My last post triggered some interesting debates in the blogosphere about whether entrepreneurs were a product of nature or could be nurtured. It’s not black or white. People are a product of their upbringing and education. Average humans can achieve extraordinary feats when they really try. I’ll concede that, like some great athletes, some great entrepreneurs may have something different about them that gives them a special advantage (this is a topic that I am presently researching). But not every entrepreneur needs to reap the same fortune as Bill Gates or Mark Zuckerberg to qualify as a success. You can build a good lifestyle business that pays the bills, or that does good for the world, and be considered a successful entrepreneur. (And you’ll probably be happier and gain more respect than most billionaires do.) Entrepreneurship isn’t all about the IPO.
I hold steadfast to my belief — based on my experience in building two great technology companies and in mentoring around 200 entrepreneurs over some years and on what I’ve learned from my academic research into the background and motivations of entrepreneurs — that entrepreneurs can be made. People born into entrepreneurial families may have the advantage of knowing the ups and downs of business, and, all else being equal, people from entrepreneurial families are certainly more likely to become entrepreneurs than others are. But the skills required to build, manage, and grow a business can be learned, and this education can level the playing field. VCs who judge entrepreneurs based on age, sex, ethnicity, or family background are doing their limited partners, and society, a great disservice.
There was one criticism of my last post that caused me to do serious introspection. The question: was Bill Gates’s dad an entrepreneur? I cited Gates Jr. as an example of an entrepreneur who didn’t come from an entrepreneurial family. A number of readers, including Jason Calacanis, pointed, out that Gates Sr. was a partner in a law firm, and so an entrepreneur, arguing that my citation was therefore faulty.
I’ve debated and written about this issue before. The broader question is whether anyone who starts a business, whether it is a law practice, a computer consulting firm, or a dry-cleaning store, is an entrepreneur. Management guru Peter Drucker would have answered with a definitive No. He wrote, “Not every new small business is entrepreneurial or represents entrepreneurship… entrepreneurs innovate. Innovation is the specific instrument of entrepreneurship.” Drucker didn’t mince words.
When I told this to some of my friends, I heard loud protests. Murali Bashyam, who started an immigration-law practice, insisted he was as much an entrepreneur as Bill Gates and his dad. Murali threatened, “if you decide that I’m not an entrepreneur, I might decide that the daily stress of growing and running a business, financial risks involved, and all the other headaches that come with creating something out of nothing is just not worth it. Maybe I’ll close up and go work for someone, where I can earn a steady and high salary and go home at 5 pm”.
Similarly, Sue Drakeford, who was Miss Nebraska 2001, had started a production company to host its own pageants and teach other African American women like her to gain the confidence and skills to compete in the real world. She wanted to provide a wholesome alternative to what she called the “cold-blooded cutthroat world of modeling and beauty pageants”. But Sue was working full-time at a bank and ran this business on the side. Was she an entrepreneur? Sue insisted she was.
After agonizing over this for weeks, I went to my friends at the Kauffman Foundation, and they referred me to their book titled “Good Capitalism, Bad Capitalism”. Carl Schramm and Bob Litan wrote that all who take the risk are entrepreneurs, but that there are two types of entrepreneurs: “Replicative entrepreneurs”, who constitute the vast majority of small businesses (such as restaurants and dry cleaners), and “innovative entrepreneurs” — the rare few who bring new products/services to market or who pioneer new production methods (such as Walmart, eBay, and Dell).
Under the Kauffman definition, Sue would qualify as an “innovative entrepreneur”, because she is developing new services and pioneering new methods. In contrast, Murali would be a “replicative entrepreneur”, because he delivers a standardized service in a field that charges primarily by the hour for its time. Murali could well end up running a huge law firm and be worth many millions, but that doesn’t make him particularly innovative in his business model.
So Bill Gates Sr. was a “replicative entrepreneur”, and Gates Jr. was an “innovative entrepreneur” — whom Silicon Valley calls an “entrepreneur”. TechCrunch founder, Mike Arrington, who used to be a lawyer for Wilson Sonsini Goodrich & Rosati, would qualify as an “innovative entrepreneur”, because he created a new product (a blogging site) and was a pioneer in the new-media world.
You can bring innovation to “replicative” fields as Arrington did. Take the example of SunRun. The company installs solar cells — which is as mundane or “replicative” a business as you can get. But its CEO, Edward Fenster, developed a new business model under which his company installs solar panels on a customer’s house for little to no upfront cost and only charges for the power that customers use. SunRun also insures, maintains, repairs, and monitors the system, and provides a money-back guarantee on the system’s energy production. This has made solar power available to the masses at an affordable cost and the company has become largest residential solar company in the country, operating in five states, and growing at more than 400% per year.
Another great example I’ve seen of an entrepreneur who has innovated in a replicative industry is Nand Kishore Chaudhary. He brought automation, supply-chain management, and professional business practices to the mundane process of carpet weaving and distribution in the desert state of Rajasthan, India. By implementing modern production practices and ERP technology, he was able to grow a small business, Jaipur Rugs, that he’d run from his home into a world-class production and distribution company, which employed 40,000 workers and generated $21 million in revenue in 2008. This is in a land where PCs were, until recently, as scarce as rainwater.
What’s the moral of the story? Don’t listen to the naysayers who are simply defending their informed views and biases by telling you that it’s nature or some special DNA that makes entrepreneurs or leads to entrepreneurial success. Don’t even be discouraged if you’re in a mundane, replicative industry. You can learn the skills needed to become a successful entrepreneur, and you can innovate.
Editor’s note: Guest writer Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. Follow him on Twitter at @vwadhwa.
Good distinction that’s not quite obvious at first glance.
Entrepreneurs replicate something that’s good and make it more good. Now, if you just repeat the mistakes or the same model of a latter idea, then you’re not an entrepreneur, but a copycat!
simple..
I strongly disagree!!! Entrepreneurs have something that other people do not. You either have it or you don’t. I have struggled my entire career trying to “train”, convince or teach traits that I have with people who have a lot of promise and they have always let me down. 2 years ago I made a New Years resolution to only work with people I like, and this year was to cut all of the dead weight. Included in the dead weight are people I have been working with trying to clone myself!
I think if people have ambition, drive, determination and a ton of common sense they can be taught how to be an entrepreneur. However, in order to drive yourself to success you absolutely have to be willing to sacrifice things important to you. There is something that I learned about in the ARMY and that is about “selfless service”. I really didn’t understand that when I was 18 but as I grew up (through experience) I started to understand. Selfless Service translates in the civilian world to putting your vision(company or project) above everything else in your life. If you have a decision to pay an employee or pay yourself, you pay the employee, even when you know your electric or phone will be shut off.
Another thing that cannot be taught is the ability to see different angles. THIS CANNOT BE TAUGHT, PERIOD. I have tried and tried to share this with people and they simply do not get it. I recently engaged an amazing Investment Banker who gets it and it is so refreshing. As we are moving into acquisition mode I do not have the necessary time to allocate to all aspects of our business. This IB CAN see all the angles and can see relationships between two organizations that most cannot. Again, not to be redundant, this cannot be taught.
Now commitment… How do you define commitment? When you have partners who take weekends and holidays off and you don’t how can they ever be equal partners. There is no such thing as a day off when you are building an empire. In the middle of a battle did Caesar say “through down your weapons it Sunday?” Of course not. This reminds me of an analogy I heard years ago about commitment. It was in regards to an American Breakfast including Eggs and Bacon. And the question who is more committed, the chicken or the pig? The chicken lays the eggs so he is involved where as the Pig gives his body and he is committed!!!
Sorry for the rant but it infuriates me when I read posts on how people can be taught to be an entrepreneur. If you weren’t selling lemonade on the corner of your block to generate a profit or understanding “Supply and Demand” and how to monetize it in your cafeteria, then you will likely never be an entrepreneur…Check out middle management, they will embrace you with open arms…
The people you’ve taught are very different from all the budding entrepreneurs I have mentored over the years, and they are different from all of the students I have taught.
What I have seen of people is the ability to transform themselves, step up to challenges, and achieve what seemed unachievable. All it took was motivation (which develops based on circumstance) and hand-holding.
Yes, there are people who lack common sense, but I’ve seen even such people rise to the occasion and do surprising things.
Maybe the difference here is that I see the glass half full and try to see the potential people have rather than condemning them for their weaknesses. That is what I learned by managing hundreds of people and teaching dozens of students.
I always see the glass half full and I do not doubt that ordinary people can step up when put into extraordinary situations.
How are you so confidant the budding entrepreneurs were different from who I associated with? I Have been experienced in many different industries and have dealt with many different personalities.
For the record, I have never condemned anyone for trying. The nature of my comment had nothing to do with implying laziness, and everything to do with your intial statement “entrepreneurs were a product of nature or could be nurtured.” They can likely be taught strategies on how to “react” to a situation but it is very challenging to teach people to be proactive, thats all. I’m not trying to start an argument, you gave your opinion and I gave mine.
Sounds like you, Brett, are merely assuming that you represent the pinnacle of entrepreneurial spirit and that anyone who does not conform to your stereotypical prejudice of how an “enterpreneur” should be (i.e. just like you) cannot be, by definition, an enterpreneur.
That’s just just arrogance and cognitive dissonance.
Hey Charles, naturally, there are different types of entrepreneurs this is not being disputed. I think a bit of arrogance is a strong positive trait when being sucessfull. There have been many times, with all odds against me, that if I didn’t believe in myself and/or my project/company I probably would have given up.
In regards to your comment about how an entrepreneur should be…If you are going to be a bear, be a grizzle! I was always brought up under the ideology that if you are going to do something, do it better than anyone else. If you elect to be a street sweeper take pride and be the best street sweeper there ever was… Anything less I am not interested in. Again, my opinion in response to the article.
Brett, I think that what you said was very unfortunate. Shows that you think you are superior in some way. Good that you were called out for your sense of superiority and arrogance. I would hate to be one of the people you say you work with.
Very well written…Its true that entrepreneurs cannot be by birth…they can be made…its like saying Prime ministers only born in the minister families
Do n’t mingle politics with entrepreneurs
Entrepreneurs (replicate/innovative) do good to the society and themselves
Politicians always do bad to the society but do good to themselves..
Tell that to every person that ever work with a lawyer (you say replicative enterpreneurs too right?) and they’ll laugh straight at your face.
My defintion of replication enterpreneurs does n’t include lawyers but they are same everywhere except a selected few like Mike
If you file a lawsuit you can expect your wealth to be eroded faster than the rate at which milk decays..
After sometime you would be left only with 1/10 of your wealth..
OT: If your friend, Murali Bashyam is running his own law firm just for the sake of being called an entrepreneur and is ready to take up a job if someone proposes that he may not really be one, then maybe he might be better off doing a job.
Murali is running a firm for the same reasons that many start their own businesses — they want to be their own boss and to build wealth. The problem that I highlighted is that no matter how much wealth he builds, he is in a field where there is little innovation. If he started the Amazon of the legal business, perhaps he would be an entrepreneur.
What does it matter what they call you. So long as you innovate and deliver results, you are an entrepreneur. Everyone to some extent is an entrepreneur because everyone at some point improvises to optimize.
40,000 workers and $21 million in revenue would translate to roughly $525 yearly revenue per employee. There must be something wrong here.
Yes. It is called the Third World.
Jack a**.
Then dare to stop your outsourcing there.
It’s called ‘Developing world’.
A Fortune 1000 IT company earns $7000 per employee..
Comparing with that it’s not bad..
In IT outsourcing salaries are the main cost – I can easily imagine unskilled programmer in India making $300 monthly or something and bring another $300 to the company. In carpet weaving and distribution I would think they have to buy materials, transportation etc. How can you pay even the daily minimum wage of $2+ with these numbers? Hey, bring more of such innovation to US with founder visas.
We need to check out their site or Vivek got his data from ..I do n’t know whether is referring to net profit or just revenue before profits there
as even the wages if we keep $600 per employee it would amount to $24 million..
I think he is just referring to net profits here
Nope. These are not profits, but actual sales. Check this out http://bit.ly/98Arbu (links to google books) – a fascinating read about Jaipur operations.
Such as “Weavers-in-training are paid Rs 20-50 (~$1 US) per day and receive housing and food. However, the company faces many problems retaining trainers for consistent periods of time. It is common for trainers to run away from the training centers without warning, until they run out of money and subsequently return.”
Indeed, what’s the moral of the story.
I think there’s another aspect to the common use of the term entrepreneur… Generally speaking most people would not call Gates (Sr. or Jr.) an entrepreneur. After owning and running a business for 40 years… at some point people just consider him the CEO or the owner of the business.
The way people I talk to use the term – entrepreneur is what you call someone defined by their role of starting and nurturing businesses (often as founder, sometimes as investor/advisor), and not someone defined by a single role/job/company.
In other words- if you start a software company, or a barber shop, I’m likely to think of you as an entrepreneur. However, if you stick with it, for 20 yrs, at some point you’re defined by “software” not “entrepreneur”, or “barber” instead of “entrepreneur”… or even “business owner”… nothing wrong with that. But to me, the entrepreneurial part is the STARTING, not the running long-term, of the business.
Not to say that all sorts of people can’t be more or less “entrepreneurial”… but why have the term “serial entrepreneur” in the common lexicon if “starting” the business isn’t important…
I’m not a fan of the replicative vs. innovative division. This is a judgment completely in the eye of the beholder. You see the beauty pageant program as innovative, but if I’ve seen something similar, it sounds replicative to me – this fails a test of objectivity to me. In *any* business you should be looking for your opportunities to innovate to do better for your customers or for your employees and shareholders, or hopefully both.
Agree- as a course of your Barber biz you create a more efficient way to cut hair, move more customers and make more revenues, so are you now an innovator or replicative?
Very nice and clear article.
Techcrunch was founded by a lawyer? You should fact check that.
Me surprised too. Learned a lot from this one. Good work Prof.
Techcrunch was founded by a lawyer? You should fact check that. He must have been a journalist.
You should actually read more of Arrington’s posts. He is indeed a Lawyer http://en.wikipedia.org/wiki/Michael_Arrington
That is amazing. I had no clue. I wonder how he became such a web guru?
By being articulate, observant, daring.
Is there much of a difference, court of public opinion or law- your objective is to get others to see your point of view- when you do you are successful.
I didn’t know much about TechCrunch before being invited, by Sarah Lacy, to write a couple of guest columns. After meeting Mike Arrington and learning about his background, I was very surprised. He seemed the stereotypical Silicon Valley entrepreneur (with a hint of arrogance, a huge intellect, and a belief that he can change the world). But Mike was indeed a lawyer at one of the top law firms.
He took a big risk to leave the high paying job and work full-time on TechCrunch. That is what entrepreneurs do.
Agree with you about @arrington, Prof. Follow him on Twitter and you’ll see that he’s no lawyer. He’s more of a brash entrepreneur.
I read and follow and enjoy these posts greatly. And was very recently in a similar, but slightly tangential discussion. So, perhaps I can throw in a perspective on three concepts; founder, entrepreneur and innovator.
I’ve found, by distilling these down. You can get great clarity. And apply to “tests” like:
you can “found” a business that is not innovative
you can be an entrepreneur in someone elses business
you can innovate without doing any business
Of course combine any two attributes, or even all three, and the discussion gets more interesting, eg can you really found a business without being an entrepreneur – yes, but not common, etc.
Interesting perspective.
Agree with the Prof. again. You’re the model, not the lunatics who obsess over money and screwing others.
“You can build a good lifestyle business that pays the bills”
That’s what I’ve been doing for 30 years in a variety of industry’s! (software being the latest with 3 successful, albeit “small” software companies.)
I enjoy my life, the drive of creation, and the financial success that continually comes my way with hard work (and no shortcuts.)
Thanks for the acknowledgment that what drives most of us isn’t parity with billionaires.
thanks for showing off from your parents couch and adding nothing to the discussion
Michael, ultimately what matters is being happy and knowing that you have done good for the world.
Glad that you are enjoying life, being creative and achieving financial success. I know some billionaires. Other than one, they are miserable people. The one that is happy spends his life giving back and helping others. His name is Desh Deshpande, founder of Sycamore Networks.
Meant to put this comment here!!
Agree with the Prof. again. You’re the model, not the lunatics who obsess over money and screwing others.
No, there’s another moral of the story that you’re not hearing.
You’re all replicative now, because IT, the Internet, widgets, etc. are now entering the Iron Age, the age of replication, when there’s a zillion of them. How can you talk, really, about “innovation” about the hundred thousandth i-Phone app, the thousandth website widget, the thousandth online game platform, the hundredth virtual world? There is little to distinguish them, and it’s about as much as distinguishes the dry-cleaner who says he uses “ecological” methods and the cheapter dry-cleaner or the dry cleaner that stacks shirts like square boards. These are nuances, not innovation.
It’s a great come-uppance to be told you are plumbers on some tubes, but really, that’s the story here on the Internet.
You also haven’t answered my question from the previous post: how many people who were in the program nurturing entrepreneurs with connections and tips and mentors and such actually then went out and made an innovative business?
Prokofy, you’re one weird dude.
Thought provoking article… Thanks for sharing.
Question, So where does a ‘Patent Troll” attorney firm that has licensed IP sit in this mix?
That is a raptor!
I say T-Rex! They’re slower and meaner but less slick.
Bill Gates actually FAIL at his first try as enterpreneur. He build system for traffic lights that fail spectacularly. Steve Jobs? He was a hippie. How come their “special DNA” didn’t work so well back then?
Oh wait, that must’ve been because they have to fail first right? That’s how the ‘dna’ supposed to work, right?
Big. F-in. BS.
They work. They learn. They do. People that says someone can be successful because of their genes are clearly still living in Egypt circa 1070 BC or smoking something.
Great series of Vivek articles.
I founded and run a sales management consultancy: we work with CEOs and “clean up” the revenue generation structure of their companies and increase revenue and market share.
I’ve worked with thousands of sales professionals in the last 15 years and ALL of them (except maybe one) were MADE. Entrepreneurship just like Sales is in IMO a 100% transferrable skill.
Companies (and society) would greatly benefit if these skills were properly taught and taught early on. In many of the companies we admire, everyone sells and sales is not segregated to a team. Same thing with innovation. The best ideas and products often come from the crowd and not from product managers or the executive team.
Armand@sparksalesconsultancy.com
What has this guy ever done?
It is true that there are “replicative” entrepreneurs and “innovative” entrepreneurs in each industry, but your friend who started the immigration law practice is not the latter. The entrepreneur who began SunRun, although in a replicative field, is an ‘innovative’ entrepreneur because he had a vision of how value should be brought to consumers. And that is the difference: vision.
Now you’re real question should be: Can you teach someone to have vision? Does your research answer that? To be able to see an industry and have a belief in what it should be takes guts, confidence bordering on arrogance, and the charisma to attract a great team (all things Fred Wilson originally pointed out). All of these characteristics can be grown and matured in a person depending on their experience, but can it simply be taught to them? Arrington is from a law firm, an industry not known for its innovation, and was able to see that there was a need for an obsessively updated technology blog and took the risk to create something out of nothing.
You make a good point about “vision”. But that is such an abstract concept that I wonder how we would quantify this.
amazing post
Agree very much!
Does all of this matter? If you want to be something you just be it rather than discuss about the semantics and definitions and then getting caught within it.
I improved a process today, I am an entrepreneur today. I did a repetitive task today. Oh no, I am no more an entrepreneur. Pointless article, well, like most of the academic stuff.
I really don’t understand why this is a subject of contention. The word entrepreneur translates directly from French to English as “to undertake”. Since I undertook explaining this, I am a entrepreneur.
Vivek: Keep up the good work. Too much of the world believes that they are limited by their ancestors, whether via genetics or via culture. You could/should write an article about the generations of wasted human talent caused by the caste system in India which operated, and perhaps still operates, on those notions.
Those who blame their lack of success on their genetics are just using a convenient excuse for things that are actually in their control – hard things such as hard work and sustained thinking.
That is the point I wanted to make. That anyone can achieve some form of success.
dang… spell check got me.
The word The word entreprendre translates directly from French to English as “to undertake”.
And here’s another thought: any normal-enough (i.e. not brain damaged or too crippled to act) human being on this earth is MORE capable than any animal on earth. Human beings are the current pinnacle of the earth’s evolution and should be insulted (and fight back) against scum such as environmentalists who hate humanity precisely because it is the first species that was capable of altering its environment to suit its needs rather than passively letting the environment dictate its actions and potential.
Phil, you’ve obviously missed the past thirty years’ news in ethnology and the past two hundred years’ news in biology. People are animals. They’re not terribly significant ones, either, except in the amount of environmental change they can impose — even unthinkingly — on their fellow travellers. Even that is not greatly significant of their worth; all animals and many plants are known to respond actively to their environment to make the most of it. Chimpanzees, parrots, beavers, and other animals change their environment to suit themselves.
It is a mistake to stereotype and universally condemn environmentalists as hating humanity; I myself know dozens of environmentalists, none of whom express the kind of unschooled loathing you have expressed here. The key lesson of environmentalism may be to put one’s own beliefs and practices into a perspective that recognises others: other humans’ real worth, other species’ equal success in adapting to their challenging environments, other ecosystems’ interactions with our own little environment, and future generations’ right to inherit a planet in at least as good a condition as we found it.
Finding ways to leave the planet in the best possible condition for those coming after us may be the greatest entrepreneurial challenge of all. The challenge is all the greater, of course, in a context of being brought up in the totally self-centred (and amusingly convenient) belief that one species — which happens to be yours — is divested of such responsibilities precisely because it believes itself to be the pinnacle of evolution.
Such a belief clearly is not any foundation for creativity of any flavour, but merely the usual bigotry of the parochial.
One last post for now. Too often the debate over causes of human potential are cast as “nature” vs. “nurture”. What anyone studying the issue must inevitably find – although not necessarily explicitly identifying – is that there’s a critical component of equal or greater importance than those two: free will. I would like to see nature+nurture+free will become the new summary because it captures the essential elements.
Thanks Vivek
Everyone should read Outliers IMO. This is one of the best books I have read that aims to explain why some people are excel more than others.
It takes both talent and opportunity to create a Bill Gates or Steve jobs. Without one of those elements they would not be nearly as successful in their ventures.
“Under the Kauffman definition, Sue would qualify as an “innovative entrepreneur”, because she is developing new services and pioneering new methods. In contrast, Murali would be a “replicative entrepreneur”, because he delivers a standardized service in a field that charges primarily by the hour for its time. Murali could well end up running a huge law firm and be worth many millions, but that doesn’t make him particularly innovative in his business model.”
Not sure if I agree with this distinction entirely. If Murali’s business is growing in this considerably saturated market, he’s probably doing something innovative, which is translating into better client satisfaction, lesser overheads etc. That’s innovation too, albeit a different kind.
Google didn’t ‘discover’ or ‘create’ the internet search space. There were other players in that market way before they came in. Would you call the Google founders ‘replicative entrepreneurs’ too?
Excellent article nevertheless.
Good point. I think “innovation” is easy to spot in a product based business..In case of Murali, you have to dig deep into what he does to actually find his innovations..
Don’t think Sue is an entrepreneur. What risk has she taken? She is working full time!
Don’t think Murali is doing anything innovative either.
Entrepreneurs are not made on ideas alone. It is all about execution. Segmenting the innovators from the replicators seems counter-productive and implicitly demeaning to most small business owners. A good entrepreneur finds ways to provide customers with recurring value, full stop.
http://vinaybeta.com/entrepreneurship-is-about-execution
it’s questionable how much of an ‘innovator’ Bill Gates’ is. He buys companies, uses their technology, or has been accused of flat out stealing it. Steve Jobs might be a better example of an innovator.
I agree with this person’s comment:
“Not sure if I agree with this distinction entirely. If Murali’s business is growing in this considerably saturated market, he’s probably doing something innovative, which is translating into better client satisfaction, lesser overheads etc. That’s innovation too, albeit a different kind.”
“Google didn’t ‘discover’ or ‘create’ the internet search space. There were other players in that market way before they came in. Would you call the Google founders ‘replicative entrepreneurs’ too?”
I think there is something ‘replicative’ and ‘innovative’ about every entrepreneurial effort. The difference comes down to degree. So it’s really not simply one way or the other.
“People are a product of their upbringing and education.” –both *external factors.*
There is more to it, much more. This is why I think that your articles [and thinking] are always weak and off the mark.
Your statement shows that you actually ignore generics, particularly genetic behavior.
I don’t know what your background is, however is seems clear that you do not know what you are writing about.