Barry, you emphasize the irrationality of starting a business. In a prior post, Jeff Cornwall and I have a short exchange about entrepreneurial irrationality. He claims that entrepreneurs are "rarely gamblers," to which I respond, "successful entrepreneurs rarely view themselves as gamblers." My point was that entrepreneurs are so confident in themselves and/or their idea that they do not think of their venture as a gamble, regardless of what their friends and family say. In his rejoinder, Jeff observes: "I am amazed at the number of entrepreneurs who really are prudent in decision making." He suggests that entrepreneurs might be both confident and careful. Three questions about this:
(1) Do you favor one side over the other in this debate -- remember, you are at my blog now! -- or do you have a different view?
(2) If you are crazy, do you know it? You have written a book packed with sensible advice, but I get the feeling that much of what you say is tainted by hindsight bias. In other words, you can see the lessons now, but you learned the lessons by doing, both making mistakes and creating successes. If that is true, will budding entrepreneurs really be able to internalize your advice, or will they understand it only after going crazy for awhile?
(3) That last question is a nice segue to this idea: I am interested in hearing about the prospect of "creating" the entrepreneurial mind through education. This is a variation on that old question, are entrepreneurs born, not made? In your view, what is the role of entrepreneurship education in spurring entrepreneurship? (Note that Barry believes that entrepreneurs are "genetically optimistic," but "even with the proper genetic makeup, you won't be an entrepreneur unless you take the leap and seek your edge.")
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1. Posted by Gordon on February 6, 2004 @ 1:59 | Permalink
One more thought on this, Barry. We have been involved in discussions at the University of Wisconsin about expanding entrepreneurship beyond the Business School. Of course, I am in the law school, so we have already succeeded to some extent, but we have talked all the way up to the Chancellor about making entrepreneurship a more integral part of the college education. Or at least offering to do that. Would you be a booster (not asking for a donation, just moral support) for such a plan? In other words, do you think that colleges should be doing more to encourage and develop entrepreneurs?
2. Posted by Barry Moltz on February 6, 2004 @ 9:27 | Permalink
1)I think that you have to be "genetically optimistic" and crazy to start a business. Look at the SBA's statistics about how many start and go out of business every year (500K). I don't think that entrepreneurs can or want to assess that risk. In fact, you need to make all your decisions with incomplete information. As I say in the book, close your eyes and jump!
2)No, I don't think I knew at the time that I was crazy. My advice in the book won't prevent anyone from making the same mistakes..I just hope that people get deja vu when they run across a situation I describe.
3)I do not think that entrepreneurs are born. I think it is something you come thru experience. School is a good way to get structural background (like in operations and fianance) but you need real life experience in the business world to cross that bridge!
3. Posted by Barry Moltz on February 6, 2004 @ 9:33 | Permalink
yes, most of the economic growth over the past decade has come from people starting small business. That is where the jobs are. Universities I believe need to help people prepare for this!
4. Posted by pj on February 9, 2004 @ 9:50 | Permalink
Entrepreneurship frequently has a very high and relatively certain opportunity cost and a very speculative reward. Thus, entrepreneurs are usually gamblers.
That said, most entrepreneurs carefully calculate the tactics to maximize their chance of winning. Thus, they are like skilled poker players, not mindless slot-machine lever pullers.
On the biggest decisions, in my experience most entrepreneurs underestimate the difficult and work involved in creating their business; many overestimate the likely returns (not just of money, but of glory). So I would agree with overconfidence also; but also suggest that entrepreneurs place a higher valuation on such things as glory than others - entrepreneurs are rarely motivated solely by money.
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