From Predators to Icons; How to succeed as an entrepreneur : The New Yorker
Paul D. Fernhout
somewhat to building an open manufacturing related business (unfortunately
it is not online without a subscription):
http://www.newyorker.com/reporting/2010/01/18/100118fa_fact_gladwell
It has incidentally a great explanation of aspects of the housing bubble
too, and how banks were basically selling underpriced mortgage-related
insurance (Credit Default Swaps) and got stung by that. By implication, the
taxpayer bailed the banks and their insurance purchasers out, because
otherwise people like investor John Paulson profiled there might have lost
money if the banks selling him insurance went bankrupt and could not fulfill
their insurance promises to him.
http://en.wikipedia.org/wiki/Credit_default_swap
Some text snippets from the New Yorker article:
http://www.theawl.com/2010/01/the-malcolm-gladwell-digest-the-sure-thing-jan-18-2010-the-new-yorker
"""
Malcolm Gladwell. Subtitle: "How Entrepreneurs Really Succeed." Ted Turner
"inherited the largest outdoor advertising firm in the South." "He could
advertise his new station for free." "Within two years, the station was
breaking even." "In a recent study." "The truly successful businessman� is a
predator." "Wall Street thought that [John] Paulson was crazy." "But Paulson
wasn't crazy at all." "'There's never been an opportunity like this,'
Paulson gushed to a colleague, as he made one bet after another. By 'never'
he meant never ever." "Paulson's story also casts a harsh light on the
prevailing assumptions behind corporate compensation policies�. to turn
executives into risk-takers." "Many entrepreneurs take plenty of risks�but
those are generally the failed entrepreneurs." "Failed entrepreneurs tend to
be wildly undercapitalized." "Famous experiment with kindergarten children."
"People who work for themselves are far happier than the rest of us."
"""
Gladwell also points out in the article that many entrepreneurs take on
substantial risks because they have no other alternatives, like they are
"undercapitalized" because they don't have rich and supportive relatives
they inherit from or can borrow from repeatedly through multiple failures.
More people discussing the article:
http://www.google.com/search?hl=en&q=new+yorker+sure+thing+john+paulson+ted+turrer&btnG=Search
Example:
"Gladwell: entrepreneurs are predators, not risk-takers"
http://econsultancy.com/blog/5245-gladwell-entrepreneurs-are-predators-not-risk-takers
"""
None of this is to say that the Ted Turners and John Paulsons of the world
don't deserve credit for what they've done, or that they haven't done a
fantastic job spotting profitable opportunities and minimizing their
execution risks. But their big successes have far more to do with the fact
that they were in a position to leverage their existing resources to seize
even bigger opportunities. Unfortunately, the average entrepreneur doesn't
have much leverage, at least when he's getting started. If you aren't left a
small fortune or aren't already wealthy, you have to begin somewhere.
And that typical somewhere is where the risk comes in. There are plenty
of now-successful entrepreneurs who took out a loan, put their assets on the
line or quit a great job to start a new business. Not all of them are the
billionaires Gladwell is looking at, but to deny that they are examples of
successful entrepreneurs is just downright silly. They did take on risk, and
they did incur significant opportunity cost. Nothing they pursued was a
"sure thing".
Perhaps a distinction needs to be made: entrepreneurs and businessmen are
not the same people. An entrepreneur is the lion cub who may grow into a
lion if he avoids predators and gets enough food. The businessman is the
lion who spends his days protecting the pride and picking off feeble prey.
For the former, relatively small risks can come at a huge cost, while for
the latter relatively large risks can be managed with relatively little cost.
In the final analysis, many entrepreneurs do bite off more than they can
chew. But the very best leverage their successes, and the capital that comes
with them, to generate even bigger successes. Gladwell seems happy to ignore
the risks incurred acquiring those early successes and instead gawks at the
fruit they eventually bear years later.
"""
That one links to a book from which most of these ideas are drawn:
"FROM PREDATORS TO ICONS: Exposing the Myth of the Business Hero"
Michel Villette; Catherine Vuillermot; George Holoch (Translator); John R.
Kimberly (Foreword)"
http://www.cornellpress.cornell.edu/cup_detail.taf?ti_id=5465
"""
In the popular imagination, the business media, and the schools of business
and management that train new generations of entrepreneurs and executives,
achieving extraordinary success in business is attributed to far-sighted
individuals who have taken bold risks, provided innovative leadership, and
introduced new products, services, or ideas superior to those of the
competition. Amid the growing skepticism about the means by which vast
amounts of wealth are accumulated and its consequences, however, this belief
is long overdue for reevaluation. In From Predators to Icons, Michel
Villette, a sociologist, and Catherine Vuillermot, a business historian,
examine the careers of thirty-two of today's wealthiest global
executives-including Warren Buffett, Ingvar Kamprad, Bernard Arnault, Jim
Clark, and Richard Branson-in order to challenge the conventional
explanations for their extreme success and come to a better understanding of
modern business practices.
In contrast to the familiar image of the entrepreneur as a visionary with
a plan, Villette and Vuillermot instead discover a far less dramatic process
of improvised adaptations gradually assembled into a coherent course of
conduct. And rather than being risk-takers, those who are most successful in
business are risk-minimizers. Huge gains, these case studies reveal, are
most reliably obtained in circumstances where the entrepreneur has
established careful provisions for risk reduction. As for the view that
innovation makes success possible, the authors find that because innovation
is an expensive process that takes a long time to produce profits,
innovators first of all require capital; success makes innovation possible.
The necessary resources, they show, are most often derived from what they
provocatively term "predation": ruthlessly taking advantage of
imperfections, weaknesses, and vulnerabilities within the market or among
competitors. Finally, From Predator to Icon considers the "practical ethics"
implemented during the phase in which capital is most rapidly accumulated,
as well as the social consequences of these activities.
Drawing on interviews with some of their subjects and, crucially, close
readings of the authorized biographies and other hagiographic accounts of
these figures, which eliminates the bias of malicious interpretations,
Villette and Vuillermot provide revelatory insights about the creation and
maintenance of business wealth that will be profitably read by both the
captains and the critics of contemporary capitalism.
"""
Discussion of that:
http://www.google.com/search?q=FROM+PREDATORS+TO+ICONS
Note that these authors are not using "predator" in the sense of doing
anything illegal. They are using the term more in the sense of hunting,
finding a situation where people have different perceptions of value and
risk, and exploiting it through various financial deals, which is just
classic capitalism. Of course, the alternative would be to alert the public
to the problem, rather than, say, bet on the collapse of the housing market.
Of course, it seems that the public and most of the financial world seem not
to listen when you try to say something. :-)
Also, it is not accurate to say these people like John Paulson are not "risk
takers" in one sense -- the risk they take is a faith in their analysis of
the situation being substantially accurate. It is very easy to miss some key
idea when thinking about things, and it is also possible to have some higher
level entity swoop in and change the nature of the game (another risk).
Key to these models of extreme entrepreneurship seems to be deliberately not
sharing key insights or raw data, so information hoarding in that sense is
leading to fiat dollar hoarding. For example, John Paulson could have
alerted the banks to their CDS insurance being underpriced based on his
analysis, but instead he just bought lots of it (well, he might have tried,
but I doubt it. :-) Still, that is not always the case, since, as I said,
you can tell the world lots of stuff, and most people won't believe you
until some time after change is staring them in the face. :-) Although
lately I've been having good success pointing out that today's smartphones
will be discarded in three years, and this makes an interesting niche for
educational computing (like a free OLPC-type project). That seems a
prediction within people' comfort zone because it is short term and they
have seen it happen already (most people already have a discarded and unused
cellphone at home).
Here is a related post by me on Bill Gates, linking to some usually
undiscussed secrets of his success (having a multi-million dollar trust fund
at birth for adequate capitalization and studying other people's code he
found in computer center dumpsters); see:
http://slashdot.org/comments.pl?sid=1316287&cid=28837221
http://slashdot.org/comments.pl?sid=1316287&cid=28837517
More on what dumpster diving meant to Bill Gates:
http://it.slashdot.org/comments.pl?sid=437640&cid=22255952
"""
Interviewer: Is studying computer science the best way to prepare to be a
programmer?
Bill Gates: No. the best way to prepare is to write programs, and to study
great programs that other people have written. In my case, I went to the
garbage cans at the Computer Science Center and I fished out listings of
their operating system. You got to be willing to read other people's code,
then write your own, then have other people review your code. You've got to
want to be in this incredible feedback loop where you get the world-class
people to tell you what you're doing wrong.
"""
Note that a basic income is the same as a million dollar trust fund in some
sense,
http://www.pdfernhout.net/basic-income-from-a-millionaires-perspective.html
and the free and open source movement would make information available to
everyone without dumpster diving. So, basically, the current economic system
is set up so that only a few people can be like Bill Gates. It might be you,
but it is very unlikely. And then things get ugly:
"The Wrath of the Millionaire Wannabe's"
http://www.conceptualguerilla.com/?q=node/47
Anyway, just more interesting stuff on entrepreneurship. And this is not
meant to paint it as entirely evil, even if one can talk about the relative
values of competition and cooperation in putting together an ethical
paradigm for building a good society.
"No contest: the case against competition"
http://www.share-international.org/archives/cooperation/co_nocontest.htm
For a more positive example, one can look at Ted Hall and ShopBot, where as
I understand it, he saw a niche related to a personal itch (cheaper and
easier to use CNC tools for woodworkers than the ones designed primarily for
metalworking) and then built a prototype for himself and after seeing it
worked, expanded into that area. And he tried to make an open DIY platform,
but found people in practice were more interested in turnkey systems. So,
there really is a continuum of possibilities of behavior here. Still, even
then Ted Hall had some capital behind him in the sense of a regular income
from being a professor and having earned a PhD and created other social
connections that might have been of some help in establishing credibility
for expansion. Granted, he still made impressive accomplishments, but it was
not as impressive, as say, some twenty-something coming out of college owing
US$100K in student loans starting a company about open manufacturing and
making it work financially (we may never see that, or see it only once, it
seems too hard. :-) So, the success of ShopBot Tools is also not an
out-of-nowhere thing for, say, a twenty-something with no assets like, say,
Bill Gates is often thought of as an icon of technology success (despite the
facts he was born with a trust fund and had lots of other advantages). Steve
Jobs was much closer to a Cinderella story in real life, although even he
was in the right place at the right time with the right skills and right
friends, and also benefited from seeing the work done at Xerox Parc on
Smalltalk and networked computing.
And for every ShopBot Tools succeeding as a small-to-mid-sized business,
there may be thousands of mechanical prototypes that people do in their
spare time or as a startup with high hopes that go nowhere. The same is true
for the music profession and for sports -- while there are actually many
jobs as music teachers, music therapists, sports coaches, and golf course
staff, there are very few people making million dollar salaries as famous
recording artists like Madonna and Sting or as sports stars like Billie Jean
King and Tiger Woods. And the fact is, there can only be a few big
successes, because otherwise, who would be the audience indirectly paying
their salaries? The star model of success in our current economic framework
guarantees most people will never be national stars (or at best, have their
fifteen minutes of fame in big media). Still, it is true that we can all be
important in our family or our neighborhood or online communities to some
degree. It is that focus to moderate success, to aspire to be connected in a
positive way to others, that is achievable for almost anyone. And even for
the range from fairly-well-off to ultra-rich, I'd suggest that good
relationships and a sense of productivity and a sense of creating good
experiences for themselves and others is where much of their healthy
life-satisfaction comes from anyway.
"What Makes Us Happy?"
http://www.theatlantic.com/doc/200906/happiness
People with a billion dollars may be happier in some ways than people with a
million dollars, but a law of diminishing returns sets in and they are not
1000X happier. Some may even be less happy. And, at some point, the things
people want and need for happiness are not easily purchasable, even as you
may need the free time from wealth to reflect on that or to have the "free
time" to build your life in new directions.
And there are also other models of cooperation that argue information
sharing helps companies more than it hurts them, because they become centers
of accumulating knowledge even if every information trade is 99% to the
other partner and only 1% back. That 1% new stuff adds up, and the cost of
giving away the 99% is usually trivial. So, even within the purely
commercial realm, there are arguments for openness. Is you competitive
advantage that you know something nobody else knows? Or is is simply that
you know a lot and can use it well to solve people's problems, just as one
of many people who can do that, and who all are important and valueable to
each other and to society?
Again, the people profiled in that article essentially made single big bets
in a fiat dollar market. That is a very different situation than running a
more diversified physical or software product-oriented business like ShopBot
Tools, where the success of a product may involve innovations in many areas,
as well as the innovation of how they are specifically combined or packaged
or marketed. Still, there is something we can learn from thinking about all
these stories.
--Paul Fernhout
http://www.pdfernhout.net/
====
The biggest challenge of the 21st century is the irony of technologies of
abundance in the hands of those thinking in terms of scarcity.
Paul D. Fernhout
> The New Yorker had a great read on entrepreneurship that might apply
> somewhat to building an open manufacturing related business (unfortunately
> it is not online without a subscription):
> http://www.newyorker.com/reporting/2010/01/18/100118fa_fact_gladwell
Just to create a circular reference :-) I posted that email (composed a week
or two ago and not sure if I would send it) in part so I could refer to it here:
"Meshwork and hierarchy; transcending fiat dollars"
http://slashdot.org/comments.pl?sid=1522556&cid=30970562
That is a conversation thread I've been having on Slashdot on some related
issues about economics and money and so on under a story called: "A Case For
the Necessity of Science Fiction".
http://entertainment.slashdot.org/story/10/01/24/1655235/A-Case-For-the-Necessity-of-Science-Fiction
Of possible interest in that slashdot post is some thoughts from my own
experience of how much in the computer world has gotten messed up due to
financial issues leading to poor technologies choices from competition and
unusability, that stems from technologists often reinventing the wheel badly
due to licensing costs or lack of cross-pollination due to proprietary and
competitive cultures.
Thomas Fledrich
multimillionaire, then yes, this would take a lot of luck or time or skills.
But if it's just about being able to make enough money for a living outside of
a corporate hierarchy chances are much better. The figures I've seen show on
average about half of start ups still in business after several years.
For me it makes a lot of difference be able to work to one's own schedule and
do the things one wants to do in the way one likes to do them compared to
following the instructions given by some boss.
But in the end this is a matter of taste and all people should be able to
choose their preferred types of activity.
Andrii Zvorygin
> It depends on what you call success. If success is being defined as becoming a
> multimillionaire, then yes, this would take a lot of luck or time or skills.
>
It might be a curious aside.
Who really even wants to be a multimillionaire with fiat currency?
There's a whole inbuilt hierarchy that's a real old game.
Big Money's got strings attached.
I'm more interested in price calculated barter.
The "money" being the left-overs from a barter transaction.
Once repayed that "money" disappears.
Hence if you've got money,
it's got value.
Can calculate the value of their good or service using price
calculation formula.
(mass+time)^chakra*utility
> But if it's just about being able to make enough money for a living outside of
> a corporate hierarchy chances are much better. The figures I've seen show on
> average about half of start ups still in business after several years.
All it takes is commitment,
a green heart chakra anchor.
A love that keeps you going.
Can still be in "business" as long as you are doing something.
>
> For me it makes a lot of difference be able to work to one's own schedule and
> do the things one wants to do in the way one likes to do them compared to
> following the instructions given by some boss.
>
> But in the end this is a matter of taste and all people should be able to
> choose their preferred types of activity.
>
Agreed.
Third-chakra density of homo-sapiens,
is the chakra of choice.
- Lowki
Sam Putman
>
> Can calculate the value of their good or service using price
> calculation formula.
>
> (mass+time)^chakra*utility
>
Can you elaborate on this formula?
Like, what's the difference between a small mass-time object with high
chakra-utility, and a large mass-time object of low chakra-utility?
-Sam.