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Archive for the “Animal Spirits” Category

John Maynard Keynes coined the phrase “animal spirits” in his 1936 book The General Theory of Employment, Interest and Money.  He uses the term to describe emotions which influence human economic behavior.  Healthy animal spirits create an ambience of trust and faith and are a necessary prerequisite for human actions, much more than quantitative logic.  Keynes felt animal spirits were needed as a goad to economic action rather than inaction.

Entrepreneurs are different than other business people.  They are optimistic risk-takers and people of passion and instinct.  They are marchers to the beat of their own drummer.  But they are also very much dependent creatures of their own animal spirits.

In a sense, entrepreneurs are much like the wild things of the forest.  They are part of an economic and emotional ecosystem that molds them, that fertilizes them.  They will not stay healthy without this ecosystem.  Hence, the importance of a salubrious trope in the macroeconomy.

A very wet blanket has been thrown over the animal spirits of small business in the last three years.  While excessive and growing regulation saps energy and time, it is ultimately only a wasteful annoyance.  A growing tax burden excessively milking the small business community is a more serious discouragement to the entrepreneur, but also not fatal.

What is potentially fatal is the undermining of the spiritual reason for entrepreneurship.  As much as profit is important, at base I believe most entrepreneurs are seeking a meaningful and free life.

While political philosophy can be argued one way or another, I personally feel the greatest and most unnecessary economic mistake of the current administration is its gratuitous and overwrought attack on the motives and values of business.  It is very hard to continually pillory the businessman as venal, greedy, and selfish and not destroy the animal spirits and passion prerequisite for success within our group.

It is also unnecessary and wasteful to cast the businessman as a villain.  It would cost nothing to hold up the virtue and value  of our group rhetorically, rather than debunking and denigrating our community.  The rewards in entrepreneurial optimism and response would be significant.  And it would not cost a dime.  Even within our depressed economy, the entrepreneur remains a risk taker.  But who wants to take the risk of adding investment and new hires when the reward is a cacophony of governmental contempt and calumny?

The current government cannot create an emotional dead zone for the entrepreneur and expect him to be enthused and fierce.  If our current recession must be remediated through the 65% of new hiring done by small businesses, why not lift us up with celebratory eloquence?  It’s free to do so, so why not a little sunny celebration and support, rather than depracatory demonization?

As John Maynard Keynes puts it, “…if the animal spirits are dimmed and the spontaneous optimism falters, leaving us to depend on nothing but a mathematical expectation, enterprise will fail and die.”

Thank you, John Maynard.

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The past three years have been among the most trying and dispiriting for business in American history. The numbers recently have turned murky again, arousing fears of a double dip recession, permanent high levels of unemployment, and the passing of the American baton of entrepreneurial and economic pre-eminence to China, India and Brazil, where the passion for success and growth seem to have blossomed while ours has waned. According to Robert Schiller, Yale’s famous and most visible economist, things will not get materially and emotionally better until “animal spirits” return to the market. We all know exactly what Schiller means.

The trouble is that animal spirits cannot be arbitrarily conjured into existence. Unlike dogs who merely need a nice day to spontaneously experience their own animal spirits, we humans need reasons to feel enthusiastic and to then commit to plans and actions. The current administration may have saved the economic system from its own worst excesses and self-delusions–the infinite expandability of leverage–but in many ways it has acted in inhibitory, controlling and arbitrary ways when it comes to a return to growth, employment and consequently, optimistic actions.

One could argue that the government in Washington has used this financial crisis to “socialize” as many sectors of American life as possible. That means more control, more regulation and a consequent reduction in entrepreneurial options. That depresses those responsible for turning their desires into action. People like me.

It is essential that small businesses look to the future as a time of renewed, worthwhile endeavors and not submit in anger and frustration to the current anti-business atmosphere. Acceptance is defeat.

Tim Askew has expressed the desire to periodically invite fellow entrepreneurs and small business colleagues to contribute to this weekly blog. This week’s guest blogger is Robert Millman. Robert is the owner of Wine Executive Seminars. He tastes and rates over 5000 wines per year. In addition to his successful small business, he is also a professor of philosophy at Pace University.

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