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The Self-made Billionaire Effect: How Extreme Producers Create Massive Value, by John Sviokla and Mitch Cohen
THERE is an important difference between a billionaire, and a self-made billionaire. The self-made category created wealth in excess of $1bn through entrepreneurial activity, or the expansion of their inherited wealth by 100 times or more. This excludes pure inheritance and crony capitalism. In 2012, there were more than 800 self-made billionaires in the world.
A large number of these self-made billionaires held management positions in established companies before launching out on their own. The authors of this book, two PriceWaterhouseCoopers executives, provide important insight into how billionaires operate, and then raise the question of how to accommodate these rare individuals in existing businesses. Many billionaires had worked in businesses before.
Dietrich Mateschitz was a marketing executive with the German cosmetics company, Blendax, before he launched the remarkably successful Red Bull drink. The Sudanese-born billionaire Mohammed Ibrahim worked for British Telecom before he started Celtel, the “bottom of the pyramid” African mobile telecommunications company.
What makes billionaires able to create such massive value? Like any other entrepreneur, there were “the serendipitous moments of revelation”, they had the right connections to the right people, and they were ready to risk their careers to pursue their new venture. However, all entrepreneurs have similar characteristics - yet few succeed, even fewer reap high returns, and fewer still make great fortunes.
There are, oddly, few pieces of research that analyse billionaires. “Those evaluations often come to contradictory conclusions,” the authors report.
To arrive at valuable conclusions, the authors eliminated from the Forbes list of The World’s Billionaires any who might have acquired their wealth in an environment where there was a lack of regulatory transparency. From the resulting list of about 600 billionaires, their study focused on 120 who were randomly selected.
Commonly-held myths
Their research found a number of common beliefs to be myths. More billionaires were between 30 and 40 years old than were at the beginning of their careers, squashing the myth of the savvy wunderkind. Only 20% of the random sample came from the technology industry; instead, they represented 19 different industries. Eighty percent of the sample became billionaires in highly competitive, mature industries.
Far from creating their wealth through the abuse of others, a large number of the billionaires studied had pledged to give away more than half of their net worth. While some billionaires did come from financially tight backgrounds, 75% came from households who were middle class and above.
What the authors’ research did reveal was the commonality of habits of mind. They are all able to function with “multiple ideas, multiple perspectives and multiple scales”, all at the same time. These dualities affect how they approach “managing their time, executing a business idea, handling risk, and balancing the talent in their own organizations”.
The authors refer to this set of characteristics as “Producers”, in contrast to “Performers”. Performers are extremely good at what they do, but it is always in a single arena. They can see what works and what won't in their arena, through years of analysis and improvements. Producers, by contrast, “revel in clashing elements together”, working with dualities.
The authors identify five dualities.
Seeing spectacular potential
Producers see spectacular potential where others see only improvement. They connect extreme empathy for the customers’ needs and desires with an imaginative mindset that explores new and untested ideas. This the authors call “Empathetic Imagination”.
The Producers work both fast, slow and super slow, knowing how little control they actually have. They exhibit “Patient Urgency”.
Where others separate the brilliant ideas from the execution, Producers approach execution with the same innovative mindset as they do the billion-dollar idea. This the authors call “Inventive Execution”.
Producers are not high risk-takers, but they are more concerned about not being part of the future than they are about taking risk. Theirs is a “Relative View of Risk”.
The mythic “lone genius” (if it applies anywhere,) is absent from entrepreneurial billionaires. They understand that it takes a master Producer and a master Performer at once to create great wealth. Their approach is the duality of the “Leadership Partnership”.
I doubt the authors have any illusions about their understanding of billionaires being the last word on this barely researched subject, but the fundamental contribution of this work is the big question: what would have happened if these billionaires had been accommodated in their previous places of work? What would one need to do to identify and retain exceptional Producers?
Mohammed Ibrahim received his advanced degrees in engineering and telecommunications in the UK. He then started working at British Telecom. The traditional way of selling telecom services was by subscription, a method beyond the ability of the poor with irregular incomes.
Ibrahim saw the potential of telecommunication in Africa, but others saw only the inability of making a return from people who could not subscribe. His solution was to sell prepaid scratch cards for a few dollars, satisfying the desperate need people have for communication. Within five years, he was serving six million people in 13 African countries.
What would it take to attract and retain a Mohammed Ibrahim?
Readability: Light ---+- Serious
Insights: High -+--- Low
Practical: High --+-- Low
*Ian Mann of Gateways consults internationally on leadership and strategy and is the author of Strategy that Works. Views expressed are his own.
