Every business has a lifespan and a human history. When we get to the end, we see things we never noticed at the beginning.
This story is about entrepreneurship in Vietnam. This is not about large-scale multinational corporations, but about the everyday businesses and services around us, especially those controlled and operated by a single individual. A 2021 study commissioned by the European Union notes that over the past 30 years, this sector “has grown exponentially.” While it is difficult to exactly define the term “small and medium-sized enterprises,” this study cites the General Statistics Office to state that there were 758,610 active SMEs in Vietnam. For comparison, one can find a post-Covid figure from the Ministry of Planning and Investment indicating that the total number of businesses in Vietnam is around 900,000.
So, although the numbers change depending on the definitions, it is clear that small businesses are extremely important to the Vietnamese economy and society. Yet do we really know what is happening to them and what it means for them to come and go?
This is the story of a single entrepreneur, a young woman who came from Vinh to Da Nang and who made her dream come true by opening a restaurant in the My An beach area. I met Lien (the name was edited) in the final months of 2022. I was struck by how she ran a multi-faceted business on her own. Certainly, she benefited from the help of her mother and her younger brother. And she told me about the generous help she received from an older brother, an architect who transformed the house into a business location and even made the tables. But it was she who came every day to cook, serve and clean. She was the one who taught herself English and learned to prepare dishes that Westerners like. And it was she who – just before the pandemic – signed the loan.
Let’s say a few words about small business economics, noting that these points are as much about psychology as they are about business.
Small businesses are almost always more vulnerable to changes in the immediate environment and they must take into account that these changes are impossible to predict consistently. This is one of the reasons why there is no effective way to prevent businesses from growing or falling. Their growth and contraction are a reflection of the activity around them. This may seem obvious, but the question is related to two other academic questions that deserve more attention.
Although much time and energy is spent trying to understand and control business cycles, the expansion and contraction of interrelated microeconomies – not to mention the national and global economy – is something that no one can entirely predict. Indeed, the technical term used by economists to describe such statistically “stochastic” cycles comes from an ancient Greek word meaning “to guess.” We make a big deal about successful entrepreneurship, but it helps to take a step back and realize that virtually all business operators get by by guessing where things are going.
 |
|
A man walks past stores that have been closed due to the impacts of Covid-19 in 2022. Photo by VnExpress/Thien Ngan |
This leads to another difficulty. I was able to see for myself that an insufficient number of customers were coming to the Lien restaurant. Should she have guessed otherwise? The answer to this question depends on your definition of what knowing better means. She took the gamble on becoming a business manager just before Covid, signing the loan documents in 2020. A few months later, the restaurant, confined, remained empty – even though the rent still had to be paid. In a sense, Lien’s announcement in November 2023 that the place will be put up for sale is one of the latest causes of the pandemic.
But I don’t think we should oppose his decision. This is the second point. For more than a decade, leading economists, including Nobel laureates like Daniel Kahneman, have pointed out that most economic decisions are not made based on a clear calculation of goals and risks. Rather, decisions are made in an atmosphere of incomplete information. How could Lien really know what to expect? Looking back, it’s clear what we were supposed to do. Before, not so much.
So instead of limiting our questions to what a business owner should do, it helps reconstruct what it means to make decisions under conditions of incomplete information. In Lien’s case, why not visualize his situation as it unfolds: what it feels like to unpack the utensils and equipment for the first time; how she surfed the Internet for recipes and decided which ones to practice in the kitchen herself; how the company felt on a good day, when it seemed like a post-pandemic recovery was happening, what it was like on a bad day, when no one came, and what it will feel, on the last day, when she packs her things for the last time.
If such questions seem too subjective, know that at the individual level, entrepreneurial decisions are completely laced with subjectivity. Of course, this does not mean that we should make no effort to be objective. It is possible to academically observe the rise and decline of small and medium-sized businesses and make recommendations for change. I’ll finish by trying a few myself.
First, data on this topic is valuable and I support collecting it and publishing it in detailed form. This means tracking businesses by regions, industries, owner age, owner gender and even more categories. Such data may already be collected in Vietnam, but it does not appear to be readily available. While broad generalizations are partly useful, more specific and granular data allows us to better understand what is happening to businesses in Vietnam.
Second, although entrepreneurship courses can be very useful, I disagree with the idea that there are educational solutions to the problems discussed. There are too many variables involved in preparing people while sitting in a classroom. There are, however, some areas of exception. I think entrepreneurs like Lien will benefit from informational seminars on loans, taxes, and the basics of rent and real estate. Perhaps banks and municipalities could cooperate with local universities to organize this.
Third, Lien chose to start a business in a place where there is a lot of interaction between Vietnamese and foreign visitors, and one could say that his problems are related to the tourism industry. However, I’m not sure the situation isn’t radically different elsewhere. Because there are versions of the same issues all over Vietnam, I recommend that the topic be discussed more frequently, especially by people who live in the same neighborhoods and cities as the businesses they are observing. A broad range of people, discussing the situation from many perspectives, will provide more opportunities for productive exchanges between entrepreneurs and the broader community.
Finally, there is one last important point. Businesses must rise and fall. There is no viable way to stop this process. In the United States, it is said that only 20% of restaurants survive to their fifth year, and that’s without a pandemic. But while businesses disappear, people who took a chance remain, and many of them have the stamina to try again. Indeed, most entrepreneurs end up better off because of the burdens they took on and the courage they showed in facing them. Lien doesn’t know where she’s going next, but people like her are a valuable national resource of sorts. They have acquired essential skills through their efforts and deserve our respect.
*David Pickus received his Ph.D. in history from the University of Chicago. He has taught at Arizona State University, RenMin University in Beijing, and other institutions in the United States, China, and Europe. He has published books and academic essays on topics related to history, education and globalization. He is currently an associate professor of history at a university in Da Nang, Vietnam.
