Does Full Transparency Work in Small Business
I wrote this article after being exposed to the length the Norwegian government goes to keep Norwegian businesses completely transparent within their society.
“Complete transparency is idealistic and can inhibit an entrepreneur's ability to learn from their mistakes.”
Not many people outside of Norway know this, but all Norwegian citizens have their taxes openly declared for all to see. It’s an interesting concept. The idea that anyone can view any citizen’s income creates a level of transparency that is socially blending. It essentially eliminates need to guess where in the economic strata someone sits.
But like any system that promotes full disclosure, there are unintended consequences. Two years ago I found myself in Tromso, a city in the northernmost reaches of Norway, having dinner with a friend and fellow entrepreneur. His business was failing and over our long dinner I suggested that he might be better off by shutting it down. His immediate response to me was, “But everybody would know of my failure.” His concern was that he would be judged on that failure and never be able to recover in the eyes of Norwegian society.
He went on to explain that in Norway, there are no secrets because of the level of disclosure in both the tax system and the exposure that one gets when they live in a small, insular society.
As an American I can reflect back on our conversation and say to myself, “what an unusual problem,” knowing full well that in my country people rebuild themselves everyday.
Since that discussion in Tromso I have had at least a half dozen similar conversations-each steeped in the fear of being labeled in a society with almost total transparency.
As someone who spends a great deal of time working with small businesses, I would like to share my view on what total transparency means for entrepreneurs.
Being an entrepreneur requires an ability to see possibility where others see obstacles. It requires an ability to look beyond the potential for failure in favor of the possibility of success. A system that openly promotes fear of discovery of a failure creates a lasting inhibition to entrepreneurism. Such a policy does not acknowledge that failure is a stepping-stone on the road to success.
One of greatest entrepreneurial examples of this is Thomas Edison, the inventor of the light bulb. Thomas Edison is responsible for over 1000 different patents and is arguably one of the greatest entrepreneurial minds of any decade. The story goes that "Thomas Edison failed more than 700 times when trying to create the light bulb." When asked about it, Edison said, " I have not failed 700 times. I have not failed once. I have succeeded in proving that those 700 ways will not work. When I have eliminated the ways that will not work, I will find the way that will work."
The idea is that when even when you fail, you learn something that you can take to heart and eventually create success. My grandmother used to say that the road to success is often not a straight one.
Luckily Edison did not have to contend with being admonished for each failed experiment as it took place. He was afforded the luxury of success through perseverance, and didn’t have to justify his continuing faith in his ability to succeed.
It is demoralizing to think that there are people in any country that are afraid of being judged for a single failure (What many would call a very expensive educational experience). It is an unintended consequence of such a broad government policy (and one that I hope will be rectified for the sake of entrepreneurship across Norway).
For those of you wondering what prompted this article, my answer is that I was reminded of these experiences when Fareed Zakaria on CNN recently discussed Norway’s policy on full tax disclosure and related it to Donald Trump’s lack of transparency on taxes. By the way, I firmly believe that all candidates for the office of President of the United States should have to disclose their taxes and be subjected to background checks. U. S. citizens must understand who their leaders are and whom they do business with. The same level of disclosure is not necessary for those who are living private lives. I believe there is no equivalency to the implication that Mr. Zakaria is making about the importance of transparency for a presidential candidate and for an average citizen.