Published in the San Diego Union-Tribune, July 31, 2017
I recently did a survey asking who was the greatest entrepreneur of them all. As you would suspect, many of the usual suspects turned up on the list, but in the final tally the winner by a wide margin was Max Bialystock. Max’s creator was Mel Brooks, and he is the star of the movie “The Producers.” No spoiler alert — just go watch it on Netflix. Let it suffice that the movie is the master class in understanding the concept of a capitalization table (who owns how much of what and why).
A new book by Mihir Desai, “The Wisdom of Finance,” uses Mel Brooks to explore the relationship between the study of the humanities and finance. This stuff resonates with me, since I think a worthless English degree or a Ph.D. in psychology is terrific preparation for entrepreneurship. However, scholarship has its limits. In the movie, he sees “the deep question in finance of what happens when ownership and control are separated, with opportunistic managers, imperfectly monitored, who create the problem of corporate governance and define the problem of modern capitalism.” What I see is one of the funniest movies ever made. As Sigmund Freud says, sometimes a cigar is just a cigar.
How does one teach entrepreneurship? Our “ecosystem” has myriad incubators and an exponential number of mentors, advisers and coaches. But one of the rules is to go out and talk to your customer (young and budding entrepreneurs), and recently I did just that. What I found is that “the war stories,” along with the standard tales of success do not seem to be what they want.
The lessons that really have impact are the ones that have some “ouch” to them. I am particularly fascinated by the unicorns who end up dying on the Serengeti. They ate too much too quickly or they got lazy or their capital structure brought them down with debt or the founders/managers were marginally neurotic, etc. There is no end to the why companies fail. And I believe that it is in the failures that the real learning takes place.
Look at some of the successes of our local entrepreneurs (no names). Many of them did not hit it out of the park until their third, fourth or fifth time at bat. I believe the early strike-outs informed and prepared them for the hanging slider that they crushed into the upper deck when they got to the plate again.
Recently Jawbone (the Bluetooth earpiece thing you wore on your ear to receive phone calls) called it quits and is now in liquidation, after having burned through more than $951 million from the blue chip firms of Andreessen Horowitz, Sequoia, Kleiner Perkins, JP Morgan, Mayfield, Khosla and BlackRock. Now they are pivoting into health services, and of course they will have to go out and raise some more dough. Stop the madness.
In my own investing and executive coaching, I find that there are certain distinct and recognizable moments when the next sentence, the next decision, the next action really matters — like, REALLY matters. What interests me is how to determine that moment, and then to also have the courage to stay with that decision in that moment. We see this all the time in sports. The basketball jump shot, the football pass into the corner, the 3-2 pitch in the bottom of the ninth — there is the instant of awareness without hesitation and then the elegance of the execution.
I often see the converse in our human interactions. We know the right answer, but if it is a painful answer, we find a way to not acknowledge its truth. We hope, we straddle, we delay, we hesitate — and then in the next moment, the arcing jump shot bangs off the rim, the rhythm and the flow and the moment having been missed.
It is often said by venture capitalists that they want to invest with the CEO who just came off a failure. They figure the odds are improved for the next opportunity — which is code for “at least they won’t make that same stupid mistake again.” But the key for the entrepreneur is to truly understand the one or two significant decisions or macro events that set the course of the company.
Failure is the best teacher — just ask Max and “Springtime for Hitler.”
Rule No. 523: Oy– where did I go right?