Entrepreneurship: How to Overcome Barriers

By Shlomo Maital

barrier

     Antoni Baszczeski, from Poland, has been taking one of my courses on Coursera, the on-line platform. (3 courses are currently running there, comprising a Startup Entrepreneurship specialization). In one of the Discussion Forums, Antoni notes:

“Some time ago, I participated in a “Design New Learning Environment” (DNLE) course project at the Venture Lab Edu platfom (@ Stanford University) :   Rethinking Vocational Education in the State of Massachusetts:An Entrepreneurship Imperative for the 21st Century.   http://www.slideshare.net/Gribbenslide/final-rethinking-vocational-education-in-the-state-of-massachusetts-1569106

   We tried to identify Barriers to Entrepreneurship, and It looks that a majority of them are driven by cultural / mindset / attitude components. And they are root causes of the problems with creativity and innovation.

  1. Internal :
  • lack of self-confidence •lack of critical thinking skills •fear of failure •passivity•lack of experience with fundraising and managing money •ack of credibility among adults that would fund the venture, due to the young age of entrepreneur
  1. External : •education  •schools are providing exam preparation courses today and kill kids/students creativity and desire to innovate •entrepreneurship is not taught nor promoted in schools •there is a lack of understanding of the important role entrepreneurship has for future generations at the level of decision makers – Ministry of Education and Superintendents of Education •cultural – society (including parents and teachers) is not tolerant of young people who think differently than those that have gone before them. • bureaucratic and administrative – including lack of transparency •financing is difficult to acquire due to the lack of faith in the youths’ ability to execute the ideas

   Antoni asks Forum participants about their own countries, and the barriers they perceive to young people starting and growing businesses.

   So blog readers: What about your country? What do you think are the main 3 obstacles that keep young people from becoming startup entrepreneurs? What are the obstacles that keep YOU personally from doing so? How can these obstacles be overcome?

   Thank you Antoni!

Marucci as Bat Man: Great Oak (Bats)

From Little Acorns Grow

By Shlomo Maital

Marucci

   There are two major lessons we learn from the story of Jack Marucci and his sports equipment company. Lesson One: Just do it – start small, create value, make a prototype…and see what happens. Lesson Two: Even if you create a great huge global company – keep doing whatever you were doing in your day job, if you truly love it. You don’t HAVE to become a tycoon/manager.

     Lesson One: In 2002 Marucci’s little boy Gino, 8 years old, needed a baseball bat. He wanted a wood bat, but no company made wood bats for kids, only for adults. Kids’ bats were all aluminum. Marucci had learned how to use a wood lathe in high school. So he bought a used lathe, got some maple (best for bats) and made a bat for Gino. It took a few tries, but he soon got the idea. Soon Gino’s friends wanted wood bats too. So Marucci made them ones. Eduardo Perez, the son of Hall of Fame St. Louis Cardinal baseball player Tony Perez, got one. He told his dad. Perez in turn told Albert Pujols, future Hall of Famer, about the bats..and Pujols loved them!   Soon Marucci was in the bat business, producing high-quality maple bats, with obsessive attention to quality, for Major League baseball players. Eventually his company expanded into other types of equipment, with two retired ballplayers as partners. Marucci Maplewood bats are used today by more than 35 per cent of all the players in Major League Baseball!

     See a need? If you can – make a prototype. If it’s great, who knows what will happen.

     Lesson Two:   Marucci has a day job, as Director of Athletics at Louisiana State University (LSU), Baton Rouge, Louisiana.   He loves this job. Despite the success of Marucci’s bat company, he has decided to keep his day job, and still holds an interest in the sports equipment company.

       So, what do we learn?   If you see a need, see if you can satisfy it, preferably with your own two hands. Amazing things may follow if your product is truly great. And if you have a day job and truly love it, hang on to it and let your partners build and grow your business.  

 

Innovator: Learn from Fermi!

By Shlomo Maital

Fermi  

Enrico Fermi 1901-1954

   One of the key problems innovators encounter is validation. You have an idea. You love it! You’re full of passion to implement it. But, hold it. Take a moment or more, and make sure you’re meeting a real unmet need. Validate the need. Don’t be like so many entrepreneurs who “fill a much-needed gap”.

   But how? How to validate? Talk to people? Sure. But will chatting with 1, 2 or even 10 people do the trick?

   I’ve just learned about an interesting method that may help. (See: Philip Tetlock, Dan Gardner, Superforecasting: Crown, 2015; see Fermi-ize Your Problem). It comes from the Italian physicist Enrico Fermi, who died young at 53; he was an exceptional scholar, both a theoretical and experimental physicist (very rare to do both), and invented the first nuclear reactor, Chicago-Pile 1, in Chicago. He won the Nobel Prize in 1938, and has an element named after him. (Fermium, element 100, symbol Fm).

   Here is how Fermi taught his students to tackle tough problems. I’ve slightly changed the context.

   Suppose you want to create an Android app for tuning pianos. Suppose you want to sell it in Chicago. How can you validate the need? How can you predict how many you will sell?

   Size of market: How many piano tuners are there in Chicago?

   No possible way I can find that number on the Internet. Impossible task. Dead end.

     Not according to Fermi.   Take a hard question. Break it down into pieces. And this will enable you to come up with a very good guess that will be surprisingly accurate.

For instance: 1. How many pianos are there in Chicago?   Well, the population of Chicago is 2.5 million. Let’s say, one person in 100 has a piano. (about 1 household in 25 or 30). That means: 25,000 pianos. But schools, etc. also have pianos. That could be, say, another 25,000 pianos. So there are 50,000 pianos. 2. How often are pianos tuned? Let’s say, once a year. Reasonble, right? 3. How long does it take to tune a piano? Roughly, two hours. Remember: each note has to be played, tested, checked. And a piano has 88 keys, 52 white and 36 black. 4. How many hours per year does a piano tuner work? Let’s say, 40 hours a week, for 50 weeks, or 2,000 hours. But take off 20 per cent for travel time: so, 1,600 hours.

     Final calculation: Total piano tuning time: 50,000 pianos times 2 hours =   100,000 hours per year. Divide by 1,600 hours per tuner:   You get about 60 or so piano tuners.

     Does that comprise a sufficient market for your app? Chicago alone, no. So you need to be nationwide or global. Can you be? How will they know about your app?

     This is called Fermi-ize Your Problem. Take a really hard problem. Break it down into pieces. Tackle each piece.

     What if your assumptions are wrong? Well – if you’ve written them down, you can check them. So – instead of giving up from the outset when tackling a hard question, you break it into pieces and tackle each piece,   and when you solve each piece, you chalk up progress and gain momentum. And move one step closer to an answer.

     Innovator: Try to Fermi-ize your problem. Fermi did this regularly with his students. I think it helped him win a Nobel Prize. If you get good at Fermi-izing, you become more willing to tackle really tough problems..and change the world. And you may avoid investing years solving a problem no one really cares about.

Which Creative Idea Will Succeed? Can We Predict It?

By Shlomo Maital   

bad idea1

     Can you predict which creative ideas will succeed and which will fail?   There is a great deal of research on how to foster creative ideas – but much too little on implementation and choosing good ideas and dumping bad ones. A recent article in Administrative Science Quarterly, latest issue (2016),   the leading organizational behavior journal, sheds light on this. [1]

     Here are the main findings:

  • Using both a field study of 339 professionals in the circus arts industry and a lab experiment, I examine the conditions for accurate creative forecasting, focusing on the effect of creators’ and managers’ roles.
  • In the field study, creators and managers forecasted the success of new circus acts with audiences, and the accuracy of these forecasts was assessed using data from 13,248 audience members. Results suggest that creators were more accurate than managers when forecasting about others’ novel ideas, but not their own.

This is a crucial finding. Entrepreneur: You are NOT not good at forecasting the success of your own ideas.   Get help. Get feedback. Validate, validate, validate. Your own passion about your change-the-world idea is often misleading.   Check it out.

  • Results from the lab experiment show that creators’ advantage over managers in predicting success may be tied to the emphasis on both divergent thinking (idea generation) and convergent thinking (idea evaluation) in the creator role, while the manager role emphasizes only convergent thinking.

   In our (Ruttenberg and Maital) model of creativity, “zoom out” (divergent thinking) and “zoom in” (convergent thinking) must be used together, sequentially. Managers use mainly zoom-in. And hence, according to Berg, they often get it wrong. Creators use both.

     One conclusion?   Innovation managers must cultivate more zoom-out thinking. Open the windows, and the doors, managers!   The nature of your job is such that you tend to keep them closed, and lose crucial information and make bad decisions as a result.

   This helps explain why creative thinking is hard to sustain. As organizations grow, they become ‘convergent’…focused, narrowly.   And they lose innovative spark. Solution? Open the windows!

[1] Balancing on the Creative Highwire: Forecasting the Success of Novel Ideas in Organizations, by Justin M. Berg

Will Paul Romer Be the Cat Among the World Bank Pigeons?

By Shlomo Maital  

 Romer

Paul Romer – New World Bank Chief Economist

      The World Bank was created in July 1944, at Bretton Woods, NH, and has as its goal spurring growth among poorer countries by helping them  borrow capital for infrastructure projects. Repeatedly, the modern relevance of the World Bank has been questioned, when, in a globalized world, nations that run their economies well can access world capital markets by themselves – and nations that do not won’t get World Bank funding anyway.

     The relevance of the World Bank depends on understanding what are the underlying factors that drive growth. For years, economists simply did not know. Here is what The Economist says:

     Prevailing models of growth assigned an important role to technological change, but lacked a convincing explanation for how it came about. Instead, the models treated new ideas a bit like manna from heaven, arriving in a mysterious and unpredictable manner.

   Prof. Paul Romer had a different theory.  

   Mr Romer sought to change that. His work made the development of new ideas “endogenous”, meaning that it sought to account for them, rather than writing them off as “exogenous” surprises. In his “endogenous growth” theory, new ideas materialise as firms invest in physical capital or research and development, creating knowledge that spills over to the rest of the economy. That suggests that open economies, with institutions that encourage investment in physical and human capital, ought to do best.

   The importance of the quality of institutions and of the dissemination of innovation led Mr Romer to focus on urban areas, which are often hotbeds for the creation and transmission of ideas. That focus, in turn, sparked a radical notion of economic development oriented around “charter cities”. Poor countries, he argued, should create new cities and give them leeway to experiment with daring economic and political reforms.

I know Romer is right. Israel has startup cities, like Tel Aviv, that are vibrant entrepreneurship ecosystems. Berlin is one; so is Silicon Valley (a region, not a city); Research Triangle (N. Carolina); Cambridge, UK, and so on.

Will Paul Romer change the thinking of that Old Lady, World Bank, with its old-fashioned stodgy theories? Will he leverage the World Bank’s lending power to foster entrepreneurship in poorer nations?

Stay tuned!

 

Creativity Capital: We’re Destroying Billions of Dollars Worth!

By Shlomo Maital

money burning

   What is “capital”? For most people, capital is something tangible, like money, houses, or other assets. But for economists, capital is somewhat abstract – it is the summed present value of a stream of future benefits.  

   For instance, a bond pays interest for 10 years or 25 years, and its value is the summed p.v. of those interest payments plus the principal.

   People, too, comprise capital. When you improve your skills, the summed present value of the added income from those added skills is also capital and can be calculated – this is “human capital”.

     I believe there is a kind of capital that we are constantly destroying, rather than building as we should. It is “creativity capital”.

     Here is a small story. The daughter of a close friend drew a picture in elementary school. The teacher said that it was utter rubbish. Even though the young girl’s mother was a skilled artist, and even though she herself had talent – she never again drew a picture.   Perhaps the world lost an important artist; but more important, she herself lost an activity that could have given her enormous pleasure.

     This one case is creativity capital that was destroyed, because a stupid teacher was insensitive and failed to understand that her role is to encourage and empower, not destroy. How many other such cases are there? How many readers have encountered similar massive destruction of their creativity capital?

     How do we get schools to stop destroying massive amounts of creativity capital? What if we tried to put some numbers on ‘creativity capital’ and more important, investment in it (the additions to Creativity Capital)?   What if we tried to measure schools not by students’ scores on stupid mechanical tests, but by the extent to which their students excel in, say, the Torrance Creativity Test?  

     What if teachers’ job definition changed radically, from teaching test-taking skills to fostering ability to come up with wild ideas and then implement them?  

     But – how in the world can we make this happen?  We need creative ideas to create Creativity Capital.

Stories: They CAN (and do) Change Lives

By Shlomo Maital

Michelle

As a Ph.D. student I was taught that serious academic research involves either a mass of mathematical equations (theory) or a database with at least 50 subjects, generating tables, T-tests, least-square regressions and other such stuff.

   It took me a long time to understand that truth often lies not in N=50 but in N equals one, or less than one – in a powerful story.   Here is an example.

     In 2009 Michelle Obama, on her first trip as First Lady, visited London with Barak Obama. She visited Elizabeth Garrett Anderson School, a London state (or public) school for girls, about three-quarters of whom are eligible for free school meals.

   According to The Economist she told the girls:

“I’m standing here…because of education,” Mrs Obama said. “I thought being smart was cooler than anything in the world.” And unlike many luminaries asked to rouse pupils, the First Lady kept in touch. Mrs Obama invited the girls to see her again in 2011 when she visited Oxford University. There, she told pupils: “All of us believe that you belong here.” One year later a dozen pupils flew over to the White House.

       Her message seems to have worked. In a paper published on July 1st, Simon Burgess, an economist at the University of Bristol, analysed the school’s exam results in the years after Mrs Obama’s visits. The 15- or 16-year-olds sitting their GCSEs did much better than girls in the previous year. From 2011 to 2012, for example, the boost was equivalent to each pupil moving from 8 C to 8 A grades. Those improvements were much bigger than the average increases in performance across London state schools, suggesting that the effects were specific to Elizabeth Garrett Anderson.”

          So my advice to countries, school systems and even parents:   Tell stories. Find role models your kids admire. Tell their stories, if you can’t bring them in person. When people understand that the impossible is actually possible, because other ordinary people like them have done it, they become inspired.  

         Great aspirations begin with individuals believing that they can. Stories of others who did   are helpful in instilling this belief, as Michelle Obama and the London school show.

   And by the way – I (and many others?) have the strong feeling that Michelle should have been elected President, rather than her husband.

U.S. Has More Oil Than Saudi Arabia

By Shlomo Maital

oil

A Financial Times report today claims that for the first time, proven oil reserves in the United States exceed those in Saudi Arabia (and Russia).

     The US holds more oil reserves than Saudi Arabia and Russia, the first time it has surpassed those held by the world’s biggest exporting nations, according to a new study. Rystad Energy estimates recoverable oil in the US from existing fields, discoveries and yet undiscovered areas amounts to 264bn barrels. The figure surpasses Saudi Arabia’s 212bn and Russia’s 256bn in reserves.

Not surprisingly, Texas has almost a quarter of those 264 billlion barrels; Texas oil wealth will thus continue. According to the report, “three years ago the US was behind Russia, Canada and Saudi Arabia. ….More than half of the US’s remaining oil reserves are in unconventional shale oil.”

   What does this finding mean? First, at last, the decline of Saudi geopolitical influence. Saudi money has financed worldwide Wahabi Islam, an extreme form of Islam that has at times ‘inspired’ bad guys, as in 9/11. The Saudis may now have to keep more of their money at home, and already have issued an ambitious plan for weaning Saudi Arabia from oil, after its former oil minister purposely flooded the market, bashed the price of oil to historic lows – and was fired.

   Second, greater energy independence of the United States, and hence less pandering to oil-rich Mideast nations. And perhaps, less geopolitical influence on the part of Russia. Both Russia and Saudi Arabia have not been forces for good in the global arena, in the past.

   Those who have written off American global leadership, under a weak Obama administration, may have to think again. Oil and geopolitics are close syblings. One qualification, however. U.S. shale oil costs a lot to recover, perhaps as much as $50 /bbl. Saudi oil has a marginal production cost of just a few dollars, as it is pumped easily out of the desert sand. So Saudi still holds a few Trump cards.

Pittsburgh: Rises from the Ashes

By Shlomo Maital  

Pittsburgh

In today’s International New York Times (July 3), David Brooks makes an important observation. The political battleground in the U.S. and other countries has until now been: big government? Or small? Too much government? Or too little? This is changing, in the wake of Trump and right-wing nationalist parties in Europe.

   The core issue, he says, in the coming decade, will be: open or closed? Open society, to trade, ideas, immigrants, information? Or closed society, with a big wall, protectionism, tariffs, and ‘immigrants not welcome’ signs?  

     Globalization began with the fall of the Berlin Wall, Nov. 9 1989. The unification of the two Germanys accelerated the European Single Market and boosted global trade. But the benefits of free open trade, which have been enormous for Asia, accrued mainly to the wealthy and better off, who make money from money. Blue collar workers in the West lost their jobs, as manufacturing migrated. This silent majority is no longer silent. And their pain has become a central issue in politics, in the post-Trump era.

       Brooks, like all good columnists, leaves his office and goes out into the field, to see first-hand. He visited Pittsburgh. My sister lives in Pittsburgh, and I’ve been visiting her regularly since her marriage to Chuck, my late brother-in-law, a Pittsburgh optometrist, in 1952. I saw first-hand the smoky steel mills along the Monongahela River and saw the terrible pollution that coated Pittsburgh with a layer of dust. I saw them disappear, as Pittsburgh reinvented itself to become today’s modern high-tech city, financial center, healthcare center and home to a great university, Carnegie-Mellon. As Brooks observes, Pittsburgh today is amazing, with sparkling clean air, great restaurants, cultural events, an old train station rezoned into restaurants and shops…   a stark contrast to many other rust-belt cities, like Cleveland, OH and Gary, IN, which have not done the same.

     But nonetheless, Pittsburgh too has its community of losers, those who lost high-paying steel jobs in the heyday of U.S. Steel.   Globalization may have produced net gains for Asia, and even for the U.S., but those gains were very very unevenly distributed, and the winners did not in the least compensate the losers.   After a long delay, the losers are now generating a political reaction and near-counter-revolution.

     It would be a shame if the benefits of globalization were reversed, simply because our political system was too lazy, stupid and short-sighted to realize that somehow, we have to find a way to help those who lose from it.   Maybe a good place to start is Pittsburgh, as Brooks notes, which lost thousands of steel jobs and eventually created thousands more of service jobs.

     I think we should recall China and its amazing Great Wall, stretching for some 13,000 miles (21,000 kilometers),  completed around 1400-1600.   The Great Wall kept out the Manchus and kept China whole and safe, at least in part. But it also kept out the world and led to 500 years of stagnation in China’s economy.   Modern China has been a huge winner from globalization, because it has been smart enough to know how to reap the benefits.   We should challenge other countries, especially the U.S. and Europe, to state: What is your strategy for evening the playing field, NOT globally but WITHIN your own country, to help those who have lost well-paying jobs to free global trade?   Because if you don’t shape such a strategy quickly, you may find that politically globalization is no longer viable and is replaced by protectionism and modern Great Walls.   Trump’s “build a wall and make them pay for it” will replicate itself elsewhere, if we do not act soon and wisely.

Refugee Energy: Tap It!

By Shlomo Maital

 Zaatari

My friend and colleague Prof. Dan Shechtman (Nobel, Chemistry, 2011) has been tirelessly touring the world with a message: For poor and emerging countries, the way to a better life is technology-driven entrepreneurship and startups.

   Today’s Hebrew language newspaper Haaretz has some proof.

   Journalist Zvi Barel, who tracks events in countries bordering Israel, writes about startup energy in the midst of great misery – in refugee camps in Turkey and in Jordan, packed with Syrians fleeing the chaos and genocide in their country.

     Al-Zaatari Refugee Camp in Jordan and other camps have one million refugees, living in great squalor. Turkey has camps with even more refugees, 2.5 million.

     In Za’atari, recounts Barel, “Ra’shim” , from Aleppo, ravaged by war, fled his city three years ago. In the camp there are a great many shops opened by refugees. By one count – there are 3,000 small businesses (in the camp, and in nearby Jordanian cities) with monthly revenues of $13 million. I wrote about one such shop in an earlier blog – a shop that rents wedding dresses.   Aided by the Oasis 500 fund in Jordan, Ra’shim opened a website to enable these shops to sell on the Internet, and raised 3 million dollars. He now has branches in Dubai and Oman, employs many young Jordanians and Syrians and plans to expand.

     Some of the small shops and businesses in the camps in Turkey have been begun to employ local Turks, in significant numbers.

     Satellite photos show that nearly 60 per cent of Aleppo has been destroyed. It will take 7-8 billion dollars to rebuild it. Oil-rich Arab nations have the money, but will never contribute such sums. So when this awful Syrian civil war ends, it will be up to people like Ra’shim, with entrepreneurial energy, to rebuild their country, with minimal resources.

     And they will.

     The incompetent EU has now more or less decided to bribe Turkey to stop the flow of immigrants. Does anyone in the EU wonder, whether an injection of entrepreneurial energy like that of Ra’shim could revive Europe’s dead economy, and generate entrepreneurship where virtually none exists, like in France? Did anyone in the EU consider giving a small fraction of the $3 billion bribe to Turkey, directly to refugees and refugee entrepreneurs?  

     In Silicon Valley, a high percentage of startups are launched by Indians, Israelis, Chinese and others?   Precisely what the EU needs – but will now not get, because it cannot see its nose in front of its face.

Blog entries written by Prof. Shlomo Maital

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