Friday, February 2, 2018

The Number One Skill of a Successful Entrepreneur

I've now completed about two-thirds of my latest project, a book called A Nation of Entrepreneurs, and have begun to confirm some of my hypotheses about the entrepreneurial experience in America.

For example, if you asked the average American what makes an entrepreneur successful, he might point to the abilities of the entrepreneur himself.  Leadership, brains, grit—that sort of thing.  Let’s call this the Jobian Theory of entrepreneurial success.  It's a perfectly reasonable position:  Smarter, more talented, hard-working people tend to do better in every walk of life, not just entrepreneurial activities.

But then there are those successful entrepreneurs who don’t have many, or in some cases, most of those skills.  I call them “reluctant” or “accidental” or maybe just lucky entrepreneurs, and profile several of them in Nation.  They tend to be minding their own business, making a living, and stumble upon some innovation or novel business model that is so powerful that it appears to carry them to success, despite themselves.

We all know someone like this, someone who we might not trust to order our lunch but who is rich and successful anyway.  Let’s call this the Business Model Theory of entrepreneurial success.

So we’ve got two factors, personal talent and quality of business model, which seem to determine success.  In the investment world these two elements are sometimes referred to as “jockey and horse,” and inevitably the jockey gets more of the focus and drives more of the investment dollars than the horse.  It’s entrepreneur over idea, so to speak.  I don’t know if this prioritization makes sense, nor am I sure anyone in an industry that only sees returns on about half of their investments knows for sure, but that’s the best current thinking.

My research in Nation suggests, however, that there is a third, related, but perhaps more powerful element of entrepreneurial success than is explained by talent or model, jockey or horse.

In that regard, I recently heard economist Russ Roberts interview Bill James, the sabermetrician who began publishing crazy-cool statistical abstracts of baseball in 1977.  James was hired by the Red Sox in 2003 to apply his statistical magic to help them win pennants and World Series which, by all accounts, seems to have worked.

One of my favorite books
of all time
What was the greatest lesson, Roberts asked James, in moving from the preparation of statistical abstracts about player performance to actually observing the workings of a Major League organization.  James answered this:
The most surprising thing was an understanding of how many people contribute to a championship.  Literally, it’s impossible to explain to an outsider how many people it requires, doing how many different jobs at a high level in order for a baseball team to win a world championship.  The number of little streams that feed into that river is almost incalculable.

If you take it on a single player . . . Dustin Pedroia . . . you have to look at everyone who had a big influence . . . This includes his minor league managers and his minor league coaches.  It may include scouts . . . his father and his high school coaches and all of those people had some impact on the Red Sox eventually winning world championships. . . .
What James has so nicely articulated is the third, and I think best theory to explain entrepreneurial success.   Let’s call it the Theory of Community.   It doesn’t negate the Jobian Theory or the Business Model Theory, but it accepts that 1) every entrepreneur is limited in some way and will require help, 2) every business model needs constant care and an eventual pivot, and 3) the most successful entrepreneurs are those who are most successful in building and leveraging community.  It's community that continually supports the entrepreneur, community that allows the business model to grow and adapt.

This lesson comes through time and again in the stories I'm writing for A Nation of Entrepreneurs

If you were actually to draw, in Bill James’s language, all of the tributaries that flow to the iPhone, they would be almost incalculable.  It’s easiest for us to apply the Jobian Theory to explain the success of this product, but it is neither accurate nor satisfactory.

Likewise, since it’s Super Bowl weekend, we might ask if Tom Brady would be Tom Brady if he’d been drafted by the Cleveland Browns.  And would Bill Belichick still be Bill Belichick without Tom Brady?  It’s talent, a great business model, luck--but most of all, it’s the community created by Brady, Belichick, and Kraft, and the incalculable tributaries that flow into it.

What’s the number one skill of a successful entrepreneur?  Identifying, building, and leveraging community.  Optimizing the positive tributaries that flow into the business.  I can't prove it, but I know it.