Selfless economic heroes or monomaniacal risk-takers spending other people’s money? It’s sometimes hard to see past the mythologies that have grown up around entrepreneurs and entrepreneurship, from the need to fail fast and fail often to the idea that entrepreneurs are born, not made.
Josie Powell joined Biz Stone (Twitter and Jelly) at the Oxford Saïd Entrepreneurship Forum to sift the truth from the legend.
Josie: In the long history of Silicon Valley Comes to Oxford, we’ve got very used to speakers telling our students about the ‘need to fail’. What do they really mean by this? Do you have an idea that fails, or you get to certain stage of setting up a company, which then fails?
Biz: If you’re not in Silicon Valley, you hear the word ‘fail’, and you think, ‘What’s wrong with these people? Why would anyone want to fail?’ But it’s almost like the word ‘failure’ is being redefined by entrepreneurs. They don’t see it as a dead-end: they think of it more like, ‘Oh that didn’t work, let’s try this.’
Think of it like a synthetic biologist who is trying to figure out DNA and they discover that a particular approach isn’t going to work. They say, ‘so I’ll try this one [instead]’ and it’s all just a part of their research project. They wouldn’t say that it ‘failed’: it’s just something that they can then rule out. So when entrepreneurs say ‘fail fast and fail often’, it means you’ve got to try stuff and fail at it to know that it’s not going to work; because if you don’t try, you won’t know either way.
Look at Elon Musk’s ‘reusable’ rocket. It kept trying to land, it would explode, and he would always tweet something like, ‘Well it won’t explode that way again,’ suggesting it’ll probably explode the next time. This reframes it so well, because you think, ‘If it doesn’t explode I’ll be very excited,’ instead of thinking, ‘Next time it’s definitely going to work,’ and being disappointed if it doesn’t. He just sort of tweaks it so you’re rooting for him.
Josie: At some point in setting up a venture you are dealing with investors. What sort of effect does this concept of ‘failure’ have on them? Are they essentially losing their investment?
Biz: They are. I mean they lose more often than they win, but then they win very big so it covers all the losses. So that’s built into their model.
They raise a billion-dollar fund, say, from a load of Limited Partners, and they have five years to deploy half of that billion dollars. So they deploy it to a diverse set of organisations; and then after five or three years they see who’s dropped out and who’s still hanging in there, and who’s really got the potential to go if they could just have some more fuel. Then with the next [half billion] they focus the next quarter on those that are looking really good, and the last bit is for the outliers. They put everything into those guys and hopefully out of hundreds, two or three look like they can really make it. So they raised a billion dollar fund, but one company is worth perhaps $7 billion. And that’s how they work.
It’s a strange place, Silicon Valley, because it seems to be the only place in the world where you can pitch an idea, get millions of dollars for it, spend the millions, and then say, ‘Well I’m sorry that didn’t work out; I’m going to go try something else’. You don’t owe the money back, nothing. It’s just a strange model, but in the grander picture it works out for a lot of institutions: they don’t lose money, and the LPs don’t lose their money.
Josie: Do you think people invest in the person or the idea?
Biz: I don’t consider myself much of an investor, but when you look at the portfolio of my angel investments it looks like I’m sort of genius – but I’m absolutely not, I have no idea. The only thing I know is that the companies that I’ve invested in that have done very well are all, when I look back, those I only invested in because of the person.
I think people do invest in people, especially if they’ve got what they call ‘pedigree’, although that’s often just because they were in early, like employee number eight at Google or Uber. And it doesn’t really mean anything: even if you’ve had one successful thing the next one could just fail. But ‘idea’ does play a part in investing too. Venture capitalists in particular want to bet on big ideas – ‘this could be as big as Google if they do it right.’ So it’s a combination of people and idea. Do these people match the idea? Do they have the ability and the skills to take this idea to prototype and massive scale?
Josie: Are successful entrepreneurs people who have ideas and want to build a business out of them? Or are they people who want to be entrepreneurs and are looking for ideas?
Biz: The second one sounds a little bit more right. It’s like you don’t fit somewhere, it doesn’t feel right to have a boss, or all you do is constantly disappoint your boss. To take myself as an example, even when I was in high school, in order to get myself get interested in some subject I had to find an angle to it that I was actually interested in. I remember that I had to write a political science paper, but it was incredibly boring so I chose ‘vigilantism’ as my subject and therefore I could use Batman comic books as my material … So it’s a type of person who wants to try to do their own stuff – who would rather do that and screw it all up than be a cog in a machine.
Josie: Do you think that entrepreneurs are only interested in starting businesses? When they get to the point where they start to scale and they need a different set of skills, can they really be called entrepreneurs then?
Biz: Yeah, I know what you mean. There are people like Jeff Bezos who start the company and continue to run the company as a global international powerhouse. At which point they’re not a scrappy little team of eight people in a room thinking up crazy ideas.
But even in getting big, if you look at Jeff Bezos or Jack Dorsey, you still see amazingly challenging, bold decisions being made. Jeff Bezos is the classic example – his company has been going for so long and I think last quarter was the only quarter they’ve been profitable. And he maintains ‘if you don’t like it, you don’t buy this stock – we’re just going to constantly reinvest in ourselves and come up with these outrageous things we’re going to do.’ A lot of companies will become ‘frozen’ and think ‘this is working really well, we’re making a lot of money: don’t change anything’. AOL basically was the internet, but they didn’t embrace the open and free web, and all of a sudden they were subsumed and they were no more.
Josie: People say that everyone has a novel inside them; do you think the same with entrepreneurship too? Do you think everyone has a business inside them?
Biz: I think they do. A lot of people come across a problem in a normal work day, and think, ‘This could be solved if someone were just to create “this”’. They don’t think that they’re capable of creating it, but everybody thinks that. Anyone can do it if they really want to see it exist in the world and they find the right partner. A good example is Kickstarter: the guy who started Kickstarter had no technical expertise whatsoever. He just thought ‘there must be some way, on the web, for people to give a little bit of money to help fund an artist’s project.’ And for 13 years he just kept saying, ‘why doesn’t someone do this?’ Finally he just got fed up and decided to try, and he got the right people together.
So I think everyone probably has something in them but the friction is huge. It means you have to quit your job, potentially – probably – fail, and then lose everything.
Josie: Do you think that’s characteristic of entrepreneurs – that they’re ‘super risk-takers’?
Biz: They’re super risk-takers or they’re like daredevils or something – either they have a thrill for the risk or they don’t notice how risky it really is. You see these guys in the construction business, just casually walking across a narrow beam 20 stories up. You want to shout, ‘Hey guy, you could fall and kill yourself’ but he’s not thinking about it – and because he’s not thinking about it he’s less likely to fall. The same thing is true with entrepreneurship. Even before I was starting companies I was always saying ‘well, let’s just go for it and see what happens’, and I was paying my rent with my credit card and all this stuff. I had this idea that my future self will somehow be smarter and get me out of the mess I’m getting myself into – and he did. I love that guy!
Josie: Do you think it can be taught?
Biz: I don’t know if you can be taught to make those leaps of faith onto something that may not be there. It’s probably genetic – in fact, it’s probably already been discovered at Oxford!
But at the very least you can sort out who has it and who doesn’t, and this is why OSEF is good. It tells people what entrepreneurship is really like. It’s nothing like school, nothing like any job, and it’s not like any simulation you’ve ever been through. You’re going to start this thing and you’re not going to know what to do at all – even all these things you learned seemingly go out the window all of a sudden, because they can’t be applied to this strange new thing that no one else has done before.
The one thing that I think helps a lot, and is a strong basis for creativity, is just getting a multitude of experiences across many different fields of endeavour: travel, talking to all of Switzerland, talking to violinists, neuroscientists – knowing of all these people and views that are not from your world. If you stick where you are then you only know what you know, and what your friends know or what your cohort knows and they’re kind of the same thing. Whereas if you go all over the place and talk to all those different people, you can say ‘oh that village in Peru reminds me of that situation right now – you know what they did?’ I just think there’s something to that.
Josie: and that brings us back to the beauty of being here in Oxford, where you get to meet of these people…
Biz: That’s right – last night on my left there was a synthetic biologist and on my right was a cellist. And from what the synthetic biologist was telling me he sounded like an entrepreneur. He said ‘You know how you can turn genes on and off, to express or not express? Well my whole thing was to try and set them to medium – and I found out, you can’t. So I just spent my entire PhD finding out that you can’t.’ And he sort of knew that going in, but he tried anyway and wanted to see if it would work. .. But that’s good because now somebody else doesn’t need to do that work.
Unfortunately in the world of business, not enough people share things. For example, Google figured out how to build the perfect data centre – really efficient, cheaper, better. Facebook then had to hire a whole bunch of PhD computer scientists to figure it all out again and reinvent the wheel as it were – a big waste of time. So Facebook have open-sourced how to build a datacentre and that just saves a whole bunch of time for everyone else. If that could be done in every field of endeavour you could image that the human race would making a lot more progress a lot more quickly. Yeah, I’d like to see that happen. World cooperation is the Holy Grail for humanity.