Tag Archives: Entrepreneur

The myth of the entrepreneur – Undoing the imaginary of Silicon Valley (2/3)

I have finished reading Anthony Galluzzo’s book which I already mentioned in part 1 a few days ago. I hesitate between irritation and a more positive appreciation because I do not know if the author simply wants to undo the imaginaty of the region or to criticize its functioning more broadly. Indeed in the last two pages of his excellent book he writes: “After reading this book, some may wonder about the possibility of “undoing” the entrepreneurial imaginary; not only to deconstruct it, but to lead it to defeat”. Then he adds: “Many commentators have already noted this: to undo an economic and social system it is not enough to demystify the beliefs and refute the syllogisms conveyed by its ideology. It is also necessary to simultaneously think of another economy and another imaginary, to make other desirable representations and incarnations of human existence prosper.”

Silicon Valley as an ecosystem and its dark sides

I do not know what to think. An imaginary does not make a system, even if it is undoubtedly an important ingredient. Behind story telling and the myth of the heroic entrepreneur, there is an ecosystem that Galluzzo talks about more in the interview he gave to Echo (To understand the economy, you have to tell it through ecosystems, not trhough individuals – Pour comprendre l’économie, il faut la raconter par les écosystèmes, non par les individus) than in his book. Silicon Valley is an ecosystem and not (just) a myth factory to hide a darker situation [1].

Of course, there are dark sides in Silicon Valley. He shows it well in the beginning of his book, which I relate in my previous post, for example through the war for talents or the invisibilization of the State. His description is darker and darker in the end, even if the new elements are just as true:
– a glaring imbalance in the population of entrepreneurs with few women or African Americans,
– an under-representation of trade unions which would have deserved a more in-depth analysis,
– employees at the bottom of the ladder who are less well treated (assuming that these jobs have not been relocated),
– an unbalanced taxation [page 206] which would also have deserved a more in-depth analysis.

Galluzzo mentions tokenism as the reason for story telling. In the sociological literature, the practice of symbolically integrating minority groups to escape the charge of discrimination is called “tokenism” [Page 204]. Galluzzo also admits that there is not always story telling. Larry Page and Sergey Brin, the creators of Google are at the origin of one of the main powers of Silicon Valley and yet are relatively unknown to the general public. They have always been quite discreet, with rare and well-defined speeches. They did not invest in storytelling and personal branding [Page 218]. Nor does Galluzzo mention the thousands of unknown and often failed entrepreneurs who are a vital component of the region.

He adds that Silicon Valley would have flourished with almighty Thatcher neoliberalism. But it seems to me that he forgets that Silicon Valley really flourished in the two preceding decades, that of the 60s (Fairchild, Intel) which allowed the development of semiconductors and that of the 70s (Microsoft, Apple) for computers . He seems to forget, even if he mentions it, that without the structuring of venture capital in these two decades, but also without the arrival of highly qualified migrants in the decades that followed, there would probably be no such Silicon Valley such as it exists (and not as it is mythologized). I don’t think the subject is so “swept under the rug”. As early as the 1980s, a relatively mainstream author showed the darker sides of the region in his book Silicon Valley Fever. You can also read The Capital Sins of Silicon Valley.

What is an entrepreneur?

The pages [pages 196-98] on the definition or traits of an entrepreneur are also very interesting.

How to define the “entrepreneur”? A first approach consists in considering him simply as a business creator: someone who starts and organizes an economic activity. We mix the small craftsman and the big boss; the baker and the wealthy start-up founder. To focus on the latter, should we add to our definition an order of magnitude as to the economic success of the company and if so, which one? Should we limit the category to those who have founded a small business in hyper-growth? Another solution is to introduce the notion of risk. The entrepreneur would be the one who mobilizes resources in a situation of uncertainty; he would be the one who succeeds in his bets on the future. [Page 196]

Faced with these problems, it may seem essential to use the criterion of innovation. The entrepreneur would be the one who organizes a new combination of means of production: the one who develops a new product, develops a new method of production, creates a new market, conquers a new source of supply or disturbs the organization of a whole sector. […] However, defining the entrepreneur as an innovator requires de facto to separate innovation from the process, to extract it from the continuum, to attribute it, often very artificially, to a single actor. [page 197]

When research in entrepreneurship developed in the 1980s, it quickly focused on the questions of who was the particular personality of the entrepreneur. […] Among the traits that have been the subject of several studies, we note the propensity to risk, the tolerance for ambiguity, the need for accomplishment and the locus of internal control [the locus of internal control indicates the tendency that individuals have to consider that the events that affect them are the result of their actions] This research did not yield any conclusive results. [Page 198]

Galluzzo could have mentioned the definition of a startup given by Steve Blank which has been almost universally adopted, it gives a fairly convincing perimeter to the tech entrepreneur, the one in question here: “Start-ups are temporary entities looking for a scalable and repeatable business model.”

Finally on several occasions, Galluzzo seems to show his preference for the builder more than for the creator, Markkula rather than Jobs in the early days of Apple, Cook rather than Jobs in its last days: Bloomberg recently ranked all the CEOs in Apple history based on how the company’s valuation has evolved under their leadership; Steve Jobs (1997-2011, +12.4%) is far behind Mike Markkula (1981-1983, +64%) and John Sculley (1993-1993, +106%). Tim Cook outperforms them all with a +561% increase. I did not have access to the article and I could have been wrong but I arrive at different results for the growth rates from my multiples: Markkula, 4x in 2 years or 100%, Sculley around 1x or 0 %, Jobs (second period) 100x in 14 years or 40% and Cook, 10x in 12 years or 25%. Finally Jobs (1st period – in reality Scott) 1600x in 4 years or 500%. But this last subject is all the less important as I am not sure of all these figures. Founder, builder, storytelling and reality, these are subjects that remain fascinating. Thanks to Anthony Gazzullo for his excellent book and the thoughts it prompted me.

[1] Here are elements that describe an ecosystem and that I took from a post dated October 2015:

“5 needed ingredients of tech. clusters”
1. Universities and research centers of a very high caliber;
2. An industry of venture capital (i.e. financial institutions and private investors);
3. Experienced professionals in high tech;
4. Service providers such as lawyers, head hunters, public relations and marketing specialists, auditors, etc.
5. Last but not least, an intangible yet critical component: a pioneering spirit which encourages an entrepreneurial culture.
in “Understanding Silicon Valley, the Anatomy of an Entrepreneurial Region”, by M. Kenney, more precisely in chapter: “A Flexible Recycling” by S. Evans and H. Bahrami

Paul Graham in How to be Silicon Valley? “Few startups happen in Miami, for example, because although it’s full of rich people, it has few nerds. It’s not the kind of place nerds like. Whereas Pittsburgh has the opposite problem: plenty of nerds, but no rich people.” He also added about failed ecosystems: “I read occasionally about attempts to set up “technology parks” in other places, as if the active ingredient of Silicon Valley were the office space. An article about Sophia Antipolis bragged that companies there included Cisco, Compaq, IBM, NCR, and Nortel. Don’t the French realize these aren’t startups?”

Finally, entrepreneurial ecosystems need 3 ingredients – I quote:
– capital: by definition, no new business can be launched without money and relevant infrastructures (which consist of capital tied up in tangible assets);
– know-how: you need engineers, developers, designers, salespeople: all those whose skills are necessary for launching and growing innovative businesses;
– rebellion: an entrepreneur always challenges the status quo. If they wanted to play by the book, they would innovate within big, established companies, where they would be better paid and would have access to more resources.

The myth of the entrepreneur – Undoing the imaginary of Silicon Valley

A friend mentioned this new book about Silicon Valley to me a few days ago and I quote: “The author’s argument is wrong (but it’s pernicious). […] Indeed, entrepreneurship generates excellence and independent-minded people, while [another view – opposition to liberal capitalism] creates a population of people dependent upon the state.”

I’m not sure I agree with my friend: on the one hand, the relationship between collective and individual is a key topic around entrepreneurship. Does a company create value without “outstanding” individuals? The subject is as old as the world. On the other hand, the distribution of this value is a second subject which belongs among other things to the field of taxation and Piketty has clearly shown that, for several decades, the distribution gap has greatly increased in favor of the richest to the detriment of the poorest.

Marianna Mazzucato has shown this imbalance in The Entrepreneurial State, which she finds all the more unfair as she shows the primordial role of the State in upstream funding (education, research, public services in general) which provides a favorable context for the creation of wealth.

In the beginning of his book, Le mythe de l’entrepreneur – Défaire l’imaginaire de la Silicon Valley (The Myth of the Entrepreneur – Unraveling the Imaginary of Silicon Valley), Anthony Galluzzo explains similar things but it seems different to me. I am only at the beginning and I will see later how closely it joins the criticism introduced above. The author is a specialist in merchant imaginary and the subtitle is convincing, namely that it is necessary to deconstruct the imaginary of this region, based on story-telling around the stars of the region, such as Steve Jobs and Elon Musk (although Elon Musk has largely lost his aura). It shows us that Elisabeth Holmes tried the same approach but succeeded only very partially.

Joseph Schumpeter is quoted extensively in the book at the beginning, in particular it seems to me, for a critique of the role of the entrepreneur and of creative destruction. Galluzzo prefers to use destructive creation to show the chronology of actions. But I didn’t see in the beginning of the book, at least, that Schumpeter adds that capitalism cannot exist without advertising. So without story-telling and imaginary.

This imaginary of Silicon Valley is therefore, I believe, only what allows capitalism to self-develop, to survive, with all the current paradoxes of destructive waste. But behind this imaginary, what is the reality? Galluzzo refuses to oppose entrepreneurs and businessmen. I understand the argument. Creators, stars at least, can make a lot of money. But I don’t know if the main reason is their ability to do business or if they are simply at the origin of a creation that makes it possible to do business. I am neither an economist, nor a historian, nor a sociologist and I find it very difficult to make sense of things, all other things being equal.

Anatomy of the Myth – the Heroic Entrepreneur

So here are a few things that I found interesting in the beginning of the book:

1- The solitary entrepreneur

Steve Jobs was not alone and worse is perhaps not critical to the initial success. The story is indeed quite well known while Jobs is seen as the only genius of Apple.
– Steve Wozniak is the real genius (Galluzzo will not like the term) behind the first computers from Apple.
– Steve Jobs is said to have “stolen” [Page 35] many ideas from Xerox to build his machines. The story is known but the term “stealing” is too strong even if many Xerox employees were shocked. Xerox received Apple shares in exchange for this rather unique deal in history.
– “Mike Markkula can be considered the true founder of Apple, the one who transformed a small, insignificant hobbyist operation into a structured and solidly financed start-up. » [Pages 19-20]
– “Arthur Rock, meanwhile, is one of the most important figures in Silicon Valley, he contributed to the emergence of the largest companies in the region – Fairchild Semiconductor, Intel, then Apple. However, no biography has ever been devoted to him and his wikipedia page is starving”. [Page 20]

I will nuance Galluzzo’s remarks again. Certainly Wozniak, Markkula and Rock have not penetrated the imagination of the general public, but Silicon Valley connoisseurs are not unaware of them and the film Something Ventured (which Galluzzo does not seem to mention in his very rich bibliography) does not forget them at all. And what about this cover of Time Magazine.

2- The war for talent

“The functioning of the labor market in Silicon Valley, however, shows us a completely different dynamic. The industrial concentration in this region leads to significant personnel movements: an engineer can easily change company, without moving or changing his lifestyle. […] This high degree of labor mobility has been observed since the 1970s, when on average IT professionals only stayed in their jobs for two years [Cf AnnaLee Saxenian’s Regional Advantage]. When circulating like this, employees, even bound by non-disclosure agreements, take with them their experiences and knowledge. The propagation of this tacit knowledge is at the heart of the ecosystem, it allows permanent collective tacit learning. » [Page 45]

Galluzzo gets to the heart of the matter here, which makes Silicon Valley unique. Not so much the concentration of talent, which exists in all developed regions. But the circulation of talent. Almost everything is said!

However, Galluzzo adds a significant nuance that I was less familiar with: “Therefore, problems arise for entrepreneurs relating to what has been called in business jargon the “war for talents”. To carry out his projects, he must succeed in appropriating the most precious commodity there is, the work force of highly qualified engineers.” [Page 46]

Galluzzo then mentions the stock options, the aggressive recruitment but also this: “Another court case illustrates well the issues of employee retention. In the 2000s, several Silicon Valley giants, including Intel, Google and Apple, formed a “wage cartel”, mutually agreeing not to attempt to poach employees. This tacit agreement was intended to eliminate all competition for skilled workers and to limit wage increases.” [Page 47 & see Google, Apple, other tech firms to pay $415M in wage case]

3- The invisibilization of the State

The subject is also known and I mentioned it above. We too often forget the role of the collective in the possibility of favorable conditions and context. But Galluzzo shows that too often there is even a certain hatred of the collective, illustrated by the growing visibility of libertarians. It is also known, Silicon Valley is afraid of unions. Here’s another example I didn’t know:

“I want the people who teach my children to be good enough to be employed in the company I work for, and earn $100,000 a year. Why should they work in a school for $35-40,000 a year if they can get a job here at $100,000? We should hire them and pay them $100,000, but of course the problem is the unions. Unions are the worst thing that has happened to education. Because it is not a meritocracy, but a bureaucracy. »

You have to read the entire excerpt and maybe even the entire interview with Steve Jobs. Excerpts from an Oral History Interview with Steve Jobs. Interviewer: Daniel Morrow, April 20, 1995. Computerworld Smithsonian Awards. We are there in the core American culture and the importance given to competition between individuals rather than to the equality of the members of the collective.

So are there geniuses or not? Is there only Darwinian emergence of talents a posteriori among those who will have survived? I don’t know or I don’t know anymore. Probably something in between. Or maybe it is an act of faith, as long as sociology does not have elements that will allow me to have a more convincing opinion…

To be continued…

Philippe Mustar – Entrepreneurship in Action – final episode

Here is my last article on the excellent Entrepreneurship in action of which you will find the 5 previous articles with the tag #entrepreneurship-in-action. Here are some final notes:

The ingredients of success

But, those who fund this project are not doing it just for the skills and experience of the three entrepreneurs. They show other qualities that convince to follow them: their passion, their motivation, their ambition. Investors know that these qualities will allow the team to stay focused and better deal with the many uncertainties that lie ahead. To a student who asked a venture capitalist what are the three most important qualities that a project must have to be financed; he replied: the first is the team, the second is the team, the third is the team. Another joke, common in this industry, says that investors prefer to finance a good team with a bad project rather than the other way round (because a good idea carried by a team whose skills do not match those necessary to developing it is unlikely to go far; while a good team will always be able to modify, transform or change an initial idea of ​​low quality). The rest of the story shows that these statements, usually made in the tone of a joke, apply particularly well to Criteo and that those who make them, the venture capitalists, will have to believe in them and hold onto them firmly for several years. [Page 220]

Some criteria explaining success (according to one of the co-founders of Criteo):
– Have been able to focus on a single product
– Aim for excellence in all areas of the company
– Find the right cursor between managing daily problems and anticipating the future
– The ability to make difficult decisions
– Trust in technology

And finally Mustar returns to this process of innovation which looks like anything but a mechanical process:
– A long and winding process, made of many transformations
– An emerging process
– An experimental process
– A process filled with uncertainties, choices to be made, decisions to be made
– A collective process and a distributed action
– A social process

What is an entrepreneur? Are you born an entrepreneur or do you become one?

Mustar addresses in his conclusion a topic as old as startups with all the humility and caution, because it seems like we don’t really know (even if many claim they do know). Apart from the tautological definition, the entrepreneur is the one who creates (and builds) a business, it seems very difficult to find common traits and qualities specifically for entrepreneurs. Still, I am less confortable with his reminder of Peter Drucker’s claim. “Most of what you hear about entrepreneurship is all wrong. It’s not magic; it’s not mysterious; and it has nothing to do with genes. It’s a discipline and, like any discipline, it can be learned.” [Page 287]

I’m a little more comfortable with Komisar’s point of view in How Do You Teach High-Tech Entrepreneurship according to Randy Komisar.

There is no such thing as a monolithic entrepreneurial condition. Even among the very small number of first-time entrepreneurs I interviewed, there is a very diverse range of relationships with entrepreneurship. What characterizes them, beyond the great diversity of their profiles, their temperament, their way of behaving, is more a desire to do, to learn, to succeed, a great capacity for work, listening to others, ambition… but this is by no means specific to entrepreneurs. We find these same desires or aptitudes among employees, executives of large companies, philanthropic activities, athletes, artists, etc. [Page 289]

This journey with these young engineers allowed me to get rid of a conception of entrepreneurship that separates on the one hand an entrepreneur or a team, and on the other an activity of creating a new product and a company. The entrepreneur and the company are built together, in the same movement. [Page 290]

Knowledge, skills and personality of entrepreneurs

A friend (thanks Kevin!) just retweeted the following: What kind of Knowledge, skills and personality traits are common to successful entrepreneurs?

I tend to agree 100% but I may have an idealized view of my own experience! It also reminded me another quote from the same period (2011 vs. 2010) by Steve Blank: Over the last decade we assumed that once we found repeatable methodologies (Agile and Customer Development, [Lean Startup], Business Model Design) to build early stage ventures, entrepreneurship would become a “science”, and anyone could do it. I’m beginning to suspect this assumption may be wrong. It’s not that the tools are wrong. Where I think we have gone wrong is the belief that anyone can use these tools equally well. In the same way that word processing has never replaced a writer, a thoughtful innovation process will not guarantee success.” Blank added that “until we truly understand how to teach creativity, their numbers are limited. Not everyone is an artist, after all. The full interview can be found on archive.org.

and also Komisar: “I think there’s stuff you can’t possibly learn in school and I’m not even sure you can learn that on the job. There’s an entrepreneurial character. Some people have it and some people don’t. Some people may not think they have it, and they may have it. A lot of people they think they have it, and many don’t.”

Guy Kawasaki – Make Meaning in Your Company

This morning I was participating to a workshop when a debate started about why making a startup. The best answer I know is from Guy kawasaki:


A presentation by Guy Kawasaki for the Stanford Technology Ventures Program Educators Corner in the School of Engineering at Stanford University. October 20, 2004.

Guy Kawasaki is among other things the author of a great book, the Art of Start

An example of his greate advice below is how to make a 10-slide great presentation of a company pitch:
Art of Start – Kawasaki

The Innovators by Walter Isaacson – part 3: (Silicon) Valley

Innovation is about business models – the Atari case

Innovation in (Silicon) Valley: after the chip, innovation saw the arrival of games, software and the Internet “As they were working on the first Computer Space consoles, Bushnell heard that he had competition. A Stanford grad named Bill Pitts and his buddy Hugh Tuck from California polytechnic had become addicted to Spacewar, and they decided to use a PDP-11 minicomputer to turn it into an arcade game. […] Bushnell was contemptuous of their plan to spend $20,000 on equipment, including a PDP-11 that would be in another room and connected by yards of cable to the console, and then charge ten cents a game. “I was surprised at how clueless they were about the business model,” he said. “Surprised and relieved. As soon as I saw what they were doing, I knew they’d be no competition”.
Galaxy Game by Pitts and Tuck debuted at Stanford’s Tresidder student union coffeehouse in the fall of 1971. Students gathered around each night like cultists in front of a shrine. But no matter how many lined up their coins to play, there was no way the machine could pay for itself, and the venture eventually folded. “Hugh and I were both engineers and we didn’t pay attention to business issues at all,” conceded Pitts. Innovation can be sparked by engineering talent, but it must be combined with business skills to set the world afire.
Bushnell was able to produce his game, Computer Space, for only $1,000. It made its debut a few weeks after Galaxy Game at the Dutch Goose bar in Menlo Park near Palo Alto and went on to sell a respectful 1,500 unites. Bushnell was the consummate entrepreneur: inventive, good at engineering, and savvy about business and consumer demand. He was also a great salesman. […] When he arrived back at Atari’s little rented office in Santa Clara, he described the game to Alcorn [Atari’s co-founder], sketched out some circuits, and asked him to build the arcade version of it. He told Acorn he had signed a contract with GE to make the game, which was untrue. Like many entrepreneurs, Bushnell had no shame about distorting reality in order to motivate people.”
[Pages 209-211]

“Innovation requires having three things: a great idea, the engineering talent to execute it, and the business savvy (plus deal-making moxie) to turn it into a successful product. Nolan Bushnell scored a trifecta when he was twenty-nine, which is why he, rather than Bill Pitts, Hugh Truck, Bill Nutting, or Ralph Baer, goes down in history as the innovator who launched the video game industry.” [page 215]

You may also so listen to Bushnell directly. This is Something Ventured and the Atari story begins at 30’07” until 36’35” (you may go on Youtube directly for the right timing).

The debate about intelligence of machines

Chapter 7 is about the beginnings of the Internet. Isaacson adddresses a topic which has come back has a hot debate these days: will machines and the computer in particular replace humans, with or despite their intelligence, creativity and innovation capabilities? I feel close to Isaacson whom I quote from page 226: “Licklider sided with Norbert Wiener, whose theory of cybernetics was based on humans and machines working closely together, rather than with their MIT colleagues Marvin Minsky and John mcCarthy, whose quest for artificial intelligence involved creating machines that could learn on their own and replace human cognition. As Licklider explained, the sensible goal was to create an environment in which humans and machines “cooperate in making decisions.” In other words,they would augment each other. “Men will set the goals, formulate the hypotheses, determine the criteria, and perform the evaluations. Computing machines will do the routinizable work that must be done to prepare the way for insights and decisions in technical and scientific thinking.”

The Innovator’s dilemma

In the same chapter which tries to describe who were the inventors (more than the innovators) in the case of the Internet – J.C.R. Licklider, Bob Taylor, Larry Roberts, Paul Baran, Donald Davies, or even Leonard Kleinrock – and why it was invented – an unclear motivation between the military objective of protecting communications in case of a nuclear attack or the civilian one of helping researchers in sharing resources – Isaacson shows once again the challenge of convincing established players.

Baran then collided with one of the realities of innovation, which was that entrenched bureaucracies are resistant to change. […] He tried to convince AT&T to supplement its circuit-switched voice network with a packet-switched data network. “they fought it tooth and nail,” he recalled. “They tried all sorts of things to stop it.” [AT&T would go as far as organizing a series of seminars that would involve 94 speakers] “Now do you see why packet switching wouldn’t work?” Baran simply replied, “No”. Once again, AT&T was stymied by the innovator’s dilemma. It balked at considering a whole new type of data network because it was so invested in traditional circuits. [Pages 240-41]

[Davies] came up with a good old English word for them: packets. In trying to convince the general Post office to adopt the system, Davies ran into the same problem that Baran had knocking at the door of AT&T. But they both found a fan in Washington. Larry Roberts not only embraced their ideas; he also adopted the word packet.

The entrepreneur is a rebel (who loves power)

One hard-core hacker, Steve Dompier, told of going down to Alburquerque in person to pry loose a machine from MITS, which was having trouble fulfilling orders. By the time of the third Homebrew meeting in April 1975, he had made an amusing discovery. He had written a program to sort numbers, and while he was running it, he was listening to a weather broadcast on a low-frequency transistor radio. “The radio started going zip-zzziiip-ZZZIIIPP at different pitches », and Dompier said to himself, “Well, what do you know ! My first peripheral device!” So he experimented. “I tried some other programs to see what they sounded like, and after about eight hours of messing around, I had a program that could produce musical tones and actually make music”. [Page 310]

“Dompier published his musical program in the next issue of the People’s Computer Company, which led to a historically noteworthy response from a mystified reader. “Steven Dompier has an article about the musical program that he wrote for the Altair in the People’s Computer Company,” Bill Gates, a Harvard student on leave writing software for MITS in Albuquerque, wrote in the Altair newsletter. “The article gives a listing of his program and the musical data for ‘The Fool on the Hill’ and ‘Daisy.’ He doesn’t explain why it works and I don’t see why. Does anyone know?” the simple answer was that the computer , as it ran the programs, produced frequency interference that could be controlled by the timing loops and picked up as tone pulses by an AM radio.
By the time his query was published, Gates had been thrown into a more fundamental dispute with the Homebrew Computer Club. It became archetypal of the clash between the commercial ethic that believed in keeping information proprietary, represented by Gates [and Jobs], and the hacker ethic of sharing information freely, represented by the Homebrew crowd [and Wozniak].” [Page 311]

Isaacson, through his description of Gates and Jobs, explains what is an entrepreneur.

“Yes, Mom, I’m thinking,” he replied. “Have you ever tried thinking?” [P.314] Gates was a serial obsessor. […] he had a confrontational style [… and he] would escalate the insult to be “the stupidest thing I’ve ever heard.” [P.317] Gates pulled a power play that would define his future relationship with Allen. As Gates describes it, “That’s when I say ‘Okay, but I’m going to be in charge. And I’ll get used to being in charge, and it’ll be hard to deal with me from now on unless I’m in charge. If you put me in charge, I’m in charge of this and anything else we do.’ ” [P.323] Like many innovators, Gates was rebellious just for the hell of it. [P.331] “An innovator is probably a fanatic, somebody who loves what they do, works day and night, may ignore normal things to some degree and therefore be viewed as a bit imbalanced. […] Gates was also a rebel with little respect for authority, another trait of innovators. [P.338]

Allen assumed that his partnership with Gates would be fifty-fifty. […] but Gates had insisted on being in charge. “It’s not right for you to get half. […] I think it should be sixty-forty.” […] Worse yet, Gates insisted on revisiting the split two years later. “I deserve more than 60 percent.” His new demand was that the split be 64-36. Born with a risk-taking gene, Gates would cut loose late at night by driving at terrifying speeds up the mountain roads. “I decided it was his way of letting off steam.” Allen said. [P.339]

gates-arrested
Gates arrested for speeding, 1977. [P.312]

“There is something indefinable in an entrepreneur, and I saw that in Steve,“ Bushnell recalled. “He was interested not just in engineering, but also in the business aspects. I taught him that if you act like you can do something, then it will work. I told him, pretend to be completely in control and people will assume that you are.” [P.348]

The concept of the entrepreneur as a rebel is not new. In 2004, Pitch Johnson, one of the earliest VC in Silicon Valley claimed “Entrepreneurs are the revolutionaries of our time.” Freeman Dyson has written “The Scientist as a Rebel“. And you should read Nicolas Colin’s analysis of entrepreneurial ecosystems: Capital + know-how + rebellion = entrepreneurial economy. Yes rebels who loves power…

3 things all first time entrepreneurs should know from the founder of Housetrip

An amazing article I had totally missed and read yesterday thank to a colleague from IFJ/venturelab, thanks! Arnaud Bertrand does not give the usual lessons about money, product, market, blablabla. It is much more profound and painful…:

1- Succeeding at building a good business is first and foremost succeeding in the art of hiring and managing people
2- Having a differentiated product or service is far from being enough to capture your market
3- Founding a company and seeing it to success is winning a whole lot of fights against yourself

ArnaudBertrand_Hero-1200x385

You must read it all: https://www.hottopics.ht/stories/how-to/3-things-all-first-time-entrepreneurs-should-know/

Elon Musk – the new Steve Jobs – insane or genius? (part 3)

I just finished reading Elon Musk and following my two previous posts (part 1 and part 2), here are additional notes.

elonmusk-vance

How does innovation work

It’s really a fascinating book and obviously Elon Musk is too. A really unique and tough character. And obviosuly, very much criticized and hated too. One such harsh critics comes from the MIT Technology Review with Tech’s Enduring Great-Man Myth by Amanda Schaffer. You should read it. I just extract two sentences:
“To put it another way, do we really think that if Jobs and Musk had never come along, there would have been no smartphone revolution, no surge of interest in electric vehicles?” Well, this is a critical question about the source of innovation. Society or individuals. The question is relevant for science too.
– “It’s precisely because we admire Musk and think his contributions are important that we need to get real about where his success actually comes from.” This is a quote from Mariana Mazzucato whom I have often quoted here. her book The Entrepreneurial State is a Must Read. It deals with the role of government in innovation. my stronger and stronger belief with years is that the governement makes things possible (science, technology and invention, innovation) but without exceptional individuals – often geniuses, sometimes to the border of insanity – I am not sure so much happens.

Now let me quote more Ashley Vance because the final chapters are as great as the first ones. These quotes show that despite the high role of the governement, it’s not sufficient to explain how innovation works.

As Tesla turned into a star in modern American industry, its closest rivals were obliterated. Fisker Automotive filed for bankruptcy and was bought by a Chinese auto parts company in 2014. One of its main investors was Ray Lane, a venture capitalist at Kleiner Perkins Caufield & Byers. Lane had cost Kleiner Perkins a chance to invest in Tesla and then backed Fisker – a disastrous move that tarnished the firm’s brand and Lane’s reputation. Better Place was another start-up that enjoyed more hype than Fisker and Tesla put together and raised close to $1 billion to build electric cars and battery-swapping stations. The company never produced much of anything and declared bankruptcy in 2013.
The guys like Straubel who had been at Tesla since the beginning are quick to remind people that the chance to build an awesome electric car had been there all along. “It’s not really like there was a rush to this idea, and we got there first,” Straubel said. “It’s frequently forgotten in hindsight that people thought this was the shittiest business opportunity on the planet. The venture capitalists were all running for the hills.” What separated Tesla from the competition was the willingness to charge after its vision without compromise, a complete commitment to execute to Musks’s standards.

[Pages 315-16]

During the entire period of SolarCity’s growth, Silicon Valley had dumped huge amounts of money into green technology companies with mostly disastrous results. There was the automotive flubs like Fisker and Better Place, and Solyndra, the solar cell maker that conservatives loved to hold up as a cautionary tale of government spending and cronyism run amok. Some of the most famous venture capitalists in history, like John Doerr and Vinod Khosla, were ripped apart by the local and national press for their failed green investments. The story was almost always the same. People had thrown money at green technology because it seemed like the right thing to do, not because it made business sense. From new kinds of energy storage systems to electric cars and solar panels, the technology never quite lived up to its billing and required too much government funding and too many incentives to create a viable market. Much of this criticism was fair. It’s just that there was this Elon Musk guy hanging around who seemed to have figured something out that everyone else had missed. “We had a blanket rule against investing in clean-tech companies for about a decade,” said Peter Thiel, the PayPal cofounder and venture capitalist and Founders Fund. “On the macro level, we were right because clean tech as a sector was quite bad. But on the micro level, it looks like Elon has the two most successful clean-tech companies in the US. We would rather explain his success as being a fluke. There’s the whole Iron Man thing in which he’s presented as a cartoonish businessman – this very unusual animal at the zoo. But there is now a degree to which you have to ask whether his success is an indictment on the rest of us who have been working on much more incremental things. To the extent that the world still doubts Elon, I think it’s a reflection on the insanity of the world and not on the supposed insanity of Elon.” [Pages 320-21]

Tony Fadell about Musk

Tony Fadell, the former Apple executive, credited with bringing the iPod ad iPhone to market, has characterized the smartphone as representative of a type of super-cycle in which hardware and software have reached a critical point of maturity. Electronics are good and cheap, while software is more reliable and sophisticated. […] Google has its self-driving cars and has acquired dozens of robotics companies as it looks to merge code and machine. […] And a host of start-ups have begun infusing medical devices with powerful software to help people monitor and analyze their bodies and diagnose conditions. […] Zee Aero, a start-up in Mountain View, has a couple of former SpaceX staffers on hand and is working on a secretive new type of transport. A flying car at last? Perhaps. […] For Fadell, Musk’s work sits at the highest of this trend. “Whether it’s Tesla or SpaceX, you are talking about combining the old-world science of manufacturing with low-cost, consumer-grade technology. You put these things together, and they morph into something we have never seen before. All of a sudden there is a wholesale change. It’s a step function.” [Pages 351-52] Doesn’t this remind you of Zero to One by peter thiel.

Larry Page about Musk

Google has invested more than just about any other technology company into’s Musk’s sort of moon-shot projects: self-driving cars, robots, and even a cash prize to get a machine onto the moon cheaply. The company, however, operates under a set of constraints and expectations that come with employing tens of thousands of people and being analyzed constantly by investors. It’s with this in mind that Page sometimes feels a bit envious of Musk, who has managed to make radical ideas the basis of his companies. “If you think about Silicon Valley or corporate leaders in general, they’re not usually lacking in money,” Page said. “If you have all this money, which presumably you’re going to give away and couldn’t even spend it all if you wanted to, why then are you devoting your time to a company that’s not really doing anything good? That’s why I find Elon to be an inspiring example. He said, ‘Well, what should I really do in this world? Solve cars, global warming, and make humans multiplanetary.’ I mean those are pretty compelling goals, and now he has businesses to do that.” [Page 353]

Larry Page about education

This is a very interesting piece [pages 355-56] not linked to Musk: “I don’t think we’re doing a good job as a society deciding what things are really important to do.” Page said. “I think like we’re just not educating people in this kind of general way. You should have a pretty broad engineering and scientific background. You have some leadership training and a bit of MBA training or knowledge of how to run things, organize stuff, and raise money. I don’t think most people are doing that, and it’s a big problem. Engineers are usually trained in a very fixed area. When you’re able to think about all of these disciplines together, you kind of think differently and can dream of much crazier things and how they might work. I think that’s really an important thing for the world. That’s how we make progress.” [Pages 355-56]

Some final words about Musk

It’s funny in a way that Musk spends so much time talking about man’s survival but isn’t willing to address the consequences of what his lifestyle does to his body. “Elon came to the conclusion early in his career that life is short,” Straubel said. “If you really embrace this, it leaves you with the obvious conclusion that you should be working as hard as you can”. Suffering though has always been Musk’s thing. The kids at school tortured him. His father played brutal mind games. Musk then abused himself by working inhumane hours and forever pushing his businesses to the edge. The idea of work-life balance seems meaningless in this context. […] He feels that the suffering helped to make him who he is and gave him extra reserves of strength and will. [Page 356]

However….

As Thiel said, Musk may well have gone so far as to give people hope and to have renewed their faith in what technology can do for mankind. [Page 356]

Elon Musk – the new Steve Jobs (part 2)

After reading chapters 8 & 9 of Elon Musk and after my recent post about the Tesla and SpaceX leader, I am now fully convinced Elon Musk is much more than Steve Jobs. He has brought back optimism to Silicon Valley, to the USA and maybe to the world. He has also brought back hardware and engineering in a world that was thinking everything was virtual and online. Mea culpa, I felt the same; I felt that software and intelligence was what was driving the world. Elon Musk has shown that tinkering, experimenting coupled with an ambitious vision could change the world.

elonmusk-vance

“When the launch was successful [SpaceX 4th launch but the 1st to be successful], everyone burst into tears”, Kimbal said. “It was one of the most emotional experiences I’ve had.” Musk left the control room and walked out of the factory floor, where he received a rock’s star welcome. “Well, that was freaking awesome,“ he said. “There are a lot of people who thought we couldn’t do it – a lot actually – but as the saying goes, ‘the fourth time is the charm’, right? There are only a handful of countries on Earth that have done this. It’s normally a country thing, not a company thing…. [Page 203]

But the reader should not forget the tough reality: For Gracias, the Tesla and SpaceX investor and Musk’s friend, the 2008 period told him everything he would ever need to know about Musk’s character. He saw a man who arrived in the United States with nothing, who had lost a child, who was being pilloried in the press by reporters and his ex-wife and who verged on having his life’s work destroyed. “He has the ability to work harder and endure more stress than anyone I’ve met”, Gracias said. “What he went through in 2008 would have broken anyone else. He didn’t just survive. He kept working and stayed focused.” That ability to stay focused in the midst of a crisis stands as one of Musk’s main advantages over other executives and competitors. “Most people who are under that sort of pressure fray,” Gracias said. “their decisions go bad. Elon gets hyperrational. He’s still able to make very clear, long-term decisions. The harder it gets, the better he gets. Anyone who saw what he went through firsthand came away with more respect for the guy. I’ve just never seen anything like his ability to take pain”. [Page 211]

Again, Musk is not afraid of risk-taking. As 2008 came to an end, Musk had run out of money […] The couple had to start borrowing hundreds of thousands of dollars from Musk’s friend Skoll and Riley’s parents offered to remortgage their house. Musk no longer flew his jet back and forth between Los Angeles and Silicon Valley. He took Southwest. [Pages 206-207] He manage to save Tesla, The deal ended up closing on Christmas Eve, hours before Tesla would have gone bankrupt. Musk had just a few hundred thousand dollars left and could not have made payroll the next day. […] On December 23, 2008, however, SpaceX received a shock. People inside NASA had backed SpaceX to become a supplier for the ISS. The company received $1.6 billion as payment for twelve flights to the Space Station. [Page 210]

It is also interesting to mention Musk’s hiring methods! The SpaceX hiring model places some emphasis on getting top marks at top schools. But most of the attention goes toward spotting engineers who have exhibited type A personality traits over the course of their lives. The company’s recruiters look for people who might excel at robot-building competitions or who are car-racing hobbyists who have built unusual vehicles. The object is to find individuals who ooze passion, can work well as part of a team, and have real-world experience bending metal. “Even if you’re someone who writes code for your job you need to understand how mechanical things work. We were looking for people that had been building things since they were little.” [Page 220] Interviews are tough with puzzles, code writing and Musk interviewed the first 1’000 employees de SpaceX.

I am far from finished but needs to end up for now with my usual cap. tables for Musk’s ventures: 1-Paypal, 2-Tesla Motors, 3-SolarCity which he did not found but backed from the early days and the two founders are his cousins, 4-finally a tentative cap. table based on what SpaceX announced.

1-Paypal
Musk-PayPal-Captable

2-Tesla Motors
Musk-Tesla-Captable

Musk-Tesla-Rounds

3-SolarCity
Musk-SolarCity-Captable

4-SpaceX
Musk-SpaceX-Captable

Elon Musk – the new Steve Jobs

Elon Musk is probably the new Steve Jobs. He might be much more even. His early life, his private life has not been simple and easy. He is probably as tough with a similar distorted perception of reality as the Apple hero. But as an entrepreneur, he may have a broader vision and ambition. He began small and simple with Zip2, an early Internet yellow pages start-up, which he still sold for $307M, followed by X.com which had the ambition to change the banking system before it merged with Confinity to become Paypal. Both were just experiments! He learnt and developed his “grandes oeuvres”: Tesla and SpaceX.

Ashlee Vance has just written a remarkable and fascinating book Elon Musk, Tesla, SpaceX, and the Quest for A Fantastic Future about his life and achievements.

elonmusk-vance

Zip2 – 1995 – 3 co-founders (Elon and Kimbal Musk, Greg Kouri) $3M with MDV – sold to Compaq / AltaVista for $307M on April 1, 1999 after more than $50M additional funding. Elon made $22M, Kimbal $15M, MDV 22x its money.

X.com – 1999 – 4 co-founders (Ed Ho, Harris Fricker, Christopher Payne, Elon Musk) and early employee, Scott Anderson. Bill Harris, CEO in Dec. 99. Merges with Confinity in March 2000. Musk netted $250M from the sale to eBay or $180M after taxes.

All told, Musk invested $12M into X.com, leaving him, after taxes, with $4M or so for personal use. “That’s part of what separates Elon from mere mortals,” said Ed Ho, the former Zip2 executive, who went to cofound X.com. “He’s willing to take an insane amount of personal risk. When you do a deal like that, it either pays off or you end up in a bus shelter somewhere.” [Page 80]

Musk was replaced as CEO while on honeymoon. But when it became clear that the company had already moved on, Musk relented. “I talked to Moritz [from Sequoia] and a few others,” Musk said. “It wasn’t so much that I wanted to be CEO but more like ‘Hey, I think there are some pretty important things that need to happen, and if I’m not CEO, I’m not sure they are going to happen.’ But then I talked to Max [Levchin] and Peter [Thiel], and it seemed they would make these things happen. So then, I mean, it’s not the end of the world. […] Throughout this ordeal, however, he showed incredible restraint. He embraced the role of being an advisor to the company and kept investing in it, increasing his take as PayPal’s largest shareholder. “You would expect someone in Elon’s position to be bitter and vindictive, but he wasn’t”, said Botha [from Sequoia], “He supported Peter. He was a prince.” [Pages 88-89]

Musk is direct and tough but “He comes from the school of thought in the public relations world that you let no inaccuracy go uncorrected” [page 91]. An example of toughness in his private life: “He was constantly remarking on the ways he found me lacking. ‘I am your wife,’ I told him repeatedly, ‘not your employee’. ‘If you were my employee,’ he said just as often, ‘I would fire you.’” [Page 94]. He married and divorced 3 times, first with Justine Wilson, with whom Musk had 1 baby who died after 10 weeks, then 2 twins, then 3 triplets, then twice with Talulah Riley.

Chapters 6 and 7 are a MUST READ. They show the drive, craziness, vision, obsession that Musk put into building rockets and electric cars, combining the chaos of start-ups and the structure needed for manufacturing.

SpaceX – Space Exploration Technologies Corp. – 2002 – https://en.wikipedia.org/wiki/SpaceX. The [PayPal] deal gave Musk some liquidity and supplied him with more than $100M to throw at SpaceX.

Tesla Motors – founded on July 1st 2003 by Martin Eberhard and Marc Tarpenning who had sold a previous start-ups for $187M in 2000. In parallel Musk helped J. B. Straubel, a passionate Stanford student, who had seen batteries had reached efficiency possibly useful to electric cars. Musk invested $6.5M in Tesla and Straubel joined in May 2004. On January 27, 2005, the 18 Tesla employees had built the first prototype. Musk invested another $9M in a $13M round. In May 2006 Tesla had 100 employees. Musk invested another $12M together with DFJ, Larry Page, Sergey Brin and others for a new $40M round. In the middle of 2007, tesla had grown to 260 employees. [page 165]

There is an interesting section about Detroit and how different its culture is from Silicon Valley [Page 164¡: Every time Tesla interacted with Detroit it received a reminder of how the once-great city had been separated from its own can-do culture. Tesla tried to lease a small office in Detroit. The costs were incredibly low compared with Space in Silicon Valley, but the city’s bureaucracy made getting just a basic office an ordeal. The building’s owner wanted to see seven years of audited financial from Tesla, which was still a private company. Then the building owner wanted two years’ worth of advanced rent. Tesla had about $50 million in the bank and could have bought the building outright. “In Silicon Valley, you say you’re backed by a venture capitalist, and that’s the end of the negotiation.” Tarpenning said. “But everything was like that in Detroit. We’d get FedEx boxes, and they couldn’t even decide who should sign for the packages”.

Then fights began between Musk and Eberhard: The engineers credited Eberhard with making quick, crisp decisions. […] Musk wanted changes that started to delay the Roadster, Musk kept pushing the car to be more comfortable. […] Eberhard groused that these features were slowing the company down. […] The company as a whole was sympathetic to Martin [Page 165]. Many issues began to appear, technical problems such as the transmission, overall costs issues and finally delays in delivering the Roadster to customers who had prepaid for it.

In August 2007, Tesla’s board demoted Eberhard to president of technology. Most of the employees were tired; Tesla was running out of money after $140M spent. In the meantime, SpaceX failed with its first two rocked launches. And musk filed for divorce. When the 2008 crisis burst out, Musk was in personal and business troubles with his two companies.

More to come if I love as chapters 8-11.

PS – a short reminder about previous posts about Elon Musk:
– June 3, 2010: What makes a good technology company? A mastery of fear and envy.
– March 8, 2010: Tesla Motors and Paypal, a tale of two founders