Entrepreneurship, Social Media, and Making A Difference

It is hard at times to discern the true value of the internet from all the hype that exists around and about the web and the internet.  It seems as if the internet and technology can cure everything that ails us, our society, and our economy; as if eating, drinking, and breathing code can solve everything.

No doubt I could be considered a skeptic, and of course I have been skeptical of the teaching of entrepreneurship in schools before and my thoughts about social media and ecommerce are well known.

But, every now and then you come across something that truly represents the hype of the internet as "revolutionary" and you have to acknowledge that; Kickstarter is an example of a real revolution.  Kickstarter represents a new way to fund creative projects; its where the concept of "crowd funding" is brought together with artists, filmmakers, musicians, designers, writers, illustrators, explorers, curators, performers, and many others to bring projects, events, and dreams to life.

In particular, I think that it is an obvious way, in smaller communities, for young people, for creative people, to become entrepreneurs and solve problems in their local communities.  One clear example, which was brought to my attention at AVC.Com was T.A.G. (Teen Art Gallery):



You can learn more about T.A.G. here or view their Kickstarter submission here.

A group of young people, taking the initiative to come together to plan and organize a teen art gallery.  This is exactly what entrepreneurship is all about; this is what social media and the promise of an online community is all about.

I am glad to see that this particular project is now fully funded and will move forward!  But do take the time to search the various projects seeking funding at Kickstarter and see if this is a way for you, as an individual to make a difference.  Or, become an entrepreuner and start your own project!


Another example of entrepreneurship, social media, and making a difference is Donors Choose, which is an online charity that connects donors with classrooms in need.

"Pattern Making" And Success

What does it take to be an entrepreneur?  Or, should all venture capitalists actually have experience at starting a company? 

In a recent blog post, Want To Be A VC?  Start A Company, Fred Wilson, who in my humble opinion is truly an "outlier," which is a complement of the highest degree that I bestow on few people, wrote about how he agrees that successful VC's need to have start up experience.  He has also written, in another post, Program Or Be Programmed, that one needs programming experience.

If you calculated the years it would take to acquire all the skill sets necessary to be successful then you would realize that no one under 50 could ever dream of starting a company, being a VC, or being successful.  Its like teaching entrepreneurship in college; exactly what classes would you have to add to your curriculum to truly prepare students to be entrepreneurs?  If you ask successful entrepreneurs they would tell you that success is due to "passion," "vision," and "people skills."  Yet our colleges come up with required classes like this.

Not real sure, within that curriculum, where a student of entrepreneurship would learn how to be passionate, or visionary, or come to understand how to motivate and lead people, oh, and shouldn't a class on "Ethics And Critical Thought" be taught by the Philosophy department rather than the Management department?

That then brings us to the concept of "Meritocracy" and the recent special by CNN:  Silicon Valley Is No Meritocracy For Minorities.  In the article the author states:

But I firmly believe, based on my 25 years in this industry, that market makers, both investors and the people who help you get ready to approach them, seek out entrepreneurs who appeal to them on some less than objective, visceral level, who feel "comfortable" to them. They don't need to actively filter out undesirable profiles. They just focus on what does appeal to them. They focus on the "patterns" they find appealing -- age is arguably a part of many investors' ideal pattern, but so are perhaps unacknowledged criteria like race, gender, cultural affinity, etc. On some level this should not be shocking, as it reflects socialization that all of us must work hard and consciously not to act on.

Patterns....

Yes, we all seek out "patterns" that reaffirm our own biases.  Of course a 20 something tech start up founder is going to believe that success is tied to being 20 something.  Just like an MBA is going to believe that success is tied to earning an MBA; and I have yet to meet a CPA who didn't believe they hung the moon!  The idea that taking up golf as a great way to move up in the world or the old saying, "...its not what you know but rather who you know that makes all the difference" is all socialization, its all bias', and its all about patterns.

The reality is that success may come from questioning ones own bias more than seeking out that which reinforces them; there may be safety in seeking reaffirmation but not necessarily success.  If skill set was all that was required then we could easily clone or program our way into success; but what if knowledge, experience, and success were more of an art than a science?

        

The Most Brilliant Ideas Are The Simplest

A true definition of entrepreneurship:  Creativity and the human spirit!

Risk

Risk, what exactly is it?  We talk about it all the time, especially in regards to business and money.  Currently, there is a big fad in regards to the term 'entrepreneur' and we marvel at these individuals because they are "...accountable for the inherent risks and the outcome of a product."

If we look at risk as a mathematical formula we would basically have:

Risk = (Probability of failure) X 

(Expected loss in case of failure)

Is it the 'probability of failure' variable or the 'expected loss' variable that makes someone an entrepreneur?  If you are young, unmarried, and either in college or of college age then the reality is you most likely have little to nothing to lose, regardless of the probability of failure in whatever is attempted.  So, does that qualify one to claim to be an entrepreneur?


As one matures, it is logical to assume that while the variable 'expected loss' will increase the probability of failure in turn decreases due to the fact that one has gained more knowledge and thus it could be assumed that one would make decisions that while no less risky are much better thought out.


But honestly, when attempting a new endeavor, how many people actually calculate risk of failure?  

The reality is that most individuals are risk adverse, which realistically means that they not only avoid and or fear risk but they will most likely avoid attempting any calculations of risk and loss altogether.  Entrepreneurs are no more or less risk adverse than others but where they differ is in  their decision making; risk adverse individuals have no calculations for "regret."  


Regret is a variable for the cost of not taking advantage of an opportunity.  Risk adverse individuals prefer the status quo not only due to the fact that they prefer the status quo to any situation that could lead to a worse off position than the status quo, but because they have no concept of "regret" or that one is worse off by not pursuing an opportunity; regret is the belief that one is in fact worse off by doing nothing.


In my experience with a variety of start ups and turnarounds the most likely causes for failure were lack of execution, lack of capital (which has always been due to sales outpacing inventory), and the inability of the founder/owner to entrust others, a belief that they had to do it all, and or the inability to acknowledge employees who were in fact, stakeholders.


In my post on Entrepreneurship I make mention of "opportunity driven" entrepreneurs and "necessity driven" entrepreneurs and I commented that:

"The world of internet based start ups is an example of opportunity driven entrepreneurs, while the rest of our economy fosters entrepreneurship as necessity driven, or people striking out on their own due to financial necessity."

In an environment where one is forced and or compelled to strike out on their own, of course the risk of failure will dramatically increase; there is no calculation of risk because there is no choice, there is no sense of regret, because their is no choice.  If one strikes out on their own out of financial necessity and if a major cause of failure is a lack of capital then logically the statistics for failure will create a sense that entrepreneurs are risk takers; but the reality is that if less than 1% of all start ups get funding, and well over 50% of small businesses are struggling because they have no access to capital the reality is that even the most talented, even the most obvious of ideas will not be successful because they will only be attempted out of necessity; and thus doomed to fail.


The reason we see more young people being innovative and striking out on their own, is because they are opportunity driven rather than necessity driven.  While the young focus on the internet as entrepreneurs the reality is that we no longer lead the world in innovation because outside of internet/technology, we are devoid of any opportunity to innovate; every week we hear of mega million dollar financing deals for another innovative tech start up, from time to time we hear of some tech start up that reaches greatness and creates billions of dollars for the founders and investors in the start up.  We celebrate this as "proof" of the greatness of our society and or our economy, we use this as an example of what the rest of the economy should do,  we even have politicians now jumping on the bandwagon of the start up model as a way to create jobs, and a great debate is occurring within our colleges about the need to teach entrepreneurship. 


The reality is all we have to do is return to a basic calculation of risk and create an environment where risk is calculated in an opportunity driven environment rather than a necessity driven environment.  We need to accept the fact that the success of the tech/internet start up world is as much of a desire to create wealth, in the sense of wealth within a bubble, as it is to "change the world."  Start ups such as Jewelmint and Beachmint, and the mega million dollars of funding they receive do not represent innovation nor will they change the world, but rather they are the equivelant of flipping homes in 2006.


We need to return the calculation of risk to an environment of risk vs. reward rather than the current environment of necessity.  We need to base our concept of risk on a more rational sense of 'value' or to a scale of base hits rather than home runs.  We do not need more risk takers, nor do we need more education in regards to entrepreneurship, and there is absolutely nothing the government can do, but rather we need more investors who value a return on an investment rather than scoring on an all or nothing gamble.


The reality is that risk is irrelevant in an environment that is necessity driven; no calculations of value are relevant in a world where opportunity has been replaced by necessity.  To calculate a formula assumes rationality and the calculation of risk without a corresponding calculation of reward is irrational.  


  


  






  

Entrepreneurship

The word 'entrepreneur' is being batted around quite a bit nowadays, in fact it is being used in so many situations and to describe so many people that I actually had to look the definition up to get my bearings.

Entrepreneurs, like the self employed and or business owner share some very important traits, they are all people who have possession of a new enterprise, venture, or idea, and are accountable for the inherent risks and the outcome of a product.  That does not mean that every entrepreneur is necessarily a business owner or self employed, nor does it mean that every owner is an entrepreneur.

Entrepreneurs are leaders and team builders, but that does not mean that they will be "a founder," "CEO/President," or "owner" of a company or organization.  An entrepreneur characteristically innovates, introduces new technologies, increases efficiency, productivity, or generates new products or services. An entrepreneur acts as a catalyst for economic change and are highly creative individuals who imagine new solutions by generating opportunities for profit or reward.

True entrepreneurs put passion before profits; the vision, the dream, is what they live for not the money.  A true creative passion to change, to improve, to see things others do not see, can actually be hindered by greed, by a desire to get rich.  

Can entrepreneurship be taught?  No, not really.  Environments can be created where entrepreneurship can flourish, and I would argue that the key issue with our economy right now is that we, as a nation, have killed entrepreneurship and it is probably the number one reason we find ourselves in the situation we are in.  Now, I realize that numerous readers will react negatively to what I just said, but outside of technology, outside of the internet, we have absolutely no environment for entrepreneurship.

If we want to foster entrepreneurship then we need to return to the concept of "critical thinking" or:

"...knowing how to sift fact from opinion, make a clear written argument or objectively review conflicting reports of a situation or event..."

In a recently published study,  Academically Adrift: Limited Learning on College Campuses, Richard Arum notes that:

Forty-five percent of students made no significant improvement in their critical thinking, reasoning or writing skills during the first two years of college, according to the study. After four years, 36 percent showed no significant gains in these so-called “higher order” thinking skills.Students who majored in the traditional liberal arts — including the social sciences, humanities, natural sciences and mathematics — showed significantly greater gains over time than other students in critical thinking, complex reasoning and writing skills.  Students majoring in business, education, social work and communications showed the least gains in learning. However, the authors note that their findings don’t preclude the possibility that such students “are developing subject-specific or occupationally relevant skills.”

Entrepreneurship is not an occupation but rather a way of thinking and seeing the world.  It is more a Weltanschauung than a 'subject' of study.  


I think we also need to realize that there is "opportunity driven" entrepreneurs and "necessity driven" entrepreneurs;  The world of internet based start ups is an example of opportunity driven entrepreneurs, while the rest of our economy fosters entrepreneurship as necessity driven, or people striking out on their own due to financial necessity.  There is an emerging body of work that shows that entrepreneurial behavior is dependent on social and economic factors:  For example, countries which have healthy and diversified labor markets or stronger safety nets show a more favorable ratio of opportunity-driven rather than necessity-driven entrepreneurs.


Necessity-driven entrepreneurs work out of their home, become insurance salesmen, or open up cupcake shops, while opportunity-driven entrepreneurs create new products, new ways of doing things, and eventually jobs for others.

Big And Tall - The Future Of Business Funding (Poking fun at the investment community)

"Getting funding for your business has had me totally perplexed.   I mean, folks are throwing bucks into sinkholes but why they won’t consider a company that has a great market and the goods is beyond me."

A quote from a friend of mine, with 10 years of experience with some of the biggest names on Wall Street, and another 15 years experience with the technology industry who in his spare time writes for Forbes.

Exactly how does one begin to answer that question?

Most Venture Capitalists have blogs and you can read them on a daily basis, you can visit Angellist, Quora, and or Kickstarter and basically you will find the same things being said a variety of different ways....and still not be able to answer the question.

I think the most interesting information comes from the Designer Fund where the mission is:

"If you're an early stage startup with a designer founder, we'll help you get to the next stage of funding and growth. If you're a designer looking to take the leap into entrepreneurship, we'll match you with hacker engineers and business hustlers to get your ideas off the ground. We collaborate with multiple accelerators and funds to build a solid foundation for your business and get you the best deals."

So, basically a bunch of designers are angry because the techies and the finance folks are cutting them out of the loop and they feel underapreciated.  Basically, their argument is that, "It's about giving designers a seat at the startup table that engineers and MBAs already have."  They believe that the focus on people with tech and finance backgrounds creates an investment climate where, "Most startups fail because they make things that people don't actually want!"  You can read more about this new venture capital fund here.

Hmm....

I guess if you have a business proposal you better have a techie or a designer as a founder or no one is going to be interested.  Or you could be like Bonobos, a company that was founded by two roommates who were graduate students at the Stanford School of Business to basically provide men with pants that make their butts comfortable!  Pants for $88 to $188 dollars a pair and a business model per selective quotes from the NY Times:

• "The Bonobos pants, which come in straight leg and boot cut, are best for those with athletic builds, although it is developing pants for slimmer and bigger men."
• "Mr. Dunn is well aware that manufacturers could easily replicate Bonobos pants, so he is trying to distinguish the company with customer service, convenience and technology."
• "Bonobos also offers free shipping both ways along with lifetime returns, and encourages people to buy and return several pairs of pants to find the right fit."

That business model is enticing enough for a major VC firm to invest $18 million dollars in?  I cannot help but wonder if the decision to invest in this start up was made by a group of young, unmarried, fellow MBA's?  I wonder what Bonobos will do once their current loyal consumers get married and have kids:  Married men with kids are not 'fashionistas' and dramatically limit their apparel purchases.  Their was once a great retailer, Castner Knotts, that had the absolute best customer service and return policy and they ended up being bought out by Dillards because of their liberal return policy!

I notice that since they received funding they have dramatically grown their product line, in fact, the whole business model has changed as they now, "...we pair our offerings with hand-picked brands to bring you an expertly curated lineup of better-fitting men’s apparel."

Hey, if that works then I can add Fatheadz sunglasses, which is a great product from a great company which Forbes has highlighted in their "20 Million Dollar Businesses That You Have Never Heard Of."  Or, I can add Sanuk Sandals in big and tall sizes!  What a great combination, big and tall tee shirts, big and tall screen printed tees, sunglasses, and flip flops!  THAT is one awesome product mix for a sized centric community!

But since most venture capitalists are young, health consious, water drinking, exercise fanatics they probably avoid at all costs noticing that the vast majority of Americans are overweight slobs who are more concerned of finding a shirt that covers their "crack" when they bend over than they are with ensuring that their pants give them the male equivalent of "butt."

Let me know when a television show is produced for "Guys With Comfortable Pants" that has more viewers than "Say Yes To The Dress - Big Bliss."

My sense of humor is getting the best of me....

How about this line from a Bonobos ad: "“When you wear the world’s best-fitting pants, women tend to stare. Even gawk. If you can handle being seen as a sex object, visit bonobos.com and order a pair.”  In a world where over 50% of the adult males are overweight?  Get the guy a shirt that fits, sunglasses, and a comfortable pair of flip flops!