Category: Entrepreneurship

How Much Do Entrepreneurs Learn from Failure?

(p. R2) . . . , I looked at 8,400 German startups to see if the new companies launched by failed entrepreneurs did any better than first-timers.

They didn’t. In fact, they had poorer outcomes the second time around.

Failed entrepreneurs were more likely to go bankrupt or dissolve their business than first-time entrepreneurs. In fact, even if an entrepreneur had run a business successfully before, they were just as likely to see their new business fail as a first-time entrepreneur.

Other researchers have reached similar conclusions. A Harvard Business School study of venture-capital-backed firms in the U.S., published in the April 2010 Journal of Financial Economics, found that previously failed entrepreneurs were no more likely to succeed than first-time entrepreneurs.

A study of German entrepreneurs by a researcher at KfW Bankengruppe found that entrepreneurs who started a company after a failure performed poorly compared with other founders. “Their probability of survival in general as well as their risk of failure in particular is worse than that of other startups,” according to the researcher, who added: On average, “there is no indication that business failure triggers a reflection process in which entrepreneurs look back on mistakes they have made and adapt their future behavior accordingly.”

. . .

Why does this happen? Why don’t entrepreneurs learn from failure?

For one thing, learning is difficult in startup contexts.

Usually, when we think of learning, we think about gaining expertise through regular practice. In his “Outliers” book, for instance, Malcolm Gladwell calculates that it takes about 10,000 hours of practice to be a chess grandmaster.

But part of the reason practice pays off is because a chessboard is regular: It always has 64 squares and starts off with 32 pieces. You face one competitor. Likewise, in football, a consistent number of players on offense face a consistent number of defenders and try to advance by clear, regular rules.

These regularities don’t occur in startup situations. Markets evolve, customers are fickle, and opposition numbers vary. You must learn what it takes to become the equivalent of a chess grandmaster by playing with constantly evolving rules and opponents—making it much more difficult to interpret prior actions and experiences successfully.

For the full story, see:

Francis Greene. “If at First You Don’t Succeed, You Most Likely Will Fail Again.” The Wall Street Journal (Monday, December 2, 2019): R1-R2.

(Note: ellipses added.)

(Note: the online version of the story has the date Dec. 1, 2019, and has the title “Why Entrepreneurs Don’t Learn From Their Mistakes.”)

The unpublished working paper, co-authored by Greene, that looked at 8,400 German startups, is:

Gottschalk, Sandra, Daniel Höwer, Francis J. Greene, and Bettina Müller. “If You Don’t Succeed, Should You Try Again? The Role of Entrepreneurial Experience in Venture Survival.” ZEW Discussion Paper, #14-009, 2014.

A related paper by three of the four co-authors, is:

Gottschalk, Sandra, Francis Greene, and Bettina Müller. “The Impact of Habitual Entrepreneurial Experience on New Firm Closure Outcomes.” Small Business Economics 48, no. 2 (Feb. 2017): 303-21.

The Harvard Business School paper, mentioned above, is:

Gompers, Paul A., Anna Kovner, Josh Lerner, and David S. Scharfstein. “Performance Persistence in Entrepreneurship.” Journal of Financial Economics 96, no. 1 (April 2010): 18–32.

Opening a New “Treasure Box of Strange Phenomena”

(p. D1) In the universe of office supplies, pencil lead — a mixture of graphite and clay, which does not include any lead — appears unexceptional beyond its ability to draw dark lines.

But 15 years ago, scientists discovered that a single sheet of graphite — a one-atom-thick layer of carbon atoms laid out in a honeycomb pattern — is a wonder. This ultrathin carbon, called graphene, is flexible and lighter than paper yet 200 times stronger than steel. It is also a good conductor of heat and electrical current.

Scientists imagined all of the remarkable things that graphene might be made into: transistors, sensors, novel materials. But after studying and cataloging its properties, scientists moved on to other problems. Practical uses have been slow to come, because part of what makes graphene alluring — its strength — also makes the material difficult to cut into precise shapes.

Last year, graphene burst back on the physics research scene when physicists at the Massachusetts Institute of Technology discovered that stacking two sheets of the material, twisted at a small angle between them, opened up a treasure box of strange phenomena. It started a new field: twistronics.

For the full story, see:

Kenneth Chang. “A Physics Trick: Take 2 Sheets of Carbon and Twist.” The New York Times (Tuesday, November 5, 2019): D1 & D3.

(Note: the online version of the story has the date Oct. 30, 2019, and has the title “A Physics Magic Trick: Take 2 Sheets of Carbon and Twist.”)

Ed Cray “Was a Meticulous Craftsman of American Biography”

In my Openness to Creative Destruction, I used Ed Cray’s book on Levi Strauss as the source of my account of how Jacob Davis invented Levi jeans.

(p. B14) Ed Cray, a journalist and educator who explored a broad spectrum of Americana with well-regarded biographies of Woody Guthrie, Chief Justice Earl Warren, the California serial killer Juan Corona, George C. Marshall and the bluejeans maker Levi Strauss, died on Oct. 8 in Palo Alto, Calif.

. . .

He delved into broad subjects, including police misconduct and medical care (“The Big Blue Line” in 1967 and “In Failing Health,” in 1970) and entrepreneurship (“Levi’s: The Story of Levi Strauss & Co.” in 1978 and “Chrome Colossus: General Motors and Its Times” in 1981).

. . .

“Ed was a meticulous craftsman of American biography with a penchant for deep research,” Professor Brinkley said in an email. “What mattered most to Ed was being a judicious judge of the past. There are no false notes in his body of work.”

. . .

Professor Joe Saltzman, a former colleague at the Annenberg School for Communication and Journalism at the University of Southern California, where Mr. Cray also taught, said in an email, “Although his books were not best-sellers, they always offered solid reporting and new insights into his subjects.”

For the full obituary, see:

Sam Roberts. “Ed Cray, 86, Biographer of American Lore.” The New York Times (Friday, November 1, 2019): B14.

(Note: ellipses added.)

(Note: the online version of the obituary was updated Nov. 1, 2019, and has the title “Ed Cray, Biographer of Woody Guthrie and Earl Warren, Dies at 86.”)

The Levi Strauss book that I mention above, is:

Cray, Ed. Levi’s: The “Shrink-to-Fit” Business That Stretched to Cover the World. Boston: Houghton Mifflin Company, 1978.

“Misguided Regulations” Kill Ride-Hailing App

(p. B3) New York ride-hailing business Juno USA LP filed for bankruptcy protection, blaming its demise on minimum wage regulations and mounting lawsuits from drivers, riders and competitors.

. . .

Ride-hailing companies are grappling with efforts by several states to extend employment protections to gig workers. In the face of additional regulation, the ride-hailing industry has been consolidating and pushing back against government measures that could upend their business models.

Gett, which bought Juno in a $200 million equity-based deal, said the company’s demise stemmed from “misguided regulations” in New York City.

. . .

Juno generated $269 million of revenue last year, a 23% annual increase, according to court papers. But this year its costs escalated after the city put in place a pay floor for ride-hail drivers.

The wage regulation pushed customer prices up by nearly 20%, bringing Juno’s rides per day down to 25,000 immediately before the chapter 11 petition from 47,000 per day in 2017.

. . .

Juno also said it spent substantial money on legal fees to defend itself against lawsuits from drivers, riders and competitors alike that the company described as “opportunistic.”

Drivers have sued over unemployment insurance, saying they were employees rather than independent contractors, and over stock incentives.

For the full story, see:

Alexander Gladstone. “Ride-Hailing App Enters Bankruptcy, Blaming Wage Law.” The Wall Street Journal (Thursday, Nov. 21, 2019): B3.

(Note: ellipses added.)

(Note: the online version of the story has the date Nov. 20, 2019, and has the title “Ride-Hailing App Juno Enters Bankruptcy, Blaming Wage Law.”)

“Rejuvenate Bio” Startup Succeeds in Using Gene Therapy to Fight Age-Related Diseases in Mice

The online PNAS article mentioned below includes the information that one of the article’s referees was Aubrey de Grey, Cambridge scientist, and co-author of The End of Aging. Aubrey de Grey has been arguing for many years that anti-aging research will only take-off when proof-of-concept is achieved with mice. The PNAS article summarized below, appears to provide that proof-of-concept.

(p. A13) North Grafton, Mass.

A Cavalier King Charles spaniel named Shadow was at the front lines of a new approach to gene therapy.

Earlier this month, 7-year-old Shadow was the first dog to be screened at Tufts University for a pilot study attempting to use gene therapy to treat a type of heart disease that often afflicts aging cavaliers.

It’s part of a novel approach to gene therapy that has successfully treated age-related ailments in mice. Now it is being studied in dogs, with eventual hopes to test it in humans.

Researchers reported their success in mice in a study published Monday [Nov. 4, 2019] in the journal PNAS. They treated four age-related diseases in mice using genetic therapy: heart and kidney failure, Type 2 diabetes and obesity. On average, the mice experienced a 58% increase in heart function, a 75% reduction in kidney degradation, and normalized weight and blood-sugar levels in mice fed a high-fat diet, the study found.

. . .

What’s interesting about the new research in mice is that it is broader—targeting not a single rare defect, but common age-related ailments. The experiments injected mice with DNA to create an extra copy of a healthy gene, expressing more healthy material in cells linked to common diseases of aging.

The goal of the biotech company behind the mice study, Rejuvenate Bio —which sprang from research out of the lab of Harvard geneticist George Church, who is a co-founder—is to treat multiple aging-related diseases in dogs. It recently started working with Tufts University’s Cummings School of Veterinary Medicine on the dog pilot. If successful in dogs, the company hopes to treat similar human diseases but says that will take a lot more resources and time.

The firm says it expects the cost of dog genetic therapies would be similar to dog cancer treatments, including surgery, which range from about $500 to $8,000.

. . .

Nir Barzilai, director of the Institute for Aging Research at the Albert Einstein College of Medicine in New York City, praised the PNAS study as a proof of concept . . .

For the full story, see:

Sumathi Reddy. “YOUR HEALTH; Gene Therapy Targets Aging.” The Wall Street Journal (Tuesday, Nov. 4, 2019): A13.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the story has the date Nov. 4, 2019, and has the title “YOUR HEALTH; A New Approach to Gene Therapy—Now In Dogs, Maybe Later In Humans.”)

The PNAS article, summarized in the passages quoted above, is:

Davidsohn, Noah, Matthew Pezzone, Andyna Vernet, Amanda Graveline, Daniel Oliver, Shimyn Slomovic, Sukanya Punthambaker, Xiaoming Sun, Ronglih Liao, Joseph V. Bonventre, and George M. Church. “A Single Combination Gene Therapy Treats Multiple Age-Related Diseases.” Proceedings of the National Academy of Sciences (PNAS) (Nov. 4, 2019): https://doi.org/10.1073/pnas.1910073116.

The book co-authored by Aubrey de Grey, and mentioned way above, is:

de Grey, Aubrey, and Michael Rae. Ending Aging: The Rejuvenation Breakthroughs That Could Reverse Human Aging in Our Lifetime. New York: St. Martin’s Press, 2007.

Napa Vineyards Adapting to Global Warming

(p. D8) Few in Napa Valley feel the urgency to address climate change more than Beth Novak Milliken, president and chief executive of Spottswoode, a family estate that makes superb cabernet sauvignons here on the western edge of St. Helena.

. . .

Ms. Milliken and Aron Weinkauf, the winemaker and vineyard manager, are experimenting with rootstocks that might do better in drought conditions, and grapes like alicante bouschet, mourvèdre and touriga nacional that, as Napa warms, might be blended with cabernet sauvignon to maintain freshness, structure and acidity.

. . .

Like Ms. Milliken, Larkmead is experimenting with different grapes. Mr. Petroski has already initiated a study, planting three acres with a variety of grapes like touriga nacional, tempranillo and aglianico to determine over the next 30 years what might be better able to withstand a hotter environment than cabernet sauvignon.

“I just want people to think that Napa Valley makes great, delicious California-style wines,” he said. “If this is a great vineyard site, it will grow great grapes. It doesn’t have to be only cabernet or merlot.”

For the full story, see:

Eric Asimov. “The Pour; Napa Valley Confronts Climate Change.” The New York Times (Wednesday, November 6, 2019): D8.

(Note: ellipses added.)

(Note: the online version of the story was updated Nov. 7 [sic], 2019, and has the title “The Pour; In Napa Valley, Winemakers Fight Climate Change on All Fronts.”)

“Climate Change Has Been Good for Us”

(p. A1) SLINDE, Norway—Perched on a steep slope overlooking the country’s largest fiord, tidy rows of vines spread on the frosted ground underneath towering pine trees.

On the 61st parallel—the latitude of Anchorage, Alaska— Bjorn Bergum’s vineyard is set to become the world’s northernmost commercial wine estate, a testimony to how global warming is disrupting century-old landscapes, traditions and oenological preconceptions.

“There is no doubt,” Mr. Bergum says. “Climate change has been good for us.”

. . .

(p. A9) “First we take Scandinavia, then the world,” says Erik Lindås, head of Norway’s nascent winegrowers association. “It’s motivating to work when people think you can’t make it. People laughed at English wine 15 years ago but they are not laughing anymore.”

Denmark and Sweden are commercially producing wines that have won international awards, while Britain and Belgium are experiencing a viticultural renaissance. Vintners in Germany, which has a proud winemaking tradition in the south, are exploring new terroirs farther north.

. . .

The northerners have a replique to southern arguments about boreal vineyards’ lack of tradition: During the so-called Medieval Climate Optimum, a warm spell from the ninth century to the 13th, winemaking thrived as far up as northern England and the Baltics.

Professor Hans R. Schultz, who studies climate change’s effects on viticulture at Germany’s Geisenheim University, says global warming is pulling the winemaking economy northward. In Germany’s terroirs, which used to lose entire harvests to cold spells, every vintage since 1987 was better than the previous, he says.

For the full story, see:

Bojan Pancevski. “New Wines Invade From Viking Terroir.” The Wall Street Journal (Wednesday, October 30, 2019): A1 & A9.

(Note: ellipses added; italics in original.)

(Note: the online version of the story has the date Oct. 29, 2019, and has the title “Chateau Viking: Climate Change Makes Northern Wine a Reality.”)

Theil Venture Capital Firm Will Invest More in Later Stage Startups

(p. B1) Peter Thiel’s venture-capital firm is raising nearly $3 billion—and in a switch from the company’s usual script, much of the war chest will be poured into the swelling ranks of technology startups that have stayed private for years.

. . .

The venture firm, co-founded by Mr. Thiel, typically backs early-stage companies. But with its biggest winners, like Airbnb Inc., staying private longer than startups of an earlier generation, Founders needs to be able to make larger investments at later stages of a company’s lifetime to maintain comparable stakes and a say in company operations, some of the people said.

. . .

Founders Fund has told potential investors that older companies that stay private longer can prove to be more stable, if less lucrative, investments than moonshot startup bets, according to the people familiar with the matter.

. . .

Founders has produced investment returns well-above the industry average, The Wall Street Journal reported earlier this year. Its earliest funds, from 2005 and 2007, grew sixfold and more than eightfold, respectively, by the third quarter of last year.

For the full story, see:

Rob Copeland and Katie Roof. “Thiel Fund Builds War Chest in Strategy Shift.” The Wall Street Journal (Tuesday, October 22, 2019): B1.

(Note: ellipses added.)

(Note: the online version of the story has the date Oct. 21, 2019, and has the title “Peter Thiel’s Founders Fund Builds New War Chest in Strategy Shift.” In the third passage quoted above, the quote follows the print version instead of the slightly different online version.)

Stories of Heroic Entrepreneurs

The great idealists of our economy are not the socialists, but the heroic entrepreneurs of innovative dynamism. One of the goals of my book Openness to Creative Destruction, and some of my other writings, is to tell their stories to a wider audience. Gonzalo Schwarz has let me know that his Archbridge Institute is also telling some of these stories under the heading American Originals at:

https://www.archbridgeinstitute.org/american-originals/

Improved Stoves, Pushed by Social Entrepreneurs, Do Not Improve Health or Environment

(p. 80) Laboratory studies suggest that improved cooking stoves can reduce indoor air pollution, improve health, and decrease greenhouse gas emissions in developing countries. We provide evidence, from a large-scale randomized trial in India, on the benefits of a common, laboratory-validated stove with a four-year follow-up. While smoke inhalation initially falls, this effect disappears by year two. We find no changes across health outcomes or greenhouse gas emissions. Households used the stoves irregularly and inappropriately, failed to maintain them, and usage declined over time. This study underscores the need to test environmental technologies in real-world settings where behavior may undermine potential impacts.

Source:

Hanna, Rema, Esther Duflo, and Michael Greenstone. “Up in Smoke: The Influence of Household Behavior on the Long-Run Impact of Improved Cooking Stoves.” American Economic Journal: Economic Policy 8, no. 1 (Feb. 2016): 80-114.

“These Guys Are Selling Things to Better Their Lives”

(p. A20) The colorful bottles have popped up every summer in black and Hispanic communities — from the bodegas of Washington Heights to the stoops of Fort Greene — since the early 1990s. On beach boardwalks, at neighborhood basketball courts and block parties, New Yorkers are drinking nutcrackers, boozy homespun cocktails made from a blend of alcohol and fruit juices.

But this year, the New York Police Department is cracking down on the illegal drinks and the vendors who sell them, vendors and customers said.

. . .

But sellers and customers who believe there is a crackdown are alarmed, saying vital financial lifelines are threatened and raising the issue of which infractions police choose to focus on and which communities are scrutinized.

“It’s just another way to target us,” Dee said. “If I don’t sell nutcrackers, I can’t make my rent. I don’t have a choice.”

Most every Thursday in the summer, Dee clocks out from her job as an exterminator with the city and begins work on her illegal private enterprise.

After spending $600 or so at the liquor store nearby, she will lug her ingredients — cases of vodkas, rums, tequilas and cognacs — to her two-bedroom public housing apartment and into a dim, cramped back room where she will get to work making batches of her best sellers like Tropical Punch, Henny Colada and the Fort Greene Lean.

Dee’s concoctions will be poured into dozens, sometimes hundreds, of stubby plastic bottles and peddled all weekend to her longtime customers: old-timers playing dominoes in Bedford-Stuyvesant, basketball tournament crowds at Gersh Park in East New York, neighbors and friends in her old Flatbush neighborhood. They will all be waiting for her, she said.

On a good weekend, Dee will earn around $1,400 from nutcracker sales, enough to cover her rent, which has risen nearly $700 since 2015, she said.

. . .

“They always trying to beat us down,” said Jay, another nutcracker seller who preferred that his last name be withheld. Jay said he decided to venture into the business this summer as a way to get his music management business off the ground.

“This is going to buy studio time for my artist,” he said, nodding to the cooler he wheeled down the Coney Island boardwalk at sunset. “Ice-cold water,” he said loudly to passers-by, followed by a softer, more subtle “(Nutcrackers.)”

“Ice cold water!”

“(Nutcrackers).”

“These guys are selling things to better their lives,” said Sandra Anguiz, 30, after buying a cream-soda-flavored nutcracker from Jay. “Why are police worried about that?”

For the full story, see:

Aaron Randle. “Cracking Down on the Sweet, Boozy Staple of a City Summer.” The New York Times (Saturday, August 17, 2019): A20.

(Note: ellipses added.)

(Note: the online version of the story has the same date as the print version, and has the title “Banned on the Beach? It’s Still Nutcracker Summer.” In the passages quoted above, the sometimes slightly longer online version is followed.)