What Is An Entrepreneur?


It’s embarrassing. We, the people who claim to be experts on entrepreneurship, cannot agree on the definition of who really counts as an entrepreneur.

 

Why does your definition of entrepreneur matter? Because it influences the decisions you make and affects the outcomes you achieve. If you adopt the wrong definition of anything you value highly you can go badly astray. Entrepreneurs who lack a clear definition of what they’re doing make inconsistent decisions, wasting time and money, and risk the needless destruction of their businesses.

 

There are plenty of definitions to choose from. In the course of researching two books on entrepreneurship, I encountered close to a hundred definitions of “entrepreneur.” Some definitions are based on the performance of the business. Accordingly, you are an entrepreneur if your business achieves some minimum level of revenue, profit, growth, or job creation, and so on.

Some definitions are personal. According to these definitions, entrepreneurs are independent, creative, have a high tolerance for risk, like to be in control, seek personal satisfaction, and the like.

 

Or consider what I would call the Silicon Valley model—use other people’s money, shoot for the moon, fail fast until you perfect your idea, depend on network effects, and disrupt entire industries. Think here of Peter Thiel and Elon Musk founding PayPal, Brian Chesky and Joe Gebbia with Airbnb, or Travis Kalanick with Uber. Go big or go home.

Such audacious dreamers have made the US the world leader in enterprise software, semiconductors, social media, biotech, and ecommerce. But there are only a handful of them—less than 0.1% of all entrepreneurs. And virtually all of them have the kind of previous experience and highly developed, relevant skill sets that convince venture capitalists to fund their high-stakes, winner-take-all, invest-as-much-as-you-can-as-fast-as-you-can-build-it-out business ideas.

 

Perhaps the most destructive definition—often found in conjunction with the Silicon Valley model—is the one favored by breathless journalists and other myth-makers. In their telling, entrepreneurs are born geniuses whose innate characteristics win out against all odds, who prove all the naysayers wrong, and disrupt entire industries. You can often spot this definition in stories about Henry Ford, Steve Jobs, Bill Gates, Mark Zuckerberg, and the like. It implies that entrepreneurs like these—young when they succeeded, untrained, and inexperienced—are simply born with special traits. (The dark side of this narrative sees genius brought down by hubris—think Travis Kalanick here, too. And given Facebook’s recent troubles, you can see the beginnings of Mark Zuckerberg being fitted for the role by journalists as eager to moralize as to myth-make.)

 

No research shows that you must possess special genetic material to be an entrepreneur. And the boy-genius narrative (and its heroes are almost always males) discourages potential entrepreneurs in communities where such role models may be lacking. Describing entrepreneurs as people with extraordinary innate traits is particularly harmful to aspiring women and minority entrepreneurs and is an insidious form of discrimination.

 

Further, the genius story and the innate traits that are said to go with it don’t fit some of the most successful entrepreneurs of all time. Sam Walton was no overnight success. He spent years patiently learning the retail business, first as a Ben Franklin store franchisee and subsequently as the owner of his own store and, later, additional stores. As for creativity, he didn’t come up with an earthshaking, once in a lifetime innovation; he simply made an existing business better and better. He borrowed ideas wherever he could find them and was proud of it. Further, he had no tolerance for spectacular risk. Instead he conducted controlled experiments, week after week, year after year, learning what worked before he rolled it out across all of his stores, always taking care to avoid losses.

 

The truth is that most successful entrepreneurs start small and grow big only after they have demonstrated they could make money. These are what I call “bedrock” entrepreneurs.

 

What defines them?

  • They know that innovation is not always about doing something completely new but about doing something that competitors don’t do well.
  • They seek to minimize risk through careful, controlled experiments designed to determine what a customer might actually pay for.
  • Because they largely fund their businesses with their own money and that of family and friends (and sometimes through bank loans and equipment leases) they avoid failure at all costs.
  • They proceed from one small victory to the next, doing things—often very simple things—that competitors don’t do well.
  • They confirm profitability at each stage of growth, methodically growing their businesses over the long haul, sometimes to great size after years of patient toil.
  • They typically measure success in highly personal terms—pleasing a disapproving parent, gaining community respect, turning an avocation into a vocation, and many others.

 

Unfortunately, many people who might otherwise start value-creating enterprises are discouraged by the go-big-or-go-home model. They know they don’t have access to big pools of capital; they lack a breakthrough idea; they aren’t in Silicon Valley; they’re not tech savvy, and they have no delusions about being geniuses. Or the go-big model tempts them to pursue a course that is beyond their skills, inappropriate for an earthbound business, or both. They not only fail fast; their failure is final. All because of faulty definitions of “entrepreneur.”

 

“If you wish to converse with me,” said Voltaire, “define your terms.” It’s as good advice for entrepreneurs as it is for philosophers.