Category: Entrepreneurship

Founder Movie Is Unfair to Entrepreneur Ray Kroc

(p. 1D) McDonald’s franchise owner Jim Darmody of Omaha notes that the Hollywood film about Ray Kroc doesn’t always put the self-proclaimed “founder” of the fast-food chain in a good light.
“The movie makes it seem like he stole something from the McDonald brothers,” Darmody said. “But I can’t fault him. He bought it from the brothers and made it a dynasty.”
. . .
(p. 3D) Ray Kroc not only made a fortune that his wife turned into philanthropy, Jim said, but also created opportunities for people like himself.
. . .
Darmody said the McDonald’s Corp. has an excellent inspection program at stores for consistency and cleanliness.
Communities, he said, also have benefited from the presence of McDonald’s.
Kroc died in 1984. His widow, Joan Kroc, who died in 2003, left her $1.5 billion estate to charity.
. . .
. . . in a 1993 phone interview, Dick McDonald told me that he and his brother had no regrets about selling to Kroc for what later seemed a pittance.
“Neither of us had any youngsters who would go into the business,” said Dick, who had come up with the idea for golden arches. “I guess we could have stayed and piled up millions. But as my brother once said, ‘What can we do with $40 million that we can’t do with three or four million — except pay a lot of taxes?’ ”
. . .
Darmody, who has flipped a few burgers, said he learned some things from the movie, including how the brothers came up with the speedy production system. But without Kroc, he said, McDonald’s wouldn’t be what it is today.

For the full story, see:
Michael Kelly. “Following in the Footsteps of Founder.” Omaha World-Herald (Thurs., March 2, 2017): 1D & 3D.
(Note: ellipses added.)
(Note: the online version of the story has the date Mach 4 [sic], 2017, and has the title “Kelly: McDonald’s franchise owner in Omaha says ‘founder’ Ray Kroc created opportunities for people.”)

How Uber Resisted Regulation

(p. B1) Uber Technologies Inc. has for years employed a program that uses data from its ride-hailing app and other tools to evade government officials seeking to identify and block the service’s drivers, according to a person familiar with the matter.
. . .
Uber has set up GPS rings around government offices, tracked low-cost phones and looked for other clues that regulators were targeting its drivers, such as frequently opening or closing the app or using credit cards tied to city agencies, according to the Times report. Once identified, Uber kept regulators out of vehicles by failing to send drivers their way, according to the newspaper.

For the full story, see:
GREG BENSINGER. “Uber Used Program to Evade Authorities.” The Wall Street Journal (Mon., March 6, 2017): B4.
(Note: ellipsis added.)
(Note: the online version of the story has the date March 4, 2017, and has the title “Uber Used ‘Greyball’ Program to Circumvent Authorities.” )

Increasing Number of Free Agent Entrepreneurs

(p. A3) A tiny segment of U.S. manufacturing appears to be thriving–the one with no employees.
A mix of technology, economic necessity and adventure is leading more Americans to found companies that plan to stay very small. That entrepreneurial spark also highlights challenges facing the economy, from difficulty re-entering the job market to the diminishing role of fast-growing young firms.
Nicholas Hollows wants to be his own boss, and not anyone else’s.
“I definitely don’t intend to switch my role from a person who makes things to a person who manages people,” said the 32-year-old sole proprietor of Hollows Leather in Eugene, Ore. “Being hands-on is the whole reason I do this.”
The number of businesses classified as manufacturers with no employees has been rising steadily since the depths of the recession. The tiny operations often make food, craft beer, toiletries or other niche products. Their growth stands out in a sector that has been shedding workers for decades.
U.S. food manufacturers with no employee but the owner nearly doubled from 2004 to 2014. One-worker beverage and tobacco makers expanded 150%. Such chemical manufacturers–a category that includes makers of soap and perfume–grew almost 70%.
In all, there were more than 350,000 manufacturing establishments with no employee other than the owner in 2014, up almost 17% from 2004, according to the most recent Commerce Department data. By comparison, there were 292,543 establishments with other employees, down 12%. The shift creates a challenge for building back the number of jobs in the U.S. manufacturing sector.

For the full story, see:
Sparshott, Jeffrey. “Tiny Firms Stay That Way.” The Wall Street Journal (Thurs., Dec. 29, 2016): A3.
(Note: the online version of the story has the date Dec. 28, 2016, and has the title “Big Growth in Tiny Businesses.”)

Entrepreneur Marconi Was Driven by Wireless Communication Project

(p. C5) Marconi is another example of the Victorian “self-made man,” in this case a precocious youth fascinated by electricity and electrical wave pulses.
. . .
Sending the letter “S” in Morse code to his assistant, Mignani, on the far side of the meadow several hundred yards away was great, but not enough. What if, instead, Mignani took the receiver to the other side of the hill, out of sight of the house, and then fired a gunshot if the pulses got through? “I called my mother into the room to watch the momentous experiment. . . . I waited to give Mignani time to get to his place. Then breathlessly I tapped the key three times. . . . Then from the other side of the hill came the sound of a shot. . . . That was the moment when wireless was born.”
. . .
A combination of technological insight, organizational skill and business acumen gave him, like Steve Jobs in the next century, his place in history. To the end of his life Marconi was driven by a vision of the whole world communicating through wireless waves in the air.
. . .
. . ., Mr. Raboy exhaustively if deftly tells the tale of the next few critical years: Marconi’s long stay in England, the search for funding (without losing control), the critical establishment of patents, the embrace by officials in the British Post Office and Royal Navy, the ship-to-shore and ship-to-ship wireless transmissions. There’s a fine chapter on the critical long-range, trans-Atlantic experiments in 1901. These were conducted in wintry, gusty Newfoundland, whose supportive provincial government grasped almost immediately what Marconi offered: instant and vastly less expensive communication to Canada, Boston and New York and, above all, to Britain and its empire. Little wonder that such powerful entities as the (state-subsidized) Anglo-American Telegraph Co. were alarmed at this interloper. . . .
In 1909, at the age of 35, the Italian entrepreneur would stand up proudly to receive the Nobel Prize in physics.

For the full review, see:
PAUL KENNEDY. “When the World Took to the Air; Like Steve Jobs, Marconi combined technological insight, organizational skill and business acumen.” The Wall Street Journal (Sat., Sept. 10, 2016): C5-C6.
(Note: ellipses internal to second quoted paragraph, in original; other ellipses, added.)
(Note: the online version of the review has the date Sept. 9, 2016, an has the title “The World’s First Communications Giant; Like Steve Jobs, Marconi combined technological insight, organizational skill and business acumen.”)

The book under review, is:
Raboy, Marc. Marconi: The Man Who Networked the World. New York: Oxford University Press, 2016.

Privatized Airports Are Better Managed

(p. A15) The highest-ranked American airport on the list of the world’s top 100, as determined by the Passengers Choice Awards, is Denver–at 28. Atlanta comes in at 43, Dallas at 58, Los Angeles at 91.
Why do American passengers pay so much to get so little? Because their airports, by global standards, are terribly managed.
Cities from London to Buenos Aires have sold or leased their airports to private companies. To make a profit, these firms must hold down costs while enticing customers with lots of flights, competitive fares and appealing terminals. The firm that manages London’s Heathrow, currently eighth in the international ranking, was so intent on attracting passengers that it built a nonstop express train to the city’s center. It’s also seeking to add another runway, as is the rival firm running Gatwick Airport.
American airports are typically run by politicians in conjunction with the dominant airlines, which help finance the terminals in return for long-term leases on gates and facilities. The airlines use their control to keep out competitors; the politicians use their share of the revenue to reward unionized airport workers. No one puts the passenger first.

For the full commentary, see:
JOHN TIERNEY. “‘Third World’ U.S. Airports? That Insults the Third World; Private managers make terminals sparkle and hum the world over. Here we’re stuck with LaGuardia.” The Wall Street Journal (Sat., Jan. 21, 2017): A15.
(Note: the online version of the commentary has the date Jan. 23 [sic], 2017.)

Israelis Are Tenacious, Informal, Question Authority, and Tolerate Failure

(p. A15) Israel is a country of eight million people that at its narrowest point is 9 miles wide. It is surrounded on all sides by enemies who would like to see it wiped off the map: Hezbollah to the north, Hamas to the south, plus Bashar al-Assad’s regime, Islamic State and Iran to the east. It wouldn’t take a particularly pessimistic person to bet against this besieged slice of desert. Yet this tiny nation has also built an air force, anti-missile defense system and intelligence apparatus that is revered around the world–and relied on by the U.S. military, among many others. And it’s done it with a minuscule fraction of the budget available to larger nations.
How has Israel pulled it off? In “The Weapon Wizards” Yaakov Katz and Amir Bohbot tell the story of how the Jewish state’s military and defense sector became one of the most cutting-edge in the world. In chapters focused on particular technologies and weapons, such as drones, satellites and cyber warfare, the authors make the case that the same factors that have made Israel a tech giant have also allowed it to become a “high-tech military superpower.” The country’s military, its schools and its extracurricular institutions inculcate in its young people tenacity, insatiable questioning of authority, determined informality, cross-disciplinary creativity and tolerance of failure.
. . .
While “The Weapon Wizards” can be a bit technical for the lay reader, the authors have skillfully conveyed a key component of the dynamic innovation culture that has made the Jewish state one of the most important entrepreneurial and technology-driven economies in the world. Not bad for a country 9 miles wide.

For the full review, see:
DAN SENOR. “BOOKSHELF; Drafting Up Innovation.” The Wall Street Journal (Thurs., Feb. 2, 2017): A15.
(Note: ellipsis added.)
(Note: the online version of the review has the date Feb. 3 [sic], 2017.)

The book under review, is:
Katz, Yaakov, and Amir Bohbot. The Weapon Wizards: How Israel Became a High-Tech Military Superpower. New York: St. Martin’s Press, 2017.

Creating a Fair and Efficient Market for Photos

(p. B4) The arresting images on Stocksy.com are far from the standard fare found on many stock photography sites. Colorful portraits, unexpected compositions and playful shots greet visitors.
The most distinguishing feature, however, may be the structure of the site’s owner, Stocksy United: It is a cooperative, owned and governed by the photographers who contribute their work. Every Stocksy photographer owns a share of the company, with voting rights. And most of the money from sales of their work goes into their pockets rather than toward the billion-dollar valuations pursued by many venture-backed start-ups.
Stocksy was founded in 2013 by Bruce Livingstone and Brianna Wettlaufer, the core team behind iStockphoto, which in 2000 pioneered the idea of selling stock photos online in exchange for small fees. (Mr. Livingstone was the founder and Ms. Wettlaufer, the vice president of development and employee No. 4). IStock — which billed itself as “by creatives, for creatives” — caught the attention of Getty Images, which acquired it in 2006 for $50 million.
Mr. Livingstone and Ms. Wettlaufer grew dismayed as the community spirit they had cultivated and the royalties photographers received began to erode under the new ownership. Like many artists in the digital age, their photographer friends grumbled that they were being underpaid and exploited by online sites.
“Everyone had the same story,” Ms. Wettlaufer said. “They were feeling disenfranchised. They weren’t creatively inspired anymore. The magic was gone.”
So using money from the sale of iStock to Getty, she and Mr. Livingstone set out to create Stocksy, paying photographers 50 to 75 percent of sales. That is well above the going rate of 15 to 45 percent that is typical in the stock photography field. The company also distributes 90 percent of its profit at the end of each year among its photographers.
“We realized we could do it differently this time,” said Ms. Wettlaufer, who took over the chief executive role in 2014. “We could enter the market with a model that ensured artists were treated fairly and ethically.”

For the full story, see:
AMY CORTESE. “A New Wrinkle in the Gig Economy: Workers Get Most of the Money.” The New York Times (Thurs., July 21, 2016): B4.
(Note: the online version of the article has the date JULY 20, 2016.)

Founder-Led Firms Do Better

(p. A19) A study out earlier this year from Bain & Company, where we work, shows that over the past 15 years founder-led companies delivered shareholder returns that are three times higher than those of other S&P 500 companies.
. . .
Great founders imbue their companies with three measurable traits that make up what we dubbed “the founder’s mentality.”
The first is insurgency: The founding team declares war on its industry on behalf of underserved customers.
. . .
The second trait is an obsession with how customers are treated–an attention to detail that borders on compulsive.
. . .
Third, these companies are steeped in an owner’s mind-set. Too often in business, the founder’s vision becomes distorted.
Bain’s research found that the best companies–the top 20% of performers, founder-led or not–exhibit the three traits we’ve described four or five times as often as the bottom performers. The bad news: Only about 7% of companies, founder-led or not, manage to maintain these traits as they grow to scale. Yet those that do create more than 50% of the net value in the stock market in any given year.

For the full commentary, see:
CHRIS ZOOK and JAMES ALLEN. The Company Founder’s Special Sauce; No one leads a firm as effectively as the person who started it.” The Wall Street Journal (Mon., Dec. 19, 2016): A19.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Dec. 18, 2016.)

The Bain research mentioned above, is:
Chris, Zook. “Founder-Led Companies Outperform the Rest — Here’s Why.” Harvard Business Review Digital Articles (March 24, 2016): 2-5.

The passages quoted above are related to the authors’ book:
Zook, Chris, and James Allen. The Founder’s Mentality: How to Overcome the Predictable Crises of Growth. Boston, MA: Harvard Business Review Press Books, 2016.

People Root for Billionaires If They Believe They Also Could Become Billionaires

(p. 22) “Billions” manages the feat of making you want the guy who has everything to have even more.
“People still root for billionaires because it reinforces the idea that they can do it too,” Mr. Kirshenbaum said recently. “People don’t want to be in a place where there’s not a lot of magic left in the equation.” Political analysts have long given this explanation for why poor or working-class people vote against tax increases for the wealthy: They want to believe that some day they, too, will have assets to guard.
. . .
Like the TV series, the film “The Big Short” puts you in the position of wanting the investors — or at least the investors depicted on the screen — to win. The movie channels your anger at the banks that came up with the perilous financial instruments that devastated the economy, but it leaves you no room to despise the charmingly eccentric rogue geniuses who made hundreds of millions of dollars shorting the housing market. All that hard work, the culling of documents and the fact-gathering trips to endangered Sun Belt real estate markets — it would be so wrong if they didn’t triumph in the end. Institutions are greedy; people are merely obsessed.

For the full commentary, see:
GINIA BELLAFANTE. “Big City; Rooting for the Robber Barons, at Least Those Onscreen.” The New York Times, First Section (Sun., MARCH 20, 2016): 22.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date MARCH 18, 2016, and has the title “Big City; Rooting for the Robber Barons, at Least on the Screen.”)

Public Policies Choke Off Entrepreneurial Opportunities

George McGovern was the Democratic candidate for President of the United States in 1972. He was a fervent advocate for expansion of the federal government.

(p. A12) We intuitively know that to create job opportunities we need entrepreneurs who will risk their capital against an expected payoff. Too often, however, public policy does not consider whether we are choking off those opportunities.

My own business perspective has been limited to that small hotel and restaurant in Stratford, Conn., with an especially difficult lease and a severe recession. But my business associates and I also lived with federal, state and local rules that were all passed with the objective of helping employees, protecting the environment, raising tax dollars for schools, protecting our customers from fire hazards, etc. While I never have doubted the worthiness of any of these goals, the concept that most often eludes legislators is: “Can we make consumers pay the higher prices for the increased operating costs that accompany public regulation and government reporting requirements with reams of red tape.” It is a simple concern that is nonetheless often ignored by legislators.
For example, the papers today are filled with stories about businesses dropping health coverage for employees. We provided a substantial package for our staff at the Stratford Inn. However, were we operating today, those costs would exceed $150,000 a year for health care on top of salaries and other benefits. There would have been no reasonable way for us to absorb or pass on these costs.
Some of the escalation in the cost of health care is attributed to patients suing doctors. While one cannot assess the merit of all these claims, I’ve also witnessed firsthand the explosion in blame-shifting and scapegoating for every negative experience in life.
Today, despite bankruptcy, we are still dealing with litigation from individuals who fell in or near our restaurant. Despite these injuries, not every misstep is the fault of someone else. Not every such incident should be viewed as a lawsuit instead of an unfortunate accident. And while the business owner may prevail in the end, the endless exposure to frivolous claims and high legal fees is frightening.

For the full commentary, see:
McGovern, George. “Manager’s Journal: A Politician’s Dream Is a Businessman’s Nightmare.” The Wall Street Journal (Mon., June 1, 1992): A12.

Alzheimer’s Innovator Financed Research with Loan on His House

(p. 29) In the early 1990s, Dr. Roses and his collaborators at Duke University rejected prevailing assumptions that the buildup in the brain of a protein plaque called amyloid directly caused memory loss and other mental impairments in Alzheimer’s patients.
Instead, they maintained that the plaque largely resulted from the disease, and that the deterioration of brain function actually originated from the variation of a single gene.
In 2009, after financing his research with a loan of almost $500,000 on his house, Dr. Roses and his team identified a second gene that they said could help predict whether the cognitive ability of an older person, generally between 65 and 83, would decline within about five years of acquiring Alzheimer’s.
. . .
The heart attack that caused his death was his third since 1990, but his pace never faltered. “He treated every day like it was his last one, because he knew it probably was,” Stephanie Roses said. “He woke up every morning and would blink three times and say, ‘I have another day.'”

For the full obituary, see:
SAM ROBERTS. “Allen Roses, Who Studied Genes’ Role in Alzheimer’s Disease, Is Dead at 73.” The New York Times (Thurs., OCT. 6, 2016): 29.
(Note: ellipsis added.)
(Note: the online version of the obituary has the date OCT. 5, 2016, and has the title “Allen Roses, Who Upset Common Wisdom on Cause of Alzheimer’s, Dies at 73.”)