South Africa: Youth unemployment stands at a devastating 47.8% for the first quarter of 2022. The official unemployment rate is at 34.5%.
In this article, I argue that postgraduate education won’t create jobs to smoothen this crisis (in the short and long term).
And, if Corporate South Africa is serious about job creation and economic growth, they should redirect some of their funds for post-graduate education to intrapreneurship, as one of the solutions.
The country’s fundamental problem is a product problem. It is what I’ve diagnosed. We do not have enough products that we own: that we sell to the world and ourselves.
My argument is that a reduced or increased spending on education does not affect economic growth significantly, but, any endeavour that directly trials (and errors) to produce Proprietary-To-Novel innovation does, like entrepreneurship. However, for Corporate SA, the better substitute is intrapreneurship.
In a previous article here I described what intrapreneurship is.
It is, essentially, an employee tasked with executing a business idea. It could be their idea, sourced within the organisation, or from anywhere else (even through a prize).
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It’s great that corporate South Africa funds post-graduate education for its employees.
There are tax benefits.
The imperative and primary income-producing variables of a business are products (the income which then funds education), and therefore the products need to be competitive.
At best – critical in today’s world – they need to have some Proprietary-To-Novel properties. I.e. be mechanically better and agile than the competition – or why else would users and consumers adopt them as an alternative.
The description of Proprietary-To-Novel innovation. Novel is something new in that it did not exist before, i.e. novel innovation. I describe it as Proprietary-To-Novel innovation.
I.e. (without getting into a lengthy explanation) proprietary novelty starts from a 10X improvement – e.g. like the 1975 Moore’s Law observed the trend of transistors on a microchip growing exponentially (every two years): faster speed, reduced size and more in quantity.
The newer (slightly novel materially) transistors still had some of the properties of the old but infused something new in them that enabled them to be smaller and faster in size. Therefore they were proprietarily novel.
Material discovery novelty is innovation that is new and has nothing like it in existence – e.g. like when the process of making the first true antibiotic (i.e. penicillin) was discovered in 1928 by Alexander Fleming for the first ever in recorded history. It was new in it of itself. Antibiotics kill and stop pathogens from growing, unlike antibacterials which only kill.
I use ‘between proprietary to novel’ to illustrate that, some innovations lean towards proprietary, even if they infuse new (novel) materials. The transistor was novel at invention, and along the way got better and agile through infusing existing and sometimes novel materials to become proprietary.
The antibiotic was more novel as the differentiator was it plus stops pathogens from growing.
I will use the acronym PTN to describe Proprietary-To-Novel innovation in some instances.
So, the prescription of this article looks at the importance of playing the variables that can produce innovative and therefore competitive products in the range of Proprietary-To-Novel (if they lead they produce competing income); unlike sending everyone to school and hoping they come back as innovators of products.
I argue it’s better to approach Proprietary-To-Novel innovation directly, i.e. fund intrapreneurship and play the direct gamble to try to create innovative products.
The positive consequence of PTN innovation other than income growth is the creation of jobs – an addition to the national macro.
Therefore, this article is about ‘skin in the game,’ i.e. executing variables that propel exponential growth (Proprietary-To-Novel innovation) outside of any other tax incentives than normal deductible business expenses (innovative leaders don’t rely on incentives to attempt).
I will illustrate why funding intrapreneurship is better for a company’s growth, macro economic growth and job creation than a bet on postgraduate education.
Let’s see how intrapreneurship can create PTN innovation.
Approach and context
For the whole article, keep the context that intrapreneurship will be approached as a part-time-while-working endeavour, financed by a company, and worked on outside of work hours, but intensely. It is like how a working person studies part-time – intensely.
However, depending on the complexity of the venture and whether the lead intrapreneur works with other team members, it would be prudent for them to eat into work hours.
At best, it should be a full-time endeavour, even beyond work hours.
Intrapreneurship in addition to R&D: A free radical
Corporations traditionally have Research & Development departments, which are responsible for experimenting with and creating the innovation.
Below is a surveyed glimpse into R&D spending in South Africa. It is prepared by The Human Sciences Research Council for The Department of Science and Technology.
South African National Survey of Research and Experimental Development: Statistical Report 2018/19
Of course, this is a survey and does not include all R&D done in South Africa.
Worthy of noting is looking at business spending on R&D. The spending has been declining from 2016/17 to 2018/19.
Also, per the constant rand value of 2010, it has been dropping since 2010.
Opting for the free radical that is intrapreneurship
Now, this article argues for intrapreneurship, separate from R&D.
I am saying it should be a separate approach.
The traditional approach was R&D would create the products and the marketing department would take them to the market. That’s cool.
Here I implore an intrapreneurial approach, i.e. the intrapreneurs running the projects themselves more than using the traditional R&D and sales departments and channels.
The intrapreneur, even if working in conjunction with other departments like sales, should oversee or lead the overall business model aspects of the project or venture: (a) Product (outsourcing is allowed), (b) Marketing, (c) Distribution and (d) Marketing, as per the EBC Business Model I created in my first book ‘Forget the Business Plan Use This Short Model.
The reasoning is to leave nothing to chance. If they are unhappy with the sales team, they should have control to come up and employ alternative methods of sales.
In entrepreneurship, you leave nothing to chance and blame no one. So should intrapreneurship.
Intrapreneurship just like entrepreneurship should be lean and agile. The products will get tested quicker with the market when such lean and agile approaches.
Therefore it is about the idea. The intrapreneurs will be executing the best-chosen ideas. And they don’t have to be adjacent to the organisation’s existing offerings.
I am suggesting for one organisation to have multiple intrapreneurs. In this way, one organisation is antifragile against the failure of one intrapreneurial pursuit (it happens). The others might work.
It’s like a country with many entrepreneurs (e.g. 1000) is antifragile compared to a county with few entrepreneurs (e.g. 500). Probabilistically, the country with more entrepreneurs will have more successes in quantity (100 if 10%) even if their failure rate is at the same percentage as the country with few entrepreneurs (50 if 10%).
Current characterisation of Corporate SA
I wrote a lengthy article titled: MBA and chartered accountant led corporate South Africa has failed to innovate products and thus failed to create jobs https://buff.ly/3fUJUoY
It rubbed people in different ways.
The gist of the article and still my current characterisation of Corporate South Africa is it is not producing enough product innovations to be a leader in a sense of Proprietary-To-Novel innovation.
And because of this, growth and job opportunities are far from reach.
Corporate SA imports a lot of finished products innovated by others (PTN): from physical products to virtual products.
The one example I made used Edgars as a frame. At the beginning of the millennium, department stores (when they were far from dying) like Edgars still had the leverage of using their big bank balances to have exclusive licenses to products from overseas, and, that of being the few who can afford MOQ production runs of single clothing items.
Today, brands have mostly done away with exclusive licensing. They sell to anyone interested in retail. They live by that if a product is hot and in demand massively, they sell to anyone who wants to retail it – and that permeates through the corners their distribution didn’t reach before.
Innovation has allowed manufacturing MOQ runs to be small, from 1000s to units of 50. It’s The Cheapest And Easiest Times In History To Be An Entrepreneur & Innovator (as one of my workshops goes).
One of the arguments I’ve heard against the article – a silly one at that – was that it is not corporate’s to innovate PTN products. I hope they do not teach this in any business school class.
We don’t expect the next 6/7/8 generation internet innovation to come from neither our local network providers (Vodacom nor MTN, just to give an example).
The converse of the above would be a minority that produces exponential income for any of these companies (i.e. if they produce any next-generation internet which falls within the confines of Proprietary-To-Novel innovation). They would supply their competition locally and their peers abroad.
All that money would be coming to one company based in South Africa. Many jobs will be created.
There will also be an exponential increase in jobs.
Now, imagine if Corporate SA would offset even 10% of its funds that go to postgraduate studies, e.g. MBA being one of them – it typically costs over R200 thousand, and use that to fund their employees for intrapreneurial ventures.
We could not find data that showed how much corporate South Africa spends on educating its staff. However, any hundred new intrapreneurship roles included across all of corporate South Africa, well, it is positive.
As you read on I will show that entrepreneurship (and intrapreneurship) are minorities that produce exponential results.
Even if it is one company that funds many intrapreneurs, the exponential benefits will be reaped by them.
They would directly be exploring the discovery of the minority that produces exponential competitiveness, income and growth, i.e. Proprietary-To-Novel innovation.
As you read I will show you the following: Whereas most global comparative studies breakdown that there is a negative correlation between increased education spending and economic growth, and, those that say there is a positive correlation give superfluous reasons and do not breakdown which variables stimulate economic growth (mostly of individual countries or regions).
My argument is that increased spending on education does not affect economic growth significantly, but, any endeavours that directly trials (and errors) to produce PTN innovation do (like entrepreneurship, and in our case here, intrapreneurship).
I also say entrepreneurship and intrapreneurship are forms of education.
All in all – a topic for another day – is not to say South Africa does not produce any Proprietary-To-Novel innovations. There are patents and groundbreaking discoveries produced yearly, however not enough to push the macro significantly.
They are produced by private individuals, small to medium companies and government research agencies majorly, but less by corporate South Africa.
A lot of the innovations don’t go anywhere, for reasons that have to do with it being the nature of novel innovations and by that they don’t get multiyear burnable funding for commercialisation.
Corporate SA can afford this burnable funding.
Most, or some, novel innovations take time to proliferate into use, especially if they don’t at least complement efficiently (than other innovations) to other innovations/products/tools/utilities in mass use.
E.g. the internet, tinkered with since the 1960s, took time to proliferate society until it was open to everyone through the then-new user interface called the World Wide Web. The web came to use in the early 90s and had thousands of users. It struggled to take off initially.
YouTube, launched in 2005, took less than 24 months to reach 100 million views because the internet had over a billion users then. It would have not been possible in the early 90s purely because there were not enough millions of users.
The internet got many users when the then-new innovation that was the web was introduced. Because the web’s apparent uses became possible (e.g. dating apps, pornography, news), it took off and reached billions. YouTube took less time than both the web and the internet – the internet took time than the web.
Some PTN innovations take time because of such complementing gaps.
Hence they need burnable funding over years.
Here, I am not laying blame on anyone for not funding South African PTN innovations. However, it is the gap in the South African economy if fixed would fastrack economic growth.
The imperative of the article is not to say Corporate SA (or government) should fund these external innovations, but to encourage it (Corporate SA) to expand its internal intrapreneurship programmes also.
The strong minority that is entrepreneurship and intrapreneurship
Entrepreneurship and intrapreneurship are minorities that produce exponential income and jobs.
Intrapreneurs might fail – just like entrepreneurs fail many times and succeed a few of the times (but with moderate to exponential gains). Some entrepreneurs fail totally in their lifetime.
A few entrepreneurs succeed to reach those exponential income and job-creating levels, after many and varying tries, or ventures.
Therefore, companies need to give multiple and many chances to intrapreneurs.
In a direct sense, intrapreneurship and entrepreneurship are a mathematical sequence that produces exponentials.
To give an analogy, intrapreneurship and entrepreneurship produce like a fifty-hectare power station producing electricity to thousands of households occupying thousands of hectares.
This is the chief reason why companies need intrapreneurship. Thousands of them are needed to have a chance of a few hundreds of them producing exponential newer incomes and thus moving the national macro for the benefit of the many.
The argument that postgraduate education creates jobs and wealth
I do think undergraduate education is good for the individual and also creates a competent society. It is where most of those who pursue tertiary education reach.
In its entirety, education allows individuals in society to have a rising degree of innovative to moonshot (PTN) ideas if it comprises of the day’s innovative courses. In today’s world, it is courses such as coding, robotics, material science, the nano fields, etc.
Any such innovative ideas would need to be executed entrepreneurially or intrapreneurially, in the context of this post. The two are mechanics that execute ideas.
If postgraduate education does not produce physical to virtual products in the manner of subjects such as robotics, material science and medicine, I believe to produce material chances of exponential profits, a slice of its funding should go towards funding intrapreneurship.
I do believe people don’t want post-graduate education just for status (some do as it works), or to produce marginal change. If offered a material opportunity to lead material innovation, they would gladly do that. And these people are society’s brightest minds.
After all, entrepreneurship and intrapreneurship are mechanics that execute ideas, and ideas are inspired by what we consume. Education is a major part of what we consume. If it is elevated, it will spark PTN business ideas.
Those educated and employed won’t move the macro of wealth and jobs significantly and exponentially as compared to intrapreneurship and R&D (this post is about the former).
So intrapreneurship and entrepreneurship should be deliberate, as they produce deliberate and tangible (physical and virtual) products.
Going further: Distinction of the complexity in education
A minority of education degrees are artisan-like, i.e. the graduates equipped to produce Proprietary-To-Novel innovations.
This minority falls under the acronym STEM (Science, Technology, Engineering and Mathematics).
If they don’t produce Proprietary-To-Novel innovations, well, they don’t, at least in the majority mostly.
The times they produce such innovation (PTN), it’s when they are employed to do so, like scientists at government labs like the CSIR trying to find vaccines for novel diseases.
This is being intrapreneurial.
On the other hand, the majority of courses at colleges and universities belong to humanities and commerce.
All of them (STEM, humanities, commerce and other streams), their majority, do not opt for entrepreneurship – entrepreneurs are a minority. Of course, employment is sanely a safety net.
Again, the imperative gist of this article is to encourage Corporate South Africa to gear up to produce Proprietary-To-Novel innovation through intrapreneurship.
Their intrapreneurship has a direct chance of producing exponential results.
In a behavioural sense, also mathematically
Let’s say postgraduate education creates some jobs. However, it is not greater (exponential) than under the context of entrepreneurship and intrapreneurship.
Think of it in the following way. Entrepreneurship is like this: Say out of a 1000 entrepreneurs – in a power-law sense (Pareto distribution), 80 percent will fail with varying and diminishing degrees, if there is any survival, 20 percent will succeed with varying and ascending degrees of success.
The 20 percent will create jobs for ten X thousand.
This is the variable of what entrepreneurship and intrapreneurship do. One or few persons create a product, and the product employs hundreds to thousands.
Perhaps what brought to the mainstream that spending more on education doesn’t necessarily create wealth for a country as theoretically thought of before, was economist Alison Wolf’s 2002 book titled ‘Does Education Matter?: Myths About Education and Economic Growth.’ It showed a trail of a supposed correlation between high spending on education versus economic growth over time.
She points to the World Bank data that show a negative relationship between education levels and growth. The countries that devoted the most resources to expanding their education systems grew less rapidly than those that devoted fewer resources to education. For example:
- Egypt doubled its education spending from 1970 to 1998. In that period it moved one place from 47th poorest countries to 48th.
- For a century Switzerland has been one of the top richest countries in the world and has the lowest rate of university attendance in Western Europe. And this is not because of its natural resources.
In a South African context, the two studies that alluded to this are by Luxolo Mihle Malangeni, of the following titles:
- (Published 2017) Education and economic growth in post-Apartheid South Africa. Collected annual data between 1994 and 2014.
To quote part of the conclusions:
“Our results further highlight the importance of government spending in improving economic growth, and as is well-known, a major part of government’s budget is dedicated towards education. However, the insignificant link between education and economic growth implies that an increase in school enrolment numbers will not necessary benefit the economy in terms of improved growth. Henceforth, our study implies that government should be rather concerned with deeper fundamental education issues such as improved quality of education.”
- (Published 2021) Effects of different levels of education and government spending on economic growth.
The study investigated “… the impact of the level of education and education spending on economic growth in the Southern African development community (SADC) using annual panel data from 1995 to 2017”
To quote part of the conclusions:
“Education was assumed to be linked to economic growth through its effect on the development of cognitive skills. As education augments cognitive and other skills, it will enhance the productivity of labour, ultimately accelerating innovation and technological progress and bringing higher economic growth.”
“Government spending has a negative relationship with education due to the mismanagement in government and that has a negative impact on society. On the other hand, government spending was found to be significant in influencing economic growth. The effect between economic growth and education can presumably go either way, given that economic growth can help reduce poverty and poverty can deter the attainment of economic activity.”
To not misrepresent the studies, they did show two things: primary and secondary education are crucial, and overall, the quality of education is as well.
Primary and secondary education is crucial for overall literacy. This is significant in how citizens navigate the world. Literacy is how to navigate the civilised world.
Undergraduate education – although I think entrepreneurship can strike its price by 80% – is what produces or should produce a technically competent workforce.
There is no direct causation that shows that undergraduate and postgraduate education (particularly in humanities) creates wealth and jobs.
However, mass undergraduate education is necessary for an economy. The economy needs an educated workforce: accountants, HR, software engineers, etc.
Of course, I am arguing for part of postgraduate education to be directed to intrapreneurial activities.
In a sense, I am classifying intrapreneurship and entrepreneurship as a category in addition to humanities and STEM.
They are artisan-like, a minority one, but that produces jobs for the majority.
Humanities cannot produce exponential jobs so to say.
Producing jobs and wealth for the majority require artisan-like hands: intrapreneurs and entrepreneurs.
Any positive or negative correlation between education and economic growth will not mean causation obviously. For example, when minerals in a country are responsible for a large part of the GDP, obviously it does not mean education created the jobs – however such jobs need ‘some’ educated people and they create jobs for all (even the uneducated).
If the education comes before the mining of the minerals, it doesn’t exactly mean the education created the jobs – because it was not funded by it.
Minerals are naturally given resources. Most income-producing products today in the world are man created.
Think of software companies like Facebook, Spotify and Netflix, their revenues exceed the GDP of various countries.
They employ few people – than mines – and pay them well.
These incomes increase and dilute the average Per Capita Income (PCI) figures (if the majority earn less – the norm).
Nations gifted with natural resources – often deoptimized – can have jobs and thus funds for education.
The sequence is income from the products funds the education and not that the education creates the wealth.
Money for education can come from debt. However, the debt needs to be paid with income from somewhere (mostly products).
If it is not paid, the debt accrues interest.
The history of wealth creation is bottom-up since millions of years ago
It is clear that since over 2 million years ago, the innovations (Oldowan tools and Acheulean) that our ancestors made, were not an academic endeavour. It was pure trial and error, a bottom-up evolution for better survival and thriving.
So was the agricultural revolution. It was not academic at all.
The Industrial Revolution was not founded by academics but by folks with no formal education.
Anything created on the earth is bottom-up. No internet fell from the sky. Not a wheel, a chair, cars, etc.
Everything known – e.g. modern science – became known because of past experiences and experiments.
All these wealth accumulation periods were not by academia. They were just pure doers.
The United Arab Emirates became rich first through selling products (oil in their case) and started pursuing education for the masses later.
So did Singapore, South Korea and Switzerland. The character of the variables that contributed to their rise to riches lean towards entrepreneurship and intrapreneurship: low taxes, low tariffs, ease of opening a business, owned manufacturing industries.
They have products. These variables allow exponential results: income, jobs and thus economic growth.
Wealth is created off products and not education. The sequence matters – the latter can complement the former.
Of course, education is good for the educated and their families. It increases their socioeconomic standing.
Now can we create jobs and wealth through postgraduate education? No. Sure, the few who go through that postgraduate degree will have a chance at an improved socioeconomic standing. But the majority won’t be that affected by their efforts.
The variable that creates jobs is the creation of products through intrapreneurship or entrepreneurship.
Education teaches experiences and experiments gained off the bottom up of innovation.
Education that teaches top-down skills, e.g. managing people, however important it is, won’t create jobs and wealth close to the exponentials that are intrapreneurship and entrepreneurship.
A simple exercise is, out of all the artisan courses like physics, how many of them produce actual product innovations (e.g. patents)? A very few of them.
However, inventors produce patents and entrepreneurs have the ball to risk not receiving an income.
The easily available way for Corporate SA to do the same is through intrapreneurship.
Postgraduate education booms off a wealthy economy. It has to contribute intrapreneurially and entrepreneurially to sustain and grow individual livelihoods in their country.
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The coming sections will cover examples of intrapreneurship historically, locally, and internationally.