine was never running according to natural and authentic inputs by the people seeking to meet their goals within it. It was, instead, elaborately and convolutedly constructed to produce the arrangement of goods and services that a small group of disproportionately powerful people decided would be in the best interests of everyone. Such an illegitimate representation of what consumers wanted could never begin to approach the optimal method of filling those wants. It also could not even produce its fabricated mandates in an optimally cost-efficient manner. The result was more and more costs required for less and less actual productive output, and what was produced was far from the optimal arrangement of what people actually wanted.
Under Soviet economic rule, both output and input were sabotaged from the start. There is no way for a Labor Department to organically calculate what productive roles people are best suited to perform and the ideal way to compensate them for their productivity without allowing them to make those choices according to their own priorities and abilities on an individual level. No generic and universal mandate can ever adequately approximate the vast confluence of what value is available to be supplied and what value is presently in demand, and the consequences of ignoring this fact only get more drastic the larger the scale of the economy.
What do you suppose the justification used by Soviet authorities for taking control over the arrangement of their economy was? In large part, it was a circular claim about individuals’ inability to make those kinds of vital choices for themselves. It’s easy for people to fall into the fallacy of thinking that the way something is presently done is the only (or best) way it ever can be. So, all a Soviet supporter needed to do to invent a justification for what an outsider would see as human rights violations and counterproductive economic policies was point to the visible occurrence of something as simple as the State providing bread rations for hungry people.
“See? We are feeding the hungry,” they could claim. “Without us taking the extreme measures we do, these people would have no bread and quickly starve to death. The fact that any people at all are still alive is due to our direct intervention in the natural process of their starvation and the benevolence we gift them. If we were to stop forcing the production and distribution of bread to occur, there would be no bread at all.”
This analysis leaves out an obvious yet unspoken premise: The only reason the State was the only producer of bread was that they employed violence against the bread-producing populace to ensure things worked out that way. There was generally no flour available in stores because the State controlled the production and distribution of flour. If any individual figured out a better way to produce grain and offer bread outside of State control and attempted to offer it on the market to hungry people, there would quickly be efforts to remove these private producers from the economy. Their choices and mentality would be seen as threats to all the people who depended upon State-produced bread. They would be considered profoundly selfish for taking matters into their own hands and caring foremost about their own benefit at the expense of the collective need for bread. That individuals continued to risk death by State mandate in order to find their own under-the-table methods of feeding themselves, their families, and their communities is a testament to just how bad the State was at meeting these essential needs for them.
This simplistic centralized economic model of feeding people also completely overlooks the fact that there are countless varieties of staple foods beyond mere bread, and there are equally untapped strategies for producing enough calories and micronutrients to sustain large populations of human life. In the West, where more varieties of food now exist in greater abundance than any other time in history, many people even elect to omit bread and other grain foods from their diet, which is something that would have seemed impossible to Soviet citizens who principally depended upon bread to meet even a basic level of nourishment.
It is now so easy to feed people in the West, in fact, that we have created the inverse problem of starvation: Far more people now die from eating too much than eating not enough. This is a beautiful form of irony that perfectly demonstrates what can happen when artificial restraints to production and consumption are removed and entrepreneurs are enabled to serve their vital function in society. More problems are solved in a greater variety of ways when you have more people free and incentivized to solve them. But a single centralized body can never take into account all the possibilities outside the linear models it has adopted as the singular means to solve what it perceives as singular problems.
Over the last 15 years, I have traveled from one economically developing country to another, living, working, or teaching among the local populations in more than 50 nations. I began my journey where I grew up in California but ended it in a rural village of Armenia, where I have lived the last three years. In many ways, the cultural mentalities regarding how to organize the productive pursuits of life could not be more different.
But what has always stood out to me is how often many of the poorest residents of a nation, notably those who live in villages or small communities away from major cities, are quite competent and talented in a range of important lifestyle skills. Their isolated lives require them to be. If they need to repair parts of their homes to protect themselves from poor weather, there is no handyman to call to give them an estimate and a timeline for the job. If their cars break down in an unfortunate spot, the burden is theirs to provide for themselves and support each other in fixing them with whatever is available. There is simply a problem, with real consequences, that they need to figure out how to solve as soon and as efficiently as possible.
Even without access to modern schooling, books, or the internet, as is often the case, they manage to pass wisdom and skills among their communities, from the old to the young and neighbor to neighbor. But what they rarely seem to learn is how to apply their knowledge and skills in tactical and systematic ways to take control over their ability to produce, manage, and leverage value in their favor.
The cause of this strategic shortcoming seems obvious. When people grow up with one particular paradigm for how they are allowed or ought to interact with reality, they will usually carry that paradigm forward for the remainder of their lives, no matter what changes around them. Likely, they will also pass their limiting beliefs on to their children, even if it is evident to an outsider that the world their children live in is radically different than the one they adapted to. While this unfortunate bias applies to all of us, it is of particular consequence to cultures undergoing rapid and massive changes in political and economic practice. The rules of the game that previous generations learned to play by as they were coming of age are outdated and often counterproductive to the aims of their progeny.
One conversation I had with Mery, a young Armenian woman from the capital city of Yerevan working as an English teacher in a village neighboring mine, comes to mind. She introduced me to her young students as a “business author” and then described her ideas about what business is to them in a way fairly close to how I would describe gambling. “In business, you need to risk everything you have to start something new. And you might be very lucky for a little while and make a lot of money, but then the next day, you could just lose everything and go out of business.”
What sticks out to you about this description? To me, it reeks of a sense of having zero control over the outcome of being involved in business. Perhaps such people get into business for the wrong reasons and under the wrong impressions about how it will work. Perhaps they view it as a guaranteed get-rich-quick vehicle that is bound to bring hundreds of eager patrons with cash to burn to their doors. And maybe, just maybe, such people happen to be in the right place and at the right time with the right product so that they find some modicum of success at the start. But they are not capable of telling the difference between what they are doing right and what they are doing wrong, and, sooner or later, their mistakes catch up to them. The success (or the illusion of success) they start with quickly crumbles, and they are left with only the cold reality of a non-sustainable business model. They don’t know what they did wrong, so they can’t even blame themselves. They only blame some nebulous concept of business itself or the market conditions under which they failed to find success.
That’s why such people prefer the apparent certainty of a guaranteed paycheck, however meager it may be and however unrewarding the work required to earn it. At the very least, they know their job won’t just crumble beneath their feet for reasons they can’t identify. This outlook is, of course, only an illusion of security. Any job in any organization can disappear at any time for reasons either in or out of their control. But a job creates the appearance of comfort, security, and a place to belong in the world, and that appearance is all some people have. They prefer it to the unknown uncertainties of trying to make it on their own.
It's quite ironic that laypeople tend to think of economics as a dull or impractical subject to learn about or discuss. In my paradigm, economics describes the sum total of willful human behavior on this planet. It’s fascinating for me to consider everything it encompasses and how every choice people make interacts with and affects every other choice.
Economics is also one of the subjects that the average person seems to be the most ignorant on and, more than that, ignorant even of the fact that they are ignorant of it. Whereas someone who does not study biology or mathematics likely won’t profess to understand very well how they work or form strong vocal opinions about them, it seems that just about everyone insists on some particular view of how economics does or ought to work, as though its objective nature were somehow malleable to popular opinion and the culture of the day. I’ve often pondered why this might be the case. The best answer I can come up with is that most people have never been taught that the science of economics even has an objective nature at all, most likely because it is the study of human choice, and humans have free will after all. Therefore, so they seem to think, economic models should operate however we freely will them to.
What this unvoiced analysis misses is that economics is the study of human choice applied to an objective and finite reality that functions according to hard and fast rules. It is a discourse on how we interact with reality to get what we want from it and change it to how we want it to be. There is no way to do this without first acknowledging the natural laws and qualities of reality, including the topics we call economics and entrepreneurship. An entrepreneur, in principle, is merely someone who produces or manages wealth in the form of subjective value. It is impossible to consciously live without doing this.
Many of my Armenian countrymen and other post-Soviet citizens still live today in a culturally derived state of unconscious fear about the concept of freedom and personal responsibility. Having lived under the control of dictators for so many decades, many have lost the natural and innate sense of pride that comes from taking charge of one’s own life, deciding for oneself how that life will go, and achieving through intentional effort what one wants for themselves. The transition to a system of relatively greater personal freedom at the termination of Soviet control and the new paradigm required by it was not easy for them. Many among the older generations continued to believe that dictatorship and economic enslavement were preferable to the unprecedented burdens that are inherent to acting willfully within the world that they faced for the first time. They preferred a powerful and imposing figurehead or State agency to make choices for them about their production and management of wealth.
This pathological fear of freedom prompts parents and grandparents here in Armenia to teach their children to avoid unnecessary risk, which also means cutting them off from the possibility of emergent gains. The predictable result is that many talented and creative young individuals found great incentive to leave the limitations of Armenia for foreign lands that could provide greater freedom and opportunity to pursue their ambitions. And without its most entrepreneurially minded forward-thinking youth, Armenia’s progress toward economic sustainability and abundance remains stifled.
Money is exchanging hands every single day all around us. Everyone decides all the time that there are countless things they would rather have than money, and that’s why they make the exchanges that they do. Through this lens, it’s really a wonder that anyone has any trouble finding at least one way to make money at all. Monetary exchange defines our modern way of life. The number of ways to spend money grows every day, and, by corollary, so does the number of ways to make money. After all, for every dollar, euro, yen, or dram spent, there must be a dollar, euro, yen, or dram received.
But people rarely think this way. They, of course, see the obvious range of options for giving their hard-earned money away. We are inundated with advertising and the other effects of consumerism that encourage us to spend, spend, spend on everything under the sun, including things we might not have even previously known existed, let alone that we should want. But when people think about the opposite side of the equation—the options for making money—they tend to view the world through limited and rigid structures pertaining to acceptable career paths.
So, why the imbalance? Why have we accepted that opportunities for spending money are abundant and freeform, but opportunities for making it are scarce and must adhere to strict dogmatic rules and be forced to occur under the limiting eye of bureaucratic social institutions? The answer is not physical or even intellectual in nature; the answer, of course, is cultural. And, fortunately for those who struggle the most to make a living in the world, culture can change. To be an economic success, all anyone really has to do is produce more than they consume. The ways they can arrange their choices and actions to accomplish that are as endless as the forms of wealth that exist for them to produce or manage in the first place.
You may already be critical of my premises and approach to this much-debated subject. Accordingly, you should accept the arguments I make throughout this written work only if you agree with the premises and definitions I present and see the logical connections I make between them. It has been my endeavor to be as clear and consistent as possible with the key terms I use; to that end, you will find a principled glossary of entrepreneurial terms at the end of this book that elaborates on exactly what I mean within the confines of this book and in the context of economics.
More than that, you should be able to extrapolate beyond the isolated, anecdotal examples I give here and apply them to whatever is going on in your own life and the cultural and economic conditions you are in. Only then can we say that the principles I endorse are universal and that they are not applicable only in a particular nation, economy, or at some arbitrary level of personal wealth and education. They apply to the most impoverished and least educated third-world residents just as much as they do to the rich and credentialed residents of the most developed countries on Earth.
I have never been one to let cultural associations with how things are supposed to work (or how people would prefer that they worked) stop me from figuring out on my own how they actually do work. And, in the end, that’s all anyone needs to be a successful entrepreneur at any scale: The willingness to try new things, question established practices, and think for themselves about the best way to accomplish their goals according to only the hard and firm rules of reality. Anyone who tells you differently is trying to affirm the limitations of the paradigm they’ve learned to live by… or perhaps they’re just trying to sell you something.
