Last week, Michael Tavani (of Switchyards and Scoutmob) visited GuildQuality’s headquarters to interview me for his On Doers series. I’ve known Michael via Twitter for years, and this was the first time I’d met him face to face. What a super guy. Thanks Michael. I am honored to be a part of this.
My kids are always starting businesses. They aren’t often successful businesses, but I love their effort and their indomitable spirit.
The lemonade business has been pretty good, but only when they time it right. The front-yard restaurant was surprisingly successful despite them selling only imaginary food. But the rock business! That one was horrible.
Both my kids love rocks. They don’t love rocks so much that they’d be willing to buy one, but their love for rocks is so strong that they believe other people would gladly pay 50¢ for any one of the small stones they’ve pulled from the creek behind our house.
Two winters ago, when the lemonade business wasn’t really a good option, they set up their rock stand and tried selling to passers-by. Whenever anyone would get close, Alex would shout, “Rocks for sale! Get your cool rocks here!”
Unfortunately, there wasn’t enough foot traffic for them to get any real traction, so they decided to take their game on the road. They bagged up the rocks, and started walking around the neighborhood. I tagged along.
EOx is a quarterly event put on by the Atlanta chapter of Entrepreneurs Organization. They invite entrepreneurs to give a brief talk on “entrepreneurial ideas worth sharing.”
Outside of Forum, EOx is my favorite EO event, and I was honored to have the opportunity to speak to this crowd. Joining me at the podium that night were Robert Dreesch, Benjamin Rudolph, and Reid Smith-Vaniz of Reliant Technology (one of my forum mates). Last quarter, two other forum mates shared their stories: CBQ of Big Nerd Ranch and Sean Cook of ShopVisible. Set aside an hour, and listen to what they have to say.
For my talk, I decided to share the short version of how our company switched from a rather conventional organizational path to the path we’re on today. To pack it into eight minutes, I left out a ton of stuff, but I tried to hit all the high points. Let me know what you think!
Speakeasy deserves some special thanks. They are one of EO’s sponsors and helped all the presenters (me especially) avoid looking and sounding like complete fools. ATV hosted us, and Friendly Human aced the video production.
A friend forwarded me this great article from Jesse Lipson at Forbes, applying Taleb’s concept of antifragility to business. The author encourages entrepreneurs to cultivate a work environment where people will “embrace volatility,” “fail frequently in small ways,” and “build back even stronger.”
“So in Antifragile,” writes Lipson,
Taleb suggests we stop trying to predict the future and focus on protecting against something that we can more easily measure: fragility. Something is fragile if it breaks with small changes in the environment: a wine glass shatters if you drop it; it’s fragile. If an object or system can withstand large changes, it’s resilient. A system is antifragile if it actually thrives on chaos, growing stronger when the unexpected occurs.
It’s like weightlifting: Your company is antifragile when it’s composed of more muscle than bone. Yes, bones can recover from a break, but often in a weakened state. A muscle is strengthened by damage. Weightlifters build muscle by pushing it past the limit. A stressed muscle is riven with tiny tears and, as the muscle repairs itself, it actually rebuilds stronger and bigger than before.
This morning, I forwarded the article along to some other entrepreneurs, and one responded thusly (I paraphrase):
Thinking about this, we should never have 100% client satisfaction. We should be doing little experiments all the time, and experiencing little failures here and there, with the result being that a small percentage of clients isn’t happy. If we don’t do that, none of our clients will ever be ecstatic.
I love that observation, even as someone who makes a living monitoring customer satisfaction. If 100% of our clients will recommend us, then we’re never failing to meet expectations, and that suggests we’re not taking enough small risks to keep driving our business forward in an enduring (and antifragile) way.
Companies add jobs more slowly, even in good times. Investors put less money into new ventures. And, more broadly, Americans start fewer businesses and are less inclined to change jobs or move for new opportunities.
The changes reflect broader, more permanent shifts, including an aging population and the new dominance of large corporations in many industries. They also may help explain the increasingly sluggish economic recoveries after the past three recessions, experts said.
Stephen Bainbridge added some thoughts as to why entrepreneurship is declining. He writes, “First, the dearth of US citizens pursuing careers in science and engineering. Second, the impact of law and regulation.” A lot of folks seem to be echoing his first point. I don’t buy it, and will share more about why at the end of this post. But, I completely agree about the second point. Bainbridge elaborates:
When you add up the growing costs of regulation and the growing risk of litigation, there’s no wonder smaller firms and start ups struggle. Only big firms can achieve the sort of economies of scale that make such costs bearable.
Regulation and litigation are absolutely stifling the growth of new businesses, and completely favoring large, established corporations. I’ve written some about that (here and here and here and here), and many other people have as well. Even so, all the bellyaching doesn’t seem to be altering the growth trajectory of litigation and regulation.
Here are a few more reasons why I believe entrepreneurship is on the decline:
Many years ago, I read Kevin Kelly’s New Rules for the New Economy, and that got me thinking seriously about building an internet business. Since then, I’ve found that all sorts of interesting people seem to point me back to his website for some interesting thoughts about interesting things. After one such pointing, I checked out his collection of sourced quotes and spotted one from George Gilder (I used the quote as the title of this post) pointing to this article about entrepreneurs and the creation of wealth. The internet is pretty cool.
I regularly find myself attempting to and failing to explain the importance of entrepreneurship and how entrepreneur means something different than business person or capitalist. Well, yes, entrepreneurs are often business people and might even describe themselves as capitalists, but seldom is a capitalist or a business person an entrepreneur. Entrepreneurs are, in fact, very rare and getting rarer.
One day a couple years ago, I got annoyed by so many people describing themselves as entrepreneurs–feeling that it dilutes the value and meaning of the career–that I tried to wrap some definition around the phrase. I much prefer the way Gilder characterizes entrepreneurship. It’s more than simply making new stuff work; entrepreneurship is about enabling prosperity.
I love how he differentiates between wealth creation and wealth extraction. Some wonderful excerpts:
Many great companies offer some pretty compelling enticements to join their teams. For a long time, we’ve seen perks like great health benefits, team happy hours, and lunches or breakfasts. More recently, employers have started offering unlimited vacation and 20% time. The trend is toward treating employees like creative, responsible adults. This is great, and I hope to see it continue.
Why is this happening? Speaking personally, we seek to offer this sort of work environment at GuildQuality because I want the people in my life to be in constant pursuit of self-actualization. Entrepreneurs seek to make the world into their image of how it should be, so those who value freedom and respect responsibility seek to bring freedom and responsibility to their workplaces.
But that’s not the only reason. More practically, businesses need great people, and great people want to work in great environments, on great projects, with other great people, where they feel they’re having a great impact. As a result, businesses compete for employees by creating as positive a work environment as possible.
Entrepreneurs, for all their quirks, aren’t so different from employees. They, too, want freedom. They want to work with great people. They want have a positive impact. They want to spend as little time as possible on administrivia and bureaucracy. They want to spend as much time as possible being creative and bringing their ideas to life.
Imagine, then, that industries are like employers for entrepreneurs. The best employees are selectively choosing where they’ll work. They ask themselves questions like,
Where will I have the freedom to be creative?
Where will I be rewarded?
Where will I get to work with wonderful people?
Where will I be able to have an impact?
And where do people want to work now? The internet. And why? Because they have no restrictions on their freedom or opportunity.
Unfortunately, we can’t eat the internet. The internet can’t heal us, nor can it shelter us from the elements. So if we’d like to start seeing real innovation — like the kind Tyler Cowen argues we’ve lost in The Great Stagnation — then as a culture, we have two choices:
1) We could aggressively regulate and corporatize the internet, so that all the profits from that industry would concentrate among only a few really big businesses, and all the time spent being creative and innovating would be consumed by time spent prostrating before bureaucrats for permission and favors. That would make entering the internet industry as distasteful a prospect as it is for other industries, thereby pushing more talented people toward industries that feed, heal, or shelter people.
2) We could strip the drag from the other industries.
Imagine what the built environment would look like if technology’s greatest entrepreneurs pursued a career in real estate development. They wouldn’t, of course, because this is too common a story.
Can you imagine people like Sergey, Larry, Steve, and Bill suffering impediments to their creativity? Of course not. As a result, we can’t dwell in the neighborhoods and homes they build. Nor can we be healed by the procedures they invent, or eat the foods they grow or serve.