Monday, November 4, 2013

The Cult of the Entrepreneur: Maybe It's Too Easy to Start a Company? (2013)

In October, Disrupt Europe 2013 was held in Berlin to highlight what was described as the “burgeoning European tech startup ecosystem.”  2,000 delegates attended, “the cream of Europe’s entrepreneurs and investors.”  Fifteen semifinalists had been honed to four finalists.

What would the best of Europe’s high-tech brains be offering?  Would the finalists address clean water, climate change, food waste, urbanization, acidic oceans, tools for an aging society, or maybe pandemic control?  Perhaps they would tackle something way-out, like defenses against rogue asteroids or slowing species extinction.  Was someone finally curing cancer?  There are so many big, seemingly intractable problems. I could not wait to learn what the best and brightest was working on.
Alas.  One of the four finalists had created an app “that helps you find clothes that you like around you in the physical world.”  Another allowed its users to turn any web page into an API with just a few clicks, making “it easy for developers to pull data from the web.”  Another had developed a platform for voice-enabling consumer and enterprise apps. 

And the eventual winner?   A smart lock for bicycles.  That was the winning idea coming out of the tech ecosystem in Europe.

Meanwhile, back in the States, last month’s winner of TechCruch Disrupt San Francisco had raised $6 million to fund a “communications platform that can be added to any mobile app by adding fewer than 10 lines of code into the mix.”  This will allow users to send text, voice, and video messages across different applications.


Does it seem sometimes like we’ve made it just too easy to start a company? 

I read a quote the other day from Someone Who Knows that “it’s easier than ever to start a business but harder than ever to build one.”  This seems only half right.  It’s certainly easier to start one—a computer, a kitchen table, and a few bucks for data storage and pizza until the app is ready for prime time.  But it’s always been hard to build one.  Maybe it seems harder today because so many tech businesses fail.  Or maybe this is just the natural result of launching too many companies that are poorly conceived or trivial

In other words, the failure rate of technology businesses is higher because there are so many bad ideas being launched in the first place.

We learned something important about human nature in the 1960s when psychologist Walter Mischel of Columbia tested young children’s ability to delay gratification.  The "marshmallow test" has become almost legendary; those children who could forego the instant gratification of eating a marshmallow were found later in life to have better SAT scores, better grades in college, happier marriages and even improved body mass indexes. 

The implication of Mischel's work was clear: The ability to defer gratification contributes to lifelong success.

In the last decade we have invented a social apparatus—I call it “The Cult of the Entrepreneur”—where we have made innovation the crowning achievement in life, and the serial entrepreneur the sexiest occupation in America.  Come, says the university brochure, and we’ll teach you “entrepreneurship.”  Join my incubator, says the cashed-out technologist, and we’ll disrupt the world together:  You bring the idea and we’ll supply the Coke and plumbing.  Why would you choose to work for someone when you can become rich and famous on your own, in no time?

When the Plain-Belly Sneetches popped out, they had stars!
They actually did. They had stars upon thars!
The Cult is a machine that brings to mind an old Dr. Seuss story, feeding initiates into an assembly process that stamps a star upon their bellies.  Certified.  Young people whose life experiences include coding, shopping, texting, and riding bikes are solving the problems about which they are most passionate, which (not coincidentally) seem to be coding, shopping, texting, and biking.  Just as the Cult preaches.  Why not disrupt the bicycle lock market if the simmering crisis in your life is a stolen bike, or the Big Idea you offer is to make bike-sharing easy?

This isn’t a misguided Protestant Work Ethic saying it’s no good unless it’s hard, or unless we do it the old fashioned way.  And, when we have a tool as transformational as the Web, there’s no question we should use it to build businesses and improve the world.  But that sucking noise you hear from our technology centers is the sound of really, truly smart kids whose talents are being flushed away when they are encouraged to leave school, forego real work and broad life experiences, and set about solving the problems impacting their young lives by coding a solution that simply joins one of the 900,000 apps already available on-line.  The opportunity cost of such a system is staggering. 

Jack Dorsey, co-founder of Square and Twitter, recently told young would-be entrepreneurs to create products that they’re passionate about.  “What matters is not so much the ideas themselves,” he explained, “but the execution of those ideas.” 

That might be a slogan for the Cult of the Entrepreneur: “Execution Trumps Ideas.”

In creating this new Cult, we have turned the app into the twenty first-century marshmallow, the most gratifying path available.  Launch an app?  Now you’re an entrepreneur.  Doesn’t sell or can’t be monetized?  Now you’re a failure which, the Cult says, is a badge of honor.  Launch another app and—presto—now you’re a serial entrepreneurA recent book about “the App Generation” describes a mindset that “motivates youth to seek direct, quick, easy solutions—the kinds of answers an app would provide—and to shy away from questions, whether large or small, when there’s no ‘app for that. ‘”

Take Nithin Tumma, for example.  He won a prestigious science award for his high school research on cancer, and, the Boston Globe reported, the Harvard University sophomore seemed destined for a promising career in life sciences.  But soon enough he heard the call of the Cult.  Tumma and two friends developed a mobile app that recommends products and services and launched it at Apple’s App Store.  Now he is thinking about a career in consumer technology. 

When Marc Andreessen told us that software was going to eat the world, he didn’t warn us that it would make our best young talent its appetizers.

Here are some of the things research shows us about successful innovators, much of it at odds with the Cult of the Entrepreneur:

1. Successful innovators crave new and complex experiences, seeking variety in all aspects of life.   

One might argue that a 23-year-old who spends his waking hours on the computer “building a business” has trouble developing any kind of experiences vaguely hinting at variety.

In fact, when we think of Steve Jobs, we think—there’s the guy who dropped out of school and became a tech hero.  But when we actually listened to Steve Jobs, we heard him complain that people in the tech industry lacked the rich, diverse experiences that allowed them to be creative.  “So they don’t have enough dots to connect,” Jobs said, “and they end up with very linear solutions without a broad perspective on the problem.” 

That lack of experience shows up in other ways, as well.  When Randi Zuckerberg refers to her former colleagues at Facebook as "the smartest people on the planet," we hope she is just being nice and not blind to the simple truth that they are not even the smartest people in their zip code.  

Narrow and rushed experiences don’t allow our best and brightest to even ask the right questions, much less propose compelling solutions.

2. Innovators require formal education or training, which is essential for finding attractive opportunities.  

If Don Draper can do it, why can't we?
The recent articles downplaying college, grad school, and MBAs are just plain misguided.  The payback calculations are shortsighted.  Expertise is absolutely essential to distinguish signal from noise.  Research has established that education and entrepreneurial success are strongly correlated.  And, we know education takes time and patience.  An Art History professor at Harvard forces her students to observe a painting for three hours before they begin researching it; “access is not synonymous with learning,” Jennifer L. Roberts says.  “What turns access into learning is time and strategic patience.”   Indeed, the terms used to describe serious learning are anathema to a world of skimming, short attention spans, promises of quick riches, and rapid app-thinking: “deceleration” and “immersive attention.”

3. Research also indicates that entrepreneurial success is a product of social capital: knowing people, having connections and building networks to mobilize resources.  

School, diverse work experiences, and time-in-service are what create this social capital.  There is no short-cut.  Perhaps it would be easier to scale a business today, even a bad business, had our young entrepreneurs more developed social networks upon which to draw upon.

Think of it this way.  You are a healthy 22-year old college grad.  You can go on and earn a graduate degree, and then maybe work for five years for a great company (IBM, Google, GE, UTC, etc.) learning how business is done and meeting lots of other smart people.  Perhaps you are exposed to a handful of industries and a batch of real problems faced by real people.  Then, at the ripe old age of 29 or 30, you start a company based on these experiences.  And you can run it for, say, 40 years, and still have a decade or two for happy retirement.

Or, you can rush now to launch a company that will insure that consumers can find the right color sweater this Christmas.  Or provide yet another calendar or weight-loss app, or one that brings together the dog-lovers in your community.  Or build a game for Facebook.  Success will likely be modest because the stakes just aren’t high enough to begin with.  Defeat, which you may finally admit three or four years into the process, means you are now 26 with a very narrow experience set, little in your bank account, a network of like peers you see at Disrupt conferences, and almost no knowledge about how to build a real business. 

At least, though, you’ll be an entrepreneur.  So says the Cult.

Certainly, there are other, dramatic, and positive outcomes possible.  Riches and fame beyond belief.  Those are the stories we read about in the Cult press.  Never forget, however, that all of these Midas tales are staged at the far right of the distribution curve and describe an alignment of stars, luck, and coincidence that you are unlikely ever to see.  Most readers, by definition, are locked in the dead center.

There are two questions a young, would-be entrepreneur should answer for him- or herself before joining the Cult: Do I have a clue what I’m doing, and does anybody but me really care about my idea?  

One good test is to decide if your stated goal is self-centered (as in “I really want to be an entrepreneur” or “I really want to disrupt the world”) or market-centered and charitable (as in “I’d like to bring clean water to poor villages”).  I’m not suggesting we all need to be Mother Teresa, or that there’s no good business if it doesn’t save the Earth.  But like pornography, you’ll know an idea has substance and impact when you see it.

For example, I just looked at the “best new apps” in the iPhone store, choosing five at random (while avoiding the endless new games).  The apps were:
Happier is a beautiful way to collect and share happy moments you find in every day.”
CarFiend is a free, fun way to share your automotive passion.”
Nextdoor is a free, private social network for you, your neighbors and community.” 
WeShould is a personal planner and assistant, dedicated to making us better friends.” “Circle is the FUTURE of Social Networking. . .Circle shows weather, events and people that are near your location, in any city!”
Do any of those ideas pass the smell test for substance or, not to put too fine a point on it, innovation

Google's Ngram shows the steady rise of the Cult.
Let’s do the math on this mishegas.  There are about 900,000 apps available.  If we subscribe to one modern philosophy—“90% of everything is crap,” which may be generous in this case—that suggests 810,000 useless or derivative apps.  Let’s say each app has three people invested for two years, or two people invested for three years; in either case, six people-years per app.  That totals 4.86 million people-years invested in useless nonsense.  

You could live to be 80 years old and reincarnated 60,750 times, laboring every second of those lives to create this body of work and never have done anything that adds real value to society or raises the standard of living.

Bill Gates recently came down on the side of sanity when he criticized the idea that the Internet could save the world.  "As a priority?” he asked. “It’s a joke."  

"Take this malaria vaccine, [this] weird thing that I’m thinking of," Gates sarcastically told Financial Times.  "Hmm, which is more important, connectivity or malaria vaccine?. . .I certainly love the IT thing," he said. "But when we want to improve lives, you’ve got to deal with more basic things like child survival, child nutrition."  (See “The Internet Won’t Save the World.”)

Has our tech culture simply gone off the tracks?  Economist William Baumol wrote a paper in 1990 in which he suggested that entrepreneurs come in three flavors: productive, unproductive, and some that "lead a parasitic existence that is actually damaging to the economy."  He says we assume entrepreneurs focus on innovation when, in fact, they are really people who are "ingenious and creative in finding ways that add to their own wealth, power, and prestige."  The rules of the game at any given moment dictate their activities.

So we wonder why economic growth has ground to a halt, when we have game-changing products like computers and the Internet at our disposal.  Thus far, the numbers say this: the Information Revolution is a poor, feckless cousin to the Industrial Revolution. 

I can think of at least 4.86 million reasons why.  All that talent, all those marshmallows.

One of my best reads every week is Maria Popova’s “Brain Pickings.”  Recently, on the seventh birthday of her publication, she summed up seven lessons adapted from the thousands of articles she has read and authored.  Her seventh and final lesson was this: “Expect anything worthwhile to take a long time.”  Our present definition of success, she said, “needs serious retuning.” 

Agreed.  We especially need to rethink this “entrepreneur” thing.  Unfortunately, there’s no app for that.