From the Good Ideas File: 4 Hard Earned Lessons about Entrepreneurship (finally)

We’ve developed a problematic habit over the past couple of years: as we go through this economic sea change, and as many of our old ways of improving local economies lose whatever effectiveness they used to have, we keep grasping at straws, trying to find some new hidden lever on the economy machine that we can yank on and make everything better again.  It’s an over simplifying method that runs the same big risks that it always had — the risk of wasting what time and money we have on ill-considered magic bullets that, best case scenario, don’t work (worst case scenario, hurt a lot of people).

One of the current favorite Magic Bullets is entrepreneurship.  Economic developers are in loooove with entrepreneurship these days– in part because it makes sense, but also in part because we’ve had a decade of the media (and a lot of serial entrepreneurs) lionizing it.  I’m on my second entrepreneurship gig myself, and I get it — if you can pull it off, there’s a lot of reasons to find the entrepreneur life very appealing.

But we have to stop treating it as a be-all, as the perfect solution to all our economic woes.

Why?  Because entrepreneurship is hard.  Damn hard.  And risky.  Incredibly risky.

Two articles came across the Good Ideas file recently that will give you an inside view of how dicey the entrepreneurship life is, and how easily governments and community agencies can screw it up.  First, one of the rock stars of the tech entrepreneur world, Ben Horowitz, penned a book about the real experience of living by your start-up wits.  As this article from Forbes sums it:

He wants to dispel the myth that being an entrepreneur is always exciting. He says,”The biggest myth is that it’s fun. The reality is that creating and running a business is an incredibly tough grind, and its emotionally debilitating. It can be euphoric, but more often than not, it’s terrifying.”

Ben’s four hard lessons about the dark side of entrepreneurship have to do with Things Falling Apart, the poison of having picked the wrong people to work with, figuring out how to get out of fragile start-up mode and to a sustainable operating level and… managing the psychological load of running an entrepreneurial venture.  Brad Feld, author of Startup Communities and a serial entrepreneur himself, has also written pretty honestly about his stress and depression in recent years.  This ain’t a walk in the park.

I’ve had some particularly enthusiastic tech wizards and incubator types tell me over the years that anyone can be an entrepreneur, and that everyone should have the chance to be an entrepreneur.  I think that’s wrong.  I have know bright, capable, talented people who could handle it, and others who could not.  Success as an entrepreneur depends as much on a person’s personal, psychological capacity for risk and her or his ability to bounce back from failure as any other single factor.  And any entrepreneur you can think of, from Steve Jobs down, has an extensive track record of failures.  Including yours truly.

The second article that highlights the importance of small business failure — and what happens when governments get in the way of that process, comes from the British newspaper The Guardian.  The author, Cory Doctorow, is a longtime tech entrepreneur and one of the brains behind the highly influential Boingboing, so here’s another guy who knows his stuff).

This article is valuable both for its outstanding insider view of how a start-up community actually works (notice the number of failures, the re-combining, the impact of small cheap spaces), and what happens to a community’s ability to keep growing new businesses when the desired “nice” developments start going in.  Note the lost opportunities, the unintended consequences, that Doctorow spies on the horizon:

When the offices came down, the rents in the remaining office-spaces in the vicinity went up. My own office, 10 minutes away in a business centre off Kingsland Road, went up a third this year. Three of the companies on my floor left Hackney altogether. My wife’s startup fears a looming, major rent-hike that will force it to move, too – with the local office supply disappearing nearly as fast as the local affordable housing supply. The scrappy startup businesses are clearing out in bulk.

These startups are good and useful in a way that cheap, pump-and-dump student housing created to serve a short-lived education bubble isn’t. They bring in a diverse set of people with diverse retail needs, supporting a wide variety of services that transient students have no use for. But more importantly, they’re good for the country. They are an alternative to a brain-draining exodus to the San Francisco Bay area. They hold the potential for the creation of good jobs and local firms that pay local taxes and nurture local talent.

Startups are local. They are about the circulation of talent and ideas at speed, through invisible personal networks. Scattering Silicon Roundabout’s startups to the winds may not kill all of them, but it forecloses on many of the startups that are yet to come. The conversation at the pub and in the sandwich shop that leads to the next big thing will now never take place, because the conversants are working in offices at opposite ends of Stratford.

Silicon Way now opens out into a building site that will shortly house hundreds of students (while the bubble lasts). The startups that gave it its ridiculous, hopeful name are gone. And unless Hackney decides that it wants to preserve Silicon Roundabout’s tech sector, that ridiculous name will soon be the only thing high-tech about the neighbourhood.

Make sure you read that whole article. You won’t be sorry.

I am more and more convinced that a revitalizing economy needs:

  • small, cheap, flexible space (read: not the kind of space that the urban designers want to design, and the kind they probably can’t.  It’s hard to build something new as cheap as what’s already there.)  And it has to be non-pristine — places where you can push the tables together, write on the walls, change your mind and do something else without worrying about making a mess.
  • Ways to Collide, as the Downtown Las Vegas people like to say, or recombine, which is more in keeping with the process that Doctorow describes here.
  • Ways to manage risk — and small cheap flexible space and a mix of people you can recombine with become two of the most important ways to make the uber-risky a little less so.

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