All Commentary
Friday, May 11, 2018

Graduates: So You Want to be an Entrepreneur?

Entrepreneurship is a noble calling. Prepare yourself accordingly.

Graduation season is once again upon us. A new chapter of life is about to begin for members of the Class of 2018. With the conclusion of your formal schooling—whether it’s high school or college—you can now put your mind and talents to work in the marketplace. I stress at the outset here that only your formal schooling is behind you; if you really intend to succeed, you have a lifetime of learning still ahead of you. (For more, see “Killer Career Advice for College Graduates.”)

This essay is addressed to those graduates who seek to become entrepreneurs. Sir Keith Joseph, who served in British Prime Minister Margaret Thatcher’s Cabinet, described the entrepreneur as

the person who seeks to identify what consumers, at home or abroad or both, want and would be willing to buy at a profitable price. These entrepreneurs are the job-creators because it is they who gather the men and women, the material, the machinery, and the money to turn the vision of a market into a reality.”

That’s not a bad description, but there’s more to it than that.

You should know that starting a business is a noble endeavor, fraught with importance to everyone in a free society who favors economic progress and opportunity. How important? Put it this way: A society without entrepreneurs is a society of stagnation and decline, of monotony and impoverishment, of bureaucrats and paperwork. Why? Because entrepreneurs are consummate change agents.

Why Do You Want to Be an Entrepreneur?

I must ask you, “Why do you want to be an entrepreneur?” When I once posed that question as a university professor to one of my classes, half the students said (in one form or another), “Because I want to make a lot of money.”

My response to them was,

If that’s your primary motivation, then you are among those least likely to succeed as entrepreneurs. You’ve got the cart before the horse. In your mind, you’re already spending wealth you haven’t yet figured out how to create. You may not make it through the likely lean times. You’ll recoil rather than rebound from your early failures. You need to either ditch that thinking or pick another line of work.”

Entrepreneurship is often presented these days as if it were a synonym for “business.” It’s not. And success at it requires a particular mindset. It is very often a long-term project seeded with exploding landmines along the way.

If you wanted to learn business while in school, you should have majored in management. If you wanted to learn entrepreneurship, you’d be better off today if you had taken some good psychology courses. If you now need to understand the psychology you didn’t learn, to refocus to be a successful entrepreneur, I suggest you commence a crash course in self-education. Cultivate your powers of observation and alertness. Put a premium on developing emotional intelligence. Think less of yourself and more about future customers, their needs, and the ways they think. That’s just for starters.

It’s Not Something You Learn at School

“We need to fund the teaching of entrepreneurship at universities!” some well-intentioned people say. I’m not sure that’s the best way to encourage entrepreneurship simply because the typical academic environment looks nothing at all like it, a fact well depicted in this clip from the movie Ghostbusters. Entrepreneurs don’t have tenure, and they’re not paid to pontificate.

There’s nothing routine or mundane about entrepreneurship. Imagination and courage are prerequisites. It’s an adventure into the unknown. As I’ve written here, it’s like the voyage of Joshua Slocum, the first person to sail alone around the world. Tom Preston-Werner, co-founder of the web-based hosting service Github, expressed it this way: “When I’m old and dying, I plan to look back on my life and say ‘Wow, that was an adventure!’ not ‘Wow, I sure felt safe!’”

If a business is a campfire, then management and accounting are the sticks. The entrepreneurship is the initial strike of the match.

Sadly, what’s often presented these days as “entrepreneurship” is not that at all. It’s mostly management, and there’s a huge difference. Arguably, both are indispensable to business success, but they are manifestly not the same thing.

Management’s focus is mostly on handling day-to-day operations, from human resources and staffing to execution of strategic plans. A manager’s attention is absorbed by the present. It aims at reducing risk. The entrepreneur is more visionary and future-oriented and, hence, more accepting of risk. (The best entrepreneurs actually are good at rewarding their managers for being less managerial and more entrepreneurial.)

Another vital business function—that of the accountant—is unlike that of either the entrepreneur or the manager. It’s oriented not so much to the future or the present as it is to the past (last year’s costs and revenues, for example).

Accounting can be taught, and that’s really the only way it can be imparted. As a college student, I found it to be my most challenging class—tedious and uninspiring, no matter how important I knew it was. Management can also be taught, though the more entrepreneur-like it is, the less it lends itself to standard classroom pedagogy.

The jury may still be out, however, on whether you can be “taught” entrepreneurship. I’m of the school of thought that believes it’s a mysterious inner spark. It isn’t so much activated by formal instruction in the nuts and bolts of organizational administration as it is drawn out, encouraged, inspired, given room to grow. You don’t get it by absorbing a large body of facts and figures; it’s more like a set of attitudes and character traits. If a business is a campfire, then management and accounting are the sticks. The entrepreneurship is the initial strike of the match.

What Entrepreneurship Needs

Entrepreneurship can be rewarded, but it can also be de-spirited and crushed. Much depends on the incentives and disincentives in society. For instance, there are lots of managers and accountants today in North Korea and Cuba but not many entrepreneurs. The systems there communicate a powerful message of disincentive, summarized by this statement, “If you build it, we will come after you. We’ll take it from you, vilify you, and declare that you didn’t build that.”

Now, back to the question I raised in my third paragraph, “Why do you want to be an entrepreneur?”

The students I thought were most likely to succeed were the ones who gave answers like these:

  • “I get a rush by creating things and solving problems.”
  • “While others see risks in opportunity, I see opportunities in risk.”
  • “I find it tremendously fulfilling to make others happy and to make their lives better.”
  • “I am decisive, future-focused, and action-oriented.”
  • “I love to break convention and blaze new trails.”
  • “I want to be the person who conquers all obstacles and gets to the top of the mountain.”
  • “I can be patient and long-suffering as long as I know I’m pursuing my own vision.”
  • “It’s accomplishment I want; the money is secondary. I understand that wealth comes from wealth creation, and I love creating it even more than I love consuming it.”

I believe that answers like those indicate a strong chance of entrepreneurial success. They fit the psychological profile of an entrepreneur with good potential.

Sometimes we think of the entrepreneur as “the idea guy,” but that’s only one-half of the equation. Lots of people have ideas, but they lack the gumption to act. “It’s not about ideas,” says Scott Belsky, co-founder of the consulting firm Behance. “It’s about making ideas happen.”

You Need Alertness, Courage, and a Willingness to Fail

I’ll never forget the first time I heard the brilliant Austrian School economist Dr. Israel Kirzner speak on his specialty, entrepreneurship. It was at a FEE seminar in the summer of 1977. He asked the audience to imagine a blizzard of ten-dollar bills flying just overhead. Each bill represented an opportunity. In free societies, the blizzard is raging 24/7. Most people, Professor Kirzner said, never look up and never see the bills whizzing by. A few who raise their heads are content to observe and do little else. It’s the entrepreneur, he pointed out, who both notices the bills and takes the initiative to raise a hand and grab one.

It’s not a perfect analogy, Kirzner cautioned, because in real life we don’t have such easy access to ten-dollar bills. But the point was entrepreneurs both notice and act. And that’s what makes them special. They are alert. In his classic book, Competition and Entrepreneurship, Kirzner elaborates:

There is a certain temptation to conceive of the entrepreneur as one who simply knows more accurately than others do where resources can be purchased most cheaply, where products can be sold at the highest prices, what technological or other innovations will prove most fruitful, which assets can be expected to increase most in value, and so on. … I speak of the essentially entrepreneurial element in human action in terms of alertness to information, rather than of its possession. … Ultimately, then, the kind of ‘knowledge’ required for entrepreneurship is ‘knowing where to look for knowledge’ rather than knowledge of substantive market information. The word which captures most closely this kind of ‘knowledge’ seems to be alertness.”

Occasionally an entrepreneur gets everything right, right from the start. But that’s uncommon enough to be the exception, not the rule. Most are in for a tough slog and emerge all the better for it. It means hard work and long hours. Entrepreneurs don’t give up. They learn from their mistakes. In effect, they allow failure to build character. “I never took a day off in my twenties. Not one!” said Microsoft’s Bill Gates. Jeff Bezos of Amazon explained, “I knew that if I failed I wouldn’t regret that, but I knew the one thing I might regret is not trying.” More than a century before, Thomas Edison famously said, “I have not failed. I’ve just found 10,000 ways that won’t work.”

Many of the entrepreneurial men and women I’ve known or have written about didn’t get their smarts from the classroom. The great majority of them began with almost nothing in their pockets.

They knew a ten-dollar bill when they saw one, even if it flew by them a foot over their heads.

Norval Morey never made it past the first few days of seventh grade, then went on to found an international company and earn an honorary doctorate from Harvard. Richard Ransom of Hickory Farms started out driving a vegetable truck around rural Ohio until he made a fortune by offering free samples of meat and cheese in attractive stores. Elijah McCoy, son of former slaves, solved a railroad problem, earned 57 patents and built a successful manufacturing company. Berry Gordy started Motown Records in his tiny Detroit home. Walt Disney failed multiple times and took risks that few others had the courage to assume, but he learned from every detour on the road to success. And Madam C. J. Walker became America’s first self-made, black female millionaire by venturing boldly into a new market for African-American hair care products.

I don’t think any of them were ever taught to be entrepreneurs. But I do know that they shared some key character traits that fit the entrepreneurial profile. They were daring, imaginative, visionary, intuitive, and alert. They enjoyed building and creating and solving problems. They possessed presence, even charisma. They knew a ten-dollar bill when they saw one, even if it flew by them a foot over their heads.

If It Can Be Taught, It Might Be Like This

I’ve never taught entrepreneurship. I’ve spent far more time observing it, admiring it and defending it than actually doing it. I don’t pretend to have all the answers to the question, “How do we get more of it?” I’m inclined to believe, as entrepreneur Jim Rohn put it, that “Formal education will make you a living; self-education will make you a fortune.”

Why begin a course on entrepreneurship with a focus on character?

But if you were to ask me what I would do if given the challenging assignment of teaching it, here’s what I think I would do.

I would start by emphasizing the importance of character, which I explained in my book, Are We Good Enough for Liberty? You can read it now or wait a month, then visit FEE’s online store and order the 2nd edition containing a brand-new companion essay, “Liberty as a Life Philosophy.”

Why begin a course on entrepreneurship with a focus on character? One reason is that solid character will always serve you well and can more than make up for any shortcomings in other traits. A second reason is that honesty, integrity, humility, persistence, introspection, responsibility, patience, courage, gratitude, and optimism make the difference between being excellent and being average at anything.

For inspiration, I would make heavy use of real stories of real entrepreneurs, in person and on video. At FEE, we’re beginning to create a stream of new videos that do exactly that. You’ll find them here. And if you’re ready for an educational deep dive, we have an 8-module online course called The Economics of Entrepreneurship that is rich with readings, videos, activities, and other resources.

For course texts, I would choose these books:

Character is Destiny: The Power of Personal Ethics in Everyday Life by Russell Gough. This book shows, as its Amazon description explains, “how to overcome the most formidable obstacle to an ethical life: ourselves. The choices we make, and the manner in which we make them, illuminate the paths our lives will take.”

Becoming Sherlock: The Power of Observation and Deduction by Stefan Cain. It instructs readers on utilizing and improving their observational skills, intuition, awareness, creativity, and critical thinking. It’s all about alertness, or at least as much about it as can be taught.

Do you have what it takes to be an entrepreneur? Time will tell us the answer to that.

The Charisma Myth: Mastering the Art of Personal Magnetism by Olivia Fox Cabane. The myth that this book effectively “busts” is that charisma something you’re either born with or not. It’s one the best self-improvement books I’ve ever read, along with Dale Carnegie’s classic, How to Win Friends and Influence People.

Good Profit: How Creating Value for Others Built One of the World’s Most Successful Companies by Charles G. Koch. Quite often the best teachers are those who’ve accomplished in practice what they’re teaching in theory. Koch built one of the world’s biggest firms by infusing within the company the entrepreneurial qualities he practiced himself.

Disciplined Entrepreneurship: 24 Steps to a Successful Startup by Bill Aulett. This book bridges the gaps between entrepreneurship and management. Readers learn how to conquer many of the challenges every entrepreneur faces.

Billion Dollar Lessons: What You Can Learn from the Most Inexcusable Business Failures of the Last 25 Years by Paul B. Carroll and Chunka Mui. There’s as much to learn from failure as there is from success.

Emotional Intelligence: Why It Can Matter More than IQ by Daniel Goleman or Emotional Intelligence 2.0 by Travis Bradberry, Jean Greaves, and Patrick M. Lencioni. Or preferably, both. Entrepreneurs tend to possess EQ by the bushels. Learning what it is, and how to enhance whatever of it you’ve got, can improve anyone’s entrepreneurial prospects.

Do you have what it takes to be an entrepreneur? Time will tell us the answer to that, but for the sake of us all, I hope and pray you do.

  • Lawrence W. Reed is FEE's President Emeritus, having previously served for nearly 11 years as FEE’s president (2008-2019). He is also FEE's Humphreys Family Senior Fellow and Ron Manners Global Ambassador for Liberty. His Facebook page is here and his personal website is