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9/18/2018 Myths About Entrepreneurship

RISK MANAGEMENT

Myths About
Entrepreneurship
OCTOBER 23, 2014

Linda Rottenberg, author of Crazy Is a Compliment, on what it really takes


to start a business.

19:12

SARAH GREEN: Welcome to the HBR IdeaCast from Harvard Business


Review. I’m Sarah Green. I’m talking today with Linda Rottenberg, co-
founder and CEO of Endeavor and author of Crazy is a Compliment, the
Power of Zigging When Everyone Else Zags.

Linda, thanks so much for coming in today.

LINDA ROTTENBERG: Great to be here.


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SARAH GREEN: So you argue in the book– at the beginning of the book–
that everyone needs to act like an entrepreneur today. And I’m just
wondering, this is sort of a refrain that I’ve heard bubbling up, and do you
feel like it’s overstated at all? I mean, does absolutely everyone need to act
like an entrepreneur today?

LINDA ROTTENBERG: So I have worked with over a thousand


entrepreneurs in 20 countries around the world, and here’s the thing. I
started getting these strange calls a few years ago from managers inside
Fortune 500 companies, from parents at my daughter’s school drop off,
from young kids in small town colleges, and everyone said, can you help
me get the skills to be an entrepreneur? But I don’t have tech idea. I don’t
have an engineering degree. I don’t live in Silicon Valley. Is
entrepreneurship for me?

And my refrain was you don’t need a hoodie to be an entrepreneur. And


it’s true that in fact, the fastest growing segments of starting new
businesses are actually women and baby boomers over 55. But the reason
I actually wrote Crazy is a Complement is I do believe that we all need to
take some risk or risk being left behind.

And today, we have this choice that we can either hope that our jobs and
our companies are safe when we know that that’s actually a risky
proposition, or we can take some risk. And Michael Dell told me, today,
there are the quick, and there are the dead.

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So in fact, I do believe that everyone now can get the skill set and this
mindset of an entrepreneur, even if they don’t aspire to start a new
company.

SARAH GREEN: So I’m glad you mentioned risk, because one of the things
I think is interesting is that I think a lot of the book seems to be about the
tension, right, between being crazy and dreaming big, but then also
managing risk. How do you advise people looking to locate themselves
somewhere on that continuum?

LINDA ROTTENBERG: What became a theme of the book is that what we


think about entrepreneurship regarding risk is wrong. It is this tension you
talk about. And that most entrepreneurs I’ve worked with are not risk
maximizers, they’re risk minimizers.

So three myths that I sort of debunk. One is that you need to have a lot of
money to get going. Half the Inc. 500– half the fastest growing companies–
started with under $5000. And with crowdfunding, that’s even easier.

The second myth is that you have to go all-in initially. And stories I found,
like Sara Blakely of Spanx sold fax machines for two years while her idea
was taking off. What surprised me even more is that Phil Knight of Nike,
the “just do it” guy, spent almost a decade doing other people’s taxes. And
so you really can start with one foot in as things get going and mitigate
risk.

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And then back to your earlier question, what if you’re inside a company?
What I found looking at people in Clorox and Pfizer and AT&T, traditional
companies, is that the people who are starting to make change in those
companies did not run to the boss, did not rush to create a PowerPoint or
a business plan.

They went stealth. They started testing products in their kitchen or testing
an idea on the side. They gathered a few colleagues. They got proof
points. And then they went and told the boss. They stopped planning,
started doing.

And what I’ve come to realize is that entrepreneurship is really a fancy


word for saying you’re a doer. So that’s my advice to people. Stop
planning, start doing.

SARAH GREEN: I want to just pick up a little bit on the second myth you
talked about, and the way that some people– like Sara Blakely, for
instance– kept their current gig while they were sort of working on their
dream. When you’re doing that, how do you know when is the right time
to jump in with both feet and finally cut the cord?

LINDA ROTTENBERG: At some point, you do. And I look at


entrepreneurship as an arc. Get going, go big, go home. And for the get
going phase, the really biggest barriers are psychological. They are giving
yourself permission to be contrarian, to see the world differently, to zig
when everyone else zags, and yes, to be called crazy.

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That’s what holds people back, is people don’t give themselves that
permission. So that’s what’s important for getting going. And I think that
you want little wins. I think you do get feedback from the marketplace.
And Sara Blakely obviously stopped when Oprah put on her favorite
things list Spanx. OK, that’s an obvious example. There are other factors
that you can know.

But I meet people at the go big phase for Endeavor, my organization. And
at that point, when people want to scale up– when they decide this is not
a lifestyle business, it’s not a project, I really want to go big– at that point I
say, close doors.

And what happens is often after they’re making enough money to stop–
you’d think it would be financial reasons holding them back. Again, it’s
psychological. So people who are making money on their entrepreneurial
venture often hold onto that job to cling to their past life. And it’s about
doing what’s safe and expected versus doing what’s unsafe and unknown.

So there is a point when you have to cut the cord. But early on, when
you’re just getting going, don’t worry about it.

SARAH GREEN: OK. So I want to ask you some of the other tensions in
entrepreneurship and sort of how to mitigate them a little bit. One that
has couple up a little bit on the fringes of our conversation already today is
about kind of experimenting and pivoting and refining your offering. And

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it seems like there’s a fine line between pivoting and experimenting and
refining your offering and then kind of losing focus of what you’re really
about.

LINDA ROTTENBERG: Exactly.

SARAH GREEN: How do people manage that kind of tension?

LINDA ROTTENBERG: You have to be open to change, but not too open.
And in fact, studies have shown– there was a group called Blackbox that
actually studied this what’s the right amount to pivot question. And what
they found mirrors what Endeavor’s experience has been with 1,000
entrepreneurs, which is that if you don’t pivot at all, if you are just
stubborn and you’re not open to any change, you bump into walls. You’re
not going to probably get very far.

But the right amount of pivot tends to be one or two times. Those firms
that pivot once or twice end up experiencing a lot more growth. They end
up getting more capital. When people start over-pivoting, that’s where the
focus problem happens. That’s when people start deluding themselves.
And oftentimes, there are certain entrepreneurs that get so excited about
the new, new thing, they really just cannot complete anything.

When Steve Jobs famously returned to Apple, the first thing he did was
slashed all their product offerings and said we could only do four things
beautifully. So be open to change, but not too open.

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SARAH GREEN: So that’s interesting because it makes me wonder, if you
think that sort of access to lots and lots of venture capital might make it
easier for firms to lose focus and keep pivoting because they still have
money to play with?

LINDA ROTTENBERG: I do. I work in markets– mainly in the emerging


markets. Endeavor’s in 20 countries plus the US, but we started in the
emerging markets where there really wasn’t venture capital and private
equity. And now there’s limited amounts.

People bootstrap, and what they do is get real customers. They have real
profits. They actually– wow, they have cash. And I think that’s really
important, because they don’t just have all of this money and all of those
expectations and just run as far and fast and start throwing spaghetti on
the wall.

And I think it’s, again, let’s go back to what I call the skunks. I call people
inside companies skunks based on Lockheed’s Skunk Works program. I
don’t like the term “intrapreneur,” but companies these days need to
breed skunks.

And I think when you start talking to managers, they really fear that
they’re going to lose their jobs or their budgets if they try anything new.
So what I found is the most successful skunks– the entrepreneurs inside
companies– start with very limited budgets. They start with about 10% or

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20% percent time. And in fact, the ones that had too big a budget to play
with, again, psyched themselves out. If they didn’t lose focus, then they
just were so concerned that a failure was going to be a disaster.

Richard Branson, someone we think of as this maverick, talks about


contained disasters. Taking small steps. Using just a little bit of money and
putting a little bit of risk on the line, but then really finding out the market
will bear. That’s when you start eating the elephant one bite at a time and
getting towards your main goal.

SARAH GREEN: So I have to ask you a little bit now about that the crazy
title. Because what we’ve been talking about so far sounds very, very
practical. So how does the crazy piece fit into it?

LINDA ROTTENBERG: Well, entrepreneurs don’t think they’re crazy.


Other people think they’re crazy.

SARAH GREEN: OK.

LINDA ROTTENBERG: I was called la chica loca for a decade suggesting


there were entrepreneurs in places like Brazil and Turkey and South Africa
and Saudi Arabia. Shockingly, there are. It wasn’t so crazy after all.

But here’s the thing. Every entrepreneur at one point has been called
crazy, whether it’s Henry Ford. Whether it’s Jack Ma, who just took
Alibaba public at a $230 billion dollar valuation. He was known as Crazy

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Jack. Or whether you’re trying something new inside a company. The
team at Microsoft that built Xbox was laughed at by colleagues and said
they were building coffin box.

So the point is back to psychology. You are going to called nuts because
being an entrepreneur is about seeing the world differently. It’s about
being contrarian. And people who are benefiting from the status quo or
look at the status quo are going to not understand what is you’re doing. So
you can’t rock the boat without being called, you’re off your rocker.

But at the end of the day, as I said, entrepreneurs– the best entrepreneurs–
are risk minimizers. They take smart risks. They’re just crazy enough
without going overboard.

SARAH GREEN: So I guess I want to ask– press a little bit more on that.
Because I think for every Sara Blakely and Jack Ma, right, there’s someone
in his basement trying to invent a perpetual motion machine or
something like that. How do you know if you’re Sara Blakely or you’re the
guy in the basement doing the thing that’s never going to work out?

LINDA ROTTENBERG: I mean, there are some ideas that are really just too
out there. Or they’re ahead of their time, right? If you talked about
driverless cars 30 years ago, people would have said, you’re completely
insane. Elon Musk and the Google boys are talking about this daily, and
we say, oh, yeah. Probably.

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So I think that at the end of the day, if you’re an entrepreneur– whether
you’re inside a company, whether you’re a mom and pop, whether you’re
aiming for something big– you ultimately have to get customers. You
ultimately have to get feedback.

Now, you can use what I call the dark arts of entrepreneurship and stalk
people gently at first, as one of my favorite entrepreneurs Estee Lauder
did. Estee Lauder was a known stalker of suppliers and the Saks and of
customers. So you can use novel methods to get your ideas out there,
especially when you’re unknown. But ultimately, you get feedback.

And if people just are not buying what you have to offer, whether it’s an
idea or a product or a mission, then it’s probably time to say, OK, go home.

SARAH GREEN: And you mentioned going home as sort of the third part
of your entrepreneurship arc, but in a successful context, that probably
means something very different.

LINDA ROTTENBERG: Yes, in a way. Instead of go big or go home, it’s go


big and go home. Yeah, I think so many books on entrepreneurship are
just about pursuing the business idea and assuming that there are these
workaholics who are going to spend every waking hour on their idea. And
yet most people have dreams because of the people they love.

And so I’m a mom. I run an organization with 350 employees and work
with 1,000 entrepreneurs. My girls told me that I could be an entrepreneur
for a short time, but I am a mommy forever. And what was stressing me
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out was this idea of balance that I hate. I hate the word “balance.” And I
thought, how do you talk about integrating your life? Because every
entrepreneur I know has to bring their family somehow into what they’re
doing.

And what I realized is even people whose lives are not always in balance–
and no one gets it perfectly right– but if their ideals, if they’re passionate
about what they’re doing, if they believe they’re making an impact, and
their families understand that they are a part of that dream, that’s when I
think things are aligned.

Then today, particularly millennials are looking for that values alignment.
They’re looking to make an impact in their jobs. And I think that
companies today that offer that are the ones that are going to attract the
most talent.

SARAH GREEN: It is funny that you mention millennials, because when I


talk with college seniors and college students today and I ask them, what
do you think you want to do? They do often mention starting their own
company, sort of the way that maybe 20 years ago they would have said,
oh, I might do some time in the Peace Corps.

You know, it really seems like for this generation, it’s almost a right of
passage that they all expect to go through. Do you think that’s sort of true,
or?

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LINDA ROTTENBERG: I do. I think that millennials want autonomy. They
want impact. They want to make a difference. They also would like to do
well for themselves. And I think entrepreneurship seems to offer all of the
above.

I think people also feel like they need this skill set to continually reinvent
themselves. So I think some– when I talk to millennials, they assume that
their career is going to take an arc where they may work inside a for profit,
then inside of non-profit, then go start their own thing. I don’t think they
think of one linear path that we used to.

But I think for employers– and this is important, because even in down
economies, if we are not giving what I call psychic equity, if we’re not
giving people that sense of meaning and purpose and flexibility, I think
the young people will walk. They assume that someone else will offer
them that, or they’ll go create it themselves.

SARAH GREEN: OK. So last question here, just because I know we’re
running out of time, but I am interested in the sort of global aspects of
this. Because I think in America, we’ve sort of made a religion out of
entrepreneurship almost. We valorize it. We believe in it. We obsess over
it.

Is this an American weird obsessions, or do you see this around the world
playing out in different ways?

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LINDA ROTTENBERG: One of the reasons I started saying you don’t need a
hoodie to be an entrepreneur was that I was meeting taxi drivers with
engineering degrees. I was meeting young women who– I met a woman in
Saudi Arabia who’s mother made terrible coffee and she did not want to
slave over the stove for 40 minutes. She came up with the Nespresso of
Arabic coffee, and it’s a $10 million business in a matter of less than a
year.

So I met people with ideas. I met people with talent and passion. And they
did not think they could be entrepreneurs. In many countries where
Endeavor first set in, there wasn’t initially a word for entrepreneur. So I
think that what I believe in is the role model effect. If he can do it, if she
can do it, I can, too.

And I’ve always felt that anywhere in the world, people have these
dreams, and they have these ideas. What they didn’t have was the sense
that it was culturally possible to take some risk, to fail, to even succeed.
So once you show a few examples– take Jack Ma, who I mentioned, in
China– I think every young 15-year-old is going to say, if he can do it, I can
to.

And that’s really what Endeavor has tried to do is to select talented


dreamers who have gotten an idea off the ground. They’re at not the start
up phase, but the scale up phase. Give them access to management talent,
to capital, to confidence, and then when they succeed, encourage them to
pay it forward, tell their stories, and inspire the next generation.

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So we have 1,000 entrepreneurs in Endeavor. They’ve generated 400,000
jobs, $7 billion annually, but what I think is the bigger impact is what
you’re going to see 10 years down the line. When kids growing up in all
these countries don’t only have to model themselves after Steve Jobs or
Oprah Winfrey. They can look to homegrown examples and say, they’re
just like me. I have an idea. I have a dream. It can happen.

SARAH GREEN: OK, I lied. There’s one more thing I want to ask you. In all
this discussion and hype around entrepreneurship today, do you think
there’s a risk of glamorizing it to the point where it’s almost too rosy a
picture?

LINDA ROTTENBERG: I think there’s a danger in only showing the boys


with hoodies. I think this is a problem. Not only does it exclude old people
and girls and women, which we know are actually starting companies
though their stories are not told, but I think that to see entrepreneurship
as a get rich quick scheme is what’s the problem.

I actually think if you go back to what I’ve been saying and why I wrote
Crazy is a Compliment is it’s a skill set and a mindset that we all need to
solve problems, to see the world differently, and to reinvent ourselves. I
think this is just what we need to survive. The world is not stable
anymore. We’re in period right now of market volatility.

And I think that stability favors the status quo, chaos favors those who
think and act like entrepreneurs. My favorite story in the book actually
involves a young widow in Northeastern France who inherits a family
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winery and is put in charge of a business she knows nothing about. She
ends up revolutionizing it, and she turns the bottles upside down and gets
the excess yeast off, and she creates the crisp, sparkling wine we drink
today.

Her 1811 vintage is known as the first modern champagne. Her name is
Barbe-Nicole Ponsardin. And the Russians then invade. And every
experienced wine owner shutters their doors. Barbe-Nicole spots a
marketing opportunity, and she resolves to get the Russian army drunk.

This succeeds, and she takes one more smart risk, and she runs the
blockades right before the peace treaty is signed. Her bottles ship to Saint
Petersburg, Moscow, and Czar Alexander declares he will drink only the
widow. Veuve is the French word for widow. Barbe-Nicole’s late husband
was Francois Clicquot. It’s the story of Veuve Clicquot.

So entrepreneurship is not a new phenomenon, it’s not only happening in


Silicon Valley, and it’s certainly not going to guarantee everyone an IPO
exit. But I believe– back to our choice today– we all have a choice. We can
do nothing and hope that our jobs are safe, or we can try something new,
give our selves permission to take a little bit of risk, and to me, the riskier
strategy is to do nothing.

SARAH GREEN: Well, Linda, I could obviously talk to you all day, but
thank you for giving us some of your time. Thank you.

LINDA ROTTENBERG: Wonderful to be here. Thanks.


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SARAH GREEN: That was Linda Rottenberg and her book is Crazy is a
Compliment. For more on entrepreneurship, visit hbr.org.

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4 COMMENTS

sashasundrique 4 years ago


Good podcast but i have a comment about different thing that was mentioned in the
podcast about "The russians than invade" ….excuse me, but Napoleon invaded Russia
rst and reached Moscow, this comment just paints a picture of Russia as an
aggressor, and personally i don't appreciate it!France was the aggressor in the
Napoleonic wars, Russians just drove them back to where they had started.

REPLY 00
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