The First Rule of Entrepreneurism: Failure is Not an Option

Article by Herb Rubenstein

Introduction: The Costs of Failure

We often hear about costs in terms of dollars. Six recent space satellite failures in the US cost billions of dollars. The Three Gorges Dam project (which may yet succeed) cost $25 billion. Dollars are measures of costs, but dollars are not the only real costs of failure that we want to discuss. Important scientific data and knowledge will be permanently lost due to the satellite failures. Hundreds of thousands of lives in China will be uprooted and harmed if this massive project fails to meet its objectives.

Today, our economic system has figured out – with substantial governmental help – how to land people on the moon, how to blow up entire cities, how to link computer users worldwide using the Internet and, possibly, how to clone human beings. We now know how to live longer, look younger, run faster, consume more, have our companies stock prices trade at over 100 times earnings and reduce pollution all at the same time. And certainly, many economic advances have occurred without any governmental assistance. With all these successes, why do we need to talk about the costs of failure that we as humans will experience if we are not able to improve our ability to create and sustain high-growth strategies in our entrepreneurial organizations.

The reason that we need to discuss the real costs of failure is that, despite all of the late 20th century economic successes, much of the world and much of the US, itself, is not participating in or getting much benefit from the entrepreneurial accomplishments of the

past half century. More importantly, at present there is no guarantee that the first half of the 21st century will be blessed with similar economic growth or that economic growth will become more widespread throughout the world. The role and influence of entrepreneurial organizations is expanding rapidly throughout the world. Recent US government publications such as Businesslike Government by Al Gore and Scott Adams (yes, Dilbert) suggest that government is starting to get the message that the “business as usual” paradigm of government will no longer work in a fast-paced, customer-centric society created during the last quarter of the 20th Century. Areas that were exclusively the province of government, such as collecting child support and issuing drivers’ licenses and automobile, boat and truck tags will soon be the province of the private sector since government has proven that it cannot perform these functions with the efficiency, the effectiveness or with the proper care and concern for the customers of these services that the private sector can provide.

Under a broad definition of entrepreneur with which we started this book, there is ample opportunity for government to be entrepreneurial. Privatization is an entrepreneurial response to a non-entrepreneurial government. Privatization means that the performance of an organization and the salaries it pays, the number of jobs that it supports, and the incentive rewards given to its leaders are all intertwined, a feat that government has never seemed to accomplish. The culture of government with its emphasis on process rather than results, job security, political favoritism, unwillingness and inability of employees and agencies to take risks, its inability to create policies and innovations on the spot, its lack of demonstrated due care and concern for its customers and its cumbersome, hierarchical systems have re n d e red many of the activities that government has performed in the past unpopular and the butt of many jokes. What is not a joke is that the justice system in the US often takes several years to adjudicate even simple disputes among citizens and businesses.

The failure of the justice system to produce speedy trials in civil cases is tolerated by a citizenry that is slowly beginning to seek alternatives to government monopolies such as our court system, our police departments and our utilities which have been run by governments since the

beginning of the country. While the Governor of Maryland in 1999 was trying to make the case that the State should take over the county judicial systems, others may look to the private sector serving as the manager of the county judicial systems in the future. Government’s inability to provide effective child support collection, effective traffic administration, effective housing for the poor, effective and timely court systems point the way to the huge costs of failure that we deal with daily. The hope is that entrepreneurial systems that reward

improvement and reward the creation of new business and economic models to solve the delivery and implementation problems that so often plague government-run programs will lead to no lines at the department of motor vehicles, no waiting ten years to collect child support, no waiting three years for a trial of a civil matter, no abuse by IRS officials and fewer

government programs that fail to address people’s real needs in a timely and cost-effective manner. Government is not the only source of failure that we need to address.

Today More Businesses Fail Than Succeed

The cost of these failures is enormous. The percentage of non-profit organizations that waste their resources without ever making a significant contribution to the economic and social

landscape may be higher than the percentage of businesses that fail. Each new organization that is created, be it a business, non-profit organization, or educational institution, represents not only an investment of financial capital, but also the investment of real people, their dreams and their forever lost opportunities to devote their lives and financial resources to other activities that could actually have been successful and improved the world. Failed businesses and non-profit organizations impoverish the world. They do not enrich it. Their costs are huge.

On occasion, a failed business or non-profit organization may lead to unexpected growth and success of another business or non-profit organization. In most instances, however, huge amounts of waste, inefficiency, conflict, and demoralization occur when a business or non-profit organization fails. The tools provided in this book and its insights on entrepreneurism are designed to assist your organization in avoiding such failure. These tools have been provided to promote high-growth strategies and are also designed to promote your business or non-profit organization operating more effectively and efficiently at whatever level of growth it seeks.

Real wages in the US have not significantly increased for most workers since the early 1960s. Today entire subpopulations of the country located in specific geographic pockets believe they have no opportunity to become entrepreneurs and know they have no opportunity to advance economically by working at poverty-level wages. The failure of our economic system to engage the minds, creative talents, intrinsic motivation, and leadership

potential of the entrepreneurially disenfranchised represents one of the greatest wastes of human talent known today. Using microcredit, some would-be entrepreneurs can get a little financial head start toward the road toward entrepreneurism. Unfortunately, a little credit, by itself, is often like one little swimming lesson. It may be marginally useful, but not when someone must swim across a large lake to survive.

Entrepreneurism and High Growth Strategies

These can be an important remedy to assisting people out of poverty, out of low-wage, dead-end jobs and out of a cycle that people experience when they are associated with business failure after business failure, on top of educational failure after educational failure. The fact that most of our public high schools do not teach business or entrepreneurism is merely

a symptom of how our government-sponsored educational system is failing those who need it most. In one high school in Maryland, in the second wealthiest county in the nation, in a new school built at a cost of nearly $46 million, 49 percent of the general student population in the ninth grade had below a “C” average in 1998. These students not only fail at the general

curriculum they are not taught the basic skills of entrepreneurism nor taught some of the essential lessons of developing high-growth personal or business strategies.

Our work over the past three decades shows that some of these key lessons that youths need to be taught today include teaching people to master the following:

• creating and communicating a clear vision for yourself and your organization

• enrolling others and working successfully with an ever-growing team to

achieve your goals and market success

• participating in an ongoing activity while adhering to core values agreed

upon by all major participants in your endeavor

• measuring and monitoring your implementation results to check

them before they stray too far or become too expensive to correct quickly

• adhering to the discipline necessary to meet, if not beat, your competition

• constantly emphasizing and learning how to serve your customers better,

more efficiently and more creatively.

These are the lessons of high-growth strategies for entrepreneurial organizations.

Many entrepreneurially disenfranchised people do not have a path to to start and run a business, or how to start and run a nonprofit organization, or how to start and run an educational institution. When we look at the distribution of income and resources in the US and throughout the world and how it has changed over the past three decades with wealth and income becoming more, not less concentrated in the few, it is clear that those who do understand and can apply these entrepreneurial lessons are the ones who have been able to increase their wealth the most.

The Potential of a Person or a Group

High growth strategies for entrepreneurial organizations are based on the fundamental belief that a person or group can form together to improve not only their lot, but also a lot of their customers, their vendors, their investors and the overall economic and social landscape. The key driving force behind high-growth strategies for entrepreneurial organizations is the spirit, the hope, the planning and the becoming prepared to address the changing needs of our business, social and physical environment for goods and services. There are no guarantees of financial success in the entrepreneurial economy, no perfect job security (as Japan is learning), no instant reward for a good idea especially if that idea is pursued without sufficient skills, resources, commitment, and discipline.

However, there are guarantees that those who are allowed to participate in the creation and management of a high-growth-oriented entrepreneurial organization will have the opportunity to learn the skills of customer service (respect), the skills of looking at the world with the intention of improving it (service, hope and dedication), the skills of working with others (cooperation) and most importantly, the skill of pushing oneself to the fullest extent of one’s intellectual and physical potential (fulfillment).

The costs of the failure of our society to teach and embrace high-growth strategies for entrepreneurial organizations is the cost of short-changing millions of people of the chance to learn these skills and to have a chance of working together with others to improve their lot and the lot of others simultaneously. The cost of failure is very high. The reward of success on the other hand is very high at the individual and group level.

This lesson applies even more forcefully to countries that are less developed economically and have less of a history of entrepreneurism. Just as companies can often leapfrog technological steps that other companies have spent millions of dollars in perfecting, less developed countries and impoverished pockets of more developed countries can use the tools provided in

this book to teach entrepreneurism and make great strides in both human development and economic development at a quicker pace than was previously possible in the countries that spent decades developing these tools and strategies. The costs of the failure of certain geographical areas and peoples to learn and adopt the values and high-growth strategies of entrepreneurial organizations is seen in the starvation of people worldwide and the starvation of the human spirit in many countries.

The role of values can never be underestimated, and the roles of the unbreakable rules that serve as the foundation of entrepreneurial organizations form the only basis of agreement

on how competitors compete, how employers treat employees and how all groups in society should be encouraged to participate in the entrepreneurial economy. Several examples from our consulting experience show how the clash of values (or lack of values) can severely limit the role of entrepreneurism in a society. Entrepreneurism requires the accurate keeping of financial books and records, honesty in dealing with co-workers, managers and subordinates, the creation of non-physically threatening, safe workplaces, the creation of value and perceived value for customers and employees alike and the inclusion of all races, cultures and ethnic groups as customers, employees, investors and vendors.

Open Books Movement to Blockchain

With the open books movement from the 1990’s to blockchain in the 2020’s, the days when financial books and records can be regularly “cooked for long” will be gone without someone finding out about it and taking appropriate action against the organization. The cost and penalties of government and private litigation against organizations that allow or promote racial discrimination or physically or sexually threatening work environments is growing. Organizations with enlightened human resource policies are gaining a significant competitive advantage . With the trend to larger and larger, even global entrepreneurial organizations, multi-cultural competencies within an entrepreneurial organization are becoming the minimum standard required to achieve high-growth strategies with different populations of customers and employees and over different geographical regions.

Sustainability and ESG

Entrepreneurial organizations will fail to meet the test of sustainable high-growth strategies if they do not had excellent ESG scores and:

• pay their workers at least the applicable minimum wage

• treat women and minorities equally as other workers

• provide training and safe work environments for workers

• seek ways to produce their goods and services with a minimum of consumer

health and safety risk and environmental pollution

• contribute financially to needed projects in their communities

• promote the empowerment of employees and customers

• keep accurate financial books and records.

Michael Saylor’s emphasis on building an “institution, not a company” and his current role in being one of the largest supporters of cryptocurrency and blockchain technologies are excellent examples of how true entrepreneurs have a social responsibility that goes far beyond meeting payroll and turning out products and services that are of value to customers.

The Costs of Failure Are Growing

As governments pull safety nets, as non-profit organizations are called upon to fill a growing

gap between the entrepreneurially successful and the entrepreneurially disenfranchised

and as educational institutions fail to provide even the basics to students to teach them how to live in the 21st century, the solutions to many of the world’s problems of poverty, lack of education, pollution, peace and safety, and failures in communication are beginning to fall more and more into that sector of the economy we call the entrepreneurial sector.

Leaders of multi-national companies such as Canon have found this to be true as they begin to spread across vast territories and begin to experience first-hand the limits of governments to deal effectively with these issues. In the future, whether two or more countries go to war in the 21st century against each other, or whether a country is on one side or the other in a war

may well depend more on the relationships between the entrepreneurs of those countries than the relationships of the political establishments or political viewpoints of the countries.

Whether pollution and carbon emissions will be allowed to grow in a country or part of a country may depend more on the stance that leading businesses take to tackling the pollution problem than on some government edict against pollution. Whether the educational system will successfully do its job in creating the workers and entrepreneurs we need in the 21st century may depend more on the role that the entrepreneurial sector plays in demanding and providing schools directly for educational success than federal or state funding or local school board edicts. Whether low-income people will have adequate housing may depend more on entrepreneurs who develop new ideas for making housing cheap and reliable using cardboard compounds and other new materials and production methods, rather than on government funding for regular housing stock that is expensive to build and more expensive to maintain.

Whether mass murders, crime and drug abuse will be curbed may depend more on the ability of the entrepreneurial sector to enroll people into the system of rewards available

from and the personal demands required by the entrepreneurial sector more than it will depend on governments hiring of police to threaten drug users and criminals with the sanction of jail or criminal punishment and records.

High-growth strategies for entrepreneurial organizations addressing social problems created, fostered, tolerated, or just not resolved by early capitalism, middle-age socialism, late communism, dictatorship, and nondemocratic monarchial forms of government. The restrictions placed by entrepreneurial disenfranchisement on the human spirit, human potential and human capabilities of billions of human beings throughout the world is the true cost of failure of high-growth strategies of entrepreneurial organizations. As shown in the last section of this book, starting with your entrepreneurial organization, the one you are currently associated with in some way or the one that you will form because of reading this book and

catching the spirit, your organization can be part of the significant transformation of the world’s economic and social landscape that will take place in the early part of the 21st century.

The Hope That High-Growth Strategies Represent For The World’s Future

This is a business article about the laws of commerce and a toolkit fo businesses, non-profit organizations and educational institutions interestedin high-growth strategies. It is is premised on the idea that the laws of commerce apply to for-profit businesses, non-profit organizations and educational institutions alike. This article is also premised on the idea that the laws of commerce know no geographical boundary, favor no race or ethnic group and render useless those institutions, governments and organizations that ignore these laws.

Lester Thurow predicts, in The Future of Capitalism, that over time, the wages of all countries’ workers will even out. Capitalism’s ugly side, as Marx suggested, was the exploitation of workers. Today, in advanced capitalistic countries where workers are in short supply, wages have started to rise above their 1960s level and many workers who seek temporary or parttime

positions can accommodate that wish. However, while wage parity between countries may exist someday in the future, huge wage differentials between the US and Mexico, its neighbor and Germany and its neighbor, Poland, continue to exist – without much showing of equalization soon.

Modern economic theory has surpassed the ghosts of its past, the class struggles of Marx, the gloom and doom of Malthus who feared that the growth of food and goods could only be arithmetic (incremental) while the population grew geometrically (explosively), the industrial era when pollution controls were non-existent and worker safety not considered

important by the governing elite and the factory owners. Modern economic theory is also currently leaving behind the imperialistic era when a nation’s entrepreneurs, with the help of their own governments and the governments who sought their investment, barged into underdeveloped countries, built factories, paid dirt wages to the workers, developed and managed plants that would occasionally blow-up killing hundreds and injuring thousands

of local citizens all the while shipping goods back to the entrepreneur’s country for sale at high profits. Maybe Thurow will be correct that wage rates will become similar across nations and that living standards will similarly even out, since the great wealth being created

through high-growth strategies in entrepreneurial organizations could be the rising tide that raises all boats.

Conclusion

With the invention of Web 3 there is a new opportunity for entrepreneurism on the planet. While the rules of entrepreneurism will remain the same, the doors are no longer locked to millions of people who have ideas, energy, and those who will support them in creating value for others far in excess of the capital they spend creating and supporting their own business.