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Entrepreneurship in American History

John Steele Gordon
Author, An Empire of Wealth: The Epic History of American Economic Power


John Steele GordonJohn Steele Gordon was educated at Millbrook School and Vanderbilt University. His articles have appeared in numerous publications, including Forbes, National Review, Commentary, the New York Times, and the Wall Street Journal. He is a contributing editor at American Heritage, where he wrote the “Business of America” column for many years, and currently writes “The Long View” column for Barron’s. He is the author of several books, including Hamilton’s Blessing: The Extraordinary Life and Times of Our National Debt, The Great Game: The Emergence of Wall Street as a World Power, and An Empire of Wealth: The Epic History of American Economic Power.



The word “entrepreneur”—one who undertakes, manages, and assumes the risk of a new enterprise—comes from the French, where it literally means “undertaker.” The word was borrowed into English in the mid-19th century— perhaps the golden age of the entrepreneur—when the number of new economic niches was exploding and the hand of government was at its lightest in history. The activity of entrepreneurship, of course, is much older, going back to ancient times. As for America, our nation was founded, quite literally, by entrepreneurs.

In 1607 the Virginia Company sent three ships across the Atlantic and unloaded 109 passengers at what became Jamestown, Virginia. They were embarked on a new business enterprise that they hoped would be profitable—American plantations. The Virginia Company was a joint-stock company, a relatively new invention that allowed people to invest in enterprises without running the risk of losing everything if the business did not succeed. By limiting liability, corporations greatly increased the number of people who could dare to become entrepreneurs by pooling their resources while avoiding the possibility of ruin. Thus the corporation was one of the great inventions of the Renaissance, along with printing, doubleentry bookkeeping, and the full-rigged ship.

Allowing incorporation as a matter of law, rather than requiring an act of the executive or of the legislature, began in the United States as early as 1811, when New York State passed a general incorporation law for certain businesses, including anchor makers—I suspect an anchor manufacturer had a friend in Albany. Soon enlarged in scope, the ability to incorporate simply by filling out the right forms freed the process from politics, and the number of corporations exploded. There had been only seven companies incorporated in British North America, but the state of Pennsylvania alone incorporated more than 2,000 between 1800 and 1860.

Unfortunately for the stockholders of the Virginia Company, the business of American plantations was a very new one and had a steep learning curve— a curve that would be encountered again and again as the American economy developed and new industries were born. It is a curve all would-be entrepreneurs must climb to be successful. The Virginia Company did not climb that curve quickly enough, and made just about every mistake that it could make: It tried to run Jamestown as a company town; it searched for gold, of which Virginia has none, instead of planting crops; and it failed at establishing a glass-making industry. Eventually Jamestown was nearly abandoned. Only when John Rolfe introduced West Indian tobacco in 1612 did Virginia find an export that had a market in Europe—indeed a market that grew explosively and made Virginia rich. But by that time it was far too late for the Virginia Company, which went broke.

In fact, of course, most entrepreneurs do fail.