Why I Am Apparently Not Entrepreneurial

This past semester, I have been enrolled in a class called “Entrepreneur Lecture Series.” “Successful” entrepreneurs would come give presentations on their journey; lessons; and, well, “success.” Though I own my own business and have just been bought out of another business, I don’t think of myself as an entrepreneur. And here’s why:

The only theme so consistently emphasized in these series of lectures was that of personal sacrifice. Apparently, in order to be a true entrepreneur, you have to be willing to bet the farm while working 70 hour weeks. Not many lecturers even made the attempt at saying “be careful” or “be responsible.” In fact, each entrepreneur gave his/her own version of the and-when-we-thought-we-could-get-no-lower-we-borrowed-against-our-house story.

The main issue I have here is that of glamorizing that which rarely happens. Only “successful” entrepreneurs were chosen to address the students, obviously. It only takes a Google search to realize that more than 85 percent of small businesses can’t make it past five years. But we ignore that and discuss how Bill Gates started at the bottom and is now the richest man in the world with his 40 billion or so. This is akin to the faulty statistic that the stock market has had an average annual return of 12 percent since inception. Yeah, again, this may be correct only when ignoring all the companies that have failed and all the grossly huge negative returns which have been hedged by bankruptcy over the years (but for the record, I still think diversified investments are a good idea even if misrepresented).

But alas, it is still a dilemma lest I make it sound so one-sided. Even with the 85 percent failure rate, our economy thrives off of small businesses. Being entrepreneurial is a good thing. But is the need to bet the farm a trade-off unavoidable? How to we promote entrepreneurialism without the starve-and-ignore-your-family-if-necessary approach?

Comments

  1. That is one good thing about the internet, it allows people to start things while also having a full time job. For example I design and sell LDS shirts online in my CTRShirtShop, and I help animals on my Animal Rescue Site. All of these things are done in my free time, and not at the expense of my “wife job”. There are many other ways that people have their own business online while not sacrificing their day job so they can still pay the bills on the way to success. I know people selling on ebay, selling on Amazon.com, and even though mlm’s are not something I would choose, they have online avenues as well.

    My husband on the other hand has also attended too many of these kinds of lectures. He comes home and talks about how every successful person quit their job and risked everything to make it work. This made it do or die, and forced them to make it a success. I get the feeling this is what he really wants to do in persuit of his dream of having his own design firm. It scares me to death though, we have bills to pay after all!

    I think it is better to have many profit centers going at once. Maybe you have a part time job to pay the bills while working towards the bigger goal… etc. Like you said though, people don’t want to focus on the failure rates and such, which is both good and bad. I guess the good is that it keeps people hopefull in persuing their dreams. It would be good to temper it with a bit of reality though.

  2. Aimee,

    This is the wrong blog to admit that you have a CTRShirtShop. But I salute your bravery.

    Bob,

    Do starting most businesses really require the starve-and-ignore-your-family-if-necessary approach? It seems to me that the only schemes that ask such are those get rich quick things. And I think most people agree that those are unwise.

  3. Funny you post this right now, Bob. I’m currently reading The E-Myth by Michael Gerber (“E” for entrepreneurial, not internet) about why most small businesses eventually fail within the first 5-10 years. It appears that businesses don’t fail because the product or service is bad, but because the person who started them are experts at that product or service, but not at creating and maintaining a business. It’s a fascinating book.

    I’d also highly recommend Rich Dad, Poor Dad and The Cashflow Quadrant by Robert Kiyosaki. These deal with the difference in mindframes between the poor, the middle-class, and the wealthy. They’re quite eye-opening, though I won’t go into details because I’m already embarrassed for having mentioned them (because they’re kinda cheesy). Also on the recomendation list is The Millionaire Next Door which explains that the majority of millionaires are people you’d never know were millionaires. Most of them own their own small businesses and live modest lifestyles.

  4. HL Rogers says:

    Aimee let me be the first to CONDEMN your evil t-shirt ways. :)

    That being said it does seem wise to have multiple income streams if that is at all a possibility. Or at least have the potential to have alternate incoe streams–one of the points Prof. Elizabeth Warren makes in her book Two Income Trap.

    Also, every good Mormon knows if you really want to make a good living in the true Mormon way you get into multi-level marketing.

  5. Finally something I can comment about on BCC! Bob, I sat through that same class at BYU and had very similar impressions. Here are a few thoughts.

    First, thinking about the personal implications of entrepreneurship, lifestyle issues are pervasive nowadays, and it isn’t clear to me that being an entrepreneur is any more demanding timewise than being a lawyer, doctor, accountant, or blue collar worker who drives taxi in the evenings to make ends meet. So the “ignore your family” part is going to be a challenge almost without regard to profession or occupation.

    The factor that most distinguishes entrepreneurs from others, in my view, is risk bearing. This is the “starve your family” part. Many entrepreneurs attempt to reduce the risk by following proven formulas, such as franchises. Or placate themselves that the downside isn’t too far down, thanks to the elimination of debtors’ prisons and the introduction of bankruptcy. Still, being an entrepreneur is inherently risky, though again I am not sure it is uniquely risky.

    Second, regarding the societal implications of entrepreneurship, it is not obvious that more small business is an inherent good for the economy. I am told by my business school colleagues that most jobs are created by large companies, contrary to the popular impression. As you observe, most small businesses fail pretty rapidly, and that is costly to everyone involved. In most European countries, “entrepreneurship” of the type on display in the lecture series is pretty rare, but somehow people survive. My point is simply that it is easy to overdo entrepreneurship boosterism.

  6. Nice thoughts, Gordon. While I can’t compete with a professional student of the subject, one thing that strikes me about successful entrepreneurs is they are “be your own boss” types who just are not happy being stuck in a hierarchy. They would rather be running a flower shop (with plans to open two new shops, diversity into funeral support, maybe revamp the website to boost out-of-state sales, etc.) than be an associate VP, directing junior associate VPs and reporting to a senior associate VP, regardless of pay and perks.

    Religious people tend to be conservative and risk-averse. Other things being equal, one would think LDS tend therefore to be less entrepreneurial. On the other hand, perhaps the Mormon safety net (large families, some LDS resources in case of economic collapse) tempers some of the risks entrepreneurs face, which would work in the opposite direction.

  7. I went to that class, too. I thought the executive lecture series was much less repetitive and generally more interesting.

    Just like there’s different types of investment with different amounts of risk (e.g., oil prospecting vs. municipal bonds), there’s different types of careers, and entrepreneurialism is more like prospecting than bonds. But I think that the risk comes from the fact that the short term benefits of entrepreneurial endeavors are often equivalent to those of indentured servitude. A regular career of employment, on the other hand, typically provides substantially more short term benefits. And of course, if things go south when you’re an entrepreneur, then you’ve lost the time you spent as well. When you consider how much seniority or experience you might have gained in regular employment career, this can be a substantial loss.

  8. HL Rogers says:

    Dave #6: “one would think LDS tend therefore to be less entrepreneurial”

    Dave, I get the impression that Mormons are more entrpreneurial and willing to take risks. Which does seem like a non sequitor. My evidence is of course anecdotal and I would like to see what a study would have to say on the issue.

    It also seems that Mormonism creates a good foundation for entrepreneurialism by encouraging mothers to stay at mom, many end up starting small businesses to help with family expenses. Whether they are t-shirt shops or nu-skin type sellers or piano teachers.

    And Gordon, it nice to see you around

  9. Oops, was it taboo to talk about that because of the preistcraft debate? :)

  10. danithew says:

    It’s very important to drop the rods properly in the watering troughs. It has to be done in front of the stronger cattle so that when they conceive, they will bring forth many more of the ringstraked, speckled and spotted cattle. If you do it wrong you might end up with a lesser number of weaker calves.

  11. I don’t know how widespread this is, but growing up in Utah I always felt a social pressure to look for the most secure job I could find. I felt like everyone was always telling me not to worry about trying to make more money than I needed to buy a modest home and raise a family — certainly don’t go for the extra income if there’s any more risk involved.

    Maybe that experience is unique to me, but my impression is that Mormons are likely to be more risk averse than others. While I’m sure nobody really likes the idea of risking everything to start a business, the fact that you’re particularly worried about the risk factor while being very entreprenurial in other areas reflects to me your Mormon upbringing, Bob.

  12. Aimee,

    It was taboo because it is considered bad form to plug your wares on a blog. I do however suggest that all of you click my link.

  13. danithew, apt description. Even when things go swimmingly, you’ve got to take some serious hits (like indentured servitude and having to marry your girlfriend’s sister to placate her father).

  14. Bob Caswell says:

    Mucho thanks to everyone for some good comments (even you, Arturo).

    Aimee,

    It’s nice to see you providing supplemental income in a way that is both convenient and not so risky. Kudos.

    Rusty,

    I’ve read both the E-Myth and The Millionaire Next Door. They’re both standard reading for pseudo-risk-adverse-entrepreneurs like myself. I didn’t find them particularly cheesy, though, maybe you were referring to the other books?

    Gordon,

    We shall remember the day we finally lured you over here, a real milestone! Your bit on how entrepreneurship isn’t uniquely risky helps put things in perspective, though I’d be interested in more support for your claim that big business does more economically than small business because I’ve “heard” otherwise (all I’m saying is that your logic makes sense, but I’d like to read more on that).

    Logan,

    It’s interesting how your observation is like so four years ago for me. What you describe is something that was a pressure before I started working for a small company where I mixed and mingled with plenty of Mormons who were totally not risk averse (not just within the company but within the community of companies involved with our company). Not to mention that every single risk-happy entrepreneur who spoke in this class was Mormon. Honestly, I don’t feel my Mormon upbringing has too much to do with it; I’m very cautious by nature.

  15. Well, since you’re all talking about business, let me ask: Have you ever thought about going in to business for yourself? You know, there’s this great opportunity I know of where you can get in at the ground floor, and cut out the middleman. We’re talking about residual income. And even if you don’t get any of your cousins to join for $500 apiece, you’ll practically save that much each month on soap anyway.

    What do you think??

    ;)

  16. Bob Caswell says:

    Gordon (and/or whoever is interested), here is some information from the very book Rusty brought up, The Millionaire Next Door:

    -94 percent of all US businesses are small businesses, and the engine that creates more than 50 percent of all new jobs every year.

    -In 20 years, business start-ups have increased ten-fold.

    -And the way FIVE out of SIX millionaires made their money.

    This is what doesn’t jive too well with your, “I am told by my business school colleagues that most jobs are created by large companies, contrary to the popular impression.”

    But it definitely wouldn’t be the first time I’ve seen inconsistencies among statistics (or opinions), thus my interest in learning more about your sources. The other crazy thing about statistics that regularly seems to be misleading is that you’ll rarely find a negative statistic that matches directly to a positive. Those who use them for positive reinforcement say something slightly different than those who use them for negative reinforcement, though it seems like there’s a contradiction even if technically there isn’t (i.e. 85 percent fail in less than five years and are costly this way vs. they create 50 percent of all jobs each year and are 94 percent of all businesses fueling five out of six millionaires). There’s a lot of good news and bad news depending on what you’re reading at the time.

    It’d be nice to get some more thorough information.

  17. John Mansfield says:

    You may find interest in Carnegie Mellon history professor Scott Sandage’s recent book Born Losers: A History of Failure in America. It “tells the story of America’s unsung losers: men who failed in a nation that worships success.” His focus as a historian seems to be mostly the late 19th Century. His interest in losers is that they are the bulk of society and a relatively untouched topic. I haven’t read the book, just some interviews.

  18. Not sure that this has much to do with where the thread is going, but from personal experience, it seems to me many people eventually figure out that although they may make lots of money and gain power through working hard and taking big risks, these activities don’t usually lead to a sense of personal peace and fulfillment.

    It’s exciting to get caught up in the entrepenuerial spirit, but this spirit is fleeting. Many people can come up with brilliant ideas and lose themselves in the initial euphoria of promoting their own brilliant ideas and starting a business, but then these people usually have little interest in the day-to-day operations of the business. And that’s usually when things start to fall apart. So then the person moves on to another idea.

    Anyway, I love listening to the tall tales of maverick entrepenuers – they thrive on adventure and certainly have incredible stories to tell!

  19. Bob Caswell says:

    Thanks, John, that book is now on my list of must reads…

  20. Last Lemming says:

    Perhaps the 50 percent figure represents “gross” jobs (i.e., ignoring those that disappear along with the failing businesses), while the other assertion refers to “net” jobs.

  21. The Millionaire Next Door is a good book for more than just the business part as well. It also talks about how most of them don’t live beyond their means, drive big expensive cars, or own large houses. It does a comparison of people with very high net worth, versus people who should be very wealthy based on income, and yet have very little net worth. It is a very good read on many levels.

    They do about how most of the millionaires are self made, like Bob mentioned, which was actually a little disapointing to me because I was was more interested in the lifestyle choices aspect of the book.

  22. Do starting most businesses really require the starve-and-ignore-your-family-if-necessary approach?

    No.

    The question is whether you are working or whether you are gambling.

    If you are gambling, the more you leverage, the better the pay-off if it works, and the greater the pain if it fails.

    /////////

    Side step.

    There are several standard paths to wealth.

    1. Get a part of an expanding pie. Being a landlord in Provo in the 1960s or buying land and sub-dividing it in California in the 1950s (but not North Texas) is the model for that type of activity.

    2. Work lots of extra hours that you wrap into the business. Often combined with number 1. Oldsmobile driving millionaires are often in this group. (See The Millionaire Next Door or the land and cattle guy who became a millionaire by having 21 kids who he put to work at ages 8 to 21 on the farm or ranch).

    3. Grab onto moving vector in the economy and leverage yourself for all you are worth. (The risk taking entrepenuer).

    3.b. Grab onto a moving vector and take a cautious approach (risks and rewards tend to be less). Most commonly this means becoming a medical doctor in today’s modern society. 20 years ago it meant opening a Domino’s Pizza ;)

    4. Choose your parents and social class wisely and use that to capture the work and wealth of others as it flows through society. Similar to approach 1.

    Successful entrepeneurs have a religion that basically involves faith in themselves and taking hideous risks and getting lucky — but also seeing the luck as reflecting virtue (variously defined) which they attempt to communicate to others.

    I know, blogging comments are too short, I’ve been too terse, but I hope I’ve gotten the general concept through.

    Most people would be happy making into the successful professional class, which has different rules, and which isn’t the subject of worshipped virtue as it doesn’t generate as much money for the vast majority of its members. No money = no virtue in our society.

    Anyway, my two bits.

  23. Stephen, you’re comment is insightful–like an analytical version of danithew’s comment.

  24. Arturo,

    You know me, couldn’t just leave it at dropping the rods.

  25. Bob,

    The cheesy books Rusty was referring to are the Rich Dad books. They are terribly written but the message is too good to miss so if you are an entrepreneur you gotta read ‘em. The basic concept is that you have to generate passive revenue if you ever want to get off the hamster treadmill in life. There are slow, low risk ways to do that and faster, high risk ways. (The other books mentioned — Millionaire Next Door, E-Myth, Richest Man in Babylon, etc. — are all pretty essential too. I think Seven Habits has helped me the most though.)

    I agree with Arturo that some of us have to be entrepreneurs. I had this nasty habit of verbally blistering my incompetent bosses on occasion in the corporate world. My best one was when I made my boss cry during the performance review she gave… I guess she didn’t appreciate my scalding, unsolicited review of her performance in return… But for some strange reason I ended up in the first wave of layoffs that happened a few months later. (It was soooo worth it though.)

  26. Bob Caswell says:

    So what DO you do, Geoff? Are you an entrepreneur yourself?

  27. Yep. I’m an Internet entrepreneur specifically. I figured out how to use those sales, biz dev., and marketing skills I developed working for other Internet companies all those years to assist a buddy who had started his own SEO-driven company. I partnered up with him a couple of years ago and things are going swimmingly — much better than my volatile/scary employee days.

    I should mention that I was quite successful as an employee (they made me a VP, etc.)– I just never particularly liked being an employee. It became worse when I realized all of my income was what “Rich Dad” calls active revenue (money that required sweat to make) so I started a serious search for passive revenue (money you make while you sleep) and ended up developing some streams of that… I also transitioned from employee to entrepreneur slowly to reduce my risk.

    [business talk]
    We’re now working on a new incubator company to seed and power new internet entrepreneurs. Building a site isn’t hard but getting traffic often is so we are working under the classic Covey “win-win” model. Basically we provide consulting and the traffic to new sites for a cut of the sales/revenues of whatever product or service the site focuses on.

    We’re always looking for new Internet entrepreneurs to partner with (especially Mormon ones) so let me know if you know anyone who might be interested in something like that.
    [/business talk]

  28. Bob Caswell says:

    Geoff,

    Interesting. I’m a part-owner of the domain computers.net, and we haven’t done much with it (other than try to sell it for six figures the real owner wants and that hasn’t worked). Ideas (this is where we should probably start e-mailing…bobcaswell at fiber dot net)?

  29. You crazy entrepreneurs. You make it look so fun and easy…

  30. I heard about your successful entrepreneurial history Arturo. (Matt Even assumed we were old pals because I defended you a few times over at T&S)

  31. i’ll try to remember the above when opening my own lil chocolate shoppe. since i am unlucky, hopefully my ensuing 5-10 year bankruptcy will leave me awash in lovely calories.

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