A vacationing American businessman standing on the pier of a quaint coastal fishing village in southern Mexico watched as a small boat with just one young Mexican fisherman pulled into the dock. Inside the small boat were several large yellowfin tuna. Enjoying the warmth of the early afternoon sun, the American complimented the Mexican on the quality of his fish.
“How long did it take you to catch them?” the American casually asked.
“Oh, a few hours,” the Mexican fisherman replied.
“Why don’t you stay out longer and catch more fish?” the American businessman then asked.
The Mexican warmly replied, “With this I have more than enough to support my family’s needs.”
The businessman then became serious, “But what do you do with the rest of your time?”
Responding with a smile, the Mexican fisherman answered, “I sleep late, play with my children, watch ballgames, and take siesta with my wife. Sometimes in the evenings I take a stroll into the village to see my friends, play the guitar, sing a few songs…”
The American businessman impatiently interrupted, “Look, I have an MBA from Harvard, and I can help you to be more profitable. You can start by fishing several hours longer every day. You can then sell the extra fish you catch. With the extra money, you can buy a bigger boat. With the additional income that larger boat will bring, before long you can buy a second boat, then a third one, and so on, until you have an entire fleet of fishing boats.”
Proud of his own sharp thinking, he excitedly elaborated a grand scheme which could bring even bigger profits, “Then, instead of selling your catch to a middleman you’ll be able to sell your fish directly to the processor, or even open your own cannery. Eventually, you could control the product, processing and distribution. You could leave this tiny coastal village and move to Mexico City, or possibly even Los Angeles or New York City, where you could even further expand your enterprise.”
Having never thought of such things, the Mexican fisherman asked, “But how long will all this take?”
After a rapid mental calculation, the Harvard MBA pronounced, “Probably about 15-20 years, maybe less if you work really hard.”
“And then what, señor?” asked the fisherman.
“Why, that’s the best part!” answered the businessman with a laugh. “When the time is right, you would sell your company stock to the public and become very rich. You would make millions.”
“Millions? Really? What would I do with it all?” asked the young fisherman in disbelief.
The businessman boasted, “Then you could happily retire with all the money you’ve made. You could move to a quaint coastal fishing village where you could sleep late, play with your grandchildren, watch ballgames, and take siesta with your wife. You could stroll to the village in the evenings where you could play the guitar and sing with your friends all you want.”
This narrative has really generated a fresh perspective for me. Are we really as lost as the Harvard MBA in this story? Is this down on the earth, sustainable life style of Mexican fisherman something, which can be neglected, even despised. One can ask, why should anybody waste his life to make money for venture capitalist and investment bankers? Where do our best brains and talent find their passion? Am I insane myself for even wondering this? The answer for the last question is – fortunately not – so I’ll keep on advocating!
It’s strange that when some phenomenon reaches its peak, like startup culture now, you can feel it intuitively. Somehow, I believe that is because of synchronicity, you start to find signals, which strenghten your ideas. And indeed it’s happening now. I have started to spot stories, links and blogs, where the message is the same, we are sick and tired of startup hype, accelerator programs and endless pitching competitions. My intuition is that the start-up hype will fade away and give space for the real entrepreneurship, where the focus is in solving someone’s real problems. So hopefully we are getting back to basics, where the interaction is happening between the entrepreneur and the customer.
And indeed it’s happening now. I have started to spot stories, links and blogs, where the message is the same, we are sick and tired of startup hype, accelerator programs and endless pitching competitions
After a serendipitous encounter with Kalevi Kurronen in the opening party of CoMalski few weeks ago, I started the discovery of this old/new approach towards doing business. I would say it is the ancient way of conducting business, where the scene is filled with a supplier, a customer and a product or service which really helps the customer to satisfy his needs. So, it’s a pretty far cry from the one, three and five min pitch talks with potential investors, which we can see dominating the contemporary startup discussions. Who needs the mobile app number 211.098 anyway? Or the game application, where the winner is the one, who kills and destroys most effectively ?
The advocates of this old but refreshed approach are Saras Saravathy, a professor at the University of Virginia’s Darden School of Business and Stuart Read from IMD Business School Switzerland, and they have named it as effectual entrepreneurship or expert entrepreneurship. I have called the same kind of approach as life-style entrepreneurship, being an advocate of that myself. Effectuation in entrepreneurship context follows five simple principles:
1) Bird in hand - means
When expert entrepreneurs set out to build a new venture, they start with their means: who I am, what I know, and whom I know. Then, the entrepreneurs imagine possibilities that originate from their means.
2) Affordable Loss Principle
Expert entrepreneurs limit risk by understanding what they can afford to lose at each step, instead of seeking large all-or- nothing opportunities. They choose goals and actions where there is upside even if the downside ends up happening.
3) Grazy Quilt Principle – partnerships
Expert entrepreneurs build partnerships with self-selecting stakeholders. By obtaining pre-commitments from these key partners early on in the venture, experts reduce uncertainty and co-create the new market with its interested participants
4) Lemonade Principle – leverage contingencies
Expert entrepreneurs invite the surprise factor. Instead of making “what-if” scenarios to deal with worst-case scenarios, experts interpret “bad” news and surprises as potential clues to create new markets.
5) Pilot in the Plane Principle – control vs. predict
By focusing on activities within their control, expert entrepreneurs know their actions will result in the desired outcomes. An effectual worldview is rooted in the belief that the future is neither found nor predicted, but rather made.
The real effectual entrepreneurs are valuing passion before profit. That applies to their decisions every where in the life, not only when running their business. It’s the leading principle in their career choices – you’ll hardly find anybody with this attitude working for salary in big corporations. They are also the ones, who have the ability to cease the moment and take advantage of carpe diem magic. If they are surprisingly delivered with lemons, they make lemonade. So their whole lifestyle follows the principle well descibed by Nassim Taleb ”Maximize serendipity around you”.
As a Mexican fisherman, would you follow the advise of this Harvard MBA? As a potential entrepreneur, would you like to share your efforts and profits with someone, who is not passionate about what you are doing? Would you like to take along people, who will keep controlling that you follow a certain business plan and the chance of making radical changes – pivoting your activity the way you feel – will require endless negotiations with your investors.
As a potential entrepreneur, would you like to share your efforts and profits with someone, who is not passionate about what you are doing?
My advise is, don’t compromize your life running after potential investors, use instead the principles of effectual entrepreneurship, find key customers who have a real need and keep on working hard with them. Your business will be on a sustainable basis and believe me, you’ll find time to go fishing, playing guitar and spending time with your family also during your career as an entrepreneur.
More about effectuation in this Inc article.