Influencing the Opening of a Store and Entrepreneurial Development in Kalavan, Armenia

Releasing Everyone Is an Entrepreneur was both a cathartic exercise and something of a social experiment for me. It served as a way to see if I could make real progress in the economic paradigm of a part of the world I was now connected to and that, in my perspective, desperately needed it. But over three years of living here, I came to see that my words had to be paired with actions if I expected meaningful results in the paradigms of those around me. So, at last, I took action that directly led to major systemic changes, and it was so simple and easy to initiate the process that I've been kicking myself ever since for not thinking of it sooner.

Nearly every time I would make the hour trip into the nearest major town, Dilijan, a particular neighbor called Shavarsh would ask me to purchase a pack of his favorite brand of cigarettes. The first few times, I didn't mind doing this small favor for him. But it began to happen so often that I usually ended up being too busy running other errands in town that I was unable to procure his cigarettes for him. And because I was the only appointed source of cigarette acquisition in these cases, he depended on me to feed his nicotine addiction. I was the only link available to complete the micro-supply chain between the village and town. My failure in this task meant he would have to go an unknown amount of time without the cigarettes he craved. Lacking a car of his own, he had no other reliable means by which to acquire them except to ask others sporadically going into town if they too might be able to do this favor for him.

After enough iterations of this inconvenient set of circumstances, I asked Shavarsh plainly why he only ever asked me to buy one or two packs of the cigarettes he wanted at a time. Since he knew with a high degree of certainty that he would want more of them in the near- and long-term future, and since cigarettes have a shelf life of at least a few years, he could easily secure a personal supply for himself by purchasing many packs at one time and just consuming them as needed. Why not just buy 10 or 20 packs on one trip into town for the convenience of having them available for consumption whenever he would need them and the security of knowing he wouldn't run out any time soon without a reliable supply chain that would allow him to acquire more? His answer was as predictable as his demand for the cigarettes: He never had enough money to invest in speculation about his future cigarette consumption. As a result, he was locked into an inefficient, unnecessary, and repetitive struggle to manage the supply that the fulfillment of his demand required at great inconvenience to himself and the neighbors he depended on to close the gap in the cigarette supply chain.

I recognized that this was the entrepreneurial teaching opportunity I had been waiting for. The next time I went into town, I spent a few extra minutes of my time finding Shavarsh's favorite brand of cigarettes at the lowest offered price. Then, despite the fact that I had no personal demand to consume them, I purchased ten packs and brought the supply of cigarettes home with me. When I saw Shavarsh, I informed him that I was now the proud owner of ten packs of his favorite brand of cigarettes. The next time he wanted to purchase one, he would no longer need to depend on someone in the village going out of their way to help him on an inconvenient schedule. He could simply purchase one of mine that I had already gone out of my way to acquire before his demand for cigarettes presented itself. And for the convenience I'd be providing him (and to compensate me for the risk of spending my own money upfront), I'd only charge him 20% above the price I had paid for the cigarettes in town. I even showed him the receipt from my purchase, so he knew that I was upfront about the price.

At once, I could see that my offer offended Shavarsh's social and economic paradigm. It was a reaction quite similar to the one I had seen from local parents when I made the mistake of paying money to my young neighbors for working for me at their request. It was a clear indicator that I had committed yet another egregious cultural faux pas. Why should he pay me extra for something I already had in abundance? He knew that I didn't smoke and had no personal use for the cigarettes I had acquired. I should be happy to share them with him, or at least give them to him for the same price I had paid. Right?

In Shavarsh's economic paradigm, when someone has too much of something, they automatically seek to give it to anyone who doesn't have enough and requests it from them. He could not see the new role I was trying to play in the local village economy by stockpiling a non-perishable supply of a commonly demanded good when I went into town (where supply is abundant), ensuring that it would be available and convenient when people needed it in the village (where supply is scarce). The economic dynamics of what I was doing with his favorite brand of cigarettes were no different than every farmer in the village stockpiling hay in the summer (when it is naturally abundant), so there would be more than enough of it in the winter (when it is naturally scarce). Because of my deliberate speculative actions concerning the local demand for cigarettes, the number of options for acquiring them in the village rose from zero to one. A fundamental economic improvement occurred for everyone who cared about acquiring maximum benefits from cigarettes for the minimum possible costs.

As expected, Shavarsh initially rebuked my offer to sell him cigarettes at an inflated price and at substantially greater convenience compared to his other options for acquiring them. Yet, within a few weeks, economic conditions were such that he was able to make the independent choice that buying a pack of cigarettes from me was now equitable. The perceived gains were now greater than the perceived costs. The irregular supply from town he had been depending on had failed to come through for him, and he was at last left with no other choice but to buy a pack from me.

The day I sold my first pack of cigarettes, I congratulated Shavarsh for seeing the economic advantage of buying from me locally instead of relying on complex and inefficient supply chains over which he had little control. Though I'm sure at the time he didn't understand why I saw the purchase as so important, it eventually led to related conversations about what other goods were most commonly acquired in town and brought to the village in an unreliable and inefficient manner. Any time that we could identify an economic exchange that was more difficult or costly than it needed to be, it would be possible for us to simplify and make it more convenient for everyone living here and (more importantly) tourists who would come to stay long-term seeking easy access to their favorite consumable goods and resources.

It took weeks to sell my first pack of cigarettes in Kalavan village. But once enough people became aware through word-of-mouth that I was offering this service as a reliable means of acquiring cigarettes conveniently for what amounted to a surcharge of the equivalent of only about 25 cents USD, I had regular customers start showing up at my house to get their nicotine fix whenever they couldn't rely on an alternate means of buying cigarettes. It became something of a spectacle among those neighbors I had told about the social and economic experiment I was performing in their backyard. Some kept an active count of how many packs I had so far sold so far. None had believed my entrepreneurial venture would be successful at the start.

When the day came that I sold out of the original ten-pack I bought in town (garnering a total profit of $2.50 for me), I could already see there had been a subtle but important change in my neighbors' mentality. They realized just as clearly as I did that if I could sell cigarettes at a profit ten times consecutively, how many more times might I be able to continue doing it? Furthermore, might there also exist the market possibility of doing it with other cheap and ordinary consumer goods that the residents of Kalavan were accustomed to acquiring inconveniently from in town? With this one act, I accomplished more in educating my neighbors about their ongoing economic inefficiencies than the past three years of begging, arguing, and lecturing had been able to. I showed them the superior reality they were ignorant of and missing out on instead of merely verbally insisting that it existed and that they could be part of it any time they wanted to.

The importance of this experiment for me was not the joy of providing cigarettes to consumers who valued them or even the meager profit I was making by doing so. Frankly, the amount of money I made from it was not worth the time and effort of taking the money in the first place from my buyers. What mattered to me was being able to demonstrate to my Kalavanian village neighbors that economic improvements can be implemented anywhere, even among small groups of low-income people with generations of contradicting cultural programming. Self-interest wins out in the end, so long as entrepreneurial actors can effectively market new opportunities to provide more of what people want in a subjectively better manner than before. And all the while, the knowledge sat in the back of my mind that if I had attempted even such a simple and clearly mutually beneficial act like offering a better way to acquire cigarettes just 30 years ago while Armenia was still under communist Soviet control, I'd be branded a speculator and harshly punished for my economic "crime" of interfering with the State's "fair" control of cigarette supply and distribution.

By going out of my way to acquire a single product (Shavarsh's preferred brand of cigarettes) before he otherwise would have bought them in a market where it is quite inconvenient to buy them, I was taking the first vital step toward the development of a fully-fledged store full of goods that would benefit everyone economically connected to Kalavan village who demanded such goods.

I began this experiment as a speculative cigarette entrepreneur because I was in a unique position to recognize the long-term benefits and economic changes that the presence of a humble convenience store could bring to the economically inefficient village I lived in. The economic purpose of any store is two-fold: To simplify the exchange process of the goods it sells and to ensure their consistent supply by acquiring them in advance of their demand being realized. By employing the division of labor principle and economies of scale, a store owner spares their customers the trouble of each having to go out of their way to accumulate the various goods they wish to consume on their own. The economic losses of such inefficiency of exchange became especially harmful to people who live in remote and underdeveloped communities, such as here in Kalavan village. A functioning store is one of the first, most simple, and most impactful economic improvements that such communities can make to the quality of life for all residents. And once the store owner establishes wholesale supply chains, they will almost certainly be able to offer their wares at prices similar to those people are used to paying in town instead of at the inflated price I had to charge in order to make a profit.

Still, my ambition of getting my neighbors involved in starting and running a small store here was met with great resistance and objection.

"Kalavan village is too small. Because not many people live here, there wouldn't be enough business to sustain a store."

This objection assumes that a store has to be operating at a certain size to be more economically efficient than the alternatives. The reality is that a locally stored and more inexpensively acquired supply of goods produces economic leverage at any scale. It doesn't necessarily have to look like the bustling shops that people are used to seeing in town. It doesn't even need to have its own dedicated building. The physical assets managed by the store owner just need to be protected from theft and deterioration, and it needs to be convenient for customers to acquire what they need when they need it. Money is already being saved by buying most goods in bulk at cheaper wholesale rates than most people in the village pay at retail prices for individual items in combination with the transportation costs and labor associated with frequent trips into town.

"People in Kalavan already buy everything they need by driving an hour into town at regular intervals. Therefore, they wouldn't buy anything from the store if it existed."

The reason the residents of Kalavan village drive an hour out of their way to do their shopping is that doing so is currently the best option they have for getting what they need. By improving the arrangement of the local economy to make a different supply model more objectively efficient and subjectively favorable to them, you can change their recurring behavior to actions that accomplish more of what they want through less effort and other costs. Though at first, many people might stick to the economically inefficient actions they are used to just out of habit, it is easy to foresee that there will eventually come times when they realize they can just grab that bottle of cooking oil, roll of toilet paper, or pack of cigarettes they need from the supply that has been pre-acquired by the entrepreneurial shopowner who foresaw the recurring need for such things (just as Shavarsh eventually did with the first pack he bought from me). Even if the economics require the shop owner to charge a little more than what people are used to paying in town, the extra convenience and reduced transportation costs will still make this a more equitable exchange for them.

"Perishable goods will spoil quickly, leading to losses for the entrepreneurial shop owner."

Entropy is a form of risk that applies to all physical assets. Everything degrades with time. Everything has a viable shelf life, after which the intended value will no longer be available to consumers. What we call "perishable" goods are those with a shelf life so short that we have to be extra conscious of the rapid loss of their utility and value. We must go out of our way to manage the storage, exchange, and consumption of these goods based on their fragile condition. All entrepreneurial efforts involve predicting the future in some form, but that's much easier to do when one has a longer window of time for their predictions to be proven accurate.

In the context of opening a store in Kalavan, perishable goods like fresh milk, eggs, meat, and vegetables represent a disproportionately large entrepreneurial risk because of the additional storage and time frame constraints. It's one thing to spend money on inventory without a short-term looming time pressure to sell it or risk losing your investment. At the very least, you can always personally consume those things if absolutely no one wants to buy them from you over the several years that their value might remain viable following your acquisition of them. But the strategy for ensuring a profit (or at least avoiding a loss) is different when the entrepreneur has only days or weeks to extract value from their speculative assets. This would be fine if the villagers here could predict with reasonable certainty what the recurring demand for such things would be and, therefore, how many chicken eggs or kilos of pork to stock the store with.

The uncertainty regarding the predictable consumption of perishable goods in Kalavan comes entirely from the fact that the people here are not yet accustomed to purchasing such goods from a local store. It is likely that even after the store opens, they will continue to produce things for themselves, barter directly with each other, or buy fresh goods in town when the opportunity allows for it. But by taking a minimal risk and at least offering the option of buying fresh fruit, meats, vegetables, and so forth, the entrepreneurial shop owner can begin to gauge what the predictable recurring demand for each category of perishable goods will be. They can even adjust their inventory based on changing economic factors that affect demand, such as the changing seasons of the year, tourists coming to visit for extended stays, or even the population of the village increasing as more people learn of its brand reputation and decide to move here.

These objections are symptoms of a larger, systemic mentality problem—one which we could say broadly applies to most residents of developing nations far more than it does to those who are fortunate enough to be born in societies where individual freedom is the norm. The systemic problem is the failure to think long-term and make choices that will affect us positively into the distant future instead of just the immediate one. That is the risk that everyone here seems so intimidated by. The "live for today" mentality is criminally limiting to the health, wealth, happiness, and fulfillment of present and future generations. We can only create sustainable and effective economic solutions for them by gradually encouraging them to fix this fundamentally flawed ideology.

You may be wondering why I never just took the initiative to start a store in Kalavan village on my own and prove what I have been preaching all along to a consistently incredulous audience. Even though I was certain I was right about the superior economic reality that would be created by the profitable implementation of a store here, I also knew that I was not qualified to undertake this process all on my own. The reason I needed to enlighten my neighbors about these simple economic truths was that I would need their help in implementing them. The division of labor principle would be paramount to the success of this endeavor.

Though I knew I was the person in Kalavan with the most entrepreneurial knowledge and experience and that I had the most capital to work with, there were several key aspects for which I was utterly unqualified. Indeed, out of the more than 100 people who live here and the hundreds more in the surrounding villages, I knew the least about the buying habits of the locals who would comprise the target market of customers for such a store. Even if I learned what people habitually bought (and, therefore, what the predictable market demand would be), I knew little about the supply options to source those items from at the best market prices. I was lacking reliable knowledge of both supply and demand, and the language and culture barrier in Armenia made it more inefficient for me to try to acquire all this knowledge than anyone else in the village who might try. The time and labor investments required from me would be far greater than from anyone else, and the results I produced would be of much lower value. High input and low output is the definition of inefficiency. And if I attempted the trial-and-error approach of guessing at how best to offer the Kalavanian people what they wanted, I would certainly waste time and money that would not have to be wasted by someone who did not have the same entrepreneurial disadvantages as me. In doing so, I might even create a negative brand identity for myself and my store.

That was why I depended upon the knowledge and labor of my neighbors, who already had the relevant knowledge, skills, and relationships I was lacking. But what I had that they lacked was the entrepreneurial perspective and experience to see the unrealized value of their intangible assets. It would require the work of an entrepreneur to arrange the economic environment to actualize that hidden value.

Shortly after publishing Everyone Is an Entrepreneur in English, the book was translated into Armenian and published locally here in both languages. I gave copies to my neighbors here in the village, not expecting much to come from the gesture but feeling inclined to make it anyway so that at least I could say I tried. But to my surprise, one neighbor actually took it upon himself to study the text in full, ask me questions about each chapter, and begin altering the inertia of his life and actions onto a more entrepreneurial trajectory.
This neighbor took it upon himself to invest the proceeds from the sale of a parcel of land into startup costs and inventory for opening a small store here out of a small, unoccupied building in disrepair located in the center of the village. With the money he had leftover, he even purchased a selection of power tools appropriate to his skills as a handyman, even though he had no perfect and immediate plan to make a guaranteed income with these tools. I saw that he was ready to take his earning capacity into his own hands, to diversify his wealth into a variety of strategies that he could rely on to always be earning an income of some kind, even if he could not perfectly control it.

Previously, he had expressed to me that he could never justify such expenses because they represented too much risk. But this concern initiated a realization in him that he was exposing himself to risk no matter what course of action he took. If he continued with his daily lifestyle of hard manual labor for meager wages into his old age, he was risking the health and safety of his body and the enormous time required of him to maintain his livelihood. If he did nothing, he risked running headfirst into increasing unfulfilled demands as he consumed most of the wealth he had already generated and lost the rest to entropy. And if he invested what monetary capital he had accumulated into a simple business venture that was not guaranteed to be profitable, he risked losing that too. What he could never do was live a life without risk. He could only choose what kind of risk he was willing to take on and cultivate circumstances that would make it more likely to work out in his favor.

My neighbor, upon reading the book, insistedthat he had already understood most of the economic lessons the book talks about. I am sure most Westerners feel a similar way. Indeed, the book stresses many times that most of the principles of entrepreneurship come naturally and intuitively to us. Yet, Armenians and Americans alike frequently fail to act on and implement their understanding as best as possible. There is a barrier between how they know things ought to work "in theory" and how they make their choices and perform their actions "in reality." The goal of the optimized entrepreneurial actor should be to adjust their actions as much as possible to match what they know is true, or else they are perpetuating a false reality where things are condemned to function less effectively than they could. That is the world we live in: One where the overwhelming majority of the human population toils needlessly to meet their basic material demands instead of living in relative abundance and luxury, dedicating the bulk of their time to what they most care about. The pivotal change in my neighbor came finally not from radically different intellectual concepts about how to interact with reality better but rather the emotional confidence to begin doing so, part of which culminated from witnessing my profitable experiment with selling cigarettes here at a micro-level. Understanding without equivalent action means little.

The lesson to be learned here for people like me whose ambition is to positively impact developing economies toward entrepreneurship and self-determination is that demonstration does more to overcome cultural inertia than compelling arguments and theories. It is actually only a tiny sub-section of humanity that learns primarily through definitions and structured discourse. It is ironic and humbling for a non-fiction writer and educator, such as myself—whose primary medium of expression is the written word—to admit this and face the reality he is dealing with.

I am, as of yet, unsure how else I will be able to influence the economic improvement of Kalavan and Armenia for the good of everyone. The opening of a store was just the first, most obvious step toward eliminating unnecessary loss from the universal experience of buying and selling common goods here. Everyone here is richer because of it, even if they lack the understanding to see how it benefits them merely by providing a superior option than they had before. Whatever other changes that this brave new venture for my newly appointed shopkeeper neighbor is able to inspire, they will likely come about by mimicking his visible actions as a relatable example to follow. If the other villagers see someone they know, respect, and relate to taking new entrepreneurial risks with confidence, perhaps they will begin to believe that they can too.

Somehow and someway, people who stagnate at the lowest end of society's economic spectrum must begin to make different choices that lead to better actions and outcomes. That is the only sustainable path away from poverty and toward self-reliant wealth. If it can be done here, in some anonymous village in a country that most people only know by association with the Kardashians, why can't it be done everywhere? Most of the overwhelming obstacles are man-made. They can be overcome or rescinded by the actions of men too.

At times, I have lamented that perhaps I have spent the last three years slamming my head against a barrier that will never budge, no matter my intentions or determination. I felt I had become like Sisyphus, exerting ever more effort without hope of seeing the results actualized as tangible change in the world around me. I have stuck to this path not out of hypocrisy and a stubborn insistence against adapting myself to the reality I am dealing with but rather for lack of knowledge of a better strategy for effecting the lofty goals I seek.

Sometimes though, we must remain open to the possibility that progress is happening slowly, so slowly that it might remain invisible to us until a moment of critical mass from gradual accumulation makes it apparent. The cracks in the concrete are showing. We are, indeed, tearing down the wall that halts human progress. And progress becomes exponentially easier after the first major signs of radical change. It may take less time and effort to go from one to 100 than it did to go from zero to one, which is a beautiful meta-demonstration of the efficiency of economies of scale. My hope is at least that some of my direct learning experience here can save others wasted time and that they can move on to more effective strategies and direct demonstration in their noble efforts to improve the economic paradigms of those around them. What begins as a store could demonstrate to the rest of the village the potential for implementing additional entrepreneurial systems here, like restaurants, transport to and from the village, and a variety of professional services they have been equipped to provide all along but too unsure of themselves to take on the associated risks. Time will tell, and I am genuinely eager to play my part watching over Kalavan's gradual entrepreneurial development. In fact, I will do my part to document the economic progress of this burgeoning little social experiment via a new blog at www.kalavan.net. Follow along with me if you'd like.

At the time of this writing, if you look up Kalavan, Armenia online, the results will show you several media puff pieces that promote the undeveloped village as a hub for ecotourism, scientific advancement, and economic self-determination. The narrative sounds terrific, but it is based almost entirely on words spoken to journalists and promises made by bureaucrats who have no entrepreneurial incentive to see them through to success and market equitability. The inaccurate media portrayal makes visitors all the more disappointed when the façade falls and the truth becomes apparent. But it does not have to be this way. The people here have the power within them to build a genuine brand identity and reputation based on the real strengths they have and ideals they seek to live up to. They and the world will be permanently wealthier because of it.

Gregory Diehl
June 2022
Kalavan, Armenia