America's former empire of wealth.

• Author: Gordon, John Steele
• Position: Business & Finance

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 Ocean and unloaded 109 passengers at what became Jamestown, Va. 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 min. Thus, the corporation was one of the great inventions of the Renaissance, along with printing, double-entry bookkeeping, and the full-rigged ship.

Allowing incorporation as a matter of law, rather than requiring an act of the Executive or Legislative branches, began in the U.S. 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 only had been seven companies incorporated in British North America, but Pennsylvania alone incorporated more than 2,000 between 1800-60.

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 glassmaking 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. By that time, though, it was far too late for the Virginia Company, which went broke. In fact, of course, most entrepreneurs do fail.

It has not been nearly well enough noted that the American colonies, while many ended up in royal hands, were not founded by the English state. Several--such as Massachusetts Bay, Plymouth, and Virginia--were founded by profit-seeking corporations. Others, such as Pennsylvania and Maryland, were founded by proprietors. To be sure, many of these enterprises had nonentrepreneurial motives, such as providing a refuge for religious dissenters.

John Winthrop wanted the Puritans to establish a "shining city on a hill." William Penn thought of Pennsylvania as a "Holy Experiment," where Quakers could live in peace. However, Plymouth, Massachusetts Bay, and Pennsylvania also were expected to show a profit. "Though I desire to extend religious freedom," said Penn, "I want some recompense for my troubles."

New York, of course, was founded by the Dutch, not the English, and profit was the sole reason for settling on Manhattan. Indeed, so bent on moneymaking were the Dutch that they did not get around to building a church for 17 years, worshiping instead in the fort. When they finally did build a church, they named it for St. Nicholas, and Santa Claus has been the patron saint of New York ever since.

Even after the British took the colony in 1664, the Dutch devotion to commerce remained. Harking back to the early source of its economic success, the fur trade, the city's seal remains...