Once upon a nigh decade ago my entrepreneurial spams reached a somewhat uncontrollable level and set me off on an adventure of explorative discoveries which will hopefully continue until I’m six feet under. For reasons unexplained businesses had toppled over somewhat so when coming along a career path from the inner jungle of the back office the way out through the front office had more and more turned into the way up, fighting vertigo. Maybe it has to do with gravity, as the more important the back office seems to become, the further down it was sinking, onwards inwards, to the center of the earth.
But ok, dating tips. It’s simple. Essentially an investor looks at the picture here and sees a picture drawn by Leonardo Da Vinci more than 500 years ago of a scarcely clad man doing aerobics with some sort of doodle on top. The picture concerns measurement guidelines from the Roman architect Vitruvius who lived nearly a millennium and a half earlier, most likely copied from contemporary architects as with the fall of Constantinople an influx of Greek scholars brought with them knowledge of the ancients. Da Vinci’s lifetime was intersected by episodes of crisscrossing Italy, sometimes Hungary and France, due to the many battles among rivaling city states.
An inventor sees the golden spiral, rectangle and triangle and is reminded of “a plus b is to a as a is to b”, phi, the most irrational of irrational numbers, which reappears in the most unexpected places in the mathematical universe as well as nature, and then some guy whose relative measurements adhere to propagating ratios in the Fibonacci series as it slowly converges to the golden ratio. The square and circle represent the earthly and the heavenly, as the world was thought to be an orderly construction of compass and straightedge, as handled by the Demiurg. Translating written descriptions of Vitruvius into a picture format Da Vinci copied and combined illustrations of two other students of the classics who also worked as engineers/architects and reused the same human measures for the construction of churches and castles.
Man is the measure… Yes, there are two kinds of people in this world; those who divide the world into two kinds of people and those who do not. Like inventors and investors are just a letter away, so do their worldview focus on ‘who’ and ‘how’. Inventors build worlds of systematic composition whereas investors build worlds connected by correspondence. In both cases though the currency is trust, in the case of the inventor it involves verifiability, commensurability and empirical falsifiability whereas for the investor it is about privacy, integrity, fidelity and due diligence. Both can easily recognize mastery and leadership.
Ok, that sounds reasonable, no? So, how come matchmaking is so difficult between the two? Much research indicates success happens about of one in ten times, with success being defined as earning back the initial investment. Making a hit is even rarer. But that is the overall figure, high-tech investments score lower, at about one in twenty five. Which is really odd, as that is both a worse score than in-house innovation projects at a big firm, or even simply random chance, the so-called “mom and pop” business, with the first having a ‘return on investment’ for roughly one in twelve project that go from the investment stage to the market. “Mom and pop” scores about one in ten, and although they aren’t in the high-tech industry still the score that they make their business happen is roughly the overall average of the average investor’s score. This is not incidental, Burton Malkiel’s 1974 remark still holds true that “a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts.” Sure some outperform the market index but they occur, again, once every ten times.
Wasn’t the ‘long tail’ supposed to revise the Pareto principle towards a 72/28 division instead of shifting towards the ninety-ninety rule? Why is that, why do mature and skilled people fail to meet up? Maybe as I am profoundly rationally challenged that I do not understand but why should this be so hard? Partly this is an optical illusion which has grown very persistent with the shift from an agricultural economy to an industrial economy towards a service economy. For Western countries the turnaround occurred in the 1980s, from a “post-industrial” economy to a service economy, an information age, a knowledge economy, a creativity culture, a care economy, and in the case of China an ecological civilization, but as the term “post-industrial” indicates such services are increasingly less dependent on limited resources and so a different set of rules applies, one which we are still trying to define while giving shape this ongoing endeavor. A piece of bread and some water can only be eaten once, yet selling smiles can make tens of people happy every day. Eventhough the cash flows associated with the different sort of economies are very different, a widely used rule of thumb in Holland says that one blue collar job leads to five white collar jobs. Automation of manual labor has reached a stage that one worker is productive enough that the associated services resulting from these activities are a fivefold of the work put in. Obviously a skilled worker, a master craftsman, represents a certain value which may not be immediately apparent when scratching the surface.
Plenty studies show that entrepreneurs with a working background, that have both the skills, experience and maturity, when they are in their forties and fifties have the highest rate of success when starting a business. Not a few percent better, but several times better. Then, how come is there so little funding available to seed and feed the early stages of these businesses, while half the investor community is spilling over trying to make students into entrepreneurs? How come crowd funding is gathering a small collection of supporters whereas if you study the initiatives brilliant ideas sink away and those who put much effort in their ongoing ‘dog and pony show’ easily reach the front page, and once they stay their long enough popularity is simply a positive feedback loop because their case is presented on the front page. Practically nobody checks the second and following pages, and so initiatives like this have long tails which are largely left unexplored. It is a nice step forward that small investments can be combined, but at its current stage these platforms have little added value, as in business intelligence, to offer the savvy investor.
Likewise with coming from the back office, which have largely remained out of view. This is not so much “right out of left field” or a “black swan”, it simply involves people and skills which are not coming from “publish or perish” academia where bigging up one’s credentials has become a top sport in a never-ending race to attract funding or start a small personality cult such as certain marketing gurus and management consultants managed to marketeer. Clearly some deserve it. Well, most do. To a large degree we humans are the story we tell, and we need storytellers as much as we need givers, takers and matchmakers. Yet it remains odd how relatively arbitrary methods for fidelity checking gradually become Institutionalized ways to avoid false positives at the expense of false negatives, at least since “innovation” has become an industry in its own right. It is hardly surprising that such surprises are seen as surprising. We keep on mixing up mastery with leadership and expertise with someone’s position in the organization hierarchy, which is primarily concerned with administrative control. And so, even professional service firms very often neglect their star performers who add indispensable value to the end client, moving them “out of scope” for any career progress as promotion would move them away from the very end client they add so much value to.
Obviously in these ethically challenged crisis years many people are trying hard to create some artificial indispensability and exclusivity but that can hardly compensate for the large many years where company policy focused on ‘widening’, spreading out sideways instead of ‘deepening’ it. Mergers and acquisitions were used to cover up decades of neglected innovation in many a company’s core business, adding reorganization on top of other reorganization so to keep it all for stagnation or collapse. Like a merry-go-round, another dog or pony moves into place to grab ones attention and fill ones view, but when the central spine fractures the whole ride spins out of control.
Selling smiles though has grown into a business of its own. Emerging from a culture of therapy and the hope industry, decades of spin-offs from the Self-Help section of the Human Potential Movement have spread into leadership development, management training, sales coaching, neuro-linguistic programming and seem to resonate strongly with comedian George Burns’ advice; “The secret of success is sincerity. Once you can fake that you’ve got it made.” Magnifying an obvious change of role into an insurmountable difference entrepreneurs are made to seem a species of a totally different order than inventors, while mantric catchphrases like “ideas are cheap” and “execution is everything” are repeated as an excuse to rip off someone else’s designs and inventions. While even Plato could have told them that “excellent things are rare” and besides that, how many things do people actually have? Even the largest retail chains only sell some 20 – 25.000 distinct products with a possible redundancy of a factor 5 to offer a choice between an A brand, B brand, cheapo, generic and bio. Then there are mutually exclusive complementary goods and so of these 4-5000 things, the average household only has about one thousand things or less. We’re not talking about toilet-trained professional consumers here, but just to get a rough estimate of how many marketable “ideas” there actually are and how many of these can be marked as “good”.
Ok, 3D Printing is coming to town and dramatically shorting the supply chain and any other long cycles. Maker Faires are becoming increasingly popular. Ordering parts over the internet has become accessible for individuals, websites even allow for customized designs, and all the pre-investments needed that used to make a high barrier for industrialized production are slowly dissolving. Even patenting and licensing don’t make sense if one’s focus is small batch production and the widespread availability of these means are adding to a critical mass that has us land right back in the age of the guilds, with the tools of the future. It is becoming surprisingly simple for an inventor to become an entrepreneur. So how can inventor and investor bypass the large many whose clattering penny cups crowd out direct contact while collecting coins at the circus entrance? How do we bridge one mountaintop to another? How to get a date with Miss right and not Miss right now? You tell me. I am listening.