by Derek Lidow
Differences Matter
To ask about the characteristics of wealthy entrepreneurs, or any other category of entrepreneur, is to focus on what’s unimportant about entrepreneurs. Understanding entrepreneurship is not about understanding numbers or averages—an average entrepreneur does not exist. Individual entrepreneurs differ from each other more than they resemble each other. Resembling everyone else creates very little value for an individual offering services for hire or for the company he or she may create. To be average or the same is to be a commodity.
Entrepreneurs exploit their differences to make a living and to control their own lives. The pressure of asking for money from strangers in return for doing something good for them exerts a pressure on entrepreneurs to differentiate themselves and their business from everyone else around them. In essence, successful entrepreneurs have to be distinct and special (and this differentness may trick us into thinking that the differentness was the cause—the special something entrepreneurs are born with—rather than the effect—what they do to be special). This differentiation may be on a very local scale, such as running a neighborhood bakery that serves the best croissants within a mile, but some differentiation must exist for a business to find any traction. And the differentiation starts with the entrepreneur accentuating personal differences, in business and in life.
What set Jordan Monkarsh up for success as a sausage stand entrepreneur cannot be captured in any discussion about an average entrepreneur’s IQ, EQ, years of schooling, or age upon founding. Jordan chose to exploit a combination of abilities to make sausages that tasted different—and better, in the opinion of many—than anything else people could eat on Venice Beach. He possessed several different-than-average traits and abilities that drove him to consider starting such a business. Specifically, Jordan had sensitive taste buds that were essential in creating sausages with new combinations of flavors. His taste buds had been cultivated in his travels around the world after he graduated from college. Although an introvert, Jordan knew how to act the part of a fast-quipping salesman. And he had masterful sausage-making skills that he learned from his experienced father.
Jordan serves as an excellent role model because there is much to learn from him in order to survive and prosper as an entrepreneur. As is true for many entrepreneurs, he tends to live in the moment; he’s not a planner or a strategist. He never wrote a business plan. Jordan acquired the additional skills necessary to run his business the way the vast majority of entrepreneurs do—by learning what they don’t know, by making mistakes, and by looking at their checking accounts to see how much is left over at the end of the month. Then they decide what to do next.
Stephanie is almost the exact opposite. She likes to make plans, surround herself with experienced advisors, and forecast her bank balances months in advance. Either type of person—a Jordan or a Stephanie—can succeed as an entrepreneur.
Jordan chose well what he wanted to do with his life and accordingly did well—at least in the eyes of most people. (More on that later.) He did not choose to do something at which he was mediocre or that he found boring. The same can be said of Stephanie and virtually everyone else who has created an enterprise that generated a great deal of value.
Ultimately, who you are is not what matters in entrepreneurship. What matters is what you want to do with who you are.
When “Who” Means “We”
Contrary to a commonly held perception, the majority of enterprises are founded by a single person, not by a team. Over half of the entrepreneurs in the United States work on their own and want to keep it that way. Most see no reason to pay good money to incorporate. Beauticians that rent chairs in a beauty parlor are a classic example, as are most gardeners who own their own truck and lawn mower, as well as full-time Uber drivers.
Founding a company with a spouse or other direct relative as a partner is also common, occurring in over a quarter of the cases. Rarely, however, do people found companies with non-relatives as full partners. Most entrepreneurs inherently understand that giving significant ownership to partners or co-founders increases risk, especially if they’re strangers. Stephanie is an exception. But her partner Steve was not a stranger—rather, someone that she knew from college. She felt that working with him minimized the risk of Advent failing; minimizing the risk of failure or loss of control is consistent with being a bedrock entrepreneur.
Among high-risk entrepreneurs, however, founding companies with relative strangers is common. High-risk entrepreneurs often justifiably feel the need to grow fast or perish. The risks associated with breaking up with a co-founder whom you didn’t have the time to get to know well can seem reasonable when survival appears otherwise impossible. To attract investments and capital that may be critical to establishing a competitive advantage, high-risk entrepreneurs often must attract co-founders who have complementary experience and expertise. Still, making strangers partners is a huge risk, and many high-risk entrepreneurial ventures fail at least in part because of a break-up among key members of the founding team.
Finally, whether acknowledged with ownership shares in the company or not, spouses and family are always de facto partners in startups. Creating an enterprise, growing an enterprise, fixing the constant problems that arise, and all the other high-stress activities entrepreneurs must endure to succeed take time, attention, and resources away from family and intimate friends. While no evidence shows that entrepreneurship leads to higher rates of divorce, research shows that it does increase familial stress, no matter how supportive the spouse and kids. Regardless of how the business is founded, entrepreneurship is always a family affair.
Who Fails
Entrepreneurs who don’t know what they want from entrepreneurship and don’t have the energy or time to figure it out are likely to fail. So are entrepreneurs who partner with people they don’t actually want to work with. And, perhaps most important of all, people who are afraid of being different have little hope of finding ways to get strangers to voluntarily give them, or their companies, enough money to survive.
Apart from these caveats, entrepreneurship may be a good career path for you or someone you care about and therefore worth it to you to read on.
CHAPTER 3:
What
“The deceased must be protected and given a voice, without a witness they will be forgotten.”
—Vidal Herrera
Entrepreneurial opportunities are everywhere.[3]
Consider: The United States collects a great deal of data about its businesses and has a well-established system for organizing them into over 1,000 different industries. Most people are shocked by how many different industries there are, particularly considering that each of these general categories can include many different types of businesses. For example, the US Census Bureau lists thirty-one kinds of construction-oriented industries that include 1,270,691 distinct businesses (as of the end of 2012). They range from “Highway, Street, and Bridge Construction” (24,315 of them) to “Tile and Terrazzo Contractors” (19,925 of them). Within retailing there are nine different types of retail industries listed just for the things we wear every day. And in every single industry classification startup activity is occurring.
In every one of these industries, there is room for improvement and innovation. Because almost all established businesses do things that frustrate some or all of their customers, they are ripe to be preyed upon by a startup. And many businesses are owned by burnt-out or older entrepreneurs who are happy to sell to an entrepreneur intent on growing the business anew.
It can be hard to appreciate how varied the opportunities are, partly because there are so many, and partly because the media focuses on high-risk entrepreneurs. Currently, high-risk entrepreneurial activity is concentrated in software-related businesses, yet of the 1,000 industry categories tracked, only five encompass software (“Software Publishing,” “Custom Computer Programming Services,” “Computer Systems Design Services,” “Other Computer Related Services,”
and “Data Processing, Hosting, and Related Services”). Stephanie’s company, Advent, is included under Custom Computer Programming Services. Today, software plays an important role in most businesses, but unless software is something a company sells directly to its customers, then software is merely a tool to support the sales and delivery of the product. Tools differ greatly from products, and products are the essential “what” that entrepreneurs must create in order to create value.
To understand what entrepreneurs do, consider two entrepreneurs who found what they wanted to do in vastly different yet very typical ways: Vidal Herrera and Sam Walton.
Desperate to be Needed
Vidal Herrera’s entrepreneurial journey was precipitated by his despondency. Having risen from an impoverished upbringing to a middle class lifestyle, he was, at the age of thirty-two, once again destitute after suffering a spinal injury on his job as a coroner’s investigator. Unable to stand for any length of time without being overcome with pain, he was put on permanent disability by the County of Los Angeles. Unfortunately, his workman’s compensation payouts were not enough to feed, clothe, and shelter his family. Herrera had applied for more than 2,000 jobs, but nobody wanted to hire someone who couldn’t stand for long periods of time or handle heavy objects.
Vidal had grown up in the barrio of East LA. When he was three years old, his mother was evicted from her home so developers could make way for Dodger Stadium. With nowhere to live and no longer able to feed Vidal and his six siblings, she was forced to give them up to foster care. Five years later she managed to retrieve them, but she made it clear that they would all have to work to support the family. So at the age of eight, Vidal began redeeming discarded soda bottles for pennies and selling newspapers on the street corners of downtown Los Angeles. Every day when he turned over to his mother the fifteen to twenty cents he had made, he felt proud. Work took on a special meaning for him: being respected. From that early age, Vidal did whatever it took to be respected for his work—to be respected as a man.
School was a low priority because the jobs he held, from newspaper boy to shoeshine boy to busboy, didn’t require schooling, and they were exhausting. When he graduated from high school with a D average, he was two years older than his peers. After high school, Vidal hitchhiked around the country for two years, trying to find out what freedom from constant work felt like. But traveling was lonely, and so he returned to LA to take a job making pizzas.
Vidal was always on the lookout for ways to make more money. A few months after he returned, a bartender told him he could make “real money” working in the morgue—if he could stomach the work. At that time, more money meant more parties, booze, and drugs, and Vidal started looking the next day. He quickly found a job as a Mortuary Attendant at a big LA hospital. Most orderlies try to avoid working with dead people and don’t look happy and motivated when cleaning up after the deceased. The work is grisly and the stench is nauseating. But Vidal liked the work, and it showed. His supervisors took note, and pathologists soon took time to explain the causes of death and the anatomy of corpses to him. When his friends started calling him “El Muerto,” The Dead One, Vidal was delighted—he knew he was onto something.
Vidal worked as many hours as possible, earning as much he could in order to live large. He and his barrio friends, some of them infamous drug dealers, were notorious for their Saturday night parties with plenty of booze, drugs, and fun-loving women. Vidal lived from paycheck to paycheck—until he met Vicki. She was a bohemian girl from LA’s San Fernando Valley. During an especially raucous party, Vicki caught Vidal’s attention when she screamed at him over the pulsing music that he would never amount to anything. He had never had a girlfriend—“why get tied down?” But now a girl smarter and prettier than he ever imagined was interested in him enough to berate him for the way he was living his life. This girl was clearly special. He wanted her and he resolved to make something of himself to win her love.
During the time Vidal and Vicki were falling in love, three years after Vidal had started working at the hospital, a coroner’s assistant assigned to pick up bodies tipped Vidal about a job: “We’re looking for a Latino to work at our place to fill a quota; you have a good work ethic; you should apply.” Two weeks later, Vidal started at the bottom of the pecking order on the staff of the Los Angeles County Coroner.
As a civil servant, he would now have to win promotions not only through hard work but also by acing exams. Vidal hated taking tests. Determined to show Vicki that he could amount to something and in spite of his poor grades in school, Vidal hit the books. Five years and several exams later he advanced to coroner’s assistant, serving as the right-hand man for the county’s coroners during autopsies. Among the coroners, including with the infamous “coroner to the stars” Dr. Thomas Noguchi, he developed a reputation for knowing as much as they did about organs and types of tissue, the signs for various causes of death, and the kinds of incisions needed to get to any part of the body without destroying evidence. Vidal found medical texts and medical terms easy to understand and remember because they were directly associated with work he loved to do. When he received the top grade on the Investigator’s exam, he was promoted yet again to Deputy Medical Investigator, and sent to crime scenes to perform medical investigations, just like on the television series CSI.
One holiday, working alone because nobody else wanted to give up their time off, Vidal arrived at a possible crime scene where he was confronted with a dead woman who weighed almost 300 pounds. The EMTs from the fire department, who were locked in a contract dispute with the county, refused to help Vidal handle the body. Exerting all of his strength, he rolled the dead woman onto her back by himself. As he did so, three of his vertebrae collapsed.
After three weeks of treatment, Vidal was released from the hospital. His doctors told him he was lucky he hadn’t been permanently paralyzed—and that he would never be able to stand for long periods or be able to lift anything weighing more than a few pounds. The Coroner’s office put him on permanent disability, which entitled him to a monthly check totaling only a third of his pay as a medical investigator.
With a wife, a young child, and a mortgage, Herrera was terrified that he wasn’t going to be able to make ends meet. For two years he searched in vain for a job, receiving over 2,000 rejections. With no money left in the bank and thousands of dollars of bills to pay, he felt like a deadbeat, a failure. Sinking ever deeper into self-hatred, he contemplated suicide.
Then, unexpectedly, he received a letter offering him a job assisting with autopsies for the Veterans Administration (VA). But when he interviewed for the position, he found that the salary was less than the disability payments he received. If he took the job, the disability payments would cease and he would be in even worse shape!
Feeling this was his only remaining chance to survive, he pleaded with the VA administrator to help him make the opportunity work. As they talked, he learned that the VA had a large and delinquent backlog of autopsies. So he made a counteroffer: instead of accepting the salaried position, he would work as an independent contractor. The VA said yes, provided he would accept $150 per autopsy and take responsibility for his own benefits and taxes. Herrera calculated that if he could perform at least two autopsies a day, working five days a week, he could make about $6,500 a month. That was more than enough to live on. It was decided—he was going to be an independent businessperson.
It wasn’t easy. To get across town to the VA, he had to take three different buses, consuming two hours each way. And because he still couldn’t stand for long periods, he had to improvise, using stools to prop himself up in the right position for each incision he performed. At times he passed out from the pain. Vidal didn’t care. Nor did he care about the hassle of being a contractor to the Veterans Administration—he was ecstatic about having an income and a first customer. And as the VA’s backlog of autopsies gradually fell, that customer was increasingly happy.
Wanting more than just to perform
contract autopsies for the VA, he worked to expand his business. He saved his money so he could buy a car and then his own saws and autopsy tools. He organized the VA’s autopsy procedures so they could be performed more efficiently, freeing up more of his time. Vidal also read business magazines; one day while reading about how 800-numbers worked, inspiration hit. He called AT&T and asked if 1-800-AUTOPSY was available. He bought the rights to the number—over the strong objections of Vicki, who thought it was pure vanity. Undaunted, he printed up 1-800-AUTOPSY flyers and began visiting local funeral homes, hundreds of them, telling them that he could perform autopsies at the funeral home for any family that asked. He arranged to pay a retired coroner to preside over the autopsies when work showed up. Even though private autopsies had never been offered before, Vidal’s phone started to ring within days. Some families wanted to find out why their loved ones had died, even if nothing nefarious had happened. As more families learned about the service, the business grew and money finally became something Vidal didn’t have to worry about.
What’s In Front of You
While Vidal grew up with not enough, Sam Walton grew up with just enough. There was food on the table when he was hungry and clothes to keep him warm in the winter (it gets cold in Missouri), but his father did not have stable employment throughout much of Sam’s childhood. Sam’s parents were frugal to make sure they’d have enough saved up for the proverbial rainy day, which was fortunate the time or two the savings were needed to tide over the family. Every family member took responsibility for their own needs money-wise, but everyone more or less got to choose how they did it. Sam’s mother raised a few cows and sold their milk, and Sam delivered newspapers and sold magazine subscriptions. Every dollar went toward basic necessities like food, clothing, and fixing things that broke.