Can we have more company failures, please?

Mainzeal Property & Construction’s collapse generated the usual and expected kneejerk bewailing and bemoaning.

It is as if it should never have happened. We had this big company yesterday. We should still have it today. It should go on forever.

Because it should never have happened, something must have gone wrong and so, someone is to blame.

The fault is invariably greed or business ignorance or both.

The fingers predictably point to directors and the company’s owners and to the government.

Business failure is reported as an economic calamity and as a sign that all is not well within the wider New Zealand economy.

It is all nonsense, of course.

The business collapse shows we have an economy that is working.

We would be better off with more.

It is traumatic and upsetting for those involved.

But so too is life.

Essential part

The trauma and upset does not make life less worthwhile or desirable.

It is simply a part, and a very necessary part, of living.

Business collapse is part of a successful economy. It is simply not possible to sit back and design once and for all the perfect business and business structure.

Even if we could, it would not work for all time.

The world is too dynamic a place.

We have, instead, a system that is constantly turning over ideas and business practice. Businesses are continually coming and going.

There is continual innovation and entrepreneurial success – and failure.

This is what gives an economy its dynamism.

We have had economies in which businesses never failed.

These economies were sclerotic.

Stronger economy

The result was not business failure, but the failure of the entire economy.

It the turnover of businesses, as traumatic as it is, that makes an economy strong, robust and, ultimately, successful.

There should be no surprise in any of this. The strongest and most resilient systems are underpinned by a continual turnover and evolution.

The obvious example is life itself and the extraordinary strength and wondrous diversity produced through trial and error.

English language, science and common law are other examples.

Esperanto is a cleverly designed language but lacks the evolutionary adaptive power of English. No one designed the English language. No one controls it but it works.

Tweaks & hacks

Business start-ups, mergers, takeovers and collapses are tweaks and hacks to the economy, making it better and stronger. They are the neologisms and, ultimately, obsolete words of yesteryear.

The economy is an organic, growing, evolving system.

Business ideas are tested and tested through trial and error.

It is and difficult. It is not a clock that has been engineered, but a living, growing and evolving thing.

But there is a driver; a driver on which the entire system depends; a driver that generates the very things that we need to sustain ourselves.

That driver is entrepreneurship.

Entrepreneurs are the rarest of people – the madness, the hubris, the focus, the drive, the wild, misplaced optimism.

These souls make the difference between an economy that ticks along and one that flies.

Do they get it wrong? More often than not.

Do they make mistakes? More in a day than commentators make in a lifetime.

Are they mad? Of course.

When they succeed, lesser folks regard them as excessively wealthy and rapacious.

When they fail, they are greedy fools.

We should be gentle on entrepreneurs, both when they succeed and when they fail. Not for their sakes.

Rodney Hide is a former ACT Party leader and former Minister of Local Government. The above article and image appeared in the online version of the National Business Review on February 17, 2013

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