operating at the margins of society. By the late eighteenth century, however, all reference to pillage and deviance had disappeared as a more positive meaning emerged, and the entrepreneur became “a man of action who achieved something or accomplished a task—an activity that was highly valued in protestant thinking.”3 This new entrepreneur, according to Schumpeter, was someone who used an invention or new technology to create a new product or to revolutionize production methods, or who created a new market, opened a new source of supply of materials, or reorganized an industry. And like his militaristic forebears, say Villette and Vuillermot, he was motivated by a desire for independence, he sought a field that would allow for the full expression of his creativity, and he had a great need for public achievement. The entrepreneur, however, is just one half of the equation, and he cannot realize the full scope of his ambitions without one other key factor—an opportunity.4
Enterprising Individuals + Lucrative Opportunities = Profits
In “The Promise of Entrepreneurship as a Field of Research,” the economists Scott Shane and Sankaran Venkataraman emphasized that, despite a prevailing “cult of the entrepreneur” that overemphasizes the role of the individual, entrepreneurship actually requires two ingredients: “enterprising individuals and lucrative opportunities.” Entrepreneurship involves finding new ways to combine goods, services, materials, and methods in what economists call “joint production.” The entrepreneur buys different resources at one set of prices, combines them together, and sells them for a total price that is greater than the sum of their original prices. Success requires making different assumptions about the values of those resources than providers and competitors who would otherwise raise their prices to capture a share of the entrepreneurial profit. Entrepreneurship therefore requires people to value resources differently, and there are two reasons why that might happen. First, estimating the value of individual resources—as well as their final combined value—requires guesswork. People will guess differently, however, so the individual who guesses correctly stands to profit. Second, ongoing technological, political, regulatory, and social changes ensure that all participants have imperfect information and people who possess information earlier than others have an advantage. But while asymmetrical information creates opportunities for some, it rarely lasts. As information and knowledge spread throughout the community of consultants, vendors, and materials suppliers, they will all raise their prices as they try to capture a share of the entrepreneurial profit for themselves. Competitors and imitators will enter the market too, and over time, the diffusion of knowledge will lead to ever-increasing competition between suppliers, competitors, and imitators until the entrepreneurial profit becomes divided among so many actors that the incentive to enter the market is eliminated. This cycle applies to the development of every type of product from condominiums and automobiles to cell phones and personal computers.5
How Entrepreneurs Identify and Exploit Lucrative Opportunities
But where do entrepreneurial ideas come from? Usually from very smart people. Each of us possesses different types and amounts of information, say Shane and Venkataraman, and the sum of a person’s information and life experience serves as the mental framework through which they view the world. A person who obtains a new piece of information before others do may have a brief advantage but, more important, they are able to fit that piece of information into their thinking in a way that complements their existing mental framework and helps them identify a new entrepreneurial opportunity.6
This underscores an important difference between managers, who work at optimizing an existing business, and entrepreneurs, who, according to Shane and Venkataraman, identify new “means-ends relations” and “combine existing information and concepts into new ideas.” The latter is more difficult to do, and people who are very intelligent and have the right set of cognitive skills are simply better at it. Intelligence may even influence how different people assess risk. Numerous studies have shown that entrepreneurial people see opportunities in situations where other people see only risks, and this may be because highly intelligent people are better able to accurately assess risk while the average person overvalues the downside risk as compared to the potential upside gain. In other words, according to the behavioral psychologist Daniel Kahneman, for most people, losing a dollar feels twice as bad as winning a dollar feels good. Those who are able to value the upside and the downside equally are better at assessing risk and reward and exploiting entrepreneurial opportunities.7
Studies have identified several other attributes common to entrepreneurs. First, they are optimists who perceive their chances of success to be much higher than they really are and much higher than those of their competitors. They are likely to be overly optimistic about the value of the opportunities they discover. This optimism, while driving them forward, can become a disadvantage if taken too far as they undervalue the downside risk. Entrepreneurs must also possess a higher-than-average tolerance for ambiguity because, unlike established businesses, entrepreneurial ventures take shape through a messy, uncertain, and fluid process. Finally, people with a high need for achievement are more likely to engage in entrepreneurial ventures because they offer greater opportunities for wealth creation and public acclaim.8
Entrepreneurs make their money by conceiving of new combinations of resources and ideas and creating new products and new markets for those products. They also share certain characteristics—intelligence, optimism, drive, and comfort with ambiguity, to name a few—that are further illuminated by recent research in the area of genetics.
The Geneticist’s View
In Born Entrepreneurs, Born Leaders, Scott Shane summarizes a growing body of scientific research that proves that our genes influence whether or not we are likely to become entrepreneurs, and that the genetic indicators of our tendency to engage in entrepreneurial behavior fall into three areas.9
First, genes influence an individual’s predisposition to entrepreneurship through a number of personality traits. Each person falls somewhere on a range of high to low for each of what are called the “big five,” or OCEAN, personality traits: “openness to new experience,” “conscientiousness,” “extroversion,” “agreeableness,” and “neuroticism.” Entrepreneurial people typically rank very high on the first three of these traits and very low on the last two.10
Entrepreneurs are more likely to be open to new experience, which is helpful because each entrepreneurial venture is new and different from the last. They are also more likely to be extroverts, and extroverts are also more likely to start their own businesses. Entrepreneurs are usually very conscientious, which translates into determination, discipline, organization, and perseverance in the face of obstacles, challenges, and uncertainty. Entrepreneurs are less likely, however, to be neurotic, to be insecure, or to be worriers. Rather, the entrepreneur must remain emotionally stable, flexible, and positive in the face of stress, financial risk, social isolation, setbacks, and the uncertainty that is inherent to any entrepreneurial activity. Finally, although they can be very charismatic and socially skilled, entrepreneurs are less likely to be agreeable—they do not need to be liked. Indeed, being agreeable—“cheerful, courteous, trusting, cooperative, kind, and altruistic”—is of little benefit to the entrepreneur who must “pursue his own interests, often at the expense of others, and drive hard bargains.”11
The Influence of Genes on Other Personality Traits and Correlations Between Traits
There are several other personality traits through which genes predispose an individual toward entrepreneurial behavior. The idea of “locus of control” has to do with how much a person believes that he or she can control the world—or that the world controls him or her. A person can have either an internal or an external locus of control but entrepreneurs typically possess a high internal locus of control, which translates into a strong belief in their own ability to influence outcomes through their own behavior. Entrepreneurs must also have a high degree of self-esteem, which translates into high self-efficacy and confidence in one’s own ability to achieve goals even
