If you ever watched the movie “The Intern” with actress Anne Hathaway, then you got a quick lesson in how start-up companies work. About the Fit, Hathaway’s young online retail business, has been growing like crazy and has relationships with VCs, one of the many acronyms that gets thrown around a lot in the corporate world. A VC is a venture capitalist, a type of investor who provides start-up money to a new business with the potential for big growth. VCs hope to get their money back quickly – and ideally much, much more as their investments in promising businesses grow.
It stands to reason that venture capitalists are often on the front lines of entrepreneurship in terms of identifying emerging technologies and trends in the market. Knowledge@Wharton recently caught up with venture capitalist Josh Kopelman while he attended the Wharton Global Forum this month in New York City. When you get the chance, listen to the full radio interview with Josh from the Knowledge@Wharton show on SiriusXM channel 111. Josh is the founder of First Round, a venture capital firm that focuses on giving seed money to new companies in their earliest stages of growth.
Do you want to start a successful business that actually gets funded? Budding entrepreneurs take note: Josh has been making some important observations lately.
Be Capable of Setting Your Own Course. When he’s considering an investment, Josh puts a lot of cred in the qualities of company founders. Here’s why: “Fundamentally, we have to bet on the founder. The first thing we look for is an ability to go off the conveyor belt. I’m a believer that in life, especially today, kids are raised on a conveyor belt. You go from elementary school to middle school, middle school to high school. You get pushed to do extracurriculars, pushed to study hard for your boards. You go to college. You’ve got to do well in college, get the right internships. It’s a conveyor belt. You show up the first day of any class in Wharton and what does the teacher hand you? A syllabus. It’s a road map. You don’t have to guess what to read. You don’t have to guess when the quizzes are and the tests are. We look for people who have an expertise in going off the road map because starting a company, no one hands you a map. No one hands you a syllabus. You have to figure it out. We’re looking for people who have historically done that and are comfortable doing that.”
People laughing at Your Idea? You May Be onto Something. Josh looks for contrarian ideas. His company First Round recently invested in RaiseMe, a startup that provides achievement-based scholarships. “The founders are very compelling, but the idea was also extremely compelling,” said Josh. “They’re realizing that universities are trying to reach out and build relationships with students while they’re in high school to attract the right demographics, to try to build a diverse student population. They realized universities give a ton of scholarship money that is issued after a student is accepted. They said, “What if we could give microscholarships while students are in ninth grade, 10th grade and 11th grade? You got an A on your English test, $25 microscholarship to this school.” Students can pick a handful of universities that they want to be eligible to receive microscholarships, and they’re updating their performance in high school, whether it’s an essay, whether it’s a test, whether it’s an attendance grade. There are students this year who graduated and had over $5,000 in scholarships from one or two universities, and they had a four-year relationship before they sent in an application. We thought that was really interesting. It took this pool of hundreds of millions of dollars in scholarships and transformed it from an after-the-fact benefit to a marketing program.”
Retail on Wheels. “In the next 10 years, autonomous vehicles are going to fundamentally transform the nature of retail,” suggested Josh. “When your printer is out of toner cartridge, why do you need a warehouse or a Staples when there could be trucks with toner within five minutes, and getting a toner cartridge is just as easy as calling an Uber today? What does Starbucks look like when the drink comes to you? Imagine what happens with everything else in retail when it’s portable? I think retail is rife for disruption.”
Entrepreneurs Need One Very Important Quality. “It’s never been easier to start a company. The costs to start a company keep coming down, the barriers keep coming down, but it’s not all up,” noted Josh. “A lot of what we look for is understanding the founder’s grit and resilience. Do the founders understand the risks that they’re about to take? Is it an informed process? A lot of it is an honest conversation about what they are signing up for, because I think many founders are often surprised by the struggle.”
Wharton marketing professor Tyler Wry helps us better understand this image of a really determined entrepreneur. “Grit is just perseverance in the face of adversity,” Wry explained. “Often times entrepreneurs (especially young and inexperienced ones) will be crushed and abandon a venture when adversity strikes. Good entrepreneurs will take setbacks as learning experiences, make the appropriate course corrections and keep pushing forward. You can also see this in an entrepreneur’s personal background (e.g., persevering through personal hardship; rising out of poverty; overcoming illness, and so on). Venture creation (like so many things) is mostly perspiration, not inspiration, so a gritty entrepreneur is someone who won’t run for the hills when the going gets tough.”
- Josh Kopelman of First Round Capital
- Forbes: What Exactly Is Venture Capital?
- Wall Street Journal: Learning Entrepreneurship from Juice Stands
- Meet a 14-year-old Venture Capitalist
Do you agree with Josh Kopelman’s conveyor belt image? As a high school student, do you ever get off that conveyor belt or away from that map and forge your own path? Explain a time you did so and how it made you feel.
Josh says that “Many founders are often surprised by the struggle.” What does he mean by this? Has entrepreneurship been glamorized to the point where anybody thinks they can become a successful business owner?
Are you a gritty entrepreneur? Prove it. Tell us a story about how you persevered in the face of adversity with your own startup and lived to tell about and learn from it. Share your story in the comments section of this article.
Mr. Kopelman made a very strong point when he mentioned that many young entrepreneurs are often crushed once faced with a serious obstacle and often quite their entrepreneurial ventures rather than turning the experience into something that should be learned from. From the perspective of these unsuccessful entrepreneurs, it can be said that all of the blame cannot be placed on them as there are financial obligations that must be fulfilled in life and everyone cannot cope with the high amounts of pressure that accompany running a company, making money, and then making them both last. However, I do believe that this does signify that somewhat romanticization of entrepreneurship and running one’s business. While I certainly do NOT believe that EVERYONE thinks that running a business is a relatively easy task that will lead pools of profit, I do believe that a decent number of young individuals do not really understand what running a business really entails. I have met, and have heard others mention, many high school students and freshman in college that express their desires to start a business right out of college. However, these individuals do NOT have a plan of action and do NOT have any backup plans (financial backing, a Plan B, etc.) if things do not turn out the way that is expected; these individuals do not have a plan to get back on their feet. I do believe that it is crucial for individuals to understand that running a business is not easy. In fact, a statistic from Bloomberg in 2013 stated that 80% of entrepreneurs who start businesses FAIL after the first 18 months. And I believe that it is this difficulty that Mr. Kopleman was seeking to underscore with his statements.
From my understanding as a high school student, I believe that if someone is seeking or has ambitions to create a business and make it extremely successful, the following questions must be answered in order to create a very basic impression that will determine if you have what it takes to be successful:
What product are you going to make?
What services are you going to provide?
What are you going to do that is BETTER than other rivals and already-established businesses and competition that is already situated or is going to emerge, in the market?
Along with figuring out pricing, finding venture capitalists, creating a startup without the assistance of venture capitalists (if you choose to do so), getting attention, providing services and products at a faster rate and a higher quality, many individuals who romanticize entrepreneurship fail to realize that that the odds are usually NOT going to be in your favor. These facts should not necessarily discourage anyone from pursuing their passions, but it should force them to consider factors that HAVE to be dealt with before taking a big step and creating your own entity. I myself have aspirations to own and run my own corporate law firm, however in order to be successful, I not only have to be one of the BEST at what I do, so that I can provide high-quality services that attract many clients, but I also have to be armed with the knowledge and networking that I can make through hard work in the realm of academia, as well as through making the active effort to spread my idea, discuss issues with more experienced individuals, and CULTIVATE my skills in other firms and areas of practice before I take this big step (if I still choose to do so in the future).
Common stories that often gets thrown around by young individuals, who haven’t really thought about HOW they are going to go about achieving their lifelong ambitions of running a startup, would be those centered around people who dropped out of college, ran a business, and minted money. What these individuals fail to realize is that those that ran a business in this manner had a PRODUCT or offered a SERVICE that offered a BETTER ALTERNATIVE when compared to their competitors; these business owners worked countless hours and created something that could be profitable and ultimately lead to their success. An example that I will use will be the company MVMT, a business that first started with creating watches and has branched out to create sunglasses and other wearables. The owners of this company, Kramer LaPlante and Jake Kassan, stared this company with money they raised through crowdfunding campaigns (they did not use venture capitalists but do note that they did have some form of financial backing). Prior to MVMT, Kassan ran an e-commerce business that he promoted for free on Youtube and produced $10,000 in a week at its peak, and growing up, he was exposed to the work ethic that is required of an entrepreneur by working with and learning from his own father who also ran his own business. LaPlante, prior to MVMT, also had experience with crowdfunding by launching his own wallet brand on Kickstarter, WHILE HE WAS STILL IN COLLEGE (take this time to note that no drastic steps have been taken yet– LaPlante was still in college, on his way to a degree, while also putting in the work on the side to fulfill his ambitions). It was with this experience and money that the duo created MVMT, which became successful for the following reasons. They were able to offer watches that were high quality and on par with those of competitors at a SIGNIFICANTLY LOWER PRICE, by cutting out retailers that served as the middlemen and selling their products online. They recognized the growth of e-commerce early on, noticed how these watches would appeal to younger generations, and offered high-quality watches at a lower price, which ultimately led them to BE COMPETITIVE and MAKE PROFITS. In fact, in the year of 2016, the watch company made $60 million.
Key points to take away from this story is that these individuals were able to offer a product that was better than those of their competitors, and they were able to do so by recognizing opportunities that stemmed from their previous experiences in e-commerce (these all correlate with the questions that I mentioned earlier in this post). They were able to create an initial source of financial-backing through crowdfunding and knew of the amount of work that was necessary in order to be successful beforehand when they worked on this project while they were still in college and still running other, very small, websites and businesses.
All in all, I believe that it is important for young entrepreneurs to seize opportunities and be able to achieve their ambitions. But, they must be able to recognize the work that is necessary in order to be successful, and they must be able to create their OWN plan, one that will not be offered to them by anyone else, that will offer a product or service that can serve as the foundation for a successful, startup business.
Here are the links to the statistic and story that I mentioned:
Hi Naveen. Thank you for your thoughtful comments! I agree with so much of your perspective and reflection. In addition to your great list of entrepreneurship imperatives, I would add: Does your idea satisfy a market need in a unique way? Many of the most successful entrepreneurial ideas — some incredibly simple — identify something that is missing in the market and move to provide it.
Thank you Ms.Drake for your reply!
I’m glad to know that you agree with my perspective on this matter. Additionally, I completely agree with the question that you proposed to be added to the list of entrepreneurship imperatives. It completely falls under the umbrella of creating a product or service that is better than those of competitors, in the manner that in doing so one is inherently making that product unique. Branching off of your statement that successful entrepreneurial ideas identify something that can be improved in the market and then move to provide it, I would also like to propose a rather general framework that I believe to encompass the overall process of successful business. An entrepreneur must be able to create something of value that is desired by the consumer and satisfies consumer expectations in a manner that will generate profits that will allow for business to continue. And in order to create something that is desired in a market that is already situated with many competitors, one must seek to provide something that is missing in order to be able to progress on their journey towards success.
I further expand upon this idea in my response to Harry’s comment as he also mentions you perspective and goes further into detail in regards to both of our insights. If you would like to observe further discussion and introspection, please read further on through this thread.
Thank you for your detailed response, especially the specific example of MVMT, which I found very interesting. I mostly agree with your points, and I will develop some of your points and add a few.
First of all, I’d like to address the point about “Many founders are often surprised by the struggle”. I do agree with the big picture you have mentioned, including the lack of back up plans, however I do disagree on some specific points you make.
Actually, I think that all the blame should be put on the unsuccessful entrepreneurs. If an entrepreneur is not able to handle pressure, the blame is on them – they are not yet experienced and skillful enough as they made the wrong decision to create their own firm. Of course, reflecting upon one’s own experiences is very important, however in this case it is quite costly.
I totally agree with you that ‘a decent number of young individuals do not really understand what running a business really entails’. I’m going to expand on this point as you’ve only addressed the lack of backup plans. Obviously, the entrepreneur made some bad decisions, which lead to failure.
The firms will usually experience short-term losses as they start. The entrepreneur may have made a terrible decision, e.g. the price of good determined by the firm is lower than the average variable costs. Also known as the shut down price, the firm can literally shut down, as they cannot cover the fixed costs and variable costs. Ultimately, this leads to the “surprise”. Alternatively, naïve entrepreneurs may expect to always profit even as they start up, so they may be surprised as the experience short-term loss. Entrepreneurs may not have ‘perfect information’ of the market, so they might be employing inefficient resources at a higher cost, or lowering the price when demand is inelastic, which decreases revenue. Bad decisions often lead to failure!
Many individuals want to start their first business after college. This can also be during college! For example, Bill Gates and Paul Allen founded Microsoft as they dropped out of college – what a daring action, but fortunately they did succeed. This includes Jack Ma as well, who failed many of his businesses until he finally succeeded.
I’m not sure how you define “success” in your response, but I’ll assume profits (revenue greater than costs), instead of an external benefit (benefit to the society like service and donations). The good or service they make is part of resource allocation, when a firm must decide – who to provide for, what to make, and how to make. Who to provide for is effective demand, those who are willing and able to pay for it. What to make is determined by an entrepreneur spotting or creating an opportunity in the market. In Jack Ma’s case, he created an online shopping platform linking producers and consumers online, and hosting a delivery service, which is cheap and efficient. How to make is the responsibility of an entrepreneur or someone he or she hires – trying to make the production process efficient and cheap.
You also mentioned ‘What are you going to do that is BETTER than other rivals and already-established businesses and competition that is already situated or is going to emerge, in the market?’ In a market with perfect competition (assuming no government intervention), there are many ways to gain demand (assuming the product is not a necessity and is elastic).
1. Price competition – this is a very risky method, however it works! The demand curve extends and quantity demand increases (note: demand curve does not shift). This is known as penetrating pricing. Predatory pricing is similar but it forces firms out of the market because of the extremely low price. There may be legal concerns as a monopoly may be born.
2. Non-price competition – e.g. after sales care, advertising, promotions, marketing – is more effective (generally) and safer to use. Less risk!
Of course, I was assuming that the products are relatively similar.
Thanks again for your great comment Naveen.
I’d now like to move on to Diana’s addition of the question, ‘Does your idea satisfy a market in a unique way?’ The “incredibly simple” part made me thing of SnapChat. SnapChat was initially developed at a very low cost (it isn’t even a complicated app but of course now there is customer service) and was purchased by FaceBook for $3 billion.
I totally agree that you said ‘Many of the most successful entrepreneurial ideas — some incredibly simple — identify something that is missing in the market and move to provide it.’ The entrepreneurs create that opportunity which never existed before; the investors identify the potential entrepreneurs and invest in them. Whether it be a niche product (which may work better for small firms and startups) or a standardized product, it will most likely succeed (get a patent first!).
I’ve added some questions to the entrepreneurial imperatives below:
– What good or service are you going to make?
– How are you going to be better than competitors?
– Does your idea satisfy the market?
– How will you make it?
– Will consumers be willing and able to pay for it?
– How are you going to make your product known (what marketing strategies)?
Please feel free to add more as long as they are suitable.
Thanks again Naveen and Diana. I’d like to end with the conveyor belt image as I found it very interesting.
I think that the conveyor belt image is a suitable image of life, but not quintessential. I do agree that if one is on a conveyor belt, they have little power or ability to get off, and can barely control their direction. This may be analogous to one’s life being determined by their parents, as they are constantly pushed whether it’s academics or extracurricular activities. They are barely controlling their own life and going with the flow of the conveyor belt. However, an entrepreneur has to “figure it [the syllabus] out”, or in other words, create the syllabus; an entrepreneur deviates from the conveyor belt by creating an alternative pathway; an entrepreneur innovates and creates opportunities.
However, this conveyor belt image is not exemplar, as the band continuously moves at a constant rate, usually slow and steady. The repetitive process can be considered mundane – but that’s not how life is. Despite only being a teenager, I’ve had many ups and downs in my experiences, which I will share later. I believe that life is considered interesting and meaningful, contradictory to the conveyor belt, which is used in robotic, mechanical, and industrial processes. If this analogy were to be true and accurate, we’d have a shaking conveyor belt (which is dangerous – I recommend not)!
Good Afternoon Harry!
I would first like to thank you for your perspectives and the level of thought that you put into your response concerning my opinion of the article. I do agree with some of your points, however, I do feel the need to clarify some of my previous statements, as well as discuss your point of view and relate both of our findings to a rather general claim that I believe to accurately portray the message that we want to make apparent. As a roadmap, I will first begin with your views on the conveyor belt, move on the definition of success, discuss your perspective of unsuccessful entrepreneurs, and then finally conclude with a series of new questions that I believe will contribute greatly to this thread.
Yet before I begin, I would first like to start with your perception of the conveyor belt. An entrepreneur is expected to create his/her own plan towards success and adapt accordingly to the many obstacles that will come across his/her way. As such, in addition to creating an alternate conveyor belt, it is simply unrealistic to view the path of an entrepreneur as one that is as constant as those of conveyor belts. As such, I have a counter proposal for an idea that can represent what an entrepreneur should be able to do: Think of life as a BOOK. There are going to some chapters which are sad, others that are happy, some that are suspenseful, and others that are exciting. While there are chapters that contain moments of happiness, success, and a sense of accomplishment that appeals to the reader, the reader must also be able to push through the experiences that are described in the sadder and more negative parts of the book. It can be very easy to get caught up in the flow of things, especially when everything is going against the expectations of the reader. However, unless the next page is turned, one will never know what the next chapter has in store for him/her. Similarly, an entrepreneur must have the ability to “flip” through the sadder and more difficult portions of their own “books,” or lives, and push forth to experience the happier and more successful parts of their lives. Of course, this does not only apply to entrepreneurs, but to all living individuals, so in order to make it fit the theme of the article, I’d say that an entrepreneur also has to have the ability to draft and publish their own happy ending, through all of the countless hours of “brainstorming”, “editing”, “revision”, and “peer-review”, whether it be by adding on more pages to their book or creating a sequel that will continue the series, rather than abandoning the plot and moving on to a completely different genre.
Now, I have mentioned the words “success” and “happy”, and as I understand, in your previous reply you stated that you were not exactly sure about what my perspective on success was. While you were correct in assuming that part of my perspective of entrepreneurial success is centered around profits, that is part of a grander picture that I will elaborate on. To me, success consists of a level of mastery & fulfillment in whatever venture that you decide to put your effort towards too, but it also consists of the ability to bounce back when you hit rock bottom. In order to be successful, one must be extremely passionate about what he/she does, and one must also be willing to do whatever it takes to accomplish their goals despite the adversities that will pop up along the plots of their “books”. In the scope of an entrepreneur, one must be able to create something of value that appeals to consumers that are willing to pay for that product or service, in a manner that satisfies consumer expectations so as to garner enough profit to make it possible and efficient for entrepreneurs to continue their business ventures. However, throughout this process, an entrepreneur must be willing to put in the countless hours of work to create a product/service that will lead to this general process. An entrepreneur must be willing to look at the grand scale of things and see where there is an opportunity to improve something in the aspect of the consumers’ lives, formulate a plan, and then test these plans. As you can see, this sounds very similar to the process of experimentation. And like experimentation, some experiments may meet your expectations while others may completely fail. An entrepreneur must be able to come up with more assumptions to test in the face of failure, as this is the hard work and persistence that will eventually lead to the desired result, like how repeated trials in an experiment yield reliable results. It is this persistent progression that will ultimately lead to a series of transactions that will make the business processes profitable that I believe to be the definition of “entrepreneurial success”. In doing so, I do believe that these entrepreneurs will leave the world being a better place than of what it was before, whether it be by serving as a role model for younger generations, leaving behind a legacy, initiating an effective process or system of organizations, etc., and as a result, contributing to the external benefits of aiding society that you previously mentioned. The quest towards profits and aiding society do NOT have to be as separate as you made them out to be, in my opinion.
With that clarification being made, and the discussion revolving around success, I would also like to address your perspective on unsuccessful entrepreneurs and how their lack of success is caused by themselves and the refusal to push forward. While it is necessary to handle this pressure and push forward, I do believe that it is a bit harsh to state that they made a “wrong decision” to pursue their interests. I believe a more appropriate and open-minded manner of expressing this perspective would be that entrepreneurs must be willing to make a lot of sacrifices and put in a lot of work. Others may not find this lifestyle to be suitable for their goals and their own definitions of success, and as such, would prefer a high-paying job in another corporation that would allow them to cultivate other parts of their lives, whether it be hobbies, relationships, interests, etc. But this is exactly why I mentioned, in my perspective on entrepreneurial success, that an entrepreneur must be PASSIONATE in what he/she is doing, as this will serve as the fuel for the persistent progression that will lead to success. If one is not willing to stay up till 3 a.m. to work on their product and then show up to lead their coworkers in the office by 6 a.m., then I do believe that they are aware of the difficulties that an entrepreneur must overcome, and some of the ones that do realize this, do end up quitting entrepreneurship (please keep in mind that this is simply a scenario to illustrate my point—the time constraints are not an issue for some individuals). Some may not be willing to cope with the financial pressures of unsuccessful business while others may have a passion for an interest, but the market simply doesn’t have enough demand to see the growth that the said individuals had imagined. While quitting may make them unsuccessful entrepreneurs in the mainstream sense, I don’t necessarily believe that ALL failed entrepreneurs will be unsuccessful and abandon their “entrepreneurial” nature. They may still take risks, take on the role of a leader, and show their ingenuity and hard work in other areas or occupations (much of the qualities that are seen in successful entrepreneurs), but the only difference is that they would not be the actual OWNER of a company or organization.
Moving on, your perspective on value and marketing strategies are similar to mine and I believe both of our perspectives resonate well. We can have further discussion on this if you would like, but for the sake of brevity, and due to the amount of depth we have both went into concerning this aspect in previous posts, I will move on to the more pressing matters of this exchange. The QUESTIONS!
I believe your last two questions do add a lot of value to the list of imperatives that I began with my first post. The level of thought that the list has been promoted on this article is very productive and after further reflection, I also believe it is necessary to move on to a more introspective platform in order to really begin to cover all of the bases, or “pages” if you will, of an entrepreneur’s journey (or “book”). I think we can both agree that along with hard work, consistency, networking, and marketing an entrepreneur as to undertake, business owners must also be able to conduct a high level of introspection in order to discover what they are passionate about, deduce their fears, and find the motivation that is necessary for the persistent progress that is crucial for them to flip the pages, experiment with different drafts, and eventually publish their own chapters of their journey.
Accordingly, I propose the following questions:
WHAT ACHIEVEMENTS MAKE ME EXCITED?
WHAT EXACTLY ARE MY PRIORITIES?
These first two questions are aimed to really focus on WHAT an individual wants to achieve so that he/she will be able to have a clear vision to work towards to.
AM I PUSHING MY OWN LIMITS? WHAT ARE MY LIMITS AND AM I BEING HONEST ABOUT THEM?
This question is aimed to make one aware and comfortable with their weaknesses. In doing so, individuals will be able to either dedicate time, energy, and attention towards cultivating those areas or dedicate these areas to other members of a team that will be able to contribute to the success of one’s goals. Being unaware of one’s weaknesses can be very dangerous and can contribute to unnecessary problems that can stunt success.
IS MY ENVIRONMENT BRINGING OUT THE BEST IN ME?
This question is meant to really make an individual strive to becoming as productive as possible so as to not infringe upon their mindset and goals. The “environment” can be anything from work setting, who one is surrounded by, and even factors such as diet and sleep pattern.
WHAT DO I VIEW AS “SUCCESS”? IS THERE ANOTHER DEFINITION THAT I MAY FIND TO BE MORE FULFILLING AND VALUABLE?
This is arguably the most important introspective question and its purpose can be a culmination of the aims of all the previous questions. As I have previously stated, one’s view of success can vary, and as such, it is important to set a bar to reach in order to feel fulfilled and be passionate about what one is doing. And, it is important to keep on asking yourself this question as the bar will change depending on the situation and the level of success that is seen as time progresses.
Yes! I like your reply so much I had to re-read it several of times to make sure I didn’t miss anything. It’s really interesting for me to read and I love the different images that evoke to my mind (not that I’m a great fan of literature of course :P).
First of all, I like your image of life as a book – probably a lot better than a conveyor belt, but I referred to it as it was stated in this article. I totally agree with everything you commented about this, but I’d like to add something else. We have to assume that the book is interesting enough to have the suspenseful, sad, and happy moments etc. But usually, the book will have something that foreshadows the sad or suspenseful moments. So, the foreshadowing can be analogous to the buildup of tension in real life.
Thanks for your detailed clarification on “success” – I was close, but missed a lot to elaborate on. It’s not only the profits, but also the passion, innovation, effort, perseverance, resilience. Although, I’d like to say that some entrepreneurs make the world worse than what it is before. Those entrepreneurs may have failed, and created lots of external costs in the meantime (e.g. pollution, global warming, health risks, destruction of habitat – all bad for the economic and life cycle). Also, they depleted the money of the investors (assuming they had investors), which obviously is a bad thing. Less money in the cycle! But again, you are right as well – they may have created many external benefits despite some failing – e.g. training for employees so more skilful labour in the economy, increasing efficiency, productivity, and output.
I’d still like to stick with my “harsh opinion” on the wrong decisions the entrepreneurs made, leading to failure. I’ll further clarify my viewpoint :). If they made lots of sacrifices, time, effort, etc. however, they are not “PASSIONATE”, the fault is still on them. They should’ve realised their interests and what they truly want to pursue before taking a massive leap for their enterprise. Not being able to cope with (financial) pressure is still their own problem. That’s a lack of skill, so they should’ve trained before the startup (provided that this is possible) – that’s a lack of decision previously made, which essentially was a wrong decision. If the market doesn’t have demand, that’s 100% on the entrepreneur for not finding out earlier. Why would someone start a business when the market is either dominated by monopolies or oligopolies when barriers to entry are high? Of course, they can still be a successful person, but not create a successful enterprise. The main business goal is still to profit (over all the other goals), and if that isn’t reached, I wouldn’t classify the business as successful.
I cannot agree more with you that introspection, or reflection, is so important! Not reflecting on past experiences is detrimental – not only to the entrepreneur, but also the enterprise. When reflecting, it’s also good to record it down so in the future, one can see the slow progression (or regression), and the constant changes in decisions (e.g. amount of time spent on marketing, work ethics, training, hiring employees, etc.).
I agree with all your proposed questions, and I’d like to elaborate on a few.
“IS MY ENVIRONMENT BRINGING OUT THE BEST IN ME?”
This immediately made me think of hiring the best resources (most productive employees, cheapest and highest quality raw materials), and best capital. This often applies in the international market when a firm will calculate transport costs. If the environment is suitable / desirable / in a major city, then transport costs will tend to be low.
A change in this question may be
AM I BRINGING THE BEST OUT OF MY ENVIRONMENT?
I know that you might not understand this question at first (neither did I), you must read my explanation for clarification xD. I just wanted to reverse the words so… What I mean is reducing external costs like pollution. Am I doing what I can to help the community (e.g. CSR), and making the marginal social benefits much larger than marginal private benefits? Am I doing what I can to preserve and improve the environment, and making the marginal social costs the same as the marginal private costs? These are probably the better questions, which you may consider.
I think that a few of your questions can be merged:
“WHAT DO I VIEW AS “SUCCESS”? IS THERE ANOTHER DEFINITION THAT I MAY FIND TO BE MORE FULFILLING AND VALUABLE? ”
as well as
“WHAT ACHIEVEMENTS MAKE ME EXCITED?
WHAT EXACTLY ARE MY PRIORITIES?”
WHAT DO I WANT TO ACHIEVE OTHER FROM PROFITS?
Essentially, the primary goal of all firms is to profit (provided they are for-profit firms). So, what does an entrepreneur want to do to society?
Thanks Naveen. Your comment has some absolutely amazing insight. Kudos to you!
I am glad that you found my response to be very intriguing, and I am even more happy to have been able to contribute to the productivity of this thread and get you thinking about the many different sources of imagery and ideas that can be associated with the contents of this article itself. Before I go on to discuss your latest response, I would like to recommend some books that you may find interesting to simply try to introduce you to literature that can be very helpful for you in the future through their contents. As for your rather unenthusiastic interaction with literature, let me know if you’d like any recommendations for books that pertain to business, work ethic, and communications with others; not all literature has to surround narratives! As a brief roadmap, I will be talking about the negative impacts you have mentioned, and then move on to our discussion on unsuccessful entrepreneurs and the newest set of questions, while also proposing 2 shifts in terms of the direction of this discussion.
Moving on to the actual extension of our discussion, now that you know the context for my perception of success (one that you seem to agree with), I would concede the point that failed business ventures can have negative ramifications. However, the impacts that you mention, such as pollution, global warming, health risks, etc. all would occur on a rather small scale; referring to the Bloomberg statistic I cited in my first post, a large majority of businesses do fail within the span of 2 years, therefore hindering a large level of impact for most businesses. Furthermore, not all of the impacts you do mention apply to all sectors of business. We can take MVMT for example; the manufacturing of these watches doesn’t pose a significant risk in health to the owners or small number of employees (unless you would want to go on a further level and take into account stress, sleep schedule, working relationships, etc., however, I believe at that point we would be talking about factors that apply to ALL jobs in general and that discussion would prevent an efficient and productive discussion). And, taking into account the external benefits you have listed while considering the future implications of those benefits, such as those employees possibly climbing up the corporate ladder, leading others, teaching younger generations, or even moving on the run their own businesses, the many benefits would still outweigh any potential negative ramifications if we were to conduct a simple cost-to-benefit analysis of your scenario.
Now in terms of your opinion of unsuccessful entrepreneurs’ ventures being their fault, there are a couple of discrepancies that I would like to point out. By saying “they [unsuccessful entrepreneurs] should have realized their interests…before taking a massive leap for their enterprise…”, you are basically removing one of the most crucial aspects of entrepreneurship that we both agreed to be one of the most crucial steps towards success: the opportunity to learn from grand mistakes that will point us in the right mindset. I did concede that there is an issue with younger generations being unaware of the work, sacrifice, and commitment that is associated with entrepreneurship in my first post, and we have no clash of ideas there. Our clash comes into play when you are inherently stating that unsuccessful entrepreneurs are in their situation because of them being passionate about the “wrong” things (what we would call an otherwise saturated market) and not being able to handle financial pressure. The first issue with this claim is that, to my understanding, the overall point of being passionate is being lost in this comparison between unsuccessful and successful entrepreneurs. The whole point of passion is to be able to find that intrinsic motivation that allows one to come up with new ideas that can eventually become successful, much like how Mrs. Drake mentioned in her response, and to have the ability to push through hard times. However, reality kicks in when other issues, such as financial and family pressures, come into the picture. As you have conceded, in the real world no one can really be taught to cope with this issue. As such, it is reasonable for one to put their entrepreneurial ventures in the backseat and pursue another occupation in order to provide for their priorities in life. This does not make them less passionate about their interests; there is still a possibility for them to continue to try again and again OR proceed to expand their ideas through the utilization of other corporations as a catalyst. This is the perfect transition into my point of the DEFINITION OF AN ENTREPRENEUR and the essence of the points of my previous post. I discussed the “entrepreneurial” nature that is so valuable, and I believe that this should be taken into your perspective.
My proposition is that we EXPAND THE PLATFORM OF THE ENTREPRENEUR; rather than making this description revolve solely around owning a company, this word should instead encompass the broader qualities that we have both mentioned in our posts: the ability to stray from the norm, to find intrinsic value and motivation, to be contributors to society, and to be able to provide for others. While I do understand that we were discussing “unsuccessful” entrepreneurs, I propose that we classify those individuals as individuals that fail to have or develop the GRIT that is necessary for success, rather than those that fail to be a CEO (given the many other factors that can contribute to failure besides the will to push through all obstacles, which is seen in only around 20% of new businesses). In the context of promoting social welfare, which is a new theme that I observed in your latest post, I do believe that promoting this type of definition of an “entrepreneur” would greatly expand your point of view on this topic of discussion and perhaps consider changing a rather absolute perspective into a more open-minded one like I proposed. This, along with your subtle shift towards social welfare, can definitely make this discussion a lot more expansive and thought-provoking in the future. Again, please feel free to offer your opinion regarding this idea or if you would need any further clarifications.
Finally, we seem to share similar views on the value of introspection. Journaling is a very strong skill and a good habit to develop over time; many successful people use this act to solidify their goals and intents for the future and I’m glad that you mentioned it within this thread. I do have some concerns regarding the changes you pose to my introspective questions.
We both seem to agree on the nature of the question, “IS MY ENVIRONMENT BRINGING OUT THE BEST IN ME?” However, you seem to have taken it in a very different context than what was intended. I was seeking to shift the debate towards the actual mindset of the entrepreneur, rather than the business setting, as these internal thoughts and answers are what serve as fuel to the GRIT that is so urgently sought. This question is supposed to make one think of the people they are surrounded by, positive and negative influences, productive discussions, and other factors that can influence motivation and goals. With this clarification being made, I propose that we keep (rather than change) my original question while ADDING your question (“AM I BRINGING THE BEST OUT OF MY ENVIRONMENT?”) to the list of imperatives, as you do bring up a good point of reflection that deals with the new theme of social welfare that this discussion is heading towards.
I do have to completely disagree with the last proposal you made, however, concerning the merging of my last question and the first two questions. An individual’s perception of success can vary based on personal experiences, goals, environmental factors, and current circumstances. Accordingly, I believe it’s fair to say that the questions I have initially posed serve a stable foundation for finding one’s passion and discovering the grit that’s necessary for long-term fulfillment. These questions really do focus on one’s inner-self, and as such, by limiting the options that an individual can choose from to serve as an intrinsic source of motivation, I believe that you are promoting an unrealistic absolute. It is not that I don’t agree with you on your point that an entrepreneur is giving back to society in some way, shape, or form; in fact, I stated the same thing in my previous post. It’s just that I already allowed for this exception to be made by making it clear that it’s very important to keep on asking oneself, “WHAT DO I VIEW AS “SUCCESS”? IS THERE ANOTHER DEFINITION THAT I MAY FIND TO BE MORE FULFILLING AND VALUABLE?”, as over time, the bar that will be set will change depending on the situation and level of success that is seen. I simply do not want to impede any option in regard to the self-reflection that is trying to be promoted with these last few questions. If need be, let one’s initial goal be to make large profits if that is what gets him/her towards the initial bounds of success; overtime as growth is seen, let those individuals have the FREEDOM to choose what else they want to achieve in life.
After all, isn’t it this sense of FREEDOM that also makes entrepreneurship and owning a business so attractive?
Let me know what you think Harry,
I’m in the situation again when I can’t reply to your post, so I can only reply to myself, which may seem a little awkward. I don’t know if it’s a bug on my computer or something else.
I have been trying to get into literature recently, and slowly learning to appreciate the masterpieces and legacies of great authors (totally not just reading it because it’s required in the course I’m studying next year). I have a long reading list to do so I might not have enough time to read business related books this summer – thanks for your offer though!
I’m pretty sure that the MVMT example still creates external costs, although I have no idea how watch manufacturing works. Possibly plastic pollution in the process, or poisoning to workers if not dealt with correctly? However, I totally get your point – e.g. accounting doesn’t pose a threat to the environment, and the firm can create many benefits.
I think there may have been a misunderstanding of what I classified as “wrong decisions” – an over saturated market was an example I gave after restating that I stuck with my own opinion. I have a lot more examples of “wrong decisions” in my first few posts. While re-reading the comments I made earlier, I realised that you mentioned an open-minded response was “…entrepreneurs must be willing to make a lot of sacrifices and put in a lot of work”. I hope you can elaborate on this, because I’m not sure how it is pertinent to the wrong decision making process. Putting effort and creating a product may be what is viewed as “success”, but the ultimate outcome may not be as successful as one had thought. But again, it is a learning process, which I will elaborate on.
I admit I omitted the opportunity to learn from grand mistakes, being important to success. However, I cannot find where I explicitly stated that I agreed with this. I do agree with most of this though, but definitely not the “GRAND” mistakes to be back on the right mindset. Mistakes are ok – failure is acceptable with young entrepreneurs. Losing a few grand to a few hundred grand feels bad, but resilience can help in the process. It’s an opportunity to learn from, depending on how the entrepreneurs take from it.
However, we can’t just say big mistakes are ok, especially grand mistakes. Not even the first time. I don’t think it’s appropriate to go up to your million dollar investor and just say, “Sorry, I messed up. However, I’ll learn from my opportunity. Please give me another chance, I make sure I’ll profit and succeed”. Trust and reputation will plunge. Yes, the entrepreneurs mindset may be back on track, but this major mistake may have caused bankruptcy, jail, etc.
Before grand mistakes, things should’ve been thought out carefully. Grand mistakes can often act as an impediment to success – small mistakes probably won’t though!
To some extent, I agree with you how passion can push you hard through the bad times. However, I think that resilience does it more than passion. Passion may keep you motivated, but resilience is what actually drives you forward, and makes you bounce back when at a nadir. New ideas, or innovation, or Research and Development (in larger firms) not only comes from passion, but also skill and ability of the entrepreneur. Sure, passion takes a part in it, but Apple won’t have a bunch of models of the iPhone without the technologically advanced skilful workers (over 200 patents). This might not be the best example as Apple is a massive multinational and Steve Jobs didn’t physically invent the iPhone. However, the entrepreneur like Steve Jobs would need the ability to hire the correct people (or hire a good HR department :)). Passion is important; skill is more (please argue against this if you don’t agree).
Moving onto the larger definition of entrepreneurs, I see that you’ve included social entrepreneurs in your example. I agree with the definition – it’s really precise! I would maybe add the actual core foundation and business knowledge as well. As I’ve said earlier, it’s really important! You’ve mentioned “grit”, we will need a clarification on this term. There are many interpretations before I digress with my own.
Swiftly moving onto the introspective questions, I realised that I made a typo. Initially, I intended to write what you proposed, keeping your question as well as adding another. I’m so sorry :(. The entrepreneurial mindset is very important – I just wanted to slightly digress and put it in the physical setting as it was what first came to my mind.
Hm… I don’t know what I was thinking when I wrote the merging of questions. I probably misread something. In retrospect, I do have to totally agree with you. I might have misread a phrase, confusing my actual view.
WHAT DO I VIEW AS “SUCCESS”?
IS THERE ANOTHER DEFINITION THAT I MAY FIND TO BE MORE FULFILLING AND VALUABLE?
I wanted to add a question on prioritise, but as I flicked through the thread, I realised you already mentioned it. Please excuse my poor memory!
Freedom is something very interesting to touch upon, as it’s been sought out for in the history of mankind. I live in China, and here, we don’t have the freedom of speech (or freedom of press). Most things we say against the government are filtered (but most of us bypass through VPN). I think it’s FREEDOM that makes entrepreneurship possible. In China, the lack of FREEDOM makes entrepreneurship very hard as an expatriate (due to lack of trust etc.). I’m not sure whether FREEDOM is the thing that makes businesses attractive. It only gives you the ability to start a company and pursue whatever you want. That obviously doesn’t make doctors, lawyers, sportsmen want to start an enterprise. Instead, I think it’s the temptation of success and reward, as well as innate abilities that make entrepreneurship and starting a business attractive.
I’ve learnt a lesson today – don’t do things in the early morning! I’ll either misread, mistype… what next? Thanks for your input Naveen – the discussion is getting much more interesting at the latter stages! Hope to hear from you soon.
Don’t worry about replying to “yourself” Harry; I can still understand your arguments without a problem!
Before I begin my perspective on the points you have recently mentioned, I would like to offer a brief roadmap: I will first be covering the issues that we reached a consensus on and then proceed to move into certain parts of your opinion that I believe can be expanded upon or perceived through a different perspective.
Accordingly, I’m glad that we were able to find common ground on our brief clash over the external costs versus the overall benefits that new businesses can produce in the grand scheme of the economy, social welfare, and further stimulation of national productivity. Additionally, I’m also glad to know that my clarification of our debate over the introspective section of the list of business imperatives allowed you to understand and agree with my perspective on the benefits and use of these questions. Don’t worry about misreading or not remembering anything on occasion; mistakes happen and it’s important to learn from them in order to experience further progress!
Moving on to the points of clash, I reviewed your examples of wrong decisions and I must say that I do understand what you are trying to state: decisions, such as establishing a “shut down price” or the employment of inefficient resources and poor marketing, can push businesses beyond a point of failure from which it is near impossible to recover from unless they receive a large influx of money. However, the entire point that I have been trying to make is that based on your scope of the situation, business failure is the SOLE result of poor execution and decisions made by business owners and this is wrong as other factors can cause businesses to fail. Some of the other points I mentioned in my last couple of posts concerning the entrepreneurial mindset and expanding the definition of an entrepreneur seem to have resonated with your beliefs as well, so instead I am going to move on and state other factors that can lead to business failure BESIDE poor executive decisions. When expanding your perspective to the open-mind approach that I proposed in my first reply to your comment, we are effectively opening our eyes to perceive the whole realm of business that also includes variables that are usually out of the hands of businesses, in general, to realistically control. These factors include wars, recessions, high-interest rates, and excessive regulations. I’m sure that you can see where my train of thought is heading towards in this direction, but for the sake of clarification and comprehensibility, I am going to expand upon these factors. An economic recession, on a basic level, takes place when high rates of unemployment yield significantly lower rates of product/service development by business and a decrease in consumer spending, ultimately affecting the profit margins and productivity of businesses, as well as forcing businesses to lay off workers in order to save whatever little money they have, while also losing the workforce that originally created all of these products that were used to create a profit. This can be the main cause of business failure even despite the “good” management decisions that are being made. Next, the ramifications of wars and conflict, besides the death toll and utilization of resources, also expands towards the economy and the flow of money. Conflict can lead to an increase in public debt and taxation (the taxes especially can limit a business’s ability to effectively allocate resources and make substantial profits) due to increased military spending, and wars also DECREASE both consumption AND investment as a percentage of GDP. Those are two factors that play a major role in the success and overall workflow within businesses; hindering them will, in turn, hinder and even stunt the growth of businesses. And finally, wars can also lead to an increase in inflation, which has even more harmful ramifications associated with it.
An increased rate of inflation, besides its regressive effect on low-income families and real incomes in general, also drastically affect businesses in a negative way in the following manners: a higher national rate of inflation will ultimately reduce the price competition (one of the big factors, that you mentioned in your first post, that can be used for business to provide value that is critical for sales) in exports within the global market, eventually curtailing exports and profits as a whole, thus leading to an increase in unemployment and a chance of business failure (due to the depletion in profit, access, workforce, and incentive). These effects then go on to apply a fairly large negative multiplier on the economy, which further perpetuates a cycle of otherwise uncontrollable factors that new entrepreneurs simply can’t control on a level that would be able to make a substantial difference. Additionally, high inflation rates are volatile, thus increasing business uncertainty due to the unpredictable fluctuation in costs and prices of goods, thus decreasing the possibility of capital investments that can be crucial for the expansion of new businesses in the early stages.
As it can be seen, there are factors that can also lead to business failure, besides poor management, and this is the message that I have been trying to propose from the beginning: rather than limiting the blame to JUST new entrepreneurs and their poor decisions, which can lead to them being unattractive to investors like you said, it’s also important to understand that other influences, such as the ones I have provided, can also influence the success of businesses. This does not mean that I don’t believe that one should learn from mistakes and push through difficult times (as it can be seen in previous posts, I believe in the opposite), but it does mean that this perspective of business failure should be expanded for the sake of promoting a broader level of awareness.
This does lead to the clarification that you requested on the relationship between the wrong decision-making process and the sacrifices that entrepreneurs must be willing to make. And I believe that this perfectly encompasses a different perspective that I believe resonates with the fact that business failure can result from poor management decisions as well as the lack of grit: can’t these “mistakes” that we have been discussing also expand to the failure of failed entrepreneurs to attempt to continue with their plans, despite any delays (such as a break at a another job in order to raise funds or any other methods that I mentioned in my previous posts), while also encompassing the fact that business failure can also stem from either poor management decisions or really poor economic circumstances?
I hope that these two explanations further clarify my points and give you the information that you were looking for, but if you do have any extensions or new thoughts that you’d like to introduce, please do not hesitate to do so.
I personally feel that this next clash of our perspectives is particularly important at this time in our discussion. Your point on passion and resilience, and understanding of both of those qualities in the realm of business is similar to my perspective to a certain extent. However, I do not agree with your polarization of passion and resilience in the scope of business productivity and success. I believe that it is necessary to realize that both of these qualities actually reciprocate one another and come together to form the desirable “skill” that you mention to be crucial for business success. The passion that creates the intrinsic motivation and sets the goals that are so necessary for success also serves as the fuel for the resilience that is necessary in order to overcome obstacles and expand to greater heights. In fact, this also closely parallels that “grit” that is mentioned in the article by Mr. Wry, which he described to be “perseverance in the face of adversity”. At first glance, this may seem to only exemplify resilience, but given the idea of reciprocity I just introduced, as well as the many stories of successful entrepreneurs, such as the ones you have mentioned yourself in your posts, I believe that this just means that the secret to success is PASSIONATE PERSISTENCE during the quest of mistakes, learning, the overcoming of obstacles, and the constant creation of new goals to achieve. To my understanding, I strongly believe that this perspective resonates with both of our beliefs on this issue. Would you agree?
Finally, to wrap up this part of our discussion, I would also like to clarify my perspective on the “freedom” I mentioned in my last post. I do agree with you on your point that freedom makes entrepreneurship possible, however, my intention with that last point was to actually refer to the financial freedom and the ability to be “one’s own boss” is what is very attractive to many aspiring entrepreneurs; the prospects of being able to forge your OWN path towards your own goals without having to work under anyone else or help anyone else achieve their dreams while you have to put yours in the backseat. I believe that this is a large part of the success & reward that you mention to be one of the major aspects of business that make it very attractive. I would also like to say that your input on China and entrepreneurship was very interesting for me; living in the USA, I think it’s great to also understand that there are countries where certain aspects of freedom are limited in one way or another. This prompted me to do further research and from what I can understand, much of the economic development that has spurred such a high level of advancement in China is accredited to government projects, infrastructure development, and foreign direct investment, with the expansion of the private sector being thought to be a byproduct by economic analysts. Given this scenario, I can understand why you wanted to verify my perspective on freedom in the realm of business and I hope that I was able to further explain my point of view.
I’m thrilled to know that you believe that this discussion is reaching more interesting stages as it progresses, and I must say that I feel the same way as well.
Let me know of your thoughts and wish you all the best,
*NOTE* The website did not allow me to reply to Harry’s latest post, and as such, I had to create a new comment.
Now I know that I’m know the only one who cannot reply to some comments sometimes :,). Starting a new comment is probably better as the thread looks a little neater.
I must admit my previous ignorance that business failure can be caused by external factors. To be honest, I was only thinking about internal factors that the firm can control (and that is solely determined by poor execution of entrepreneur). All your explanations and elaborations on examples are well thought out and valid. However, I’d like to offer you another point of view you may not have considered yet, through an example and explanation.
Let’s say that the entire domestic market for one specific good or service has “x” number of small businesses owned by different entrepreneurs (of different skill, age, experience, etc.). If we look from the macroeconomy, they will be impacted in the same way – war, inflation, recession, regulations, interest rates, etc. Hence, in an economic model, all the firms in that domestic market are affected the same way. We can assume that larger enterprises will suffer more, while small enterprises will suffer less. This is because larger firms buy more raw materials (which are often imported from abroad and they cost more due to inflation) and hire more employees (in the situation of inflation, they will demand higher wages which will cause cost push inflation).
Nevertheless, domestic enterprises that compete against each other are affected in the same manner (and cannot control). Hence, it’s up to the entrepreneurs again to see how they will face this adversity. Although they aren’t the SOLE reason, they are the MAIN reason. And, because the other factors CANNOT be controlled, and firms are affected in THE SAME WAY, it is up to the ENTREPRENEUR to make the BEST DECISIONS. Here is an imaginary example:
Let’s use the market for ice cream in China (very niche market I know). Those “x” domestic firms compete against each other, and offer a variety of ice cream. One day, there is a drought in Mexico, so vanilla is harder to grow and harvest. The price of vanilla increases as supply decreases. Vanilla ice cream is a trend in consumer taste, so now what should these ice cream entrepreneurs do? As you can see, it’s up to their decisions again (whether or not to ditch the flavour, buy vanilla from elsewhere, grow their own vanilla…). Every ice cream firm is affected in the same way (as all ice cream firms sell vanilla ice cream). The uncontrollable factors are important to take into account – I do understand this from your comment. But, as you CANNOT CONTROL THEM, it’s up to the entrepreneur again to see how good their MANAGEMENT and DECISIONS are. I think this is a very important point, which you have not addressed, so I decided to bring it up. I’m not sure how far you’ll agree with me.
You mention “new entrepreneurs simply can’t control on a level that would be able to make a substantial difference.” I think this supports my argument because experienced entrepreneurs can control on a level that makes a difference. No individual can control inflation, but good entrepreneurs know how to deal with it. Please correct me if I’m wrong.
I agree it’s important to acknowledge these factors (which can cause failure), but their role further challenges entrepreneurs in this predicament, and distinguishes the best. It’s all up to the entrepreneur(s) to deal with it.
Please can you clarify “this [learning from mistakes and pushing through in hard times] perspective of business failure should be expanded for the sake of promoting a broader level of awareness.” It may be my misunderstanding, but I cannot see a connection between the two phrases of the sentence. What I interpret is to expand the learning experience from business failure to make more people know about it (which is probably a misinterpretation).
I don’t think I have polarised “passion and resilience”. In no point of my response did I divide them apart. What I did was define my opinion – resilience does a little more work than passion. It is possible for an entrepreneur can have passion and no resilience. Resilience is something developed after practise (e.g. in simulations or real life situations). If a new entrepreneur enters the market, passion isn’t enough to drive them forwards. They need resilience, which they probably have not developed because they are new and inexperienced. You stated that “passion serves as the fuel for the resilience”. It does, but that doesn’t mean you can overcome obstacles alone with passion. They reciprocate each other, but sometimes an entrepreneur doesn’t have one or the other. That’s when everything falls apart. It’s unlikely for an entrepreneur not to be passionate (still may be possible but chances are low), so I will not address the opposite.
In addition, my reference to “skill” also included knowledge as the most important factor. In my example, I talked about Steve Jobs with his ability to hire the correct people and innovate (although not directly producing models himself). To me, skill includes knowledge, passion, resilience, perseverance, and grit.
Financial freedom has many advantages! You choose your own working hours, earn all the profits, work for yourself… However, some people may not like this lifestyle, as it’s hard to be credible, and have little starting funds (unless you are really rich). I’m thinking of a sole trader here, a business with total financial freedom!
Being immersed in bipolar cultures, I find it interesting comparing what the Chinese economy is like compared to Canada and US. Your research is indeed accurate – the Chinese government spends loads of money on infrastructure, subsidies for public transportation, etc. But all of this occurred due to globalisation! Removing those import tariffs is a Win-Win (however President Trump obviously isn’t giving any leniency on tariffs with China due to dumping), allowing only the most efficient firms to survive, which is heavily contributing to the Chinese burgeoning economy.
Indeed, the conversation is getting more insightful. Clashes lead to more ideas and explanations, while total concordance doesn’t lead to much progression. I’ll be busy starting Saturday, so I might not reply to this thread ASAP. I’ll try my best to.
Excuse my grammar and omissions in the beginning. I have no idea what I was trying to say…
No worries my friend!
Good Morning Harry!
I do agree with you on the fact that the thread will start to look a little neater now, but there are a couple points of your argument that I do not necessarily agree with.
Let’s first begin with the new perspective you have mentioned. You are correct in saying that all enterprises will be affected by factors like war, inflation, economic recession, etc., however, I believe that you are mistaken when you made the assumption that they are all affected in the same way and then go on to state that larger firms suffer more. This is simply not the case. While they may be affected in the same way, the REACTION will be different due to the following reasons. A large enterprise (for the sake of an example we can use any Fortune 500 manufacturer) will experience many of the effects that I stated previously: a decline in profits, increase in unemployment, cut costs by curtailing development procedures and reducing the quality of equipment, and even stunting the expansion of marketing and advertising. You have stated the employees may demand higher wages, but you have to realize that in the context of history and past recessions, this does not mitigate the cutting back on the hiring of new employees and the laying off of other workers, and the fact that recessions are seen in a negative light is because they do force business to cut down on raw materials that are so crucial for success. However, these large enterprises usually have a series of backup plans for all core systems, such as cash reserves, that can be used to keep them afloat. When we move to look at small business, which have a substantially lower amount of sales than of these larger companies, they have a much more difficult time of surviving recessions due to the lack of assets, like collateral, and cash reserves that can only be accumulated over time, as well as the difficulty in securing additional financial assistance from banks and venture capitalists due to the negative effects of a high rate of inflations (that I have discussed previously). As such, this accounts for the fact that bankruptcies occur at a much HIGHER rate in small business than of their larger counterparts (in the context of these other factors that I mentioned of course; this is not an absolute but rather an indication of a situation that you may have misunderstood).
Now you can argue that small businesses must expand in order to achieve the resilience of larger firms, but you must understand that history itself shows that these small businesses have often become bankrupt due to these factors. This does not mean that I don’t agree with you on the fact that an entrepreneur must try to make the best decisions and control the factors that can be controlled in order to still maintain afloat in a competitive market. And I do agree with you on the fact that good entrepreneurs know how to deal with these types of situations through experience and knowledge; this relates to my emphasis on learning from mistakes. But I believe that your flawed assumption fails to expand the platform to encompass many of the other factors that stunt business growth and while we can’t seem to agree as to whether or not they are the MAIN reason, I believe that we both can agree that they do play a SUBSTANTIAL role in the realm of business.
And now to clarify your misinterpretation. Given the context of my argument, I was simply trying to propose that these mistakes you mention should not be just limited to bad management decisions, but they should also expand to encompass poor decisions that surround a lack of drive and passionate persistence to push through difficult times in order to accomplish one’s dreams. As I have mentioned in my first post, many entrepreneurs do fail due to quitting in the face of adversity (this is simply another reason for failure; there are many other reasons, as I’ve mentioned before) and this can also be viewed as a fatal mistake.
As for our debate on passion and resilience, I believe that we both are of the same opinion and there is simply a misunderstanding. We both agree that passion serves as a fuel for resilience. However, from what I can tell, you seem to have misinterpreted my point and believe that I think that passion alone can allow one to overcome obstacles. However, in my previous posts, I have explained that passion allows one to push through difficult times and reach success; this is the resilience that you are talking about. In other words, this reciprocity, that we both agree on, is basically the product of passion RESULTING in resilience and allowing for an entrepreneur to reach success. Of course, there must be a strong passion for one is doing; simply going into the market without a serious and mindful attitude can be detrimental in the future. However, with this point being clarified, I am also glad that we can agree on the fact that an entrepreneur without these qualities will definitely face major difficulties as he/she tries to start or expand a business.
At this point in the discussion Harry, I believe that we are both clarifying our opinions and actually reaching a consensus on what we think about the factors that influence the actions of aspiring entrepreneurs. It’s been pretty interesting to watch this thread become more insightful and further expand its platform from what it was when we first began to comment on this article; I urge to go back a read all of our posts in succession to understand what I mean! Let me know what you think, and I look forward to our next discussion. Also, don’t worry about the grammar mistakes and time of reply; I understand what a hectic summer schedule can do!
Sorry for such a late reply – I had a hectic latter part of my summer and school has just started! Our conversation has almost been a distant memory ahhhhhh it took me like 20 mins to re-read everything xD.
First of all, I’d like to correct a misunderstating. By stating that larger firms suffer more, I did not mean that they collapse as often as small firms. You are right by stating “bankruptcies occur at a much HIGHER rate in small business than of their larger counterparts”.
However, what I actually meant was suffer more in DEPTH not BREADTH. Depth is how much a big firm can potentially lose rather than the number of big firms going bankrupt. And if they go bankrupt, they lose WAY more than small firms.
I like examples, and although I used many hypothetical ones earlier, I’ll focus on a real one today. Lehman Brothers. Everyone knows the terrible tragedy of Lehman Brothers. There are many factors to blame – recession, soaring of housing prices in 2005-2006, lack of financial support from US government, etc. However, $600B gone from a MASSIVE investment bank, making everyone talk about the subprime mortgage issue. The stock market almost crashed that day due to this crisis. Right now, the accounting firms for Lehman are still selling off their property and illiquid assets. Yep, 10 years after, all those houses haven’t been converted to liquid assets yet.
I must concede that I don’t have data for how much small firms lose, so please rebut me if I am incorrect. I do acknowledge that the RATE of insolvency is much higher for small firms.
Finally we are almost getting to full consensus through clarifying each others’ misinterpretations (more on my side haha) and explanations!
Being a skeptic at all times is extremely important, as I’ve learnt from Theory of Knowledge (TOK) in the IB Diploma Programme. But this course is driving me crazy ;-; I really want to doubt life now…
Good luck and have fun with school!
Many individuals nowadays overlook the qualities an entrepreneur needs to have in order to be successful. Everyone can begin a startup with the right idea, but not everyone will succeed without the right mindset. As Professor Wry mentioned, many young and inexperienced entrepreneurs abandon their ideas when adversity hits, but those who persevere and learn from their mistakes will succeed. An innovative idea is not created in one day and successful businesses are not either. While people see the final product, a big, successful company like Amazon who has created an immense amount of wealth, the majority do not even know that Jeff Bezos began its business in his house’s garage!