Enterprise Week

Last night's Wales@work programme on BBC Radio Wales asked the following:

Yesterday saw the beginning of Enterprise week in schools and colleges around the UK. Students from around the country are being challenged to come up with successful business ideas to teach them more about entrepreneurship and commerce.

• But are events like this worthwhile - can you really teach children how to become entrepreneurs? Or is it something that you are born with?
• And as these teenagers start out in the big wide world shouldn’t we be giving them a financial education as well as an academic one?
• In the current climate with money being tight shouldn’t our children be taught how to manage money and not get into debt?

So this week Wales@work goes on the road to Neath Port Talbot College to ask guests and a young audience whether business and finance is a worthwhile education.

We sent our thoughts to the show...

You can move towards an answer to all three questions by teaching children to understand "the bigger picture", and how debt and risk fit in to it. History talks about three ways to get wealth - steal it, earn it or marry it. Borrowing money without understanding its consequences was never the answer. However we shouldn't assume that debt is fundamentally bad - it isn't, but we have to recognize that it comes with consequences.

For example, businesses may take on debt as an investment in their future profitability; likewise our parents took on debt to fund the purchase of a long term asset (their house) which over the period of the debt (25 years) would increase in value. Debt to fund a short term lifestyle boost is plain daft - it doesn't deliver any long term benefits and simply makes securing debts for those things that do (such as a mortgage) more difficult. You wouldn't see a business taking out a loan to fund entertaining at a rugby international, for example (and nor would you find a bank willing to give one!). But that shouldn't stop individuals gearing up to drive future wealth creation opportunities - by all means borrow to set up a business, if you can demonstrate your belief that in doing so you'll be better off in the long term.

Being a successful entrepreneur is partly about identifying what you or your idea can do that gives you an advantage over what's already in the market, and then doing it profitably. It's also about knowing your weaknesses and either learning to address them, or getting people and resources around you to mitigate against them.

Fundamentally all of this is an understanding of risk - what's the risk of me not being able to pay my debts, what's the risk of my business idea failing - and having a strategy to deal with it.

Put it this way, borrowing money to buy a second property on an interest only basis only just covered by the rent is only GUARANTEED to deliver profit if you can say with certainty that (A) you will always have a paying tenant, (B) rent will go up at least in line with rises in interest rates and (C) property always goes up, not just in the long term but also in the short term. Sounds obvious, but amazing how many people didn't apply this thinking over the last 5 years...

Finally, for a broader look at how education stifles creativity, I can thoroughly recommend this lecture by Sir Ken Robinson.