What Really Makes an Entrepreneur Successful?
Google that question and you’ll have all the advice you could ever want or need. One list of 25 items includes “grab attention,” “be accessible,” and “get involved.”[1] Another list advises would-be entrepreneurs to be “highly self-motivated” and “exhibit strong leadership qualities.”[2] A third suggests the need for a “strong inner drive” and “being excited by work.”[3] A fourth: passion, risk-taking and self-belief.[4]
In 1931, Kurt Lewin (1890-1947), sometimes called “the founder of social psychology,” challenged his colleagues to fundamentally rethink the way they practiced their discipline. To make his point, he compared the way Aristotle approached science to that of Galileo. It’s an interesting lesson in how we might think about entrepreneurial success as well.
Enter Aristotle: Inside Out
Take the average rock. Aristotle believed that a rock’s behavior—always wanting to fall downward–could be explained by its “essential nature.” In fact, the Greek scientist said, an unmeasurable force existed within the rock that made it want to behave like a rock. The same was true of, say, a feather, which seemed to want to rise. Aristotle deemed the essential nature of a rock “gravity” and of a feather “levity.”
In the Aristotelian universe, every object had a fundamental nature that explained its behavior.
These observations were helpful until the object did something unexpected—say, a rock being flung into the air by a volcanic explosion. Then the best Aristotle could determine was that the rock was behaving unnaturally. And, if a rock rolled down a steep slope quickly and a gentle slope slowly, well, it was all captured in the vague notion that it simply wanted to move downward.
Enter Galileo: Outside In
Galileo was less interested in the fundamental nature of an object than he was fascinated with the external variables that affected it. On what kind of surface did the rock sit? What was the angle of its plane? What forces affected it? By uncovering a set of principles around mechanics and dynamics, Galileo helped us not just to understand the rock, but the behavior of every other object in the world.
The genius of Galileo, Lewin wrote, was that he had determined “the same law governs the course of the stars, the falling of stones, and the flight of birds.”[5] Said another way, Galileo sought wisdom by looking “outside in”—at external variables and the dynamic, interconnected environment an object occupied.
The great 20th-century philosopher Karl Popper concluded that every discipline that stuck with the Aristotelian method of definition “remained arrested in a state of empty verbiage.”
Entrepreneur speak: A State of Empty Verbiage
So it is with our understanding of entrepreneurship. If we insist that an entrepreneur, like Aristotle’s rock, has an “essential nature” that makes him or her successful, we end up with laundry lists of empty verbiage. In fact, we generate so many attributes that, taken together, they essentially describe what makes any human being in most any occupation successful.
And it turns out to be verbiage that doesn’t even square with our observations.
Do we know a successful entrepreneur who wasn’t an especially strong leader? Who wasn’t awfully bright? Who lacked real courage? Who was an introvert? Who was risk-averse? Who just lucked into a great opportunity? Who was successful in spite of him or herself? Of course we do. We’ve all met them.
Do we know an entrepreneur wildly successful in one company who then tanked his second company? Surely. How to explain? The R-squared fit between an entrepreneur’s success and our list of entrepreneurial qualities is far looser than we care to admit. It doesn’t even hold especially well for a single individual across two companies.
In an Aristotelian world, all this “unnatural” behavior can’t be explained. It’s a universe of outliers. Feathers are falling. Rocks are rising. If a successful entrepreneur has an “essential nature” then we are hard-pressed to describe it, and even harder pressed to use this knowledge to improve our own future success.
Entrepreneurs and the Fundamental Attribution Error
Correspondence bias is the tendency to draw conclusions about a person’s unique qualities from behaviors that can be explained completely by the situations in which they occur. It is one of the most fundamental phenomena in social psychology—in fact, so pervasive that it’s sometimes called simply “the fundamental attribution error.” One observer says it is “as robust and reliable a phenomenon as any in the literature on personal perception.”[6]
Even though modern scientists have shed Aristotle for Galileo, Newton and Einstein, correspondence bias strongly suggests that there’s still a lot of antiquated Greek in our entrepreneurial thinking.
Here’s how it works in Lewin’s world of social psychology: A recent story in the New York Times reported that Millennial men have much more egalitarian attitudes about family, career and gender roles inside marriage than generations before them, like Baby Boomer men. Indeed, the press insures constantly that we understand that Millennial feathers and Boomer rocks have far different essential natures. Yet Millennial men struggle to achieve their goals once they start families, researchers say. Some think that’s because workplace policies have not caught up to changing expectations at home. “When faced with a lack of family-friendly policies, most fell back on traditional roles.”[7]
In this case, understanding the essential nature of the rock and feather is useless unless we first understand the gravity of the modern workplace.
The business press is especially guilty of correspondence bias. Phil Rosenzweig offered a classic example in The Halo Effect. In 2000, Cisco momentarily surpassed Microsoft as the most valuable company in the world. Its CEO, John Chambers, had orchestrated an increase of $450 billion in shareholder value in five years. In May, Fortune asked rhetorically, “Is John Chambers the world’s best CEO?” By September 2000 the tech world began to slide, and by the end of the year Cisco’s share price had been cut in half. Chambers, ever bullish, continued to order more inventory and ended up writing off $2.2 billion by April 2001 when the market saw his company completely routed, losing $400 billion in market capitalization in 12 months.
Now, Fortune concluded, Cisco “had exhibited a cavalier attitude toward potential customers,” had lousy innovation and forecasting skills, and was naïve.[8] At the center of this rise and fall was the world’s former best CEO, apparently having lost his entire skill set in 12 months.
What if we go right to the source and ask entrepreneurs what makes them successful? Besides the inevitable “passion, smarts, and audacity,” innovators list the ability to be genuine, the willingness to take a break, and the ability to say no. [9] Some mention resilience, adaptability and independent thinking. In fact, it’s startling to see how invariably and inevitably they direct their answers away from competitors, customers, products, business models and market forces to highlight instead their extraordinary personal qualities as the basis for success.[10]
Yogi Berra summed up our unlimited capacity for mistaking individual agency with broad market forces when he claimed he knew Casey Stengel before he was a genius, while he was a genius and after he was a genius.[11]
So, What Really Makes an Entrepreneur Successful?
It’s not that “essential nature” is unimportant: Rocks really are different than feathers, and entrepreneurs bring vastly different skill sets to bear. But it’s the dynamics of the situation that must first be understood, and which assume as much (and often more) importance in explaining results. If we fail to recognize the power of our own correspondence bias—our inside-out, Aristotelian perspective–we end being disappointed in Millennial fathers (instead of fixing workplace rules), having vastly inflated opinions of our own talents, and generating reams and reams of meaningless adjectives about what makes an entrepreneur successful.
I don’t pretend this answer to be scientific—only that it squares with my observations and meets Kurt Lewin’s and Galileo’s requirements for an outside-in view of the world. I believe two things are indispensable to a successful business, two things that have nothing to do with the essential nature of an individual entrepreneur: an attractive market and a compelling business model. By attractive market we can mean large, fast-growing, and/or one with structural inefficiencies. A compelling business model starts with a marketable product or service and involves an efficient, repeatable way of creating customers and profits.
I would guess that market selection is about a third of entrepreneurial success and business model identification another third. This assumes the remaining one third to be all the other personal intangibles (including passion, persistence, and leadership) that get so much press. These percentages may not be perfect but are, as we say, “directionally correct.”
Don’t misinterpret. This doesn’t mean individual skill isn’t important to success. But it’s an outside-in world. An attractive market and compelling business model are the essential Galilean forces of the entrepreneurial universe. The ability to uncover and connect one with the other is what creates success, and is the true “essential nature” of a successful entrepreneur.
All of which means: Spend your time studying the world around you, not getting hung up on your own personal qualities. Don’t fret if you seem to lack the “essential nature” of Elon Musk or Steve Jobs. Don’t worry too much how you compare to the next laundry list of purported entrepreneurial skills. Rocks can fly. Feathers can drop like a rock. It happens all the time because there are much bigger forces at play.
Instead, focus on developing a talent for identifying attractive markets and opportunities. This is difficult, focused work and often involves substantial on-the-job experience. Insights come through steady observation, nicks and cuts, and creative analysis.
Then, create a compelling business model that meets that opportunity. Focus your innovation on creating customers and profits. In a fast-moving world full of unknowns, this is often an iterative and extraordinarily frustrating process—but essential to success.
That’s the short list you can take to any laundry: An attractive market. A compelling business model.
Connect those two things and you can have most any other “essential nature” you choose. You can even have three heads and smell like a durian salad. Investors will still want to wrap their soft feathery wings around you in a warm embrace. You will be loved like a rock.
[1] http://www.entrepreneur.com/article/200730.
[2] http://www.mbda.gov/blogger/starting-business/8-traits-successful-entrepreneurs-do-you-have-what-it-takes.
[3] http://www.groco.com/readingroom/lead_successful_entrepreneur.aspx.
[4] http://www.investopedia.com/articles/personal-finance/101014/10-characteristics-successful-entrepreneurs.asp.
[5] Kurt Lewin, “The Conflict Between Aristotelian and Galilean Modes of Thought in Contemporary Psychology,” Journal of General Psychology, 5, 1931, 148.
[6] Daniel T Gilbert and Patrick S. Malone, “The Correspondence Bias,” Psychological Bulletin, the American Psychological Association, Vol. 117, No. 1, 21-38, January 1995.
[7] Claire Cain Miller, “Millennial Men Aren’t the Dads They Thought They’d Be,” The New York Times, July 30, 2015, http://www.nytimes.com/2015/07/31/upshot/millennial-men-find-work-and-family-hard-to-balance.html?smprod=nytcore-ipad&smid=nytcore-ipad-share&_r=0.
[8] Phil Rosenzweig, The Halo Effect. . .and the Eight Other Business Delusions That Deceive Managers, New York: Free Press, 2014 [digital edition rpt: 2008], loc. 729.
[9] http://www.forbes.com/sites/allbusiness/2015/04/22/great-entrepreneurs-share-these-six-traits-and-some-may-surprise-you/.
[10] http://stanfordbusiness.tumblr.com/post/100866591834/5-characteristics-of-successful-entrepreneurs.
[11] For those of you who know your baseball history, that would be the Braves, Yankees and Mets. Same manager but vastly different results.
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