Call for papers: The Annual Meeting of the European Public Choice Society will be held from March 30th to April 2nd, 2016 at the University of Freiburg in Germany. Researchers are invited to submit their papers, along with an abstract, by November 30th, 2015. More information is available here.
Idea: “Example is not the main thing in influencing others. It is the only thing.” Albert Schweitzer
See you next time with our digest of new and interesting items in entrepreneurship, ethics, and political economy. Here are the previous editions of CEE Review.
Professor Stephen Hicks gave a talk in June at a conference sponsored by Fundación para la Responsabilidad Intelectual (FRI), Junior Achievement Argentina, and the John Templeton Foundation. When he was in Buenos Aires, FRI also did three short videos of him addressing questions.
Here is a 6-minute video of Stephen Hicks on “What Is a Real Education?”:
More information on Fundación para la Responsabilidad Intelectual can be found at their Facebook page.
Call for papers: ISBEE, the International Society of Business, Economics, and Ethics, is holding its sixth quadrennial meeting next year in Shanghai. Paper submissions are being accepted that address the theme, “Ethics, Innovation, and Well-Being in Business and the Economy.” More information can be found here.
Idea: “What’s dangerous is not to evolve.” Jeff Bezos
See you next time with our digest of new and interesting items in entrepreneurship, ethics, and political economy. Here are the previous editions of CEE Review.
Stephen Hicks gave a talk in June as part of a conference sponsored by Fundación para la Responsabilidad Intelectual, Junior Achievement Argentina, and the John Templeton Foundation. He spoke (in English) on “Cómo las Revoluciones se Ganan o se Pierden,” or “How Revolutions are Won and Lost.”
Hicks: Our guest today is John Chisholm. John is a serial entrepreneur in Silicon Valley, now based in San Francisco, involved in a number of ventures. And he was here today talking to the Business and Economic Ethics class about entrepreneurship and, more specifically, about how to think like an entrepreneur. Lots of fascinating material there.
One of the first things you mentioned was motivation, about why people might consider entrepreneurship as their option as opposed to working for an existing organization. What are the motivating values here?
Chisholm: Well, I can suggest three reasons. One is the freedom to do what you love. Two is security for you and your family. And one thing I remind students is that no one is going to provide for their security except for them. And do not rely on the government, because who knows what could happen there.
Hicks: Because they are young people who are looking 40 years down to the road to retirement.
Chisholm: Yes. And especially today since we have a government shutdown, that might seem particularly relevant
Hicks: Coincidentally, yes.
Chisholm: And third is opportunities that are unique to each and every one of us. Everyone has a unique set of skills, knowledge, relationships, and reputation. And these give each of us the ability to do something or start a business that potentially nobody else can. And so, developing that and taking advantage of that opportunity is one of drivers of entrepreneurship.
Hicks: When we get an entrepreneurship as a career, there are two things that we hear a lot. One is the positive motivation, about passion, about finding something you’re interested in and excited about and trying to pursue a career there. But we also hear that entrepreneurship is very hard work. It can be grueling, sometimes overwhelming, and so perseverance is important. Both passion and perseverance were central to your talk, but an interplay between the two was interesting. How does that work?
Chisholm: I see them as feeding on each other. They don’t necessarily go to together; you can have one without the other. For example, you can have passion without perseverance, and that is not likely to lead anywhere long term. I call it a passing fantasy. Or you can have perseverance without passion, but that’s drudgery and it isn’t likely to be very sustainable. But the combination of the two is very powerful, and they feed on each other. I call that combination flow. Some people call it flourishing. It goes by different names. But examples of passion driving perseverance are when you are so deeply engaged by an activity or a subject that you spend so much time that hours go by like minutes. And there your passion is driving perseverance. It’s making perseverance easy. An alternative example is perseverance driving passion. If you just dedicate yourself to working on or learning about a particular activity so that you start to get good at it and feel good doing it, then that’s an example of perseverance making you or helping you become passionate about something.
Hicks: Right. And in many cases you find out that you are passionate about something that you wouldn’t have become passionate about had you not persevered past a certain threshold.
Hicks: All right, good. The middle part of your talk focused on personal psychology. In many cases people can have self-defeating psychological habits rather than self-empowering psychological habits. One of the things, for example you mentioned was being careful about negative thoughts. How do you deal with negative thoughts? Of course we’re going to have negative thoughts, but what’s their place in the process?
Chisholm: One of things I say is: never say anything negative about yourself. And if you have to, use the past tense. That’s the way I used to be. But it’s not the way I am now, it’s not the way I am going forward, it’s not the direction I am going in. I emphasize that the human brain is like an iceberg, with only 20% of it consciously aware of the messages that come in and 80% unconscious. That unconscious mind is doing a lot of processing of messages, and some of those messages that we repeat to ourselves again and again are accepted as truth, so a negative idea can turn into reality. So, we don’t want to repeat negative thoughts about ourselves that will hold us back. So I suggest that for any negative thought that might creep into your mind, think of a specific incident, no matter how small, where you did the opposite. If it was at a party, you put everybody else at ease. If it was in a game, you were the star. Keep that specific incident in the fourfold of your mind. Think about, maybe write it down, maybe describe it in detail, and maybe tell others about it. And then let that push the negative thoughts out of your mind.
Hicks: How does that work with one’s self-evaluation, where sometimes it is appropriate to recognize that you do have deficiencies, weaknesses, and you make mistakes. And you do have to confront those in order to learn from them? So, we don’t want to get down the road of denying that one has weaknesses or that one has engaged in inappropriate behavior or whatever. So how do you balance what you were just saying with an honest self-evaluation, including evaluation of weaknesses that you have?
Chisholm: Well, as I said, it’s okay in the past tense to say that this is what I’ve done before or this was my performance before. And, maybe you can identify some improvement to that performance even since it happened. If so, great, that’s progress already starting. And then you can talk about the direction you’re going in and what you plan to do in the future.
Hicks: Two more social points: Entrepreneurs often are leaders, so they have to set the tone, so to speak. And so, cultivating the right kind of social, psychological atmosphere in a start-up firm is also important. And there you were also emphasizing the positives. Can you give us some examples of what you mean by that?
Chisholm: Well, one of things I say about culture is that it emerges; it’s emergent. It’s not directly controlled by anyone, even the CEO, although the CEO certainly has more influence over it than any other person because others will look to his or her example and follow that. But it is a combination of the interactions of everybody in the company, and I think two things that are particularly important in driving culture is how decisions are made and how people treat each other. And again, for both of these the CEO can play a very central role, including others in the decisions, delegating decisions, trusting others to make the right decision, and treating others respectfully in the same way that he or she would like to be treated.
Hicks: Including criticism, right? Criticism should be constructive criticism, not blame storming and all of that usual stuff that we hear about?
Chisholm: Something I often say is look for and find the good in the people around you. This is something I look for in other executives and try to work on in myself. And build on that good, no matter how small. So, just as it’s helpful to me to build on the small, good things I’ve done, it’s also really good for others to have me and others recognize the good things that they’ve done, acknowledge them, and build on them.
Hicks: So, an important part of the entrepreneur’s function is going to be selecting people who are in the team, and their psychology and their attitudes that they bring to the table are also going to be adding to the mix. So there might be people who are going to have the technical skill sets, but they might not be the right social mix if they don’t have that same ability to contribute positively, and so forth.
Chisholm: So there is a lot there. On one hand, you want to find people who have a positive mindset, who will have a can-do attitude, and who will contribute to those cultural elements that we talked about, and, at the same time, you don’t want to get everybody identical in the company. Because if everybody is identical, then somebody isn’t necessary. And, there are lots of ways to think about diversity. The way that seems to be most valuable to any team as far as I can tell is cognitive diversity in a business team. So, how do different members of the team think about things? What are some of the ways people can be different? Some people focus on the big picture, some people focus on the individual components, some people are better dealing with relationships and with other people, and some people are more transactional. And having a mix of those different styles, I think, strengthens the team. In fact, Scott Page at the University of Michigan has done tests that find that teams that are diverse cognitively outperform teams that are stronger but less diverse or more homogeneous cognitively.
Hicks: Is there a double-edge sword with cognitive diversity, because then you have cognitive styles and they can clash, as well as being complementary to each other? So, is a part of an additional level of management being able to manage the clash constructively?
Chisholm: Yes, and I do think you can go too far and that there is an optimal middle ground. I think of them as three overlapping circles. Say, if we have a venn diagram, if they’re too overlapping that’s suboptimal, but if they are completely non-overlapping, the members of that team may have trouble working together.
Hicks: Issues of money and funding obviously come up a lot in entrepreneurship at all levels, but, particularly, the entry stage. Young people are often deterred because they don’t think they can raise the funding or they don’t know how to think about the funding process. And you did have advice about seeking funding, but not until you’re ready. What does that mean? When you are ready to seek funding?
Chisholm: Well, I do think there are a finite number of times in a company’s life that are optimal for fundraising, and they are right after the company has achieved a significant milestone that reduces risk to potential investors. And when will those times be? Here are some examples. If you are profitable, that eliminates the risk that you can’t generate revenue. If you can generate revenue, that eliminates the risk that you can’t get customers. If you have customers, that eliminates the risk that your prototype won’t work. And if you have a working prototype, that eliminates the risk that your idea can’t even be made to work in the first place. So, those are examples of milestones that would probably be perceived as significant risk-reducers by prospective investors.
Of course, the key question is how can an entrepreneur get to that point where they have reached one of those milestones. That’s going to perhaps take some funding just to get there, and so I encourage them to look at all of their resources. So we filled out that chart that has lots of different types of assets on it. I may have a spare bedroom. Great, that means that I don’t have to rent an office. I may have some computer equipment and access to the internet. Great, that means I don’t have to buy that equipment. I can find whatever friends and family I have that can provide initial funding. I can be creative about how I engage others to get involved with the company. I can perhaps offer a combination of stock and flexibility in addition to capital and in that way get additional funding.
Hicks: As well as getting people who are enthusiastic about the product or the project so the compensation necessarily will be lower, but they will get more psychological rewards. So being creative in all of those dimensions?
Hicks: Towards the end you also talked about ethics, which certainly as an ethics professor I found refreshing, and you raised the provocative question of whether entrepreneurship is ethical, particularly since in business ethics we don’t hear a lot about entrepreneurship. So, what were your thoughts there?
Chisholm: Well, I do think it is one of the most ethical career choices you can make, and let me explain why I say that
Chisholm: First of all, we don’t often hear about entrepreneurship. What do we hear about is corporate philanthropy as being very ethical. We hear about graft and corruption and theft as being unethical. I don’t disagree with either of those, but I don’t think it’s the whole story, and I don’t even think it’s the most important part of the story.
And I think to see the full story it’s helpful to look at the stages of the entrepreneurial process. What does it require for somebody to become an entrepreneur? Well, they have to have an idea, which they have to develop. That takes rationality, creativity, and persistence. They have to have the courage to strike out on their own. That takes courage. They have to have intellectual honesty to reject an idea for which there is no customer demand as I was eventually forced to do with my first company, when I, after six months, finally accepted the fact that there was not customer demand for a cool, new technology called conditional voting. And you have to create win-wins with your employees and with your customers or else they are not going to deal with you. They are going to go somewhere else. So, all of these qualities in an individual that entrepreneurship demands are qualities, I think, we would like to see in the people around us, our neighbors and our co-workers.
Now, consider the social benefits that entrepreneurship generates. It’s impossible to be successful as an entrepreneur without making the world a better place by creating more choice, more innovation, lower cost, or some combination of the above. Because, again, if people don’t feel their world is going to be made better by your product or service, they don’t have to buy it. They are going to go elsewhere. Similarly, all of your stakeholders, employees, shareholders, customers, and partners have to, their worlds have to be made better or else they are going to go elsewhere. So, both individually and socially, I see lots of qualities that we would like in our co-workers and neighbors that entrepreneurship brings out in the people around us and which entrepreneurship demands if a person is going to be successful at it. And if you stand back and look at the tens of millions of entrepreneurs around the world who are all serving customer needs and creating these win-wins and innovating, they are driving improvements in quality of life, standards of living, and economic growth around the world.
Hicks: All of that is deeply ethical, absolutely.
Chisholm: And, incidentally, guess what’s funding most of the philanthropy in the world? Entrepreneurship. So given all of those factors, I rest my case that entrepreneurship is among the most ethical career choices you can make.
Hicks: So, as an individual, entrepreneurship requires certain virtues of character. For a venture to succeed, it has to be a network of win-win relationships that are developed. Those make the world a better place in a number of respects including philanthropy because of all of the extra wealth that it generates. Fascinating.
All right, thanks very much for being with us today. I am sure the students found it very eye-opening.
Chisholm: It has been very fun. Thank you, Stephen.