Kramer Communications

Mob Rules: What the Mafia Can Teach the Legitimate Businessman

Marc Kramer — Mon, 02 Jan 2012 13:57:59 GMT

Louis Ferrante, a former associate of the Gambino Mafia family, has written a very interesting book on management based on his experience in a dynamic entrepreneurial run crime family entitled: "Mob Rules: What the Mafia Can Teach the Legitimate Businessman" published by Portfolio. Many of the lessons he learned can be used in any business the following is an interview with Mr. Ferrante, who spend much of his time speaking to college students on leadership and entrepreneurship.

Why did you write this book?

Ferrante: “I was sort wanted to branch out into other types of books. My agent and publisher wanted me to do another mafia book. I wasn’t sure what I would write. I still think like a mobster. I came to the conclusion that my old mob ways get me through business today. I realized that we , the mob, did things a little better.”

Do mob guys read business books?

Ferrante: “Not active members. The men I was on the streets with didn’t read any books. In prison Mafia guys read Mafia books to see their name in print. I am guessing there a few prisoners that are probably reading my book. I didn’t read books until I was in prison and I feel in love with books. If it wasn’t for prison I wouldn’t have been a reader.”

How did bosses train young associates to take on leadership roles?

Ferrante: “There is a balance. They train you through building your confidence so you can do more. They are careful on who they train to take over a leadership role because it is a Darwinin world and they are sometimes afraid of their protégés. They are afraid the protégé has their sights on the boss’s job. In a world where bullets are dispensed easily so leaders can be replaced easily.”

Although violence can always be used in a society where killing someone is acceptable, what steps would a boss take if someone made mistakes that weren’t malicious, but cost the organization money, to improve the guy’s performance?

Ferrante: “If you cost someone big money it can cost you your bones at the least and your life at the most. It all depended where you stood in the organization. If a boss or captain went to bat for you or you are a major owner and can recoup it plus 10 times that then you would be given a pass. You would be waiting for a decision. For everyone else, they probably would get a beating so you will remember to not make the mistake again. You can’t give a murder a beating because he will kill you , so you might give him a pass depending on the circumstances.”

When recruiting potential members of a crew, what attributes did you look for that lined up with what a legitimate organization could also use in screening applicants?

Ferrante: “I wanted loyalty, trustworthiness and he had to be dependable. You want people who are ambitious. You mold people to meet their leader’s ambitions. You might find someone who isn’t as ambitious as you but he is loyal so that is okay. The mob had certain values like a company has and this translated into the long term success of the organization. Dependability is most important because if they aren’t dependable that affects the crew and everyone up the line.”

When does a boss realize that he has made a mistake moving someone up and how did they rectify it without hurting or killing someone?

Ferrante: “What they usually do when they make someone who is an acting or real captain and it doesn’t work out. The boss can break you back down to a solder. If they didn’t want to kill you they could put you on a shelf. They take away your right to be a member of the family and can’t make money through the mob. If you have a legit business you can keep. Any illegitimate business they would shut you down or they would let you keep it, but wouldn’t let you grow it or tax you more. The boss can take you back or a new boss takes over and can promote you. There is a lot of office politics.”

Are there other motivators besides money?

Ferrante: “When you start out it is a belief in that life. Money is the secondary. Money takes the top spot. As you get older your ideals wane and money is the biggest motivator.”

If a mob guy was being cheated and he didn’t want to use violence how would he obtain justice?

Ferrante: “You aren’t allowed to use violence. You can’t shoot or beat their brains in. if you are in equal positions and ask for a sit down to discuss it. If he is in a higher position you would go to your captain. If the person is in your crew then your captain renders a decision. If the person is from a different crew then your captain negotiates with the other guys captain. When the captain’s can’t agree then they take it up to the next level. A deal is eventually worked out. Rarely is violence used and that happens when one of the people agrees, but doesn’t honor the agreement. It’s no different than when a judge tells you that you have to pay.”

Was their one mob leader that really impressed you and why?

Ferrante: “Vincente “The Chin” Gigante, who was head of the Genovese family. He lived by the old rules. He didn’t let money interfere with his judgments. He had an ego, but you didn’t see it. He seldom exposed. He didn’t care about mansions, yachts or nice suits. He believed in that life. One time there was a meeting with other bosses about millions of dollars and chastised over meeting for money. That bosses should only meet about saving or taking a life. He had a mysterious aura.”

The Way of the VC: Having Venture Capitalists on Your Board

Marc Kramer — Fri, 18 Nov 2011 23:00:24 GMT

Yinglan Tang, a Harvard, Stanford and Carnegie Mellon, is the author of "The Way of the VC: Having Venture Capitalists on Your Board," talks about his book:

Why did you write this book?

Tan: "There are perhaps more than 10,000 VCs in the world but perhaps only about 1% are any good. In fact, although 95% of companies listed on NASDAQ are backed by 900 VC firms, 46% are backed by 5. How do the world's top venture capitalists consistently obtain supernormal returns? How do they add value to entrepreneurs they have backed? That was the puzzle I was trying to answer in my book."

What are the common misconceptions about venture capitalists by entrepreneurs?

Tan: "There are two extremes. One type think they are vultures. The other just wants a check and think VCs are philanthropists. Although there are folks at these two extremes, most VCs are somewhere at the centre."

What are the three to five things venture capitalists are looking for when deciding whether to make an investment or not?

Tan: "It is like surfing a wave - you need a good team to catch the right market just like a good surfer can catch a good wave. A good team will, on average, yield 3 times that of a mediocre team with mediocre market. A good team with a great market will, on average, perform 12x better.

What are the three to five mistakes entrepreneurs make when presenting to venture capitalists?

Tan: "VCs like to see how quantitative entrepreneurs are. In consumer internet for example, do they track the metrics and keep track of traffic conversion under matrix?

What do venture capitalists look for in business plans?

Tan: "The best VCs flip to the back and look at the numbers. If the numbers are interesting enough, then they look further. First is logic and coherence. But fundamentally is whether the business model makes sense. Then, whether the team can execute the business model."

How important is it to have experience in your industry when trying to raise venture capital considering many of the great start-ups such as Microsoft, Dell, Oracle and Facebook, the founders had little business or industry experience?

Tan: "The examples you listed are exceptions. Most of the time, the chances of success is greatly increased by industry experience."

Do venture capitalists have a predisposition to investing in elite school students over others?

Tan: "Elite schools have the advantage of drawing awesome talent - access to top networks, great education, preselection process, good stamp of approval and intellectual prowess. We have a portfolio company where CEO (from an elite school) has engineering background and can juggle complex math, sociable and does biz dev naturally and employees love him. We will back him any day."

How hard is it to raise money today?

Tan: "For Fundable companies - very easy. For not fundable companies - it is hit and miss. There are some dumb money around."

The number of venture firms is almost half of what it used to be, will we ever see a resurgence of the number of venture funds?

Tan: "In the dot-com days, there were many folks (most notably investment bankers) who hung out their shingle to raise VC funds. These non-performing funds last 6-8 years and take a long time to die. Failure doesn't happen quickly in the venture capital industry. Nowadays, there are more experienced smart money with well-defined strategy, so these funds with a sales engine (good track record) will continue to succeed."

If there is one piece of advice you would give an entrepreneur trying to raise capital, what would that be?

Tan: "Don't do it unless you have to do it. It's a time bomb. And if you really have to, raise it from the smartest money you can get. I won't worry about valuation and dilution - just focus on the smartest money you can get so that the enterprise can suceed. It is better to own 1% of Shell than 100% of a gas station."

Killing Giants: 10 Strategies to Topple the Goliath In Your Industry

Marc Kramer — Fri, 24 Jun 2011 20:34:42 GMT

Stephen Denny is a competitive strategy and marketing consultant, helping brands in technology, consumer products, clean energy and services define their competitive positioning, communication strategies and implementation plans in the market. He is the author of Killing Giants: 10 Strategies to Topple the Goliath In Your Industry (Portfolio US & Penguin UK).

Apart from writing and consulting, Denny is a frequent speaker at corporate events, industry conferences and graduate business schools on topics relating to competitive strategy and marketing. He holds multiple patents, has lived and worked in both the US and Japan, and has an MBA from the Wharton School.

Prior to consulting, he was a 20 plus year senior marketing executive having managed the people, strategy and budgets at brand name technology companies like at Sony, Onstar, Iomega and Plantronics. He lives just south of Santa Cruz, CA.

Why did you write this book?

Denny: “In the mid-90’s, I was working for a small $86 billion upstart company called Sony and the giant in my particular industry was TDK, who at $500 million or so in revenue was twice my group’s size but a rounding error to the corporate mother ship. It was clear to me that giants came in all shapes and sizes. We did good work in those days, taking our #4 share position and driving it to #1 in video media, so my early education in toppling the giant started there.

Skip to the present and it took an email from a former colleague telling me she was “stuck between two giants” in her new role to kick me into gear. I hit “reply” and had a 500 word response ready to send within minutes. I realized I had a lot to say on the topic and that email probably wasn’t the right medium.

I’m surprised that more hasn’t been written on this subject given its importance and the passion it stirs up in people. This was a book that needed writing.”

What are the five strategies a small product company should use to overcome a bigger competitor?

Denny: “All ten of the strategies I discuss in Killing Giants will help a giant killer out-maneuver the giant they face, so let me pick the five that may be the most counter-intuitive:

“All the Wood Behind the Arrow(s) discusses how being great at one thing is never enough. When Method co-founder Eric Ryan told me, “I could never have been successful if I had launched a single attribute brand… the big guys would have figured us out,” it struck a nerve. “Interestingness” is often the missing element – the brand tension that combines two seemingly incompatible elements into a more nuanced brand. This idea contradicts a lot of old marketing thinking that says brands need to be known for One Big Thing.

“Inconvenient Truths discusses how pricing is used as a weapon. It’s never about making it cheap enough to get the business. Price can be used as a lever – together with the speed of your inventory turns – at retail to maximize what they get from investing in your products. It can also be used to flip the emotional polarity from rational to emotional or vice versa.

“Polarize on Purpose sings the praises of defining who you are and who you’re not. You have to be willing to leave some people behind – some brands are quite content offending a lot of people, come to think of it. But for those who are in on the joke, the brand becomes part of their identity. 42 Below vodka and even MINI are brands that aren’t for everyone, but for those who identify with them they’re the perfect choice.

“Winning in the Last Three Feet is as much a mindset as it is a tactical counter-punch. Being nimble, ready and willing to let your giant drive the demand for your category and smart enough to intercept that demand as it reaches for its collective wallet has real Zen-like beauty to it. This works in physical retail locations and it works in search, with two good case studies in the book describing the details. A lot of brands I talk to want to get better at this.

“Fighting Dirty is probably the chapter that gets people wound up the most. Changing structures, shifting perspectives and refusing to play the giant’s game – or even the established game – is the heart and soul of winning competitive strategy.

What examples of small companies can you give that demonstrate giant killing and what were the keys to success?

Denny: “Black Like Me, a brand that grew out of the townships of South Africa, is an example of how a brand can create an argument that its giant competitor can’t win. For a black entrepreneur in the townships of South Africa in the 90’s, you were fighting against more than just global players – you were fighting apartheid, too. But the defining feature of this brand is its name. You don’t have to ask who Black Like Me is for. This sense of identity and the “for the people” attitude of the company made it impossible to dislodge.

“Baidu is another example of a local champion who in this case persuasively convinced new Internet users in China that it simply spoke Chinese better than Google did. When most of your prospective customers can’t even spell “Google,” this is an argument that’s easy to win. Robin Li’s story is an inspirational one for any local brand fighting against a global player.

“Go Daddy was languishing with a 16% share when it realized that the reason it wasn’t bigger was because no one knew the brand. Bob Parsons gambled on a Super Bowl ad in 2004 and the rest is history. He’s #1 in the business, larger than all of his competitors combined, and is growing at a faster rate than they are. For many, a Super Bowl ad isn’t the answer but if we distill the real lesson here, it’s that sometimes seizing the microphone is the big idea.

“Killing Giants is filled with 33 stories like these. There are no “buzz” stories. Every interview tells of how a smart, nimble company out-maneuvered the giant it faced.”

Why do great companies like Microsoft cease to be great innovators and smaller companies with less resources become leaders?

Denny: “Giants become vulnerable when they become trapped by their own success. They can’t imagine that their way of going to market could be wrong. Think of IBM’s Watson defeating the two reigning Jeopardy champions, one having won the game 33 times and the other a multi-million dollar winner. Could either of these two champions in their wildest dreams conceive of a situation where their tested and true approaches could be wrong? Probably not. Watson won because it didn’t play the game like a human. And the humans got mowed down as a result.

“Giants develop ways of doing things and these ways become instilled in their culture. They become masters at winning the game their way. This works right up until the moment that a giant killer comes along and changes the rules. Intel was unbeatable in microprocessors until the market grew up to include more than just PC’s – once it included smart phones and tablets, they were behind. They resoundingly won the last war. But they’re in a new one now using old weapons.

What are the attributes of the leaders who are able to lead their teams to success in areas giants dominate?

Denny: “The giant killers I interviewed routinely stressed culture, speed and alignment. Bob Parsons at Go Daddy, Jim Koch of the Boston Beer Company and Eric Ryan all stressed that their primary roles were to make sure the culture stays the way it is. Many discussed the ability to “end the internal debate” and get a “facts not feelings” culture instilled quickly, with alignment and execution following closely.

“Once a decision is made, the expectation is that everyone is striving for the best possible implementation plan, even if it wasn’t your idea. “There is no room on a high performance team for, ‘I told you so,’” serial entrepreneur Mike Cassidy explained to me.”

How do you create mismatches when the competitor has greater name recognition and funding?

“Head to head mismatches are typically easier in technology industries where a ‘winner takes all’ dynamic is more prevalent. I recall being at Iomega in the late ‘90’s when Syquest launched its Sparq drive – a removable storage device with the capacity of Iomega’s bigger Jaz drive but priced at parity with its smaller Zip drive. This drive stalled Iomega’s growth and produced the biggest backlog in Syquest’s history. Iomega had no answer and frankly got lucky that Syquest just ran out of cash.

“In a decidedly non-technological field, Hershey pitched its smaller Krackel brand against Nestle’s powerhouse Crunch bar in the relative backwater of the vending machine class of trade. Hershey’s massive 30% trade discounts forced Nestle to first stand and fight, which caught the attention of Nestle’s significantly larger national accounts, who quickly demanded the deep discounts they learned the company was handing out. The brand was forced to retreat and the resulting vacuum allowed upstart Hershey to gain a number of additional facings in the process. Awkward mismatches like this one make the giant’s size a liability.

Is there one company that has been very good taking on Giants on continuous basis?

Denny: “A number of the brands I interviewed in Killing Giants have been able, over a period of decades, to continuously fight off successive competitors who dwarf them in size. A good example would be Jim Koch at the Boston Beer Company, who has been largely described as the grand-daddy of the craft beer movement in the US. The giants have awoken at times and launched their own craft-styled beers from all quarters, but the brand – now the largest American-owned brewery left, incredibly – is still growing and thriving.

“How is this possible? The Boston Beer Company has focused its attention on more than just making great beer. “I set out to change how Americans thought about beer,” Jim told me. This is a wonderfully loaded statement, isn’t it? It says, ‘I won’t rest until you, too, understand what makes this incredibly interesting 10,000 year old human tradition so important.’ His employees all do stints in the brewery. They’re encouraged to home brew. They’re experts. This is more than what a training course or a new employee orientation course could possibly teach. They have it “under their fingernails,” as Jim puts it. And still, Jim says, “They spill more than we brew!” And it’s true. “

You give an examples in the book where large companies who were either small players in a particular market or didn’t own a market used pricing as a way to push the opposition to losing market share or crumbling completely. How can early stage companies use this strategy to their advantage?

Denny: “Using pricing effectively starts with understanding how your channel partners make money. If you sell through retail, understanding how fast inventory is turning is just as important as understanding their margins. Helping your partners make more money with your products than they can with your larger competitors is how smart brands secure and hold scarce shelf space. I talk a lot about return on inventory investment in Killing Giants and it’s a smart strategy.

“Another pricing strategy that works is re-imagining how the product is consumed. How could a capital investment become a subscription? Zipcar did in a category synonymous with American culture - cars. Germany’s Prizeotel re-imagined the overnight stay, providing a high end design environment for E 59 a night by removing all those elements that no longer mattered to modern business travelers like landline phones and minibars. Giant Killers are usually the first ones to re-imagine a stable industry and destabilize it to everyone’s benefit.”

How is social online services changing the playing field between brand names and aspiring entrepreneurial companies?

Denny: “Social media has given us so many tools that we didn’t have a few short years ago. We have the means to project our “interestingness” – our brand’s personality and even its people – in ways that make the world very small. Social media has radically, dramatically transformed the playing field to the point where those willing to invest the time and the effort at interaction and dialog can up-end the giants who have more dollars than time.

“Look at Indium Corporation, a maker of industrial materials for the manufacturing industry. The company hosts over 70 blogs written by their materials scientists, essentially eliminating the need for a heavy rotation of print ads and an escalating trade show budget. They’re publishing critical need-to-know content that their customers, the materials scientists in their customer locations, require. This has served to eliminate the sales funnel. When someone downloads three white papers on a problem, an Indium salesperson calls the exact person with that burning problem and the person picking up the phone is thrilled to get the call. That’s what social media can do. “

What do you tell entrepreneurs who use the excuse that they don’t have the financial capability to compete against larger players?

Denny: “This is an age of smarts, of brains instead of brawn. It isn’t about big budgets for most of us and the customers we’re trying to reach with these dwindling budgets trust the message and the medium less and less. We’ve changed as consumers, too. We’re looking more to friends, to others like us in our communities (both physical and virtual) to understand what experiences others have had. As a result, the outlook for entrepreneurs has changed dramatically – and I’d argue that this change is for the good.

“Competing against giants rarely comes down to out-gunning them in the market. As one serial entrepreneur with several name brand technology companies behind him confided to me, “Giants would rather die than change.” Giants are rarely the reason a start-up goes under, he told me, and based on the interviews in Killing Giants and the consulting work I’ve done with entrepreneurs and start-ups, I believe him.

“Another advantage that entrepreneurs have going into this fight is that all things considered, we want them to win. We love underdog stories, particularly in this culture. This isn’t an entitlement – all things are rarely equal, after all – but the door is open. It’s a good time to be a giant killer.”

SAGE ADVICE FROM LEGENDARY VENTURE CAPITALIST BILL DRAPER

Marc Kramer — Mon, 16 May 2011 13:43:24 GMT

Bill Draper, one of the country’s legendary and most successful venture capitalists, is the founder of the Sutter Hill Ventures and Draper Richards. He has invested in over 1,000 companies and many of his hits are household names such as Skype. Now he has a new book out entitled “The Startup Game,” published by Palgrave Macmillan. The book is a very fun interesting read. The following is an interview with Draper.

Why did you write this book and who is the intended audience?

Draper: “I wrote the book because I had so much experience in venture capital and with entrepreneurs and I should get the word out before it is too late. The fact I was part of a three-family generation of VCs gave me the punch to get going. The intended audience is entrepreneurs, VC and business people interested in how venture capital and startups get going and the inter-relationship between venture capitalists and entrepreneurs. Actually anyone interested in the creative sparks of American economy.”

How much has the venture capital profession changed in the last 50 years?

Draper: “It has changed dramatically. When I was driving a car around the prune orchids in Santa Clara, before it became know as Silicon Valley, I would write the terms of a deal on yellow piece of paper. I would discuss it with the entrepreneur and have him look it over and he would say he was ready to go.

“I would then give it to an attorney. There was no term sheet back then. There is more formality today. The size of the industry has dramatically changed. There were only a few funds back then and we all cooperated a lot .

“If we had a $2 million dollar deal and we were putting in $1.5 million and we would get two others to come in to make up the difference. The sizes of the funds have become so large they can’t share because they have so much money under management. I don’t think it is good because when we partnered we shared due diligence, shared ideas and provided different support from contacts.

“The greater the number of funds the better it is for the entrepreneur because there are more people to talk and negotiate with. We would start the equity split with the entrepreneur at 50-50. There are going to be more specialized venture funds focused on socialization or chips. The technology has gotten so sophisticated and is dramatically so it is hard to keep up without specialization.”

How important is a business plan?

Draper: “That again has become more important today then it was 50 years ago. I remember when we backed Quantum and there were four guys who were all engineers They were building storage drives. We talked about what they wanted to do and had backed another company in the field, so we knew the territory. They didn’t have a business plan and we just discussed their ideas. Today you wouldn’t think of backing a company without a business plan.”

What do you look for in plans today?

Draper: “The first thing I do is look at the biographies of the management. I am most interested in the leader. I want to get to know them. I talk to others about the leader. I want to make sure the entrepreneur has strength of character, empathy and that they have the internal strength to stay with it. I want to know that the leader can recruit people smarter than themselves.

“I look for good margins in the area of 50% or better because margin gets into by marketing, distributors and other things. I look for what is different. You don’t know what is going on at various companies and you might not know what the competitor is coming out with. I look at the financial projections to see how they will scale up.

“The entrepreneur always underestimates cost and overestimates sales. I look for spelling and grammatical errors. Details are very important. I look to know they have done their home work.”

What if the entrepreneur has a great idea, but no money or so little money is spouse is afraid to risk it?

Draper: “That is why they need a venture capitalist. We like them to have skin in the game, but if they don’t have it or the spouse doesn’t want to take the risk that is okay. That is what VC’s are in business for.”

What has been your experience of investing in husband-wife teams?

Draper: “The most well known team example is Cisco, which was started by a husband and wife team. My old firm, Sutter, looked at it and turned it down because the husband and wife were a little wacky. They did the right thing, but Sequoia went in and replaced the husband with John Morgridge who was the CEO and it was a huge success.

“I haven’t invested in any. It wouldn’t be a positive, but it wouldn’t be an overwhelming negative. There was a company called Measurex and was lead by a great leader, which became a New York Stock Exchange company. He was married to a very nice person and he made her the vice president of personnel. That was a problem because they people in the company go to the personnel to discuss problems about the boss and was a bit of a drag on the company because employees didn’t feel they could come to her.”

What is the youngest entrepreneur you would invest in?

Draper: “We backed a guy who was 26 or 28. He came into the office in shorts and sandals. He ended up running a company called Oona. We had backed Skype and the entrepreneur wanted to use Skype to develop hardware to use on Skype. We once had a 29-year-old nerdy kid come in and he wanted $2 million for 10% of the company. We made the same offer others had, but he turned us down and that was Bill Gates.”

All of the examples of entrepreneurs you invested in all went to elite schools, have you ever invested in a person who graduated from a state school?

Draper: “I am sure we have. We want to back brain power so we don’t care where they come from. I can’t remember anyone right now that I had invested. I probably backed over a 1,000 companies, so there must be a few there. I don’t focus on the elite schools; it just depends on who comes through the door.

“I am interested if they graduated cuma cum laude. We backed a guy named David Lee, who went to school in Minnesota, who was Asian, and didn’t go to an elite school. Many of the foreign entrepreneurs don’t go to elite schools. The foreign students are risk takers and are ambitious because they were willing to come here.”

Is there a difference between East Coast and West Coast investors?

Draper: “I think West Coast investors are more like gun slingers. They worry less about entrepreneurs who have failed. There is more risk taking tolerance. It shows. I was speaking at Harvard that they say they haven’t been as good at backing their entrepreneurs so they go West. An example is Facebook, who came to Silicon Valley to raise its money.”

What is the biggest mistake entrepreneurs make when trying to convince a VC to invest?

Draper: “They should be themselves and not put on an act. They don’t level right away about their weaknesses or their plan has. It’s best to get that out early. I don’t like when they come in and show a lack of knowledge of the venture capitalist before coming in. They need to know how the VC can help them build their company.

“They try to put on a front or an arrogant attitude. They act cocky. They come in alone without bringing in a couple of other people who has a certain expertise that would show the depth of the team. I don’t like to see them reading off the Power Point because I want to look in their eyes.”

What do you look for during due diligence and how long does it typically take?

Draper: “It varies dramatically. After a first meeting you do a few phone calls. Then you have a second meeting to ask better questions. Then you start aggressively calling people to tell them about the deal and getting information. It shouldn’t take months, but weeks.”

Is it good to start the conversation with the VC by asking them what they liked about your business?

Draper: “It is a good idea, but not to start off with it.”

If you had one piece of advice to give an entrepreneur trying to raise capital what would that be?

Draper: “Go where the money is. Let me explain. There are a lot of VC’s are on time clocks because their funds end usually in a 10-year period. You shouldn’t go to a fund that is in the process of raising money. Go to firms that just completed raising money and they need to put the money to work.”

Leadership Without Excuses

Marc Kramer — Tue, 18 Jan 2011 17:02:07 GMT

Jeff Grimshaw, a Philadelphia native and a graduate of the University of Utah, is the co-author, along with Greg Baron, of a new book “Leadership Without Excuses: How to Create Accountability and High Performance,” published by McGraw-Hill. In an era of high management turnover due to either poor performance and/or unscrupulous leadership, the authors interview leaders that have turned around the companies they run by learning from past mistakes, hiring people they believe are smarter than they are and a willingness to adapt to new situations. The following is an interview with Mr. Grimshaw, an accomplished consultant who has worked with entrepreneurial and Fortune 500 companies.

Why did you and your co-author write this book?

Grimshaw: “Gregg and I have been consulting for two decades. Many years ago we observed that while everybody talks about the need for more accountability, few actually do anything about it.

“At the same time, we’ve had the opportunity to work with some great leaders whoand who don’t make excuses for why they can’t. We wanted to showcase their wisdom and experience.

"“Finally, over the years we’ve found many great insights—largely untapped—from behavioral economics, evolutionary psychology, and other social sciences about why humans make so many excuses…and what to do about it.

“We saw a unique opportunity to pull it all together in a relatively quick, enjoyable, and highly practical read for busy people. Interested readers can download two chapters of the book there for free at www.takeawayexcuses.com.”

Who is the intended audience?

Grimshaw: “We wrote the book for leaders and aspiring leaders. Some of what we talk about is particularly applicable to very senior executives. But we’ve been surprised—and enormously gratified—by how many people have said to us, “I’ve had some success applying the Leadership without Excuses philosophy at work. But I’ve had even more success applying it home with my spouse and kids.” It turns out the three Conditions of Accountability we prescribe—communicating clear and credible expectations, creating compelling consequences, and leading conversations grounded in empirical reality—are broadly applicable in all walks of life!”

Are people avoiding accountability?

Grimshaw: “Yes. And we think we know why. As fallible creatures we have lots of hardwired quirks, but two in particular are relevant here: One’s called self-serving bias. The other’s called fundamental attribution error—by the scientists who study these things. Put these two things together and you get something that we call “heads I win, tails you lose” syndrome.

"Here’s what I mean: As humans, we give ourselves credit when things go well, but we blame external factors when things go poorly. When we’re looking at other people, however, we often do the reverse. We chalk up their successes to external factors (e.g., luck) while chalking up their failures to “the kind of person they are.” How does this net out for leaders? When they see their people doing great things, they give themselves credit: “My team’s performance is evidence of what a terrific leader I am.” But when their people are stumbling, they blame it on the kind of people they are: “They’re idiots who lack accountability!” The Leadership without Excuses philosophy says: “Before I chalk up my people’s failures to the kind of people they are, I better first make sure I’ve done my best to create the three conditions of accountability.” At the end of the day, it’s about demonstrating appropriate stewardship for what you’ve been given: People to lead.

“In case that’s confusing, let me put it another way: There are three kinds of people. Saints are always accountable. Sinners never are. Then there are Save-ables. Most people are Save-ables. When the Save-ables aren’t doing what you need them to do, it’s easy to write them off as Sinners. But until you’ve created the three conditions of accountability, you don’t know the difference. The best leaders turn their Save-ables into Saints. There are still going to be some Sinners left over…but then those Sinners stand out…and are easier to “cast off,” if you will.

How can leaders hold non-reporting employees accountable when they have no leverage?

Grimshaw: “We work for lots of CIOs and in lots of complex, matrixed organizations where this is a real challenge. What we tell our clients is that they have more leverage than they realize. We ask: “Are you increasing confidence and reducing anxiety among the people you need to be accountable but over whom you have no positional authority?” If the answer is “yes,” and consistently so, you can get them on board with just about anything. If the answer is “no,” they’re never going to give you what you need. So in the book we talk about how to do those two things—increase confidence and decrease anxiety—when you have no positional leverage.”

Many employees think their leaders push their failures down the chain of command, how can employees hold their leaders accountable for poor decisions?

Grimshaw: “You’re not going to like this answer. There’s not much they can do that’s sure to work—except go to work somewhere else. Short of that, the best you can do is try to change the culture…which is difficult and largely thankless, but is also possible in many instances. For example, when problems happen, don’t point fingers yourself. Instead, try to get others engaged in a root cause analysis. Make “reserving the right to get smarter” your personal mantra and model it for others—including your leaders.”

Based on your interviews, what are the traits of a good leader in today’s business environment when leaders are no longer kings with employees, boards, media and the government questioning their leadership?

Grimshaw: “Our research and experience have shown us time and again that the very best leaders do three things: They communicate clear and credible expectations. They create compelling consequences. (Our slogan is “Reward what you want to see more of and stop tolerating what you don’t.”) And they lead conversations grounded in empirical reality. We get lots of questions about that third one. It’s about confronting reality—the world as it really is and not the fantasy world we’d prefer to inhabit. It’s about confronting risks with eyes wide open and learning from mistakes.

“I think it’s worth noting that we can trace the financial crisis back to failures to create the second and third conditions of accountability. If you’ve read Michael Lewis’s amazing book, The Big Short, you know that in the run up to the crisis, consequences on Wall Street were out of whack. Traders who took big risks got big rewards if it paid off…and they personally lost little or nothing if their wager failed. And there was nobody leading conversations grounded in empirical reality. At Harvard, for example, where their endowment got clobbered because of crazy investments, anybody who said, “Hey, this seems a little bit nuts” got shot down.”

What are the best ways to motivate people to maximize their potential?

Grimshaw: “Forgive me but I’m going to use the f-word here. As in “feelings.” In serious business settings, it’s taboo to talk about feelings—a mushy word that evokes rainbows, unicorns, and Johnny Mathis. Despite all that, we tell leaders that “Your greatest source of power is the ability to change how people feel.”

“If that sounds too New Agey for you, consider this: You can’t really understand why people make the economic choices they do without taking feelings into account. As Daniel Kahneman said, upon accepting the 2002 Nobel Prize in economics, “economic utility cannot be divorced from emotion…A theory of choice that completely ignores feelings…leads to prescriptions that do not maximize the utility of outcomes as they are actually experienced.”

“Highly oversimplified layman’s translation: People pretty much do what they feel like. And the practical implication for leaders (and one of our mantras): Your greatest source of power is the ability to change how people feel.

“Lots of our work focuses on helping leaders leverage their “greatest source of power” more effectively and efficiently to drive accountability and performance and deliver business results. The book shows readers how concepts like social comparison, loss aversion, and declining marginal utility help to predict which rewards and consequences will have the strongest motivational value. For example, did you know that humans are twice as sensitive to losses as they are to gains? So when you want to change behavior, wield your biggest stick: Your power to take things away!

“On the positive side, you have more reward currency than you realize to motivate performance. Because the opportunities to positively change the way your people feel are nearly limitless.”

Should every employee be treated the same or do you adjust for the employee’s personality, learning and communication style?

Grimshaw: “When it comes to holding people accountable, the answer is “yes.” You can’t let your favorites operate outside the rules while holding everyone else to those standards. That crushes leadership credibility.

“But when it comes to motivating people, the answer is “no.” You shouldn’t treat everyone the same. We quote Florida football coach Urban Meyer in the book. He says: ““The old adage about ‘treating everybody the same’ is something with which I cannot disagree more. You have to get to know someone before you can understand how to coach them, how to treat them, how to get the most out of them.” Our research tells us he’s right.”

Is there a leader, business, government or sports that people are familiar with that exemplifies this and what makes him or her unique?

Grimshaw: “There are a couple of really special leaders here in Philadelphia that we write about in Leadership without Excuses. They’re not famous, because neither does anything to draw attention to himself, which is refreshing. But they’re both world class.

“The first is Jack Brennan, chairman and former CEO of Vanguard. One of the things we talk about in the book is his acronym, DAWAW. It stands for “Don’t ask who, ask why.” When we asked him about it, he explained, “We’re always trying to do things better on behalf of our clients. But the way we do that is not by pointing fingers or assessing blame.” Instead, he says, it is about asking, “Why aren’t we doing as well as we can? Where are the opportunities to improve? And what are the opportunities to capitalize on businesses that we can build?”

“Another exemplary leader is Walt Buckley, chairman and CEO of Internet Capital Group. At the height of the Internet boom, ICG’s market capitalization exceeded GM’s—back when that meant something!

“He told us that in the late nineties, “Every time we made an investment, the stock went up—we could do no wrong…and this created a false sense of invincibility. We lost a good deal of our discipline and focus.”

“When the crash eventually came, it hit hard. But instead of blaming everything on forces outside their control (namely, the dot-com crash), Buckley led his team in meditating on their mistakes. As he says in the book, “We had to be honest with ourselves about the mistakes we’d made that put us in that place, including the mistakes I made. What mistake didn’t I make? Looking back, I now call that time the MEMP period—Made Every Mistake Possible,” he says. “For example, our decision-making process broke down. We had too many people at the table. There was far too little transparency and, as a result, far too little accountability. That was a tough lesson.”

“But with the tough lessons came an interesting perspective. Think about it: You make every mistake possible, and you’re still around to fight another day? For a band of warriors, that’s a liberating feeling. And with it, Buckley created an environment where, without being paralyzed by defensiveness, he and his team could thoughtfully catalog their mistakes, treat them as “intellectual capital,” and apply them in their return to battle.

“As we headed up the next hill, we turned every one of those mistakes into a guide for how to climb back up to the top,” Buckley said. And they did.”

What is the one piece of advice you would give a leader?

Grimshaw: “Recognize that intentionally or unintentionally, you’re always broadcasting messages to the people you lead. And it’s not just your words. What sends a louder message than the words you use are the decisions you make, the actions you take, what you reward, and what you tolerate.”

WHAT ARE VENTURE CAPITALISTS LOOKING FOR IN THE NEW DECADE?

Marc Kramer — Sun, 13 Jun 2010 15:20:30 GMT

WHAT ARE VENTURE CAPITALISTS LOOKING FOR IN THE NEW DECADE?

By Marc Kramer

Jeffrey Bussgang, a successful serial entrepreneur for ten years, wrote an insider’s guide to what venture capitalists are looking for in the start of the second decade of the new millennium entitled, “Mastering the VC Game,” published by Portfolio. Currently Bussgang is a general partner at Flybridge Capital Partners, an early-stage venture capital firm with more than $500 million under management.

Before becoming a venture capitalist, he was the cofounder of Upromise, the largest private source of college funding contributions in the United States. He currently serves as an entrepreneur in residence at Harvard Business School, where he earned an MBA. The following is an interview with Bussgang about his new book.

How did you become a venture capitalist?

Bussang: “In truth, I was born to be an entrepreneur. My father was a Holocaust survivor who immigrated after the war and became an entrepreneur and in many ways I saw entrepreneurship through his eyes. His entrepreneurial experience and immigrant mentality forged me into the person I am today, and guided me through many life decisions. Following my graduation from Harvard Business School, I decided to join a VC-backed start-up, turning down a far more lucrative opportunity to join a VC firm.

“The company went public in 1996, and I became a member of the executive team over time. I later co-founded Upromise, which also became VC-backed. A few years later, I was approached by two VC friends of mine who had invested in my previous companies. They had recently started a new VC fund and invited me to join them. So, I joined Flybridge Capital Partners in early 2003 and have been there since. I guess when you’re an entrepreneur that has been involved in companies that make VCs money, they want to hang out with you!”

Why did you write “Mastering the VC Game”?

Bussang: “I wrote the book to help demystify the VC business for entrepreneurs. I tried to make it a mix of “how to” and “war stories” so that it’s entertaining and accessible, yet detailed and directive enough to be helpful. In my interviews with over a dozen entrepreneurs and a dozen VCs, I draw out their lessons learned as well – folks like Twitter’s Jack Dorsey, LinkedIn’s Reid Hoffman and Union Square’s Fred Wilson.”

What has changed about venture capital over the last 10 years?

Bussang: “You know the old adage – the more things change, the more things stay the same? The VC business today is far more global than it ever was. In the book, I profile Henry Nguyen and how he has brought Venture Capital to Vietnam. I also talk about the VC business in China, where the “John Doerr of China”, Quan Zhou, leads IDG-Accel. But despite the globalization of the business, it’s still a hands-on, not very scalable, local business. Great opportunities exist to build interesting companies, but it requires patient capital, hard work and great people – just as it did 10, 20 and 30 years ago.”

How long is it taking typically for companies to raise money today?

Bussang: “The time it takes to raise money is very case by case, but as a rule, entrepreneurs should plan for a 4-6 month process. Funding opportunities are harder to find in this environment, but although the VC community is an extraordinarily small one (probably no more than 500 active firms and 1000 active decision-makers who can write a check), there are numerous options for founders. Angels, super angels, incubation groups and seed funds compliment VCs as potential funding sources.”

What characteristics and qualities do VC’s look for in entrepreneurs they invest in?

Bussang: “They are looking for a team that works well together and has some unfair advantage in what they are bringing to the market. There are a million good ideas out there, but strong execution of the good ideas is a defining factor for success. VCs also tend to have sweet spots in terms of the types of investments they make and the amount they invest. Entrepreneurs need to invest the time to the firm and particular VC professional they’re pitching to in order to ascertain those important elements.”

Is there a preference for VC’s to invest in Ivy League/elite school grads over state school grads?

Bussang: “Generally, no. Most VC portfolio companies have a mix of individuals from many different schools and backgrounds. That said, great entrepreneurs usually exhibit excellence is some aspect of their life and, for some, that aspect is academic. Scientifically-minded start-ups often have strong academic pedigree. Further, the many Ivy League graduates may have strong alumni networks. For example, schools like MIT, Harvard and Stanford are legendary training ground for start-up executives and that might be helpful in getting initial meetings. I would say, though, that a great deal of teams have mixed backgrounds. We pick great teams made up of very different members all the time.”

How often do VC’s invest in companies where the plan is mailed traditional or e-mail?

Bussang: “Nearly never. Your worst chances are with sending a cold email or mailing in a traditional business plan. One of the important elements of the book is that I discuss how to get in the door and what to do when you get there. A great deal of entrepreneurs think a well crafted email will get them a response, but in truth VCs pay most attention to the people closest to them who they respect the most. To get a warm introduction from one of them is the key to getting a warm welcome.”

How important is a business plan?

Bussang: “A business plan – either in the form of a well-done PowerPoint pitch or Word document – is important in outlining the market opportunity, providing the background of the entrepreneurs and why they are uniquely well suited for this opportunity, and providing a window into the quality of your thinking and writing. Business plans also help and in laying out the assumptions behind the business (“what must I believe for this to be a success?”) and setting the VC on the path to vetting those assumptions during a due diligence process. I would say, though, that the entrepreneur’s record and accomplishments are more important than a well-researched or written plan.”

What do you focus on in business plans?

Bussang: “I focus on the background of the entrepreneurs – is it a track-record of accomplishments and is it relevant to this market such that they may have a unique perspective on it? I also evaluate the company’s approach and assumptions about the market they are pursuing. I also focus on their assumptions, their facts, and the raw material that goes into that framework. The business in many ways is about working through and finding the most compelling vision of the future, the market and the companies role in the market. So it is less about they financial projections and more about the way they approach business.”

The IPO market is starting to come back, will we ever see times like the late 1990s?

Bussang: “I do not think we will see anything like the mid- late-1990s ever again. My company, Open Market, went public in 1996 with $1.6 million of trailing revenue and had a market capitalization of over $1 billion. That said, the market is returning somewhat – in the first quarter of 2010, we had nearly 10 VC-backed IPOs. It won’t be as easy as it was in the late 1990s, but that’s OK. There’s less confusion nowadays about whether you are lucky or smart in this business. And, thankfully, there’s a lot more humility!”

NEW TELECOMMUNICATIONS TECHNOLOGY TO SIGNIFICANTLY IMPACT THE WORLD

Marc Kramer — Tue, 18 May 2010 03:27:39 GMT

NEW TELECOMMUNICATIONS TECHNOLOGY TO SIGNIFICANTLY IMPACT THE WORLD
By Marc Kramer

Dr. Scott Snyder, a serial entrepreneur, is president of Decision Strategies International and the author of “The New World of Wireless: How to Compete in the 4G Revolution.” Dr. Snyder is an international technology expert that provides strategic advice for both the private sector and the government. His new book talks about the changes we are going to see because of the increased speed and bandwidth of telecommunications that will impact every facet of our lives and how business leaders can use it to take advantage of new opportunities. The following is an interview with Dr. Snyder, whose book is a most and quick read for strategic thinkers, leaders and investors.

Why did you write the book?

Snyder: “I have always had a deep interest in communications. At Penn I developed a course on 4^th generation wireless several years ago. At that time, 4G was just a glimmer of hope. Now 4G is emerging all around us and I thought it would be good to make people more aware of it.

“That course brought together executives across domains from finance to healthcare to retail. The objective was to stimulate what was possible and to think about new applications. The course was a combination of what 4G could be and an internal venture course about using 4G applications to get a competitive edge.

“The other thing I see as a strategy consultant, we work with many large firms where they get blindsided by new technology. I wanted to make sure business leaders were aware of 4G as a new technology and and how it would effect their company and how they could take advantage of it.

Who is this book for?

Snyder: “One of the reasons I did it with Wharton Publishing was to go to a broader audience. I wanted a book that was accessible for a business executive or a working professional. It’s a crossover book. It has enough meat to appeal to a tech person and is not so intimidating to a non-tech person.”

What major changes do you see for telecommunications in the next 10 years?

Snyder: “Clearly, everyone talks about the Internet of things. This is going to be true in spades. The number of connected things is going to dwarf the number of people by a factor of a thousand. Consumer to consumer communications may get the most attention, but it will be machine to machine communications that will have the greatest impact. This will be driven by more capable networks, open standards, and micro-processors embedded in everything.”

What industries are going to be most effected?

Snyder: “They are all ripe for change. Publishing is going to be greatly effected as we have seen with the advent of the Kindle. The one’s I get most excited about are energy, health care and transportation due to the size of the problems that wireless can address.

“They are three massive problems screaming for better solutions and this platform provides an opportunity to rethink the problem sets in those industries like remote health care and energy management. It gets back to things to monitor and making decisions we could never make before because we didn’t have the information. There will be sensors that work cheaply that will open up a whole new set of applications..”

Why does it take the US longer to adapt telecommunication innovations such as using the phone to watch television and carry personal information?

Snyder: “My main theory is that the innovations are usually founded here, but the Japanese and others are good at standardization. The reasons the Japanese have 160 million e-wallets is because they chose a standard. We chose two different mobile technologies and the rest of the world chose one. They chose GSM and they standardized. We haven’t learned our lesson as fast about selecting standards.”

What current companies do you see as the winners?

Snyder: “You have to break up the value chain. It depends on the future we end up in. As I talk about in the book, the big linch pin for me is security and privacy. If people openly embrace these newer networks and I will be connected to many more networks than today. It will be less about the pipes and how will you improve the quality of life for consumers and business.

“The one’s that can create smarter devices! The network providers can’t make money on a flat data plansso they have to figure out how to go upstream. There are now viruses hitting mobile phones. If big companies abuse their power then people will lose trust. People really trust the networks and are willing to have their health care information or retail profile available to wireless applications, as long as these services provide benefit for consumers.

“Companies that look at wireless as an innovation platform will take advantage of great opportunities, so if a company like Aetna wants to get customers out of clinics and hospitals, it could collaborate on wireless solutions with medical device products and get them to come together. To make this work, you have to have the customer in the loop.. An example is a consumer-driven I-Phone App to scan and fax a check. Big applications for banking!”

What new businesses do you think will be launched?

Snyder: “A great question! There are a couple in the book I talk about. One is pervasive retail. Because of the intelligence of the handsets and if 4G is out there concierge services will take off. You will be told about your preferences (health care, retail, other)and you will find out where the ideal products and best deals are. It will happen proactively instead of you looking it up. There will be virtual tour guides.

“If I am touring Philadelphia it may start telling me about historic sites in my language. It knows where I am standing and what I am looking at. Some people call it augmented reality. The other piece that is going to be big is people as sensors. We see a little today with traffic sensing such as the Tom-Tom or Garmin devices.

“We can learn about what traffic is like from gathering all of the GPS users. There is an application that will tell mall and store owners where people go through tracking their cell phones. NASA has come up with a chemical sensor to pick up bio agents and air quality via cellphones.”

How much more of a productivity gain can the US wring out from 4G?

Snyder: “It can be enormous. It’s one of our great opportunities to spring board back. We bet the farm on life sciences and other countries have learned from us and have disrupted us. We are still very strong in wireless.

“Our military is one of the lead users of wireless. We are well positioned as a country. Two things have to happen and for this to occur. We have to embrace standardization. We have to engage industries that don’t talk to each other like insurance guys don’t talk to transportation and wireless operators. It could create some fantastic innovations globally. We won’t solve any of the big problems without wireless.”

How will cyber security be effected and will this level the playing field with terrorists?

Snyder: “That’s a real challenge for the military. The commercial technology is changing so quickly. It’s creates an opportunity to source ideas from all over the world, but I can’t protect him. Everyone has the same capability.

“An example is the military software defined radio that can su0port a large number of different wireless channels, but soon someone will come up with a lot cheaper commercial solution that does 80% of this. We have had an edge for so long, but now we don’t have that edge because we have to outsmart the bad guys.”

PROBLEMS CREATE OPPORTUNITIES: INNOVATION X

Marc Kramer — Tue, 20 Apr 2010 17:42:35 GMT

PROBLEMS CREATE OPPORTUNITIES: INNOVATION X

By Marc Kramer

Innovation is the key to developing new revenue streams, staying competitive and creating jobs. Adam Richardson, creative director at global innovation firm frog design, inc., where he has worked with companies such as HP, Intel, Motorola, Logitech, and Yahoo!, has come out with a new book entitled “Innovation X” published by Jossey Boss.

Richardson writes regularly on design and business, and speaks at conferences worldwide. In addition to teaching design and user research, he is a guest lecturer at the Ecole Nationale Supérieure de Création Industrielle in Paris, and at the IESE University of Navarra in Barcelona. Richardson earned his BFA in Industrial Design from the California College of the Arts, and a multi-disciplinary MA from the University of Chicago.

Why did you write this book?

Richardson: “I began to see a pattern with companies who sat down at the conference table at frog design. They knew they had a problem, but they couldn’t figure out what it was. But there were some common symptoms that came up over and over, regardless of the company size or their industry: they’d lost touch with who their customers were, they were getting disrupted by unexpected competitors, and they were needing to create ecosystems of offerings for customers rather than stand-alone products.

‘So I wanted to see how these ambiguous, vague problems, which I started calling X-problems, could be better understood and tackled.’

Who should be reading it?

Richardson: “Senior executives, division leaders, and product managers – people who are struggling with these tough X-problems and must answer the fundamental question, “What should we make?”.

“It is a business book about innovation, not a design book. It’s a from-the-trenches, hands-on book with concrete tools and methods for dealing with X-problems and making innovation work.”

What companies are good at innovating and why?

Richardson: “Beyond the usual suspects of Apple and Google, many companies are succeeding at innovation and tackling X-problems. I profile a variety of them in the book: Autodesk (architecture and design software), Clif Bar (energy snacks for athletes), Progressive Insurance, MINI, Logitech, Twitter, and others. Some of these are startups, some are large companies, so innovation is not exclusive to either. However, breakthrough innovations tend to come more consistently from small companies taking bet-the-farm risks.

“These companies share a few attributes. Leadership at the top that sets the expectations around innovation and the “panic threshold” for how long radical ideas are entertained before being dropped. A combination of restless experimentation and relentless attention to detail on execution. A focus on deep customer needs, and innovating on behalf of customers rather than just doing what customers ask.’

Can you tell walking into a company that their culture is either receptive or not receptive to innovation?

Richardson: “I often feel like a corporate tourist – I land in a new client culture and new landscape, and all I can see is the people, behaviors and beliefs that are right in front of me. It’s not always clear from this first exposure how the larger culture is set up for innovation.

“But it quickly becomes clear if the people have passion and drive, and if there is the support from top-level management. All of these have to be present, or innovation is not going to take root broadly.”

There are less than a handful of companies that were on the Fortune 500 a half-century ago that are still on the list. How important is innovation to maintaining success?

Richardson: “That is a great question. It is true that innovation can seem to be a flash-in-the-pan phenomenon. Too often innovation is treated as an end in itself, rather than a means to an end. Not that many companies last fifty years, whether they are considered innovative or not, but fundamentally for a company to continue to thrive it needs to differentiate itself by providing unique value (which can be defined in many ways) for customers. If done well, this is what innovation can help deliver. And today’s competitive environment is far more turbulent and fast-paced than fifty years ago, making innovation even more important.”

What is the profile of the leaders that embrace innovation?

Richardson: “They must be curious. For example Jeff Bezos of Amazon spent a week on the floor of one of his warehouses, seeing what he could learn about the “boring” part of the business. I firmly believe that joie de vivre and lifelong inquisitiveness are essential to innovation, which at its core is about optimistically trying out things that have never been done before.

“They must have a passion for the details of the end product. Too often business strategy is divorced from product development, as though one doesn’t affect the other. They exist symbiotically.

“Innovation leaders must be patient and persistent. Google’s 1200 quarter (300 year) vision of making all the world’s information available is an exaggerated case in point, but let’s at least get a perspective further out than 1-2 quarters. Big innovations take time.

“And leaders must be willing to take risks based on informed instinct, even if it goes against what market research is saying. For example, Gary Erickson, founder of energy snack maker Clif Bar, took a “damn-the-torpedoes” approach to launch a radical new product for runners, after a long period of investigation that yielded ambiguous results. Fortunately his instincts were right, and the product rapidly outsold its predecessor.”

What is the profile of the type of employees innovative companies should be looking for?

Richardson: “Pretty much the same qualities as I just described for leaders, actually, with the added ingredient that they must play well with others from different disciplines and organizational groups. And there’s no escaping the fact that when you’re dealing with tough problems, talent matters.

“Ed Catmull of Pixar says, “If you want to be original, you have to accept risk and have the capability to recover when it fails. What’s the key to being able to recover? Talented people!” At frog we are very picky about who we hire – we hire less than 1% of the people that apply for a position.”

In the book you mention about capitalizing on your own and your client’s problems, how do you identify problems and find out if clients are really willing to pay for a solution?

Richardson: “I like the quote from David St. Hubbins, lead singer of the fake rock group Spinal Tap, “It’s such a fine line between stupid and clever.” It can be hard to sort out the good solutions from the bad ones. You cannot rely purely on market data when assessing an innovation – that data is about the past. Motorola’s market research said that the Razr would be a low-volume, money-losing phone. It went on to become one of the biggest selling phones of all time.

“So you have to triangulate on new opportunity spaces and innovations from many different angles, what I call multi-vector analysis – customers, technologies, trends, competitors, sales channels, brand, and other vectors. From this you build a holistic business case about the value of the solution and what it will take to build it.

Is there one process and methodology that you follow for identifying problems and then creating a revenue producing solution?

Richardson: “In part this book is an attempt to demystify many of the processes and frameworks that my colleagues and I use at frog use on a daily basis. But you cannot take a cookie-cutter approach. At frog we have a broad set of tools and a loosely defined process for putting them together. We are pragmatic rather than dogmatic about choosing which tools to use, and when to use them.

“But the common denominator is that we combine qualitative and quantitative approaches – ethnography with market research for example – and creative and analytical methods. It’s the combination of these that produces the magic, which can then be backed up with rigorous logic and data.

Is there one company that truly understands innovation that you consider the model for other companies?

Richardson: “There is no one-size fits-all model, though many look to Apple these days. Apple is an odd-ball in many respects, and it’s hard to replicate. But there are lots of other archetypes. One of my favorites is Zappos, the online shoe retailer, who took a fresh look at their organizational toolbox. In it they realized that they had two core assets - their reputation for great customer service and their quirky, fun organizational culture–which they could actually sell. They set up a little experiment, called Zappos Insights, which is a consulting service for small business owners who want to get better at customer service and improving their company cultures. This is a great example of a company being innovative by rethinking what it does without throwing out its old business, and taking risks in a sensible but effective way.”

Israel: The Ultimate Entrepreneurial Culture

Marc Kramer — Fri, 12 Mar 2010 22:18:19 GMT

ISRAEL: THE ULTIMATE ENTREPRENEURIAL CULTURE
By Marc Kramer

Dan Senor, co-author of "Start-Up Nation: The Story of Israel’s Economic Miracle", spoke at a sold out Israeli Chamber of Commerce function where he talked about the amazing story of how Israel has become the second largest producer of publicly traded companies on the NASDAQ and is home to the largest Google, Intel and Microsoft research and development facilities outside the United States. Mr. Senor, who is an adjunct senior fellow for Middle East studies at the Council on Foreign Relation and a founding partner of Rosemont Capital, talked about his book and Israel’s successful entrepreneurial culture. This is a must-read book for government officials at all levels that deal with economic development and business innovation.

Why did you write this book?

Dan Senor: Originally, the idea was not to do a book. When I was in my second year of Harvard Business School in 2001, I took a group of 30 students to Israel, three of them were Jewish, twenty-seven were not, and had no connection to Israel. The idea was to look at the economic opportunities in Israel and also study the history and the politics. It was at a pretty depressing time — there was a good entrepreneurial economy story there — it was during the Second Intifada.

I took all these students — to their credit, none of them pulled out even though literally the day we were leaving, things were blowing up — and my classmates were all saying to me, “I get it. There’s huge economic opportunity here for people who are willing to invest here and do business here.” But, even more than that, I was struck by the question of how they pulled it off. It’s a very young country [and] a very difficult environment. There are no natural resources, no access to regional capital or regional markets. If you were to paint a picture of the circumstances under which you’re not going to have a successful economic developing country, it would be Israel.

Israel represents the highest concentration of innovation and entrepreneurship in the world today: the most start-ups per capita; the highest percentage of GDP invested in civilian R&D; more companies on NASDAQ than all of Europe, Korea, Japan, India, and China combined; and the biggest destination for global venture capital per capita. Israel raises 2.5 times as much global venture capital as the U.S., 30 times more than Europe, 80 times more than India, and 350 times more than China — and these numbers are from 2008, when the world was in the midst of an economic meltdown. Israel all but escaped the crisis that ripped through economies everywhere else. No one has told this story before of what makes Israel so economically successful.

What is in the Israeli DNA that makes them so entrepreneurial?

DS: Our book dives into many interacting factors, but one of the most important is the training and battlefield experience that most Israelis receive in the military. The military is where many Israelis learn to lead and manage people, improvise, become mission-oriented, work in teams, and contribute to their country. They tend to come out of their years of service — three for men, two for women — more mature and directed than their peers in other countries. They learn “the value of five minutes,” as one general told us. They even learn something more uniquely Israeli: to speak up — regardless of ranks and hierarchy — if they think things can be done better.

What is the difference between Israel’s entrepreneurial culture and the U.S.?

DS: It’s partly derived from the military, of course, but it’s also the result of “spin-offs” of military R&D and the companies created by Israeli engineers who have passed through the special military tech program. More than that, however, the military in Israel promotes innovation and entrepreneurship, it’s a country of immigrants who, by nature, are natural risk-takers and entrepreneurs.

While there has been a burst of clean-tech ventures in Israel, most exciting to us are the companies and sectors that one would least likely expect in Israel — from a world-class digital animation studio in Jerusalem to a next-generation asset management industry in Tel Aviv.

Israel itself is a start-up. While the book deals to some extent with elements of Jewish identity, it tends to focus more on exploring Israeli traits. But sometimes the two overlap. It’s very Israeli to be constantly questioning, arguing and not accepting, but challenging authority.” Israelis are not worrying about hierarchy and ranks. All these things are Israeli traits, but some of them have Jewish antecedents.

The Israeli emphasis on education is a Jewish trait and has also become an Israeli thing — Israel’s universities were founded in the 1920s before the state was founded. To extract the most basic elements from the recipe, Israel has a perfect balance between innovation and entrepreneurship, and it is this balance between the two that make it very competitive with other “smart” countries like Finland, Singapore and Ireland.

What are some of the great success stories to come out of Israel?

DS: The great irony of the Start-Up Nation story is that Israel has transformed the challenges it has faced into assets that form the cornerstones of its culture of innovation. Adversity of all kinds, such as being under attack, small, isolated, and lacking resources, have forced Israelis to be resourceful, to do more with less, to innovate, and to be global from day one. The fact that Israel specializes in adversity is most dramatically seen in downturns.

When the tech bubble burst and the peace process fizzled in 2000 to 2001, one might have expected the Israeli tech scene — then only a few years old — to evaporate. Instead, Israel garnered a larger market share of the global venture capital pie in 2005 than it did in 2000. Similarly, in the current downturn, Israel has been among the least affected and the first to recover among developed nations.

The tendency to tinker, question and improvise that often begins in the military leads to a particular Israeli specialty: technological “mashups.” Israel leads the world in medical device patents, partly because when Israelis discover a technology, they can’t help considering applications to solve unrelated problems. Just look at a company called Given Imaging, whose founder realized that the miniaturized sensing systems in the nose cone of a fighter jet could serve a medical purpose.

He adapted the sensor to produce a swallowable camera, the size of a pill, to beam out a movie from inside a patient’s intestines. This is making some highly invasive and painful diagnostic surgeries all but obsolete. As with so many Israeli start-ups, PillCam is now a major company and has spawned a new industry.

Do you think Israel’s entrepreneurial spirit changes people’s perceptions of the country from one that some feel is oppressive?

DS: People find it refreshing to have a discussion about Israel that is not conflict-centric. While so much of the debate is about the threats and the moral obligation that the world has to Israel, there’s another part of the narrative: what the world can learn from Israel.

Israel’s economic success has been a key component in convincing the Arab world that its existence is permanent in the region, which is the threshold incentive for the Arab world to end its attempts to destroy Israel. The moment the Arab world is ready for peace, the opportunities for economic cooperation are great, and Israel could play a pivotal role in helping regional economies advance.

What type of support does the government provide that other countries don’t?

DS: A key lesson from Israel is that innovation is not just something that goes on inside companies; it comes from a wider culture that fosters both innovation and entrepreneurship. Israel is a country of immigrants — there are over 70 nationalities represented in this tiny country. Two out of every three Israelis are newcomers, or the children or grandchildren of newcomers. The Israeli battery-operated car grid company Better Place was founded by the son of an Iraqi immigrant. The Israeli company Koolanoo, the third-largest social networking site in China, was founded by the child of an Iranian immigrant. The Internet music start-up FoxyTunes, which was recently sold to Yahoo for tens of millions of dollars, was founded by a young Ukrainian immigrant. Walk around Israeli neighborhoods, and you’ll find yourself dealing with Israelis from Ethiopia, Poland, Yemen, Russia, and Australia, to name a few.

Immigrants are natural risk takers since they were willing to uproot themselves and start over. In particular, the great wave of immigrants from the former Soviet Union in 1990 to 2000 brought to Israel a tremendous boost in engineering talent just as the tech sector began to take off. Israel is also the most pro-immigration country; politicians there actually compete with each other with campaign promises to bring in more immigrants, not fewer.

Another key lesson is to learn to leverage the business talents of young people with military experience. In Israel, employers look for and value the leadership skills of young officers who have already received tremendous management skills by age 21. By age 25, they have both military experience and a university degree. In the U.S., by contrast, too many corporate executives are illiterate when it comes to reading a military resume. We heard one story about an Iraq-war vet being interviewed by a corporate recruiter. The vet walked through all his incredible leadership experience from the battlefield. But, at the end of the interview, the interviewer said, “that’s all very interesting, but have you ever had a real job?”

American businesses need to embrace, not spurn, this incredible reservoir of ex-military talent. This does not mean that other countries need the military conscription model that Israel has been forced to take to become entrepreneurial. Other frameworks, such as national service programs, could also provide the management and maturation experience that Israelis get, but in a civilian context. Finally, the Israeli experience shows that countries that want to be more entrepreneurial should welcome immigrants as a great resource for rebooting their economies.

Has Israel become a mature technology power or is there still a lot of upside?

DS: Israeli entrepreneurs have been too busy building their start-up companies and their start-up country to step back and piece together exactly how they pulled it off and, even more importantly, what others can learn from their experience. We thought that this was the right moment for this kind of book because western countries are desperately looking for ways to re-boot their own innovation economies. The world needs innovation; Israel’s got it. There’s no better time to look at the Israeli model. The next phase for Israel’s economy is not just building start-ups that are quick to exit, but building self-contained, stand-alone institutions more in the mold of Teva.

What could Israel do to leverage their entrepreneurial success to possibly bring peace to the Middle East?

DS: Israel’s economic success has been a key component in convincing the Arab world that its existence is permanent in the region, which is the threshold incentive for the Arab world to end its attempts to destroy Israel. The moment the Arab world is ready for peace, the opportunities for economic cooperation are great, and Israel could play a pivotal role in helping regional economies advance.

What is the biggest misconception of the Israel “economic” miracle?

DS: Many people conjecture that there is something specifically Jewish at work. The notion that Jews are “smart” has become deeply embedded in the Western psyche. We saw this ourselves; when we told people we were writing a book about why Israel is so innovative, many reacted by saying, “It’s simple — Jews are smart, so it’s no surprise that Israel is innovative.” But pinning Israel’s success on a stereotype obscures more than it reveals.

For starters, the idea of a unitary Jewishness — whether genetic or cultural — would seem to have little applicability to a nation that, though small, is among the most heterogeneous in the world. Israel’s tiny population is made up of some 70 different nationalities. A Jewish refugee from Iraq and one from Poland or Ethiopia did not share a language, education, culture, or history — at least not for the two previous millennia. As Irish economist David McWilliams explains, “Israel is quite the opposite of a uni-dimensional, Jewish country. . . . It is a monotheistic melting pot of a Diaspora that brought back with it the culture, language, and customs of the four corners of the earth.”

While a common prayer book and a shared legacy of persecution count for something, it was far from clear that this disparate group could form a functioning country at all, let alone one that would excel at — of all things — teamwork and innovation.

Indeed, Israel’s secret seems to lie in something more than just the talent of individuals. There are lots of places with talented people, certainly with many times the number of engineers that Israel has to offer. Singaporean students, for example, lead the world in science and mathematics test scores. Multinationals have set up shop in places like India and Ireland, too. “But we don’t set up our mission-critical work in those countries,” an American executive from eBay told us. “Google, Cisco, Microsoft, Intel, eBay ... the list goes on. The best-kept secret is that we all live and die by the work of our Israeli teams. It’s much more than just outsourcing call centers to India or setting up IT services in Ireland. What we do in Israel is unlike what we do anywhere else in the world.”

What does Israel need to do to continue to foster entrepreneurship?

DS: For the global economy to recover and thrive, it is not enough for individual companies to cultivate innovation. What is needed is for countries to build a comprehensive culture of innovation that welcomes risk-takers from all over the world; encourage young people to improvise, to be mission oriented, question established business models; and institute sensible regulations and monetary policies that do not create perverse “easy money” proxies for growth.

While Israel has much to learn from the world, other countries need to look at how Israel has produced the world’s most innovative start-up economy. The non-tech portion of the Israeli economy is over-concentrated, overregulated, and overtaxed, and has, consequently, performed at a mediocre level. If the conditions that have allowed the high-tech sector to flourish were applied to the rest of the economy, Israel could grow even faster. If Israel also were to address the low labor-force-participation rates in certain demographics, we agree with Prime Minister Netanyahu that Israel could become one of the top ten largest economies in the world.

WHAT SHOULD WASHINGTON DO TO FIX AMERCIA

Marc Kramer — Mon, 15 Feb 2010 20:29:07 GMT

WHAT SHOULD WASHINGTON DO TO FIX AMERCIA

By Marc Kramer

Lori Ann LaRocco, senior talent producer for CNBC, and one of the most connected and respected business journalist, was feeling like many Americans over the last 12 months and that was frustrated with the progress of the economy. She wondered why the American and world economy at large have a massive heart attack, what could be done to fix the economy and where are the future opportunities? So this journalist did what you hope the President of the United States would do and that is bring together the best business minds in a cross section of industries and ask them what happened, what the government needed to do to make America healthy again and where the opportunities are for investors and working people of all levels.

In her book, “Thriving in the New Economy: Lessons from Today’s Top Business Minds,” published by John Wiley and Sons, the S.U.N.Y. Plattsburgh, Mass Media Communications and Broadcast Journalism major, opened her Rolodex and moving faster than Washington, DC, she interviewed some of the major business leaders such as Wilbur Ross, Jack Bogle, Gerald Greenwald and Abby Joseph Cohen and within a month she completed her book. The following is an interview with Ms. LaRocco.

Why did you write this book?

LaRocco : “I wrote the book because I am lucky enough to talk to the most engaging minds in the economy. During the crisis I started thinking to myself people have to be making money regardless of the circumstances. In capitalism you should be able to make money during the highs and lows. I opened up my rolodex and I realized there was a story here.

“It wasn’t something that could be told on television in a meaningful way. I wanted the rest of the world to get into these great minds. It is the how and why in the strategies these leaders employ that make them so great. To understand their secrets is so invaluable and that is what they share in the book.”

Who should read it?

LaRocco: “This book is for anyone. From a college student, a mom and pop business owner to a corporate executive! I think anybody who wants to be inspired and want to learn techniques on how to handle challenges should want to read this book.”

What did you learn that surprised you?

LaRocco: “There are a couple of things. One was Richard LeFrak President of The LeFrak Organization. LeFrak is a real estate developer and by trait they are optimistic. He said for the first time in 15 years he didn't have one new foundation in the ground. That statement screams volumes on his outlook on commercial real estate. But despite his outlook on real estate, Richard is still thriving and putting his money to work. Be it with his venture with WLR LeFrak and buying up the real estate assets of the Corus Group, to being part of a consortium and owning BankUnited. Richard isn’t standing still. He is still moving forward.

“Another thing that surprised me is the common theme many of my contacts referred to during the interviews. The majority of them said don't get caught up in crisis. Recognize you have a problem, solve it and move on. It didn't matter what industry you were in. None of them got swallowed up in the moment and let it consume them. They had the vision to look past it and move on."

What was the overall consensus for America’s future from your experts?

LaRocco: “They were all bullish in their own way, but they were worried about the populist drum beating in Washington. They all believe Washington should be working with business and not against it. Wayne Huizenga set the tone of the book about Washington. Capitalism is what we are built on and government should work *with* business; not against it."

“It isn’t that capitalism is bad. It was the greed and arrogance that brought down our financial sector. I would also add the lack of understanding of the financial instruments as well. In a capitalistic system, we are going to have ups and downs and you will need leaders in place to go after opportunity. If you don’t have the right leaders then it is an opportunity lost.”

What industries based on your interviews do you think have the greatest chance of success?

LaRocco: “I think the industries that are going to thrive are education and healthcare. Many of the jobs lost this recession will never come back. Ron Baron said this is a great time to invest in these two sectors because many people who lost their jobs are going back to school. DeVry and Strayer Education will attract the blue collar workers for retraining. Ken Langone and Baron are also investing into the R&D side of healthcare because of the innovative tests being created by some companies.

“I think we are going to see a change in the financial markets and I don’t mean because of the 'Volcker Rule'. There is a dynamic trend occurring in the financial services business according to Peter Cohen and Don Marron, who are buying brokerage firms and retooling their businesses to a more client-oriented business. It isn’t going to be about the big institutions, it is going to be about serving the individual customer. Marron and Cohen believe in this trend so much they are putting their money behind their words.”

Are large money centered banks like Citigroup and Wells Fargo, which are really the only banks capable of providing large multi-billion dollar warehouse and credit lines, necessary for the future of America’s large corporations or should they be dismantled?

LaRocco: “I don’t think they should be dismantled. How are you going to do it and do it right? It sounds great in theory, but can you really do it? What is going on in Washington right now is that you have career politicians, depending on staff research and making decisions based on that. Everything is so inter-connected. We need to really think about the unintended consequences. The government thought Lehman was ok to fail. ”

Did anyone think the Obama administration was on the right path?

LaRocco: “Not really. Larry Lindsey summed it up beautifully. He said while the President is a beautiful orator he has not really developed a track record. With Brown winning the Massachusetts Senate seat, the Administration and Congress are seeing that people are voting with their pocketbooks and pink slips. "

What does administration need to do to support the advice your experts give in the book?

LaRocco: “They need to realize tax cuts aren’t a bad thing. Innovation can’t be forecasted. In order to innovate you need to have incentives. Tax cuts are a great way to do that.

“There needs to be tax cuts for research and development, as well as tax incentives for hiring people. Senator Charles Schumer and Hatch's jobs bill is a good start. Wilbur Ross who has sat down with policy advisers to both Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi has a great idea to help spark job generation. Ross has suggested cutting the payroll costs of a new hire employee between 20-26%. The Federal government would send the company a payment equal to the total with holdings from each new employee's pay in addition to the employer contribution.

“This tax incentive would be available to companies who added to their staff since January 31, 2010. Ross uses the example of a worker making $60,000 per year. The rebate would be between $12,000 to $15,600 per job created, costing the government between $24,000 to $31,200. Comparing this to the Obama Administration's $787 billion dollar stimulus program where supposedly 3.5 million jobs were created, that means it took more than $224,000 to create a single job. And that 3.5 million jobs created has been debated around the country among economists for months so the figure could actually be higher. Government needs to be creative.”

The president is publicly encouraging banks to loan to small business, but yet you hear small business leaders saying they can’t access capital. Why is that?

LaRocco: “Some regional bank CEOs have told me while banks are being told publicly by the President to loan small businesses money, the bank regulators are discouraging them from doing it even if it is profitable for them because they are considered "risky". The banks are stuck in the middle.”

It’s hard to predict the future, but what do you think will happen with the economy over the next 12 to 24 months?

LaRocco: “I think until the job picture is solid and the uncertainty is
over when it comes to Washington's plans on job creation, bank tax, financial regulation and healthcare the markets will be up and down. There is too much uncertainty and the markets like certainty. Too many of the plans in Washington can affect a companies bottom line because of the costs associated with them and until businesses know what they will be facing, it is a big question mark."

AMERICAN ENTREPRENEURS THE FOUNDATION FOR GREATNESS

Marc Kramer — Mon, 30 Nov 2009 15:59:47 GMT

I recently read a terrific book that provides the history of entrepreneurship in the United States entitled “American Entrepreneur” by Drs. Larry Schweikart and Lynne Pierson Doti. Dr. Schweikart is former rock drummer who became a history professor. He has written extensively on the history of American business, particularly finance and banking, and has more recently had several best-selling general U.S. history books, including A Patriot’s History of the United States. Dr. Pierson is a professor of economics at Chapman University and served as director of Leatherby Entrepreneurship Center.


Buy this Book

What I liked about this book was that it reminded me about what a great country we live in and how people with nothing more than intelligence, hard work and good timing come overcome the odds build great businesses that catapulted the US into the forefront of the world economy. The following is an interview with the author.

Why did you write this book?

Schweikart: “This book originally came out as a textbook because the business history textbooks didn’t have enough economics and the economic history textbooks didn’t have enough about entrepreneurship. So I thought a blend was needed. Most readers don’t need IS/LM curves or standard deviations, but do want the economic explanation of events. On the other hand, mainstream economic history has completely forgotten about the “animal spirits” as Keynes called them, or the “spirit of enterprise” as George Gilder labeled it.”

Entrepreneurism appears to be in the American DNA, why is that?

Schweikart: “Great question, and you’re right. This is the result, I think, of the confluence of many factors to create a distinctly American character (and it’s why capitalism runs into problems in some parts of the world---you have to “buy in” to the whole concept). What are those elements? First, private property. While under assault since Kelo and with the Obama nationalization of GM, it is still the dominant characteristic of American business. Second, the ability to rely on private property rights (thus profits) generates risk-taking, which is the essence of the entrepreneur. Third, our Christian heritage and promise of forgiveness enhances that risk-taking in a good way, because people can fail and not lose everything. There is always a second chance in America---as Ford, Giannini, and Colt all discovered. Finally, the hostility to taxes and, until quite recently, “big government,” has kept larger shares of capital in the hands of entrepreneurs who have used it to better all of society, not just a few bureaucrats or government-favored elites.”

What makes the American system so fertile for starting businesses?

Schweikart: “All of the factors I listed above. But let me add another: toleration. This began with religious toleration in England, then spread to the colonies. But it was a historically significant development, because up to that point, whoever didn’t believe like you did was essentially dead already---going to hell. The American experience began with religious toleration that said, “You believe your way, I’ll believe mine, and we’ll work together when we can.” If you can disagree on the biggest question in human life, i.e., the nature of God and man’s relationship with him, then who has a better clock or a more efficient sailing ship become relatively insignificant debates. You build yours, I’ll build mine, may the best man or woman win. No one had to worry in America about the Great Khan lopping off an inventor’s head because a device suddenly chose not to work.”

What are the traits of a successful entrepreneur?

Schweikart: “I think the key traits are vision and faith. First, you have to have a vision for what is needed, what people want, what might work. It involves seeing how hamburgers all prepared the same way are in some ways superior to individually grilled burgers; or how ice that you find in your backyard pond, as Frederick Tudor did, is actually valuable for a lot of things. Then it takes faith to hang on when everyone else tells you your crazy, when the funding is running out, when the first five buyers say “no thanks.”

Why do some entrepreneurs fail?

Schweikart: “Entrepreneurs fail for the same reason people fail in everything else: all people don’t have entrepreneurial talent; there is such a thing as bad timing; maybe you’re a great salesman but can’t balance books; maybe, like Robert Morris, you’re great at managing a country’s accounts, but never devote attention to the details of your own business. Just as there is a different story for while every entrepreneur succeeds, there is a story for why every one fails. Usually, however, it does not have to do with lack of effort. I’ve yet to meet a lazy entrepreneur.”

Which entrepreneurs that you researched were you most impressed with and why?

Schweikart: “My favorites are James J. Hill and Walt Disney. Hill is a great story because while the federal government is literally throwing money at the Union Pacific and Central Pacific, he builds a transcontinental RR without a dime of government money. In the process, he has to take every precaution that it’s profitable: he keeps his depots close to his endpoints to minimize transporting supplies; he learns agriculture and breeding, then gives away land to farmers so that he’ll have future customers; he never builds on inclines if he can help it, even if the terrain is ugly. It paid off: in the Panic of 1873, he’s the only one who doesn’t go broke among the transcontinental. Disney is a different story, because he went from employee, as an artist, to founder and owner of an animated motion picture studio---then at the peak of his success, he took the greatest gamble of all to start an amusement park. The idea was so whacky, even his own brother and financial manager, Roy, wouldn’t support him on it initially.”

Is America losing its edge when it comes to entrepreneurship or do you see it as strong as ever?

Schweikart: “Hard to say. I see kids embarking on all sorts of projects that are amazing---uses of the internet, employment of technology. I do worry though about their patience, stick-to-it-iveness in an MTV, six-second-sound bite world. Above all, I’m concerned that the “entitlement” mentality has started to so permeate the public’s mentality that it will dampen entrepreneurship.”

What do Federal and State governments need to do to foster and support entrepreneurship?

Schweikart: “As little as possible. These are the major impediments today to entrepreneurship. In Dayton, Ohio, where I live, good idea after good idea is shot down by city councils and mayors because it doesn’t benefit this minority or that specific group. Entrepreneurship benefits everybody, but you can never predict in advance how. The worst thing we have going in our economy today is massive government interference, from federal to state to local. The fact that America has four or five times as many lawyers as most other countries is a symptom of that, not the cause. The lawyers exist---and slow down everything---because everything becomes subject to litigation as opposed to common sense. Ronald Reagan would be great today, but I don’t think even he would go far enough to purge the system of “bureaucratic blight.” Cut taxes, slash regulations, cap civil lawsuits, and watch the entrepreneurs make everyone rich.”

Do you think entrepreneurship should be a core course in high school as a way to introduce young teenagers to the concept of starting a full or part-time business?

Schweikart: “Actually, no. I know many people would be surprised by this, but the essence of entrepreneurship is something that cannot be taught. Teach the basics. Teach “readin’, writin’, and ‘rithmatic,” and of course good history, and students will have the tools they need so that IF they are entrepreneurs, they can proceed immediately with their vision.”