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Lunch at the Four Seasons with: Carl J. Schramm

Published by The New York Sun on 2005-03-21

As he heard Carl Schramm, president and CEO of the Ewing Marion Kauffman Foundation, cogitate on the American business ethos, the reporter recalled what President Calvin Coolidge famously said in the 1920s: "The business of America is business."

Coolidge's sentiment reflected supreme confidence in the American economy, although the country was soon to plunge into the Great Depression on his watch. But Mr. Schramm -- whose Kansas City-based foundation gives away more than $90 million annually, making it one of America's 25 largest philanthropies -- left the impression in the reporter's mind that Coolidge wasn't wrong, only that his remarks didn't fully grasp the story.

"The story of America is a story of entrepreneurship, not just of big business," Mr. Schramm said at lunch. "Americans are entrepreneurial -- no people anywhere on earth match our entrepreneurial skills. Entrepreneurship is in our genes. Entrepreneurship is in our national woodwork. During the course of their lifetime, 7 out of every 10 Americans will try and start a business."

He speaks with a special passion about entrepreneurship not only because his Kansas City-based foundation recently gave $25 million to 8 universities to start programs designed to identify and encourage student entrepreneurs.

Mr. Schramm, who holds a Ph.D. in economics from the University of Wisconsin in Madison, and a law degree from the Georgetown University Law Center in Washington, has also been an entrepreneur in earlier phases of his life. He was chairman of Greenspring Advisors, Inc., a Baltimore-based merchant banking firm he founded to support business development in health care and insurance. (His clients included Ford, Johnson & Johnson, Diebold, Fortis, ESG Re, Allianz and Child Health Corporation of America.)

His entrepreneurial record includes the co-founding of HCIA, a health information technology company. He also co-founded Patient Choice Healthcare, Inc., in Minneapolis, where he serves as vice chairman of the board. Patient Choice provides a new model of patient-directed health insurance to large employers.

The grant to the universities carries a special significance for Mr. Schramm.

That's because these institutions were able to implement one of his favorite concepts, leverage, and use the Kauffman money to exponentially increase their funding base for the entrepreneurship programs. In fact, the grants were to Washington University, the University of Rochester, the University of North Carolina, Wake Forest University, the University of Illinois, Howard University, the University of Texas at El Paso, and Florida International University, on the condition that they match each Kauffman dollar with another two dollars through their own fund raising. In little over a year since they received the Kauffman money, the institutions have raised $100 million on their own, far exceeding Mr. Schramm's exhortation and expectation.

"This is resourcefulness of the highest kind," he said. "And this, too, is entrepreneurship, albeit institutional entrepreneurship."

He's heartened, too, by the inventive use of the money. Washington University, for example, has built a special student mall on its St. Louis campus; the stores were created through student enterprise. Students enrolled in special courses on entrepreneurship have the option of living in a dormitory designated for student entrepreneurs; the assumption is that there will be cross fertilization of ideas, even professional associations, Mr. Schramm said.

The University of Rochester, which has an acclaimed music conservatory, decided to use the Kauffman grant to focus, among other things, entrepreneurship in the arts. "All over America, symphonies are failing because of a lack of funds," Mr. Schramm said. "What we're saying at Kauffman is that surely entrepreneurial energy of students and others can be mobilized to ensure financial security for these music organizations, which so enrich our culture."

"The point is, it's important to offer academic guidance to students who've shown an aptitude for entrepreneurship," Mr. Schramm said. "Our view is to help such students -- so that they can become people who create companies that, in turn, create jobs and generate wealth. This is one of the most effective ways that a foundation can use its resources."

The Kauffman Foundation's resources of $2 billion came from the late Ewing Marion Kauffman, founder of Marion Laboratories in Kansas City. Kauffman had definite ideas about how he wanted his money to be used, Mr. Schramm said: for education, particularly of underprivileged youths, and to expand entrepreneurship in America. Those ideas led, among other things, to the creation of an urban entrepreneurship initiative in cooperation with the National Urban League. African-American entrepreneurs are given guidance about finding venture capital and about the use of technology and sophisticated marketing techniques.

In order to sharpen opportunities for new entrepreneurs, the foundation corralled in America's 180-plus "angel investor" clubs and started an Angel Capital Association. By identifying funders -- or "angels," in business parlance -- Kauffman is providing a handy tool for access to information about thousands of new businesses. "Try raising $200,000 or $500,000 for a new business," he said. "America may be a nation of entrepreneurs, but we don't make it easy for aspiring entrepreneurs to get money."

The nation of entrepreneurs that Mr. Schramm waxes eloquent has more than 25 million small businesses, ranging from enterprises that employ fewer than five people -- and there are 3.3 million of such companies -- to those with more than 500 workers, of which there are nearly 17,000. Self-run and small businesses employ 110 million Americans, according to the federal government. Small businesses account for nearly $20 trillion in annual revenues, and they are growing at the annual rate of 2%.

"I believe that entrepreneurship will continue to be the backbone of the American economy," Mr. Schramm said. "That's why we need to infuse campuses all across America with the enthusiasm for entrepreneurship."

He's also proselytizing on the subject of entrepreneurship to audiences beyond American campuses. The Kauffman Foundation has opened an interactive exhibit at the Epcot Center in Florida's Disney World. It's called "Opportunity City," and it will draw nearly 3 million visitors each year.

Then there's a Web site that Mr. Schramm and his colleagues have developed in cooperation with Disney: Aimed at children between 9 and 12, it's meant to simulate business strategies and opportunities. The games have been enormously successful.

"The idea is to catch them young," Mr. Schramm said. "The idea is to teach our children at an early age about the joy and benefits of entrepreneurship."

Then he, perhaps unwittingly alluded to Calvin Coolidge's oft-quoted saying.

"See, the business of America is entrepreneurship," Mr. Schramm said.

Pranay Gupte,
Senior Writer and Global-Affairs Columnist

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