Great article by Gladwell, that shows the successful entrepreneur is not a risk taking, fool hardy person, but a rational predator who minimizes risk.
Bullet points below on what makes or breaks a business.
"The entrepreneur has access to that deal by virtue of occupying a "structural hole," a niche that gives him a unique perspective on a particular market."
Read " From Predators to Icons" - Michael Villette and Catherine Vuillermot
" The Illusions of Entrepreneurship" - Scott Shane
"The Greatest Trade Ever"
"his focus throughout the sequence is on hedging his bets and minimizing his chances of failure. The truly successful businessman, in Villette and Vuillermot's telling, is anything but a risk taker. He is a predator, and predators seek to incur the least risk possible while hunting."
"Marty Gruss dilled a maxim into Paulson. ' watch the downside, the upside will take care of itself.'"
"Negative-carry trades are a 'maneuver' that investment pro's detest almost as much as much as high taxes and coach-class seating. Their problem with negative-carry is that if the trade doesn't pay off quickly it can become ruinously expensive."
Failed Businesses violate all kinds of established principles of new-business formation;
- New business success is clearly correlated with the size of initial capitalization. Failed entrepreneur's tend to be wildly under capitalized.
- Data shows organizing as a corporation is best, failed entrepreneur's tend to sole proprietorships.
- Writing a business plan is a must. Failed businesses often skip this step.
- Taking over an existing business is always the best bet. Failed entrepreneur's prefer to start from scratch.
- 90% of the fastest growing businesses sell to other businesses; failed ones usually try to sell to direct consumers and rather than serving/ finding customers that other businesses have missed, the chase the same group as the competitors.
- Failed business underemphasize marketing.
- Failed businesses compete on price.
- Failed businesses don't understand the importance and need/ use of financial controls.
Taking excessive risks is a psychologically protective strategy: no one can blame you when you fail
Predator is often quite happy to put his reputation on the line in the pursuit of the sure thing.
Why are predators willing to endure abuse? They are sufficiently secure and confident that they don't need public approval.
Shane says that the average person would have to earn 2 1/2 times as much money to be happy working for someone else as he would be working for himself.
The predator is a rational actor - but deep down also a romantic, motivated by the simple joy found in the work.