Entrepreneurship – Page 173 – artdiamondblog.com

McDonald’s Entrepreneur Ray Kroc Wrote Useful Autobiography

Source of book image: http://media.us.macmillan.com/jackets /500H/9780312929879.jpg (Note: the image is of a more recent edition of the book than the one whose source information is given below. I believe the main body of the editions is the same, but they differ in preface and afterword.)

Ray Kroc was one of the most famous entrepreneurs of the second half of the 20th century, credited with building McDonald’s. Kroc is not my favorite entrepreneur, but his story as portrayed in his autobiography does contain some observations that are useful for suggesting, or testing, generalizations about entrepreneurship.
One of them is suggested by the title: the importance of hard work.
Another is that if you have the right attitude, work hard (and have a bit of luck) success can come later in life (he was 52 when he met the McDonald brothers).
In some future entries to the blog, I’ll quote a few passages from the book that I found especially interesting.

Reference to book discussed:
Kroc, Ray. Grinding It Out: The Making of McDonald’s. Chicago: Henry Regnary Company, 1977.

Economists Better at Measuring Destruction than Creativity

(p. 49) As entrepreneurs accelerate the processes of creative destruction that impel all economic advance, the economists measure the destruction, but not the creativity. They see the sinking value of existing capital but neglect the new ideas, hopes, enthusiasms, and plans of entrepreneurs.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

“The Single Most Important Question for the Future of America Is How We Treat Our Entrepreneurs”

(p. 13) The single most important question for the future of America is how we treat our entrepreneurs. If we smear, harass, overtax, and overregulate them, our liberal politicians will be shocked and horrified to discover how swiftly the physical tokens of the means of production collapse into so much corroded wire, eroding concrete, scrap metal, and jungle rot.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

Leading Entrepreneurs “Are Chosen for Performance Alone”

(p. 5) Far from being greedy, America’s leading entrepreneurs– with some unrepresentative exceptions–display discipline and self-control, hard work and austerity that excel that in any college of social work, Washington think tank, or congregation of bishops. They are a strange riffraff, to be sure, because they are chosen not according to blood, credentials, education, or services rendered to the establishment. They are chosen for performance alone, for service to the people as consumers.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

Most Entrepreneurial Tycoons “Begin as Rebels and Outsiders”

(p. 8) Because entrepreneurship overthrows establishments rather than undergirds them, the entrepreneurial tycoons mostly begin as rebels and outsiders. Often they live in out-of-the-way places– like Bentonville, Arkansas; Omaha, Nebraska; or Mission Hills, Kansas–mentioned in New York, if at all, as the punch lines of comedy routines. When these entrepreneurs move into high society, they are usually inheritors on the way down.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

Government Regulatory Costs Impede Energy Innovation

Robert Metcalfe receiving the National Medal of Technology in 2003. Source of photo: http://en.wikipedia.org/wiki/Robert_Metcalfe

The author of the commentary quoted below is famous in the history of information technology. His Harvard dissertation draft on packet switching was rejected as unrealistic. So he left the academy and became the main innovator responsible for making packet switching a reality, through the ethernet.
(He is also the “Metcalfe” behind “Metcalfe’s Law” about the value of a network increasing at a faster rate than the increase in the network’s size.)

(p. A15) . . . new small reactors meet important criteria for nuclear power plants. With no control rods to jam, they are far safer than the old models — you might well call them nuclear batteries. By not using weapons-grade enriched fuels, they are nonproliferating. They minimize nuclear waste. And they’re economical.
. . .
As venture capitalists, we at Polaris might have invested in one or two of these fission-energy start-ups. Alas, we had to pass. The problem with their business plans weren’t their designs, but the high costs and astronomical risks of designing nuclear reactors for certification in Washington.
The start-ups estimate that it will cost each of them roughly $100 million and five years to get their small reactor designs certified by the Nuclear Regulatory Commission. About $50 million of each $100 million would go to the commission itself. That’s a lot of risk capital for any venture-backed start-up, especially considering that not one new commercial nuclear reactor design has been approved and built in the United States for 30 years.
. . .

As we learned by building the Internet, fiercely competitive teams of research professors, graduate students, engineers, entrepreneurs and venture capitalists are the best drivers of technological innovation — not big corporations, and certainly not government bureaucracies. So, if it’s cheap and clean energy we want, we should clear the way for fission energy start-ups. We should lower the barriers at the Nuclear Regulatory Commission for the approval of new nuclear reactors, especially the new small ones. In particular, we should drop the requirement that the commission be reimbursed for reconsidering new fission reactor designs.

For the full commentary, see:
BOB METCALFE. “The New Nuclear Revolution; Safe fission power is our future — if regulators allow it..” Wall Street Journal (Weds., JUNE 24, 2009): A15.
(Note: ellipses added.)

“Nothing Will Ever Be Attempted if All Possible Objections Must Be First Overcome”

(p. 23) Mr. J. R. Simplot had entered the food processing business, without any clear notion of how to produce dried onion powder or flakes. Once again he followed his lifelong precept of entrepreneurship: “When the time is right, you got to do it.” His rationale is written more elegantly in metal on a small plaque that has stood on Simplot’s desk–and has greeted him each time he pulls up his chair–for some twenty-five years: Nothing will ever (p. 24) be attempted if all possible objections must be first overcome. The objections to signing a contract for delivery of 500,000 pounds of dried, powdered, or flaked onions–without drier, pulverizer, or flaker, or any clue of how to build them–seemed altogether prohibitive. But J. R. Simplot struck when the time was right.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.
(Note: ellipsis added.)

The “Chief Desire” of Entrepreneurs is the “Power to Consummate Their Entrepreneurial Ideas”

(p. 305) Entrepreneurs understand the inexorable reality of risk and change. They begin by saving, forgoing consumption, not to create an ersatz security but to gain the wherewithal for a life of productive risks and opportunities. Their chief desire is not money to waste on consumption but the freedom and power to consummate their entrepreneurial ideas.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

Drug Innovation Funding Slashed in Economic Crisis

Source of graphic: online version of the WSJ article quoted and cited below.

(p. B1) Big pharmaceutical companies have spent billions of dollars to buy other drug giants lately, leaving behind small biotech companies that can no longer find investors.

The biotech industry had thrived as a new-drug incubator for big pharma companies, which poured money into acquisitions and partnerships to build up their biotech-drug product line. Some of that is still happening, but most sources of investment funding have dried up in recent months.
Since November, 10 biotechs have declared bankruptcy, says Ellen Dadisman, a spokeswoman for the Biotechnology Industry Organization. Meanwhile, 120 of the 360 publicly traded biotechs have less than six months of cash left, compared with just 12 companies in that position a year ago, according to Burrill & Co., a venture-capital concern in San Francisco that follows the industry.

For the full story, see:

KEITH J. WINSTEIN. “Cash Dries Up for Biotech Drug Firms.” Wall Street Journal (Mon., MARCH 16, 2009): B1.

Government Regulators Again Suppress Entrepreneurial Innovation

Source of photo: http://images.quickblogcast.com/82086-71861/pedicurex_large.jpg

(p. A1) Until Mr. Ho brought his skin-eating fish here from China last year, no salon in the U.S. had been publicly known to employ a live animal in the exfoliation of feet. The novelty factor was such that Mr. Ho became a minor celebrity. On “Good Morning America” in July, Diane Sawyer placed her feet in a tank supplied by Mr. Ho and compared the fish nibbles to “tiny little delicate kisses.”

Since then, cosmetology regulators have taken a less flattering view, insisting fish pedicures are unsanitary. At least 14 states, including Texas and Florida, have outlawed them. Virginia doesn’t see a problem. Ohio permitted fish pedicures after a review, and other states haven’t yet made up their minds. The world of foot care, meanwhile, has been plunged into a piscine uproar. Salon owners who (p. A12) bought fish and tanks before the bans were imposed in their states are fuming.
The issue: cosmetology regulations generally mandate that tools need to be discarded or sanitized after each use. But epidermis-eating fish are too expensive to throw away. “And there’s no way to sanitize them unless you bake them for 20 minutes at 350 degrees,” says Lynda Elliott, an official with the New Hampshire Board of Barbering, Cosmetology and Esthetics. The board outlawed fish pedicures in November.
In Ohio, ophthalmologist Marilyn Huheey, who sits on the Ohio State Board of Cosmetology, decided to try it out for herself in a Columbus salon last fall. After watching the fish lazily munch on her skin, she recommended approval to the board. “It seemed to me it was very sanitary, not sterile of course,” Dr. Huheey says. “Sanitation is what we’ve got to live with in this world, not sterility.”
. . .
State bans have disrupted Mr. Ho’s plans to build a nationwide franchise network. Currently, he has four active franchises, in Virginia, Delaware, Maryland and Missouri. But others have terminated franchise agreements. In Calhoun, Ga., Tran Lam, owner of Sky Nails, says she paid Mr. Ho $17,500 in exchange for fish and custom-made pedicure tanks. A few weeks later, in October, the Georgia Board of Cosmetology deemed fish pedicures illegal. “I’m very mad,” says Ms. Lam. “I lost a lot of money and the economy is so bad.”

For the full story, see:
JOHN SCHWARTZ. “Ban on Feet-Nibbling Fish Leaves Nail Salons on the Hook; Mr. Ho’s Import From China Caught On, But Some State Pedicure Inspectors Object.” Wall Street Journal (Mon., MARCH 23, 2009): A1 & A12.
(Note: ellipsis added.)

“Entrepreneurship is the Creation of Surprises”

(p. 297) Because he started in rebellion against established firms, he bears a natural skepticism toward settled expertise. Because he had to make scores of decisions before all the information was in, he recognizes that enterprise always consists of action in uncertainty. The entrepreneur prevails not by understanding an existing situation in all its complex particulars, but by creating a new situation which others must try to comprehend. The enterprise is an aggressive action, not a reaction. When it is successfully launched, all the rest of society–government, labor, other businesses–will have to react. In a sense, entrepreneurship is the creation of surprises. It entails breaking the looking glass of established ideas–even the gleaming mirrors of executive suites–and stepping into the often greasy and fetid bins of creation.
In the entrepreneur’s contrarian domains, he needs most of all a willingness to accept failure, learn from it, and act boldly in the shadows of doubt. He inhabits a realm where the last become (p. 298) first, where supply creates demand, where belief precedes knowledge. It is a world where expertise may be a form of ignorance and the best possibilities spring from a consensus of impossibility.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.