Would you define entrepreneur?
A: The definition is very old. It is somebody who endows resources with new wealth-producing capacity. That's all.
Q: You make the point that small business and entrepreneurial business are not necessarily the same thing.
A: The great majority of small businesses are incapable of innovation, partly because they don't have the resources, but a lot more because they don't have the time and they don't have the ambition. I'm not even talking of the corner cigar store. Look at the typical small business. It's grotesquely understaffed. It doesn't have the resources and the cash flow. Maybe the boss doesn't sweep the store anymore, but he's not that far away. He's basically fighting the daily battle. He doesn't have, by and large, the discipline. He doesn't have the background. The most successful of the young entrepreneurs today are people who have spent five to eight years in a big organization.
Q: What does that do for them?
A: They learn. They get tools. They learn how to do a cash-flow analysis and how one trains people and how one delegates and how one builds a team. The ones without that background are the entrepreneurs who, no matter how great their success, are being pushed out. For example, if you ask me what's wrong with [Apple Computer Inc. cofounders] Wozniak and Jobs…
Q: That's exactly what I was going to ask.
A: They don't have the discipline. They don't have the tools, the knowledge.
Q: But that's the company that we've looked to for the past five or six years as being prototypical of entrepreneurial success.
A: I am on record as saying that those two young men would not survive. The Lord was singularly unkind to them.
Q: Really?
A: By giving them too much success too soon. If the Lord wants to destroy, He does what He did to those two. They never got their noses rubbed in the dirt. They never had to dig. It came too easy. Success made them arrogant. They don't know the simple elements. They're like an architect who doesn't know how one drives a nail or what a stud is. A great strength is to have five to ten years of, call it management, under your belt before you start. If you don't have it, then you make these elementary mistakes.
Q: People who haven't had this big-company experience you prescribe: would you tell them that they shouldn't attempt their own enterprise?
A: No, I would say read my entrepreneurial book, because that's what it's written for. We have reached the point [in entrepreneurial management] where we know what the practice is, and it's not waiting around for the muse to kiss you. The muse is very, very choosy, not only in whom she kisses but in where she kisses them. And so one can't wait.
In high tech, we have the old casualty rate among young companies, eight out of ten, or seven out of ten. But outside of high tech, the rate is so much lower.
Q: Because?
A: Because they have the competence to manage their enterprises and to manage themselves. That's the most difficult thing for the person who starts his own business, to redefine his own role in the business.
Q: You make it sound so easy in the book.
A: It is simple, but not easy. What you have to do and how you do it are incredibly simple. Are you willing to do it? That is another matter. You have to ask the question.
There is a young man I know who starts businesses. He is on his fifth. He develops them to the point that they are past the baby diseases and then sells out. He's a nanny. You know, when I grew up there were still nannies around, and most of them used to give notice on the day their child spoke its first word. Then it was no longer a baby. That's what this particular fellow is, a baby nurse. When his companies reach twenty-nine employees he says, “Out!” I ask why and he says, “Once I get to thirty people, including myself, then I have to manage them, and I'm simply not going to do anything that stupid.”
Q: That example would tend to confirm the conventional wisdom, which holds that there are entrepreneurs and there are managers, but that the two are not the same.
A: Yes and no. You see, there is entrepreneurial work and there is managerial work, and the two are not the same. But you can't be a successful entrepreneur unless you manage, and if you try to manage without some entrepreneurship, you are in danger of becoming a bureaucrat. Yes, the work is different, but that's not so unusual.
Look at entrepreneurial businesses today. A lot of them are built around somebody in his fifties who came straight out of college, engineering school, and went to work for GE. Thirty years later, he is in charge of market research for the small condenser department and is very nicely paid. His mortgage is paid up and his pension is vested, the kids are grown, and he enjoys the work and likes GE, but he knows he's never going to be general manager of the department, let alone of the division. And that's when he takes early retirement, and three weeks later, he's working for one of the companies around Route 128 in Boston. This morning I talked to one of those men. He had been in market planning and market research for a du Pont division—specialty chemicals—and he said, “You know, I was in my early fifties, and I enjoyed it, but they wanted to transfer me….” Do I have to finish the story?
So now he's a vice-president for marketing on Route 128 in a company where he is badly needed, an eight-year-old company of engineers that has grown very fast and has outgrown its marketing. But he knows how one does it. At du Pont, was he an entrepreneur or was he a manager? He knows more about how one finds new markets than the boys at his new company do. He's been doing it for thirty years. It's routine. You come out with something, and it works fine in the market, but then you see what other markets there are that you never heard of. There are lots of markets that have nothing to do with the treatment of effluents, or whatever that company does, but they didn't know how to find them until this fellow came along.
There is entrepreneurial work and there is managerial work, and most people can do both. But not everybody is attracted to them equally. The young man I told you about who starts companies, he asked himself the question, and his answer was, “I don't want to run a business.”
Q: Isn't there some irony in the fact that you who study organizations aren't part of one?
A: I couldn't work in a large organization. They bore me to tears.
Q: Aren't you being very hard on the Route 128 and Silicon Valley people? You've called them arrogant, immature.
A: High tech is living in the nineteenth century, the pre-management world. They believe that people pay for technology. They have a romance with technology. But people don't pay for technology: they pay for what they get out of technology.
If you look at the successful companies, they are the ones who either learn management or bring it in. In the really successful high-tech companies, the originator isn't usually there five years later. He may be on the board; he may be honorary chairman; but he is out, and usually with bitterness. The Apple story is different only in its dimensions. Steve Jobs lacked the discipline. I don't mean the self-discipline. I mean the basic knowledge and the willingness to apply it.
High tech, precisely because it has all the glamour, is prone to arrogance far more than any other. But it's not confined to high tech.
Q: Where else?
A: Finance. There's a different
