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Identity Construction of the Entrepreneur

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Published: Tue, 06 Feb 2018



1.0 Introduction

Wealth creation and economic growth has been one major factor which distinguish the developed countries from the third world countries and entrepreneurship is one of the main reasons, responsible for of the current progress of nations (Baumol, Litan et al. 2007). The identification of ‘entrepreneurship’ as a differential factor raises numerous challenges. One of those is to replicate the economic success in nations which lag behind, the developing countries and the third world countries. However it is of importance to answer some basic questions about entrepreneurship, what are its causes? What are its effects? And its different understandings and meanings specially when applied to wide arrays of contexts.

In the seminal literature there exists an inherent divergence. Richard Cantillon’s (who used the term entrepreneurship for the first time) defined an entrepreneur are “wholesalers in Wool and Corn, Bakers, Butchers, Manufacturers and Merchants of all kinds who buy country product to work them up and resell them gradually as the inhabitants require them”. This description essentially included ‘replicative’ entrepreneurs who set up a business for livelihood purposes. This type of entrepreneurship can be found in abundance in capitalist economies however in terms of impact on economic growth ‘innovative entrepreneurship’ is of higher significance. Schumpeterian entrepreneur is one of its kinds among thousands, a hero, motivated by higher order goals than mere profit earning, fights against the odds, battles risks and achieves success.

One implication of a celebrated figure of hero entrepreneur is that there is an elite group of higher order ‘homo-sapiens’ who are considered the driver of economies and whose vision will be followed by ‘lower order humans’. Those working for ‘real entrepreneurs’ will be working either as ‘cogs in a machine’ or entrepreneurially in some respects, depending on the type of organization and the economy they are in. While the few ‘real entrepreneurs’ enjoy the fruits of their success and find infinite reasons for their success the rest have to be content with what they are allowed to take. The speed and trajectory of progress of ‘the rest’ differs, e.g. someone working for Donald Trump or Bill Gates can earn a fortune and easily spun out their own organization. While a lady working on handicrafts in far flung mountains of Afghanistan may never get to know the real value of the art her fingers create. Surely not even in terms of monetary rewards leave alone the artistic and aesthetics appreciation of it.

Entrepreneurship is a multidimensional concept. For entrepreneurial venture to materialize many factors must get aligned at a critical junctures. Because of the ‘hero entrepreneur’ model considers the ‘successful innovative entrepreneurs’ it might ignore all those potentially innovative entrepreneurial ventures which could not materialize. In other words ‘innovative entrepreneurship’ will be appreciated if it goes the distance. This essentially believes that humans will either be entrepreneurial or not. However Hornaday (1992) proposes that entrepreneurship rather lies on a continuum along three dimensions of organization creation, economic Innovation and profit-seeking in the market. This approach relies on the fact that entrepreneurship can only be rated (like rating points in gymnastics) and not measured (like clocking the exact time in 100 meter race) along three dimensions. This view is more humanistic, as the difference between an innovative entrepreneur and a mere factory worker is not that the former was born with abilities (and led a track) which implies 1 while the later was a zero.

If all human beings are entrepreneurial to some level, that is that they essentially form unique combinations to create or add value, then entrepreneurship lies at the heart of human spirit. However it is necessary to see why it expresses itself in differently under different conditions. The question of where to find an entrepreneur is elaborated by Baumol, (1990) giving examples from history, suggests that variation can be found among societies in terms of both the total supply of entrepreneurs as well as their allocation between productive activities such as innovation and unproductive ones such as rent seeking and organized crime. This allocation is influenced by the relative payoffs society offers to such activities. It follows that numerous reasons pertaining to context actually allocate the entrepreneur to different sectors and thus there is no reason to eliminate any sector from entrepreneurship.

For the developing countries and the third world, entrepreneurship is more significant than only economic development “Replicative entrepreneurship is important in most economies because it represents a route out of poverty a mean by which people with little capital, education or experience can earn a living”. ((Baumol, Litan et al. 2007, page 3). However it does not qualify everyone as an entrepreneur. There must be some scale on which one can segregate entrepreneurialism.

Gartner’s (1990) reports distinct perceptions of entrepreneurship as ‘focus on characteristics’ and ‘focus on outcomes’ of entrepreneurship. Resource acquisition and integration under the head of new venture creation and organization creation emerged as the most agreed upon parameters for assessment of being entrepreneurial. This means that perceptually organizational creation will be creation of new organization will be one of the foremost requirement for people to start considering as entrepreneurship to be taking place.

This research investigates entrepreneurial identity as it perpetuates the entrepreneurial process. The study takes a dynamic view of entrepreneurship. Entrepreneurial identity is seen as becoming rather than static phenomenon.

1.1 Background

In Pakistan, cultural orientations discourages independent thinking which is a significant impediment to research, this results into low level scientific knowledge. The hierarchal system at every level of society means that elders can ‘never be wrong’ and children are ‘not expected to speak’ unless asked to (Jafarey, 2005). Though efforts have been made to stimulate research activities, the solution is still elusive. Social Sciences have emerged as the weakest, Altaf (2006,s.1) expresses his views:

Research is mostly funded, demanded by foreign donor agencies and has no internal demand and thus never translates, locally, into actions. Pakistani culture predominantly oral, the response to written word is lukewarm and the world view deriving form this kind of wisdom is renewed very slowly. Researchers must direct existing and future knowledge and research to permeate popular wisdom and help it update much quicker. The situation is unique to us and cannot be achieved by only as setting up research and policy institutions and publishing journals.

This has now led to the stagnation of continuous process of making sense and understanding. Educational institutes and faculty should be the mainstay of research, have failed to produce the desired results in Pakistan and they have not produced significant contributions (Inayatullah, 2005). A considerable increase in disciplines and number of teachers in social sciences has still resulted in low to average research output. Economics and business administration also suffer from the lack of local research and knowledge. A deeper analysis reveals that education is perceived as a direct means to employment. In the absence of well defined, overarching strategies in pursuance of clear goals corresponding to long term vision has resulted in mushroom growth of institutions following a convoluted meaning of ‘education and research’. Whatever local indigenous, research activity is produced in these circumstances is neatly summarized by “We might have gone beyond the point of diminishing returns and we are researching in the state of habitual mindlessness” (Altaf,1, 2006).

Research in Pakistan has been largely initiated and funded due to foreign (donor bodies and funding agencies) interest (as mentioned already). This type of research, though beneficial, cannot drive the research towards the knowledge and understanding which can direct action. Thus there has been little effort to understand the local scenario. Particularly, there are very few mentionable publications on entrepreneurship and SMEs. Predominantly highlighting problems has been much more prevalent rather than exploring success stories. This study takes different and deeper view that explores success stories which are deeply ingrained with social and cultural factors.

This research aims to make sense of the business successes achieved by Afghan Entrepreneurs in unfavourable business conditions. This research aims to answers the question of how this group of people construct their success as entrepreneurs. Peshawar, not the best city in Pakistan for business, where the local population grapples for any business opportunities and jobs are hard to find, Afghans appear to be highly entrepreneurial and successful entrepreneurs (Inayatullah, 2005). This study takes departure from a position where this phenomenon has been considered as a refugees’ practice of livelihood.

The conventional idea of Business functions such as Finances, Marketing and Human Resource though highly relevant with self-employment their contribution is secondary to the entrepreneurial success in this case. The Success of Afghan Entrepreneurship is about a group of people with ancient culture and strong traditions faced with odd circumstances. The interpretation is that Self-employment and creation of sustainable business ventures translates into a strong entrepreneurial identity which leads to successful entrepreneurial activities.

As a knowledge quest his study, firstly, will contribute to opening up new avenues of research in entrepreneurship. Understanding of entrepreneurship can be enhanced through contextualization (Morrison, 2006). Secondly, exploration of research consistent with local interests and more inline with local wisdom can be helpful in improving local business opportunities. My personal conclusion, based on me living for the last 15 years among Afghans in Peshawar, is that socio-cultural factors are the key factors in forming their entrepreneurial identity. Thirdly an Afghans are open to talking about their culture and their relationships which affect their business; this is compatible with an in depth research.

1.2 Motivations

My experience with Afghans come from living together with them or 15 years as well as carrying out business transaction as I work for family business, “Junaid Paper Mart”, a printing and packing paper and board business , headed by my father. I have observed the rapid rise on many Afghans; they take part in diverse range of businesses. So much so that Afghans are found in every kind of business and it will be next to impossible to find a business without any Afghan Entrepreneur.

1.3 Expected Contributions

This study researches a group among Afghans who are involved in entrepreneurial business activities; it opens up new areas for future research e.g. comparative studies with other groups. This study actually tries to find the roots of entrepreneurial identity as a social process in a refugee/immigrant context. In particular, the proposed study will have the following implications.

i) This study is beneficial for wide range of audience (e.g. Governments, United Nations, humanitarian non Governmental organizations) concerned with refugees. From policy making to directing of aids and grants in efficient manner, the results form this study can be of importance.

ii) The context of study makes it unique but is not the only one in the world (War Refugees crossing into nearby countries). As a contribution to knowledge, entrepreneurial identity has not been explored in a refugee context.

iii) Underdeveloped and developing countries do not necessarily need to “Export Policies” from developed countries in order to progress. This research will explore the way entrepreneurship as a social practice, thus opening up new ways for promoting entrepreneurship.

iv) Geographically, the area of study lies at the heart of South Asia and is of high importance to China, India, Iran , Pakistan and the oil rich central Asian states. Afghanistan, after the defeat of invading Russian forces, never settled. From the policy perspective, one main reason for failure is lack of local knowledge. This study will also prove to be a first step towards this direction.

On the practice front, firstly, this research will make potential contributions to refugee and immigrant knowledge. The interest in this research is consistent with the current world scenario where population movement is a natural consequence in prevailing circumstances. Chinese economy growing ever stronger by economies of scale, the Europe Union forming an integrated economy and Canada and Australia encouraging valuable human resources to immigrate. The integration of new settlers is a matter of importance. The utilization of these immigrants in entrepreneurial ventures will be highly desirable by the host countries. This research can contribute to formulate better policies that govern current and new immigrants and refugees.

CHAPTER 2: Literature review

2.0 Introduction

There is no one agreed upon definition of entrepreneurship and it has led to an ever increasing debate. The word ‘Entrepreneur’ is derived from French word ‘entreprendre’ which means ‘to do something’ and it was used in the sense of ‘a person who is active, who gets things done’ (Hoselitz, 1951). In 1730, Richard Cantillon, a Paris banker gave the first economic theory of entrepreneurship in an article titled ‘Essays on the nature of commerce in general’. In the mid nineteenth century John Stuart Mill, an economist, gave the term general currency. Since then the term has been used in variety of ways, all having some justification as they point towards different dimensions and forms of entrepreneurship.

The distinction and relationship in basic terminologies can serve as a starting point. Essentially, the phenomenon, ‘entrepreneurial process’, is made up of an activity (entrepreneurship) where a market place combines individual (entrepreneurs) act in a certain way (entrepreneurially) (Virtanen, 1997). Theories from different fields have been used in effort to capture the essence of entrepreneurship. This chapter will highlight different views of entrepreneurship as progressed by theories from various fields.

2.1 Views of Entrepreneurship: Definition and Meaning

The research in quest for the how, what and why of entrepreneurship has been undertaken under the umbrella of social science, traditionally. However business schools are responsible for the current surge in studies of entrepreneurship (Swedberg, 2000). The contributions of Social Sciences can be broadly categorized as studies under Economics and non-Economics social Sciences. Social sciences (such as economics, anthropology, sociology and economic history) and business studies alike have contributed to highlight the different aspects of entrepreneurship, however the debate among different disciplines about the ‘usefulness’ of their insights still goes on (Swedberg, 2000) . A view progressively posed by business studies community is that Social sciences answer the ‘what’ and ‘why’ of entrepreneurship however they lack in terms of explaining the ‘how’ question (Jarillo & Stevenson 1990:23). Though it is right to argue that business school ought to concentrate more on the ‘How’ aspect of entrepreneurship, at the same time social sciences have contributed to the preclinical side of entrepreneurship though the emphasis on what and why have been deeper than business studies. The different understandings given by social sciences and business studies gives a complex but deep insight in the phenomenon.

2.1 Contributions of Economics

Economics literature on entrepreneurship is not nearly as intensive as it should be on entrepreneurship because mainstream economics have great difficulty in fitting entrepreneurship in its theory. The work done in economics (on entrepreneurship) has therefore only been possible through invention in conventional economic model.

2.1.1 Early contributions the legacy of Joseph Schumpeter

Among economists, Joseph Schumpeter’s contributions are a landmark because firstly, he is able to give a comprehensive account of entrepreneur and entrepreneurship and fitting it in economic theory. Secondly his views on entrepreneurship have evolved into a multi-dimensional and eventually (1940 and onwards) into multidisciplinary perspectives.

Joseph Schumpeter was born in 1883 in today’s Slovakia in family with business background; he also tried his hand in venture capital later on. There is some evidence which suggest that Schumpeter did not had much success in his business endeavors. He started with a thesis in economics and followed Leon Walrus, the great mathematical economist; believing equilibrium theory is the solution to every problem in economics. Schumpeter developed felt that Walrus’s static economic model does not take account some essential parts of economy. According to Walrus’s model economy is static and responds to external impulses (e.g. population growth) by trying to adapt and get back into equilibrium. In his book The Theory of Economic Development (1911) Schumpeter progressed dynamic view of entrepreneur. He emphasized that entrepreneurs are responsible for all important changes in economies, thus changes in economies are not only form external impulses. Schumpeter classified the activities in all phenomenon (including economics) as consists of two types of activities, the routine and repetitive ones and the new and innovative ones.

In 2nd edition of the same book (1926) Schumpeter suggested a comprehensive theory of economics with entrepreneur placed in centre. His views became more moderate e.g. Innovation, described in terms of business cycles was simply ‘new production function’ (Schumpeter 1939; 87). Entrepreneurship was defined as making of new combination of already existing resources, it is innovation not invention. Accordingly no one is an entrepreneur forever but only when they are doing an act of entrepreneurship. In other words it can be concluded that humans are essentially entrepreneurial, though they differ on the extent to which they are entrepreneurial and for the time they act entrepreneurially. Schumpeter’s view of newness is applicable to variety of situations; he broadly categorized entrepreneurial behavior consisting of ‘essentially new’ a) Good; b) Method of production; c) Market; d) Source of supply and e) Organization of industry. Schumpeter also highlighted the motives behind an act of entrepreneurship. Entrepreneurs are not purely motivated by profit; in his view three main factors motivate the entrepreneur

  • The dream and will to found (strive for independence and power)
  • The will to conquer (or thirst for success)
  • The joy of creation ( to get things done)

Considering profit motive as a contributing factor and not the foremost primary motivational factor is well founded in research. Hirschman (1967) argues that many businessmen would never start a business if they come to know in advance how difficult it was going to be. Though without any profit motive, an act of entrepreneurship may not be considered entrepreneurial. Profit motive might be acting as a catalyst which induces the act of entrepreneurship. Whereas, afterwards the entrepreneurial process requires further motives and money is not enough as motivator.

After 1940’s Schumpeter’s works consist of sociological work, mainly Capitalism, Socialism and Democracy (1942), where he argues that routinization of change, demystification and rationalization of innovation has created an environment of less opposition towards entrepreneurs. This environment is not conducive for breading real entrepreneurship (Schumpeter). The presence of opposing force for ‘unleashing’ entrepreneurship has been evident throughout history, though in different forms, ranging from dissatisfaction with current job to need for a basic ‘bread earning’ activity. Schumpeter’s views entrepreneurship as not limited to a single person and organization (social or business) or institution (even as a society) can be entrepreneurial; this argument comes from his belief that theory of entrepreneurship should be based upon the actual activity of entrepreneurship rather than researcher’s personal injunctions.

Schumpeter’s views on entrepreneurship does glorify entrepreneur to some extent. This element does not lend Schumpeter’s entrepreneur to be explained through mathematical economics. Some may view this as detrimental even unacceptable in terms of economic contribution, however in essence Schumpeter’s work lives on even today only because his views are ‘practical’. Schumpeter ‘spoke of realities’ which he tried to explain through theories rather than theories trying to explain the reality.

2.1.2 The Contributions of Mainstream Economics

Economics is unable to place Entrepreneurship in its mainstream theory, though the presence of entrepreneurship has been largely accepted by economists. The lack of entrepreneur from economics has been termed as the performance of Hamlet with Danish Prince missing (Baumol 1968; 64), so much so that Blaug (1986; 229) calls it a ‘scandal’ of keeping the students of economics unaware of entrepreneurship. Economics does have some thoughts on entrepreneurship mainly Schumpeter’s thoughts, which are supplemented by theories of Israel Kirzner and mark Cason. Other also takes account of William Baumol and Austrian economics such as Friedrich Von Hayek and Ludwig Von Mises.

The first two economists who considered entrepreneur were both French. Richard Cantillon defined entrepreneur as those willing to buy at a certain price and sell at uncertain one. (Blaug 1986; 220) while Jean Baptise Say tertmed entrepreenruship as combining of factors of production into an organiasm. Entrepreneur and capatilst were also confused however it was suggested that entrepreneurial profit can be termed as rent of ability (Hans Von Mangoldt 1824-68).

Among the Neo-classical economists entrepreneurship was classified as ‘rent on ability’ (Marshal 1842-1924) while others ignored entrepreneurs as neutral entities in terms of profit or loss in equilibrium conditions (Walrus cited by Schumpeter 1954: 893). Frank Knight’s Risk, Uncertainty and Profit (1921) explained entrepreneurship in terms of risk (where objective probability can be calculated) and Uncertainty (where nothing can be known). She classified entrepreneurial profit as profit derived from bearing uncertainty which is consistent with neo-classical framework as entrepreneurs. Mark Cason views entrepreneur as specialist on decision making regarding coordination of scarce resources (Cason 1983; 23). Isreal Kirzner termed entrepreneurship as alertedness to profit making opportunities; he argues that entrepreneurs restore the equilibrium of economy. The argument is often contrasted with Schumpeter’s thought of entrepreneurs as disrupting the equilibrium. Mises and Kirzner both agree that one entrepreneur’s error becomes other entrepreneur’s opportunity. Kirzner’s insights also draw from Ludwig Von Hayek (199-1992). Hayek’s relates entrepreneurship to knowledge. The knowledge about local condition where profit can be made come more in form of ‘discovering new information ‘ rather than being preceded by analysis of already present information and diagnosing it as incomplete.

The above insights are of significant importance for theory and practice. An entrepreneur is someone who takes on selected uncertainties as he is alert to ‘appropriate for profit’ uncertainty. Entrepreneur is specialist decision maker and goes through ‘discovery of information’ process. A comprehensive sketch of entrepreneurship consists of various external and internal forces shaping the process of entrepreneurship. At an individual lies the ability of a human to interpret opportunity, decide to take on an uncertain situation while discover information throughout the process. Economy is but one element of the ‘habitat’ of entrepreneurs, they are doing all these activities in a social setting where all non-economic social sciences become relevant to exploring the concept in further detail.

2.2 Contributions of Non-Economic Social Sciences literature

Non Economic social sciences have contribution from a much larger variety of perspectives on entrepreneurship though it lacks the coherence which is the mainstay of economics literature on entrepreneurship

2.2.1 The contribution of psychology

Psychological theories of entrepreneurship pay attention to personality traits, motives and incentives of one individual.

Entrepreneurship has been researched by focusing on the individual since long mainly under the field of psychology. The approach used in this study adheres to these traditional approaches (that are going to be discussed in the following) which consider Entrepreneurs as unit of analysis, however it takes a more holistic view. Various studies researched the traits responsible for entrepreneurship (e.g Gartner 1998, 1989; Bird 1989, baron 1998). Psychology has mainly contributed two broad categories of insights, both have at its core, the personality of an entrepreneur 1) the trait theories of entrepreneurship take a view that internal characteristics of an individual are responsible for entrepreneurial behavior, 2) the more social psychological insights into entrepreneurship take a view that an entrepreneurs personality is shaped by outside forces (Swedberg, 2000). Entrepreneurs and non-entrepreneurs are differentiated on the basis of attitudinal and behavioral factors. In general, trait theorists see non-monetary rewards as the main source of motivation for entrepreneurs. Entrepreneurship is dictated by innate characteristics. Nature rather than nurture is what would determine entrepreneurship.

McLelland & Winter (1971) concluded that a strong need for achievement is a distinguishing trait of entrepreneurs. Yet as Virtanen (1997) summarize

In analyzing entrepreneurial behavior we should pay more attention to expectations, motives and incentives. “The forces in the brain region” (needs) foster expectations, motives and incentives to take some action. What kind of motives and incentives are required to enforce entrepreneurial activity? Why would someone start a new venture? The reasons, as well as the businesses, may differ from case to case.

Why do People act entrepreneurially? The Motivation for entrepreneurship comes from diverse sources but at the individualistic level Vroom’s (1964) expectancy model takes into account the desirability and the feasibility of becoming an entrepreneur. Recent studies of OECD-Member nations shows that dissatisfied people draw satisfaction from the very acting of creating own business (Noorderhaven et al., 2003; Hofstede et al., 2004).

Results of studies focusing on trait theories show a large variation of characteristics that are held responsible for entrepreneurialism e.g. need for achievement and strong urge to build (David McClelland ,1961), toughness, pragmatism unwilling to submit to authority (Collins and Moore, 1970), mercurial, cunning, opportunistic, creative, and unsentimental behaviour (Bird, 1992), overconfidence (Busenitz and Barney 1997). Trait theories project the image of entrepreneur as some one who is (or assumes to be) in control historically because of higher need for achievement and high self-efficacy. This high level of self control has roots in Descartes philosophy of self, which argues:

While the external world, including the thinker’s body, is subject to the laws of physics and other external contingencies, the mind is not. I, being pure mind, enjoy a supreme degree of independence from my body and everything physical. …..The radical separation of mind and body–and of the mental and the physical in general–is known as “Cartesian Dualism”. (frostburg, September 2007)

The field of Psychology has produced more studies than either in mainstream economics or sociology (Chell et al 1991). The status of psychological theories of entrepreneurship is fairly low among social scientist mainly because firstly, the existence of a distinct blueprint for ‘entrepreneurial’ personality is doubted and secondly, psychology has tried to explain about entrepreneurship what other fields e.g. sociology or economic history would be better equipped to explain (Swedberg, 2000).

2.2.2 Sociological view of entrepreneurship

Indeed, some theories have pointed at the dynamic view of entrepreneurship. Entrepreneurial process feeds on change and in fact can create it, as Bagby (1988, 5) concludes: “Entrepreneurs capitalize on change, or even create it.” This means that Change and dynamism can be favorable for entrepreneurship. This thought leads to a process view of entrepreneurship which is dynamic “Entrepreneurship is the process of doing something new and something different for the purpose of creating wealth for the individual and adding value to society” (Raymond 1993).

The notion of ‘becoming’ emphasizes the nature of the entrepreneurial process as a dynamic rather than static phenomenon. According to Bygrave & Hofer (1991, 14) the later contains all the functions, activities, and actions associated with the perceiving of opportunities and the creation of organizations to pursue them”. The process itself is not taking place in vacuum. Social institutions play a major role, they are defined as the written and unwritten ‘rules of the game’: laws, norms, beliefs, etc. (North 1990). How the social system works varies and different social system that places a high value on innovation, risk-taking, and independence is more likely to produce entrepreneurial events than a system with contrasting values (Amir, 2006). The way in which culture, societal values and personality create this effect is complex and highly interrelated

2.3 Entrepreneurship as an embedded process

In this thesis I will propose that entrepreneurship is deeply rooted in society. It is a dynamic process of interaction between socio-cultural factors and personal attributes; change is the essential ingredient of this process.

Such embeddedness perspective is highly relevant to most of the eastern part of the world. The reasons for greater need for affiliation, strong family structure and embeddedness is one plausible explanation is given by Amir (2006), the environment of weak resource-sharing institutions are vulnerable and thus entrepreneurs ‘must’ bond themselves by affiliating with a social network.

For deeper insights the entrepreneurial process rather than entrepreneur in isolation should be researched. Entrepreneurship is an economic process drawing from the social context which influences outcomes, so it is fitting to call it socio-economic. Jack and Anderson (2002) emphasize that;

“Embeddedness is process whereby entrepreneur (acting as agent) becomes a part of the local structure; both the agent and structure affect each other through diverse mechanisms. The social structure’s nature is understood; ties forged through enactment of re-enactment and maintained, this leads to drawing on resources and creating opportunities.”

2.4 Discussion

Entrepreneurs give different understandings to their own selves and may be acting entrepreneurially and not knowing, For instance, a businessman may say that why would he want to know if he is entrepreneurial or not, he thinks he is (Gartner, 1990). It is mo

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