4 Lies We Tell Entrepreneurs About How To Succeed
A vast industry has grown up in this country to dispense advice to entrepreneurs. Some of that advice is helpful, but much of it is harmful—almost as if designed to make entrepreneurs self-destruct. Consider these four commonly heard recipes for success that, on inspection, turn out to be poison pills:
You must have a high tolerance for risk. In fact, comprehensive long-term research on entrepreneurs in America shows that they are no more risk tolerant than the rest of us. Encouraging entrepreneurs to take on additional risks to increase their chances of great rewards—to “shoot for the moon”—is particularly pernicious. Entrepreneurs, mistaking their own caution for cowardice, take on unnecessary risks and make reckless moves—into markets, into debt, into adjacent products—that kill their companies.
Entrepreneurs are born, not made. The danger here should be obvious: self-delusion. Entrepreneurs who believe that they’re endowed with a natural gift—akin to perfect pitch or photographic memory—for entrepreneurialism are headed for a fall. Even if an entrepreneurial gene existed, it wouldn’t help its possessor lead people, make good decisions about how to commercialize products or shape and re-shape an organization as it grew. The myth of the born entrepreneur also causes many people to shun entrepreneurialism in the first place. That’s because the “geniuses” held up as examples—Steve Jobs, Jeff Bezos, Elon Musk—are all white men. That sends a discouraging message to women and minorities: you need not try because no born entrepreneur looks like you.
Grow fast or die. Almost all successful businesses start small and stay small until they know how to deliver real value to their customers. Exhorting entrepreneurs to grow fast before they fully understand what customers want can push them to expand businesses that turn out to have only limited appeal. BirchBox, an online beauty products subscription service, was prodded with $90 million of investment and loans to grow fast. But it did so without actually understanding which customers might want to receive $10 worth of cosmetic samples every month for years versus those who might sign up for only a few months. Today, the company is heavily in debt and being sold for a fire-sale price. Worse, some companies feeling the pressure to grow, like Outcome Health, Zenefits and Theranos, cut corners and even cheat to make it look as if they’re expanding. They hope the illusion of growth will attract investment, which leads only to bigger losses and greater failures. Before extolling the virtues of growth, we should be cautioning small businesses to find their footing and prove out their business models.
It’s all about STEM skills today. Entrepreneurship is ultimately about making some group of people happy enough to gladly give the entrepreneur money in return. Technology and computer code are important tools entrepreneurs use to make their businesses efficient and to help them find customers, but they are rarely the product per se. Further, the companies that sell their tools to entrepreneurs compete to make those tools easier to use, so entrepreneurs do not need STEM degrees and MBAs to succeed. And many people have readily commercializable skills that have little to do with technology. We should encourage them to put those skills to work instead of making them feel inadequate about their education or technical ability.
Why does it matter what principles of success we push? Because all the new jobs in our economy are created by startups under five years old. According to some estimates, around $531 billion—yes, billion—are spent each year on starting new companies. Right now, about 18 million nascent entrepreneurs are working to start about 9.5 million new businesses. U.S. Census Bureau data shows that slightly less than 650,000 actually incorporated in the past several years—way less than the 800,000 a year typical of 20 years ago.
Meanwhile, the vast entrepreneurship industry rumbles on—new books published every week, a vast and growing academic literature, numerous organizations dedicated to helping launch startups and a business press ever eager to showcase the next big thing. Admittedly, I’m part of that industry. So what’s different here? I take my mission to be examining, challenging and debunking much of what we think we know about entrepreneurship. If we are to stem its dangerous decline, we have to change the dialogue. Stay tuned.