I recently saw a real estate listing urging prospective buyers to “buy while the market is hot!” Wait, what? A “hot” market is one defined by an (often synthetic) overabundance of optimistic buyers which creates a demand spike and corresponding high prices. Buy while prices are irrationally high? Isn’t that the worst advice a real estate “professional” could give?
Entrepreneurship is also trending right now and this leads to an acute problem. Any time something rises in popularity, marketers will gin up a product to sell into the hysteria. Startup-themed products are everywhere: books, articles, seminars, social media feeds, and—not surprisingly—university curricula. This flood of products to market doesn’t tap into an emerging market that only exists recently, due to some new technology (like computers or the internet during the last couple of decades). Instead, these products are a response to customer enthusiasm—the result of savvy marketers who know an opportunity to sell a product when they see one.
I don’t claim that the purveyors of startup tchotchkes intend to or go out of their way to scam their customers; they’re merely ambivalent about whether the product delivers any real value to its user. This is, indeed, a fine example of sales and marketing in a vacuum.
The concept of entrepreneurship is being bought and sold like it was some type of concrete commodity. And it’s being promoted by the same hucksters that spent the last few decades peddling cigarettes, asbestos, and 90s denim shirts. Again, I’m not saying that the marketers go out of their way to deceive customers, only that the purveyors have detached their behavior from the reality of whether their product is value generative or simply profitable.
Why bother defining entrepreneurship?
Is it important that we define entrepreneurship? Is it important that we create a filter that separates the “in” from the “out”? Permit me a quick sidebar. I promise I’ll bring it back to the point.
Fundamentally, there are only two reasons to study anything:
- to go and do (with enhanced ability due to the learning)
- to become capable of transmitting the knowledge to other learners (for one of these same two reasons)
Because of the recursion in #2, the entire reason for learning can be encapsulated in the singular goal of improving future performance. The reason for studying entrepreneurship is to increase the likelihood of entrepreneurial success. In order to detect whether we’ve improved in that dimension, we must define the activity. The answer to the question of which is the most effective preparation will depend heavily on our definition of entrepreneurship. So if we aspire to teach/learn entrepreneurship, yes, it’s critically important that we start by defining it.
OK, so what is entrepreneurship?
Disclaimer: This section dives deep and you can probably skip down to Philosophy: Scarcity or Abundance below if you’re not into pedantic definitions of abstract concepts ;-)
I have a somewhat narrow view of what qualifies as entrepreneurship. This is probably at least partly due to my default reaction whenever something I do/like becomes trendy. My response is the stereotypical “but I liked them before they were popular!” But my narrow definition also makes it easier to identify cases of entrepreneurship and also to prescribe behaviors and characteristics that enhance it.
My definition of entrepreneurship is quite simple:
Entrepreneurship is an orthogonal-contrarian opinion of some market, incarnate.
Let’s dissect some of the vocabulary:
- contrarian = The opinion deviates from convention or best practice; not the path that will be taken if existing cultural, social, economic, or policy forces continue to dictate activities.
- orthogonal = The opinion is not defined by convention or rejection of convention, but is instead ambivalent as to whether convention is respected or followed.
- market = The common definition of an economic market.
- incarnate = Execution. Build the thing and deliver it to the market. There is always, 100% of the time, a thing, but it might be non-tactile like a service or process.
It’s worth noting that the orthogonal-contrarian nature of the endeavor always leads to the disruption of some type of incumbent (even in the case of an entirely novel industry), which is why I haven’t specifically included “disruptive” in my canonical definition.1 The same reasoning applies to why I didn’t include some component of “risk” in my breakdown—actively pursuing a path that deviates from convention is inherently risky (financially, socially, etc).
Given a point in time, there are various future scenarios that have different probabilities of occurring. Entrepreneurship is the act of delivering a product or service to a market in a way that leads to a future which lies outside the set of the most likely default outcomes.
Given this definition, we can classify activities as entrepreneurship or not:
Entrepreneurship
- starting a business that delivers a novel technology to a market
- corporate intrapreneurship (so long as it’s allowed to disrupt the mothership)
- building a meta-business (i.e., building a chain of dry cleaning stores)
Not entrepreneurship
- simply being self-employed (the nature of the endeavor matters)
- owning a franchise (market forces ensure that someone would have done it; there’s no deviation from the most likely future)
- being a traditional landlord (although building a real estate empire is probably entrepreneurial)
These lists are not comprehensive, but should give you an idea of how I classify activities.
Philosophy: Scarcity or Abundance?
Back to the matter of teaching/learning entrepreneurship…
Biz schools explicitly teach students how to allocate scarce resources in ways that maximize profit. This is unquestionably a valuable skill. This scarce view of the world is appropriate in some contexts (mining & extraction, commodities trading, hourly rate services) but is entirely nonsensical in other contexts (software, space exploration, social happiness). It’s worth repeating: biz schools have historically (and appropriately) focused their research and training on fields with inherently scarce resources. Those colleges have even built the training system itself to be inherently scarce (think: admissions boards, entrance exams, selective/prestigious universities, etc).
It’s understandable—business school administrators know that scarce resources command higher prices. They calculate (consciously or subconsciously) that perpetuating the scarcity of the educational credential will increase the transactional value of that credential. They might be right. The school’s ability to serve students has historically been limited by facility/faculty size. Given that rigid cap on scale, tailoring the system to extract maximum profit from a small subset of customers is a rational profit-seeking decision.
Taking on entrepreneurship education is also a rational profit-seeking decision for the business school. But it’s not a sound pedagogical one. It’s ridiculous, actually—the thought of a scarce-minded, hierarchical, traditionalist gerontocracy being charged with teaching abundance-bred anarchy to people at whose age that stuff comes naturally. Entrepreneurship is inherently abundant in the sense that it is anti-scarce—it typically introduces competing alternatives that threaten incumbents who control presently-scarce resources. Whether entering an existing market or creating a new one altogether, the startup ethos is to build a better mousetrap and replace the legacy ones. Displacing an incumbent is rarely the point, but is often a side effect of this mindset.
B-schools transmit to students the sacred values of incumbency (creating and maintaining competitive advantages) and bureaucracy (a power structure of technicalities; a form of incumbency). Entrepreneurship’s entire premise is anti-incumbent. Even when a startup creates an entirely new market, those customers (and their dollars) come from somewhere. That somewhere is an incumbent.
Those same biz schools that for generations have preached the gospel of incumbency have recognized a market opportunity around entrepreneurship and have co-opted the training of would-be entrepreneurs because of that market (profit) opportunity.
So, what should the aspiring founder do if they find themself in an entrepreneurship class?
It depends. Every person is different and each of their situations is unique. However, if we simply focus on what actions will, on average, increase the likelihood of entrepreneurial success (as defined above) for the average student sitting in a business school classroom, the answer becomes easy: find a different major. The overwhelming majority of household-name founders from the past 50 years trained as engineers and scientists. Their studies focused on inventing and making things. Makes sense. The second most common background (miles behind the first) is humanities (history, economics, etc). These folks learned about human behavior and interconnected systems. Both macro disciplines teach students foundational skills and theories that apply universally.
I recently made a list of the most recognizeable top-tier founders and their college majors. It wasn’t a terribly scientific compilation, but I didn’t go out of my way to include/exclude any category/individuals, and the list serves for illustration purposes. Maybe I’ll include the entire matrix in a future essay, but here’s a sample for flavor:
| Founder | Company | Studied |
|---|---|---|
| Jeff Bezos | Amazon | Electrical engineering @ Princeton |
| Larry Page | Computer engineering @ Michigan | |
| Elon Musk | Paypal, Tesla, SpaceX | Physics, Economics @ University of Pennsylvania |
| ... | ||
| Oprah Winfrey | [media empire] | Speech & performing arts @ Tennessee State |
| Sam Walton | Walmart | Economics @ University of Missouri |
| Stewart Butterfield | Slack | Philosophy @ University of Victoria |
In my list of about fifty people, roughly half came from backgrounds in science/engineering, but only one (Marc Benioff) had majored in something taught in the business school (business administration in this case).2 Considering that only 6% of college students study engineering but 20% study business, the lopsided distribution of degrees among top-tier founders is even more shocking. In nerd-speak: studying STEM is extremely positively correlated with entrepreneurial success (at least at the highest level), while studying business is strongly negatively correlated. Indeed, any major outside of business is probably a better choice if a student wants to succeed in startup land.
Entrepreneurship education takes its current form because that form is profitable, not because it’s the shortest path between aspiration and success (cynical, yes, but also true). A more likely path to success is to acquire foundational skills like computer programming or economics. This approach parallels the athlete who (after being blessed with favorable genes) focuses on strength & conditioning before situational skills like penalty kicks or half-court buzzer-beaters. The specialized skills might be the difference in one game every few years, but the foundational strengths will increase the odds of winning—every time.
1 For example, Oculus was a disruptive threat to Facebook, not because Oculus was entering the social media space, but because it could compete for the time that Facebook’s users were spending on Facebook-owned properties. Facebook acquired Oculus to ensure that if VR became the next big time waster for internet-connected humanoids, that Facebook could continue monetizing that time.
2 When I relaxed my criteria to include people I had never heard of who had founded well-known companies, the percentage of business degrees remained roughly constant, but the scale of success decreased significantly (think: Papa John’s Pizza vs Google).
brnt 2021-07-13
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