Business Analysis: Latvia’s self-fulfilling prophesy

  • 2011-12-07
  • By Charles Cormack

In Riga last week I was asked by two senior academics for help in finding a UK university to help develop a joint degree program in entrepreneurial studies. I have always been skeptical about these courses, as I am not sure that you can inculcate entrepreneurial states of mind in the lecture hall.

To me, an entrepreneur needs to have the confidence to take risks, an innate belief in their own ability, and belief that “it can be done.” Formal education and business training come second to that positive mental attitude.
But as I thought more about the potential to bring UK entrepreneurial studies to Latvia, I began to analyze my own experience over the past 11 years, and particularly over the past three years. I realized that Latvia has a significant problem, shared to a lesser extent by the Lithuanians, and I admit by my fellow Scots. It needs to be addressed before Baltic business can really fulfill its undoubted potential.

It is a personality trait that seems to run across all sections of society, whether Latvians run their own business, or work for someone else, whether they are working in academia or working for the government. The trait is worse in older people, but is still discernable in the younger generation.
I am referring to the Latvians’ natural and pervading pessimism. Whatever the situation, you can guarantee that a Latvian will always see the downside. But it is not just being a glass half full person which is the problem, as that is simply a view on life, shared by people across the world (though not normally on a national scale); it is the constant belief that the worst will happen.

We have a saying in the UK: “if you think it won’t work, it probably won’t,” meaning that expectations are self-fulfilling. I see this all the time in our business activities, whenever we start a new business in Latvia, or bring a new UK client, you can guarantee someone will say “that will never work here.” 

I had this brought home to me in one particular meeting where I had been asked to go in and talk to a group of people involved in a struggling business, to see if I could give them some new ideas. I realized as soon as I arrived that this was going to be a difficult meeting. The boss immediately said “you don’t understand this market, so you can’t help.” Well, I have run a business in Latvia for almost 11 years, so I think I do, but that is another issue. 

Then, as I went through my thoughts and suggestions, I was met with a simple response: “It won’t work here,” and after a while I thought, you are correct, it won’t, because if you try anything with that attitude it is doomed to failure. So that business, which is an important one in Baltic terms, is probably condemning itself to a slow and painful death.
I had another illuminating conversation with a friend on the fate of Krajbanka. He was asking if the news of another Latvian bank failure would affect the Latvian recovery, and its reputation in the UK. I replied that in my opinion, the bank failure would have no effect, and that the governments in Latvia and Lithuania had handled it well, and that what was happening in the eurozone was much more likely to cause Latvia problems. My friend nodded knowingly, and then said “a new crisis would not be that bad anyway; I would rather have a crisis than the uncertainly we have at the moment.”

That attitude, when it runs across a nation, poses a real problem for both social and economic development. I understand that the recent history of the Baltic States has led to this, but if we are to use history as our teacher, let’s look further back to the relative prosperity of the first independence, or back further to when Riga was a thriving Hanseatic Port, with its wealth based on wide international trade. 

Poor attitude will lead to business stagnation and a slow and lingering death for many companies. So if Latvia really wants to become an entrepreneurial economy with fast growing innovative businesses, if Latvia wants to attract and retain international companies, and even if Latvia simply wants to retain her bright young people, then confronting this problem will do more than the introduction of new courses in entrepreneurial studies.