Young Entrepreneur Journey: February 2006 Archives

February 27, 2006

Think Quick:What is Your Greatest Fear?

About seven years ago when I was in high school, a close friend asked me, "Why do you go after so many pursuits? Do you think it is based on an insecurity?" I remember being very offended, but I coolly responded that I just enjoyed doing big things.

Two years ago, another friend asked me, "What is your deepest fear?" For some reason, I decided to ignore my internal censors and respond with my first thought. To my surprise, the thought was, "Being insignificant."

Although both of these were short moments in a life of many moments, they've stuck with me because they've rung true at a deep level. Still, I kept in my old habits of thinking, even though I knew at some level, they weren't what I really wanted.

Now, for the first time, for reasons I don't fully understand, the body has begun to start to let go of this fear. As a result, I can actually picture a life where I'm happy despite not being the biggest this or the most well-known that. This is a first for me, and quite frankly it feels like an incredible weight has been lifted. Some of the symptoms of the fear were:

Always being 'busy' and feeling guilty if I wasn't doing something, even if what I was doing was unproductive.
Being jealous of people who had big accomplishments.
Being stressed that I was 'behind' where I should be.
Defining myself by the things I was going to achieve in the future.

Perhaps, the questions my friends asked may ring a bell with you too:

Why do you go after so many pursuits?
Do you think it is based on an insecurity?
What is your greatest fear? (what comes to your mind first?)

Posted at 09:36 PM | Comments (7) | Top

Do You Need School to Succeed?

Fortune Small Business has a great article on entrepreneurship education and success. You can read more about it on their web site. Below are some interesting excerpts:

Researchers found that five years after graduation, the average annual income for entrepreneurship majors and MBAs who concentrated in entrepreneurship at the school was almost $72,000, or 27 percent higher than for other business majors and students with standard MBAs.
Moreover, entrepreneurship graduates were three times more likely to form new companies. And we're not talking mom-and-pop shops. On average the businesses had annual sales of $50 million and employed 200.
Even those entrepreneurship graduates who took jobs within large companies earned bigger paychecks: $23,500 more a year on average than for other business graduates.

Hat Tip: Jason Dorsey

Posted at 05:20 PM | Comments (1) | Top

February 17, 2006

Living Your Purpose Through Your Company

Going to the business school at NYU for my undergrad degree, I had to immediately face the decision over which path my career would follow. Would I follow the glamorous, high-paying track of becoming an investment banker/consultant that most of my peers were following or would I become an entrepreneur.

My decision was to become an entrepreneur. This decision was fairly easy for me because my previous experience of starting and running my own business had been so empowering and rewarding.

Now, one year after graduating, Sheena and I are being sustained by the business, and a new question is arising. Do I want to be a high-growth entrepreneur or a lifestyle one. In other words, do I want to be a part of a company whose main goal is to grow large and then sell or go public? Or do I want to be part of a business whose main goal is to give me the lifestyle I want and make a difference.

To be honest, this is an extremely difficult decision for me. However, I'm leaning in the lifestyle entrepreneurship direction. Here's why:

Stress. For many months after graduating, I worked 70 hours a week. When I did this, the business became the filter through which I viewed life. If business was up, then I was up. If it wasn't, I wasn't. This essentially made for a life where I was stressed and constantly thinking about the business. I don't like this. For the past two months, I've been working 50 hours a week and have been taking time to exercise, read, take walks, meditate, and watch documentaries. This has made a DRASTIC difference in the quality of my life. Moving forward, I don't want to be in a position where 50 hours a week is not enough time to keep me on top of my work flow.
Control. One reason I like entrepreneurship is the ability to control when I work, where I work, how I work, and with whom I work, and what I work on. By giving ownership in the company to outside individuals, one becomes legally and morally responsible to make them the largest return possible. When one sells a company, staying on as an employee for a certain amount of time is often a requirement of the sale.
Making a Difference. By growing a purposeful, enduring, great company slowly and surely, I personally think I can make a difference better with the customers, employees, and community than I could by growing a company solely for making money and then giving that money away. Plus, I think it would be more fun.
Money. I don't have statistics to support this, but I've seen many entrepreneurs who have profitable lifestyle businesses that make way more money then they need every year. Furthermore, they own a controlling share, which means if they sell it, than can make good money. So, while their business might be a $10 million dollar business rather than a $100 million one, they're making good money.

A growing part of me knows that this would be the most fulfilling track for me. However, another part is definitely attracted to the potential of hitting it big, becoming famous, etc. The jury is still out and Sheena and I have been talking a lot about it.

What kind of company do you want to grow?

Posted at 05:24 PM | Comments (3) | Top

February 15, 2006

The Most Important Lesson I Learned In Business School

The most important lesson I learned In business school is that the best way to maximize profit is to do business in imperfect markets. When markets work perfectly, a zero profit condition occurs where competition pushes profits to zero.

How Markets Fail
The four ways markets fail are:

Information Assymetry (i.e., see Rothschild example below). When one side of an exchange has more information than other.
Monopoly/Monopsony (i.e., patents, copyrights, Wal*Mart). When there are many buyers but only one seller (monopoly). When there many sellers, but one buyer (monopsony).
Network Externalities (i.e., fax machines, telephones). When the more people that use a product/service, the more valuable it becomes or when companies can externalize a cost
Public Goods (i.e., radio waves, public space). Property of the government that certain companies can use.

Below is an example of information assymetry:

In the early 19th century Rothschild set up a Europe-wide network of messengers and carrier pigeon stations, gathering information that could affect his investments. He soon garnered a reputation for being first with the news. In June 1815, when the Battle of Waterloo was being fought, other speculators watched Rothschild's stocks in an attempt to guess who would win. Shortly after the battle ended, and long before anyone else knew who was the victor, he began selling stocks. Everyone assumed this meant Napoleon had won and Europe was lost. Panic selling ensued. When prices crashed, Rothschild bought everything in sight. [He made his fortune when news came that Napoleon had actually won and the stock market had risen!]. (Wikipedia)

Other examples are:

Wal-Mart's ability to negotiate low prices from its suppliers because of its buying power (Monopsony).
An invention being given a patent so nobody else can compete with it for 20 years (Monopoly).
GE saving money by dumping PCBs into the Hudson River, making the river unfishable to this day. In so doing, it essentially pushed the costs outside of its network and to the local fishing indstustry (Network Externalities).
Getting access to public goods such as radio waves and television waves (Public Goods).

Each market failure produces its own issue of ethics. In fact, I learned about this concepts from my corporate social responsibility class.

Plan English
All of this is to say, when choosing a career, I really think it is worth searching for the 'right' opportunities, that is market failures. While certain career paths are "hot", that just means you'll have more competition. From my experience, many of the 'real' opportunities in markets are not talked about by the people profiting from them, because they have an incentive to keep quiet and not let other people in.

I'm sure there are many ways to capitalize on market failures, but here are a few that have worked for me in my career:

Find a mentor in the industry/profession you'd like to enter who trusts you, isn't threatened by you, and who is willing to give you the keys to the castle.
Be willing to try new things others aren't trying and consequently be an early adopter/innovator.
Explore opportunities that are uniquely suited to you, but where others have barriers to entry.

Posted at 07:35 PM | Comments (0) | Top