BOOK REVIEW: Strange facts about entrepreneurs | Fin24
 
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BOOK REVIEW: Strange facts about entrepreneurs

Aug 02 2016 06:57
Ian Mann

Originals: How Non-conformists Change the World, by Adam Grant

THE sub-title of this book, “How Non-conformists Change the World”, does describe one aspect of this book. However, its value to business people lies elsewhere. Let me explain.

As I have quoted previously in this column, “It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.” (Mark Twain). There is much about investing in businesses that so many believe, that simply isn’t true. It is the insights into this area that make this a ‘business book’, and not only a book of sociological interest.

Author Adam Grant is a charismatic Wharton Business School professor, who has gathered sound research and pithy accounts to make the case against many accepted truths about investing in businesses. Where this has particular relevance, is the direct investment into your own or others’ businesses.

Let’s start with the young. Despite what we might expect from child prodigies, they rarely change the world as they grow up. Studies of history’s most distinguished and influential people show them not to have been unusually gifted children. The child prodigies do no better than their less endowed peers from similar backgrounds, at coming up with ideas or companies that advance business or the world.

“They become doctors who heal their patients, without fighting to fix the broken systems that prevent many patients from affording health care in the first place.”

Economists find that as teenagers, successful entrepreneurs were nearly three times as likely as their peers to break rules and defy their parents, skipping school, shoplifting, gambling, drinking alcohol, and smoking marijuana.

So who are the brave who venture out into uncharted territory, and produce the break-throughs and products? Surprisingly, they tend not to be that brave.

Most investors would never put their hard-earned money into businesses where the founders won’t commit fully. Yet the best founders rarely do so.

Just before Warby Parker - an American brand of prescription glasses and sunglasses sold online - launched in 2010, Grant advised the founders to focus every waking hour on making their project a success. “We’re not sure if it’s a good idea and we have no clue whether it will succeed, so we’ve been working on it in our spare time during the school year,” they told him.

With this response, Grant declined to invest in the business because the founders didn’t have enough skin in the game. The company went on become a “unicorn” – valued at over $1bn.

Keeping your day job is a good move

A study of over 5 000 Americans in their twenties, thirties, forties and fifties who became entrepreneurs showed that those who kept their day jobs had 33% lower odds of failure than those who worked in their business full-time. The risk averse and self-doubters are more likely to build a business that will last.

Another study of over 800 entrepreneurs and employed adults asked participants to choose one of three ventures they would prefer to start. The entrepreneurs were significantly more likely to choose the safest one.

“Former track star Phil Knight (founder of Nike), started selling running shoes out of the trunk of his car in 1964, yet kept working as an accountant until 1969 when he went into Nike full-time. After inventing the original Apple I computer, Steve Wozniak started the company with Steve Jobs in 1976, but continued working full-time in his engineering job at Hewlett-Packard until 1977,” Grant reports.

Seeing a gap in the market caused by something that aggravates users or raises costs unnecessarily - alone - is not always a strong sign of opportunity. Many failed businesses have held this popular view at the expense of their shareholders.

Consider that “before women gained the right to vote in America, many had never before considered their degraded status as anything but natural”, Grant points out. Before the internet bubble burst, it felt “natural” to go to a bricks and mortar store to select anything from books to clothing to food to videos. Many start-ups learned this lesson the hard way, burning investors’ money and crashing.

It took the success of stores such as Amazon and Zappos before enough people were comfortable to buy products they typically didn’t order online.

What are the criteria for judging the success of a new opportunity? The Segway was forecast to be a wild success, but failed. Seinfeld was expected to fail, but turned out to be a wild success.

Quantity is the best predictor of quality

Across all disciplines, psychologist Dean Simonton noted, those with the greatest volume of work had the highest number of influential or successful ideas. For example, Bach wrote over a thousand pieces in his lifetime, and three were rated among the 50 greatest pieces of classical music by the London Philharmonic Orchestra. So were six of Mozart’s 600, and five of Beethoven’s 650. Edison produced 1 093 patents, but only a handful of truly great inventions. The conclusion is surely that with great ideas, quantity is the best predictor of quality. 

Why did Dean Kamen, founder of the Segway, and a prolific inventor, fail? Steve Jobs, Jeff Bezos and John Doerr all thought it would succeed, and invested in it.

The best way to judge ideas, our own and those of others, is clearly to get feedback at each stage of development from the right people. Kamen was so concerned someone might steal his ideas that he had a strict secrecy policy.

However, not anyone’s feedback is valuable – ‘the wisdom of crowds’ is only wisdom in specific contexts. The best quality feedback will always come from colleagues in the field. “Comedians often say that the highest badge of honour is to make a fellow comic laugh; magicians like fooling audiences but live to baffle their brethren,” Grant points out.

The Segway’s early investors simply didn’t know enough about transportation – a key cause of the Segway’s failure. What would one do with a Segway that couldn't be locked, had no carrying capacity, couldn’t be used on pavements, and was simply too expensive as a… well, toy? “To accurately predict the success of a novel idea, it’s best to be a creator in the domain you’re judging,” Grant warns.

Aside from the collection of interesting narratives, there are some very valuable business pointers that justify including this book in your library.

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.

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