The Harbour Pilot

“Risky, Daring, Action, Adventure, Difficult” – Are we throwing ourselves off tall bridges with only an elastic band to save us? Not just yet! These words describe entrepreneur. Entrepreneur is a title that seems to be bestowed on businesspeople, generally, although it is often self-bestowed. Question is – is that valid? Are businesspeople all entrepreneurs?

Business, some Definitions

I define business as the set of activities that are intended to generate a profit – a surplus of value. Value is judged by others in our society – rightly or wrongly. All of us spend our time and money on things that we value, for whatever reason.

Sidebar : We meet our needs, real and perceived, by spending our time (our primary irreplaceable asset). The time can be spent directly on something, for instance cooking a meal or home-brewing our beer. Alternatively, we can spend time earning money – trading our time for someone else’s money. Money is our stored time.
The measure of value is how much time and money we spend on a given product, or pastime. By this standard, we do not value politics very much, and we do value the Simpsons – ahh, the subject for another day.

In business, profit is what is left after you have exchanged your product for the price (value) your customers place on your product. This means that profit is a surplus. In summary, a business is a surplus value generator.

Essence of Business

Business is the organized activity that exchanges products for values to generate a surplus. The surplus or profit, is often claimed to be the reward for taking risks. Is there always a risk to business? Well - yes and no. I have written extensively on risk recently, and the overall thrust is that there is risk to everything. However, not all risks are equivalent.

• Is there a risk that your product is not needed? Not if the product is food.
• Is there a risk that the product is not saleable? Not if the product is gold.
• Is there a risk that the business person will find themselves unable to eat? Not if the business is a multinational, and the person is a manager.

Nor are all personal assets at risk if the organization is a corporation. Much of what we now classify as business is not particularly risky, and often, the risk is not total and personal. Not convinced?

I start a tavern. I know that the propensity of people is to socialize, and that alcohol has a venerable history as a social lubricant. I organize as a corporation. I may well put up some assets to capitalize my venture, but even if the operation is unsuccessful, I still have skills to offer the marketplace, and I am not personally bankrupt. My risks are limited. The operation’s failure will hurt, but will not necessarily be personally financially devastating.

Entrepreneurs on the Other Hand…

How do we distinguish business people with limited risk from those with personal devastating risk? Why on earth would someone willingly put themselves in such a position? To the business community, risk means financial – it is an axiom, it goes without saying. My observation is that true entrepreneurs

• do not perceive risk in the same ways that business people do, and
• do not monetarize risks and analyze them like business people do

There is a business saying – “do not fall in love with your product”. Entrepreneurs are not just in love with their products, but also with their businesses. In upcoming posts, I will be exploring at some length the nature of an entrepreneur’s risk, and their perception of what is being risked.

Time for a story? Sure it is..

A Long Time Ago, in a Place Far Far Away…

There was a man – let’s call him George – whose head was filled with the leftovers of stories and books from the golden age of science fiction - space ships and ray weapons, romance stories of good and evil, organizing forces, and individual heroics in the face of dramatic threats. Being a visual type of guy, he accompanied the written word with scenes and pictures of what he read. One day (my favourite story-telling device), he formed the desire to show the world what he saw in his head. You know the rest of the story, I presume.

Was his motivation financial?

Not particularly, it was simply a requirement of the form of organization he chose – a business venture.

Were his days filled with reviewing financial spreadsheets and marketing projections?

No, they were filled with cinematography and the innovation and development of techniques for special effects.

Was he motivated by filling specific human needs of others, either real or perceived?

Not particularly – he was telling a story.

Did he view his undertaking as a risk.

You bet. The risk however, was NOT financial – he ran over budget and treated finance as more of a nuisance than anything else.

So what was the nature of the risk, and how did he perceive it?

The risk was innately personal. He was telling a story that was important to him personally, reflected his world view, that reflected his values, his aspirations – it was an expression of himself. The risk was NOT financial, it was the risk that the world would not accept his self expression.

This is the nature of the entrepreneur. Ahh, you say, that is the arts, and you are speaking about creativity! That’s right, I am. An entrepreneur is a person, often engaged in a business, who operates from a core of self expression that reflects their own world view and values. The outward risk is financial, but the drive is from the risk to identity. Entrepreneurs engage their entire identity in their undertakings. Hence, the often noted idea that successful entrepreneuring requires passion – emotional engagement.

End of the Story

Well our friend George was successful. Financially, certainly. Critically, well – maybe not quite as much. However, hundreds of millions of human beings vouched that his product was of value to them, with their time, and their money. I suspect Mr. Lucas can live with his critics fairly comfortably – particularly since most of his critics had never taken the type of personal risk that he did.

Business People and Entrepreneurs

Business people engage in exchanges of value for a financial profit surplus. Entrepreneurs engage in business activities that engage their identities and so have an intensely personal risk. Some business people are entrepreneurs, most are not. Few business operators of significant sized operations have their identities at risk – they often have their egos and their pride at risk, but not their core identities, their value systems, nor their complete personal life circumstances. The nature of the risk is different.

That is why few managers and business people in large organizations are entrepreneurs.

Many businesses are in fact, anti-entrepreneurial, and in upcoming posts, I will argue why that is.

Bear in Mind

To me, the real sense of entrepreneur is “lighting a fire”. I’ll nail this to the door for an argument. Much of the progress of the human species is generated by the entrepreneuring spirit. In business, the arts, literature, music, science, mathematics, exploring… much entrepreneuring is undertaken outside the mechanics of a business.

Question for us all

How many people are prepared to argue that Microsoft is still (or ever was) an entrepreneurial effort?