Paul W. Smith
The Entrepreneurs: The Relentless Quest for Value by Derek Lidow - A Review
Most of us think of an entrepreneur as someone who makes a lot of money for a lot of people very quickly. Entrepreneurs are justifiably a much-studied group - they have influenced us more powerfully than even governments or organized religion. The Entrepreneurs: The Relentless Quest for Value by Derek Lidow distinguishes itself from a crowded field by examining entrepreneurialism throughout recorded history, from Iceman Ötzi (c. 3250 BC) to the present. Entrepreneurs succeed by challenging the status quo and testing the limits, and there are risks involved for everyone. The historical record adds a completely new perspective to the relationship between entrepreneurs and our desire for a sustainable, equitable world.
The history of entrepreneurs is basically the history of mankind – people have been pursuing some sort of profit ever since humans began forming permanent settlements. In the Ötztal Alps in 1991, archaeologists discovered the mummified remains of what is now known as the Iceman (aka Ötzi). With him were found tools, clothing, and various medicines whose sophistication suggested he had obtained them in trade from early entrepreneur specialists.
People often took advantage of their environment – mineral deposits or other natural resources - to produce specialized goods. Balancing the self-benefit from these resources while exchanging goods to benefit others is basic to the nature of entrepreneurship. Stories of the beautiful beads of the Wadi Jilad or the copper smelters of Cabezo Jure’ illustrate how these practices came about. Before governments were sophisticated enough to take care of their citizens, people were forced to scramble and take responsibility for their own survival. Entrepreneurs filled a gap that their rules could not.
Economists don’t always agree on what constitutes an entrepreneur, but given their impact, it is important to have a working definition. Dr. Lidow visits this issue throughout the book and brings it to a crisp conclusion in the final chapter. My cousin is a fourth-generation farmer in North-Central California. The farm dates back to 1923. He took it over from his father, and now grows cherries, walnuts, and basil. Although he is an independent, self-directed businessman, that does not make him an entrepreneur. He has, however, developed new technologies for growing picking, shelling, sorting, etc. that break with tradition and have improved product yield and quality. He exchanges some of his services with neighboring growers to their mutual benefit. That makes him an entrepreneur.
The real power of entrepreneurialism comes from swarms, which rapidly scale new ventures. This made me think of smartphones – the early ones were amazing, but other entrepreneurs soon came along to capitalize on the idea, adding cameras, better cameras, and other distinguishing features to grab a piece of the business. This type of scaling has an enormous impact on the world.
Rapidly growing an entrepreneurial business requires resources, and the first evidence of venture capitalism was found chiseled into a cuneiform tablet. The port towns of 16th century England form the background for some enlightening stories about how early startups were legally organized, and the tale of the Dutch East Indies Trading Company demonstrated how the general public could also be a good source of funding for a joint-stock startup. On the other hand, John Law’s notorious failures at managing money left much of Europe wary of entrepreneurs throughout the 20th Century.
Unburdened by this history, America was an entrepreneurial place from the beginning, with fewer restrictions and a patent system to reward innovation. The management of the increasingly larger scale entrepreneurial endeavors led to a new type of organization – the corporation – which didn’t always follow the original founder’s vision. The stories of Cornelius Vanderbilt, John D. Rockefeller, J. P. Morgan, Henry Ford and, more recently, William Shockley and Jeff Bezos illustrate many of the challenges encountered by entrepreneurs along with their responses. Navigating legal restrictions, raising money, dealing with price competition, smoothing business cycles, and effectively managing large organizations were just a few of the trials they faced.
Early entrepreneurs focused on meeting people’s basic needs, but they soon recognized the market for wants, some of which were once known as “objects of astonishment”. Marketing is illustrated by the story of Josiah Wedgewood’s pottery -he was one of the first to market his premium goods in a retail store where customers could shop (and hopefully impulse buy). No one thought much about bad breath until a clever entrepreneur gave it the medical term “halitosis” and sold a version of a product once used as a medical antiseptic, known as Listerine.
Associating positive emotions with products gave rise to the hospitality industry, where people sought comfort and entertainment along with superior food and alcohol. Entrepreneur Edward Bernays leveraged his propaganda efforts during World War I to spawn the modern public relations industry, connecting certain products with good feelings and promoting the unquenchable desire for more and better things. He is responsible for making it fashionable for women to smoke.
Entrepreneurialism can produce, but it also has the capacity to destroy itself. The swarm is difficult to control, and is capable of unpredictable things, like the way scaling up the production of sugar led to the spread of slavery. Financial difficulties, deforestation, air pollution, and food safety all can be traced to entrepreneurial enterprises. Stories of food safety included a reference to adding opium to beer to make it addictive – reminiscent of the flavored, highly-addictive e-cigarettes that are currently marketed to young people.
Socially responsible entrepreneurship is the ultimate prize, but difficult to attain when entrepreneurs are by definition self-directed. Few can foresee the long-term consequences of their actions, and as some find ways to work around laws, others will follow. The Giving Pledge – notably signed by Bill Gates and Warren Buffett among others – is an example of what Andrew Carnegie had in mind – not worrying too much about the social consequences of your startup but pledging to give away at least half of the money you make to charity. Better than “break it now, fix it later” would be to estimate the future cost of entrepreneurial effort before sanctioning it.
As a former CEO of International Rectifier with a PhD in Applied Physics, Prof. Lidow is well qualified not only to put forth a thorough history of entrepreneurs, but also to highlight the lessons to be learned from their successes and failures throughout the centuries. He leaves the reader with a much clearer picture of what constitutes an entrepreneur, and what can be done to continue reaping the benefits of entrepreneurialism while minimizing the unwanted consequences. More than just an entertaining read, The Entrepreneurs: The Relentless Quest for Value is the beginning of a plan for encouraging good entrepreneurial efforts in the future.
Author Profile - Paul W. Smith - leader, educator, technologist, writer - has a lifelong interest in the countless ways that technology changes the course of our journey through life. In addition to being a regular contributor to NetworkDataPedia, he maintains the website Technology for the Journey and occasionally writes for Blogcritics. Paul has over 40 years of experience in research and advanced development for companies ranging from small startups to industry leaders. His other passion is teaching - he is a former Adjunct Professor of Mechanical Engineering at the Colorado School of Mines. Paul holds a doctorate in Applied Mechanics from the California Institute of Technology, as well as Bachelor’s and Master’s Degrees in Mechanical Engineering from the University of California, Santa Barbara.