The Spirit Of Independence;
It was only last March that President Reagan, speaking to a Wall Street crowd, made his pronouncement about the age of the entrepreneur. Like most official charistenings, it came a little late: Entrepreneurship has been a buzzword of choice for a few years. Giant corporations, bureaucracies atremble, have proclaimed their born-again entrepreneurial souls. Pundits and professors have reported and dissected the new age's Horatio Alger tales -- beginning in a garage and ending, thanks to luck and pluck, in an initial public offering.
Out beyond the cliche and hype, however, it is hard to escape the conclusion that something real is taking place. The numbers alone tell a compelling story. In 1980, according to Dun & Bradstreet Corp., 533,520 new businesses incorporated in the United States. By 1984, the figure was up to a record-breaking 634,991, with 1,748,584 in the intervening three years. Even when the paper corporations and the quick failures are weeded out, the trend is unmistakable. Along with the new businesses have come new jobs -- more than 20 million in 10 years, according to Massachusetts Institute of Technology researcher David Birch's well-massaged figures -- and new products, indeed whole new industries. Ten years ago, who would have known what to make of a new company whose chief product was, say, CMOS electrically erasable memory chips? Who would have imagined franchised legal-services clinics or a host of feisty new regional airlines?
For three months this year, as winter turned to spring, I traveled across the United States, tape recorder in hand, asking people what they thought about this age of the entrepreneur. I went wherever curiosity led me, on the road from New York to Los Angeles, from Anchorage to Miami. I stopped in Amarillo, Tex.; in Wausau, Wis.; in Boulder, Colo.; and Sterling, Ill. -- and in many, many places in between. The people I talked with were not, I confess, a wholly random sample. I wanted to hear what the chief executive officer of IBM Corp. thought about the entrepreneurial revival. (A busy man, John Akers provided me with a few remarks taped earlier, as did William Hewlett and David Packard, the founders of Hewlett Packard Co.) I wanted to visit oil raider T. Boone Pickens, and to talk with the telephone operator at Apple Computer Inc. I wanted to see what was becoming of the South Side of Chicago, where the smokestacks have been stilled, as well as Silicon Valley. I wondered if Mary Kay Ash, who started her $277.5-million cosmetics giant in 1963, thought it was easier for a woman to start her own business today. I wanted to meet a man who had bet his life savings on a franchise of the now-bankrupt Pizza Time Theatres Inc. restaurant chain, once home of Chuck E. Cheese.
I wanted to listen. Not to analyze, and not to quantify. I hoped, through the voices of the men and women involved, to capture a portrait of the current entrepreneurial moment. I say current, because entrepreneurship is nothing new. It is as American as W. K. Kellogg's original Battle Creek Toasted Corn Flake Co., or the once-struggling Computing-Tabulating-Recording Co., which a man named Thomas Watson Sr. renamed International Business Machines. It is as familiar as Henry Ford's automobiles or Ray Kroc's hamburger stands -- the rights to which Kroc bought from Maurice and Richard McDonald for $2.7 million almost 25 years ago. In the 1890s, and again in the 1920s, there was the same explosion in start-ups, in new technologies, and in new products that we are seeing today. The fractional-horsepower electric motor was as radical a technology in its day as the micro-processor, and Ford's assembly line at Highland Park, Mich., as novel an organizing principle as any hightech skunkworks along Massachusetts Route 128.
But the current entrepreneurial boom is different, too. It is bigger. And the players have changed. They are still the tinkerers, the malcontents, the dreamers with good ideas and the stubbornness to see them through. These days, however, an entrepreneur is likely to have a business-school education or a big-corporation track record that would have been unheard of in the past. There is a good chance, too, that the founder of the business down the street isn't white -- and that she wasn't born in the United States.
The first part of my chronicle is simply a sampling of these entrepreneurial stories, along with some thoughts from the experts on how durable -- and how widespread -- the phenomenon may be. From there the questions grow more complex. Is the entrepreneurial revival only, or mainly, a creature of technology, an offspring of the digital computer -- and is Silicon Valley, warts and all, a vision of tomorrow's America? Or is it something hardier, a trend that reflects people's search for an independent life and livelihood beyond the world of big organizations? To what extent is entrepreneurship an answer to the dramatic dislocations of today's economy? What is its promise?
Such questions are grandiose, and the fact that the following sections address them doesn't mean I have answers. Most of the entrepreneurs I met, in any case, were too busy trying to build something to think of themselves as part of a larger phenomenon, let alone as creators of an ill-defined new age.When they reflected, if they had time to reflect at all, they were more likely to marvel at the twists of fate that led them, almost by chance, to where they are today.
"Who can describe constant fear"? -- Michael Levy
Michael Levy publishes Texas Monthly magazine.
I went to a career counselor, and he gave me a No. 2 pencil and told me to fill out this questionnaire. They gave me two choices after evaluating the questionnaire: One was raising chickens, and the other was starting a magazine called Texas Monthly -- and I don't like chickens.
When I was asked to give a speech on being a young entrepreneur, I got up and said, "My name is Mike Levy and I'm 38 years old. I started Texas Monthly 12 years ago, when I was 26. And at that time, I was tall and had long, curly blond hair. Now I'm bald and two-and-a-half inches shorter."
A friend of mine who's a radio commentator in Dallas likes to say that people who remember the good old days have bad memories. Basically, he's right. I can remember starting Texas Monthly, but who can describe constant fear? The fear not just of economic loss, but the fear of failure. The biggest reason more people don't try to take that entrepreneurial risk is that they can't get over the hurdle of, "God, I might fail."
"There I stand, a woman 57 years old -- where do I go from there?" -- Alicia Paige
Alicia Paige had spent most of her life as a small-town librarian. Six years ago, she founded a business to automate library catalogs; today that company, Computer Engineering Associates Inc., does roughly $6 million in annual sales. Paige works out of a cluttered office in a courtyard across the street from the town hall of tiny Avon, Mass., not far from Boston.
Everything collapsed for me in one year, 1978. My sister died in October, my divorce became final in November, and I had to sell my home in December. So, at that point, what do you do? There I stand, a woman 57 years old -- where do I go from there?
When I was in the Randolph Library, we used to have what they called the interlibrary loan service; sometimes it would take six months to get the book that you wanted yesterday. So I said, now, wouldn't it be interesting if I could put all of the South Shore library holdings on one database, and put a CRT in each library, and make the librarians feel like they're big computer operators? They could call up for a book by author, title, or subject, and they would know immediately where the book was, what library it was in.
I talked with my brothers, and they said, Well, go ahead and try. I said, Yeah, but suppose the business fails? What am I going to do? Where am I going to live? My brothers said, You've always got us, you can come and live with us until you get back on your feet.
I sold my house for the start-up money, and I knew that it was all I had. If the business did not prosper and bring in money, then I would eventually have to go bankrupt. I used to wake up in the middle of the night -- you know, I'd be sound asleep, and all of a sudden, I'd wake up, and I'd sit straight up in bed, and say, Am I crazy?
I never thought of just a small business. I said, no, if I'm going to start a business, I might as well go big. Like IBM. I'd like to keep going so I can say I have $1 billion in orders. I would love to say that! I don't ever expect to, but I'm looking that way. I never thought that we would do close to $6 million in business. But we did.
"The first thing you do is buy crayons." -- Tom Barnidge
Tom Barnidge, 59, is the founder and CEO of Agri-Resources, selling $1.5 million in cattle and hog feeding equipment throughout the Midwest. Before going out on his own, Barnidge worked in the chow division of the Ralston Purina Co. for 30 years, climbing up the ladder from a packer to a division vice-president.
Before I left, it was conceivable that, with some degree of luck and timing, I would have made corporate officer. But when it became a matter of whom you're to please rather than what you're supposed to do -- which is really what it was -- I decided then, who wants it? There's a degree of honesty and integrity in most of us, and I couldn't honestly come back that last year at nighttime and say that I'd done anything I really thought was productive.
When I went to work for myself, the first thing I wanted to put together was a sales-promotion package. The way I would've handled that back at Purina is to call in one of the copywriters and someone from the art department and tell them what I wanted. They would've done it. But when you're a two- or three-man organization, the first thing you do is buy crayons. Then you buy a pad. And then you do it.
It's a pleasure not to have 14 different people who have to sign and approve what you do. You don't have to please anyone, you don't have to answer those damn reports. But of course, if you get 14 people to do it, then there are 15 of you who make a mistake. In this company, if you make a mistake, there's no one but yourself to blame.
"All of a sudden, this bunch of friends turned into a company." -- Bill Epifanio
Harvard-educated Bill Epifanio, age 26, followed a traditional path after graduation -- he became a consultant with the firm of McKinsey & Co. While there, he researched the histories of America's most successful large corporations for Allan Kennedy's ground-breaking book, Corporate Cultures. In August 1982, he founded DynaMedix Software Corp. with five of his friends from New York City. The company projects 1985 sales of several million dollars.
I had done quite a bit of work researching a Procter & Gamble story and an IBM story, and the basic takehome message I gained from doing that work was realizing that, my God, the guy, Thomas Watson, was a regular human being. William Procter and James Gamble were real people. And they created giants. They were faced with problems, they had to meet payrolls and make decisions, but the point was seeing how they started. It's a very human process. I realized that it was something within my reach.
I felt, gee, if they could do it, why don't I give it a try? So we formed a corporation, and all of a sudden, this bunch of friends in a room turned into a company. The funny thing was, we thought things were going to be a lot simpler. We figured we'd just write a program and sell a few copies, make $40,000 apiece and have fun, and that was it. We didn't start off planning to try to take over the software world. Now we've got visions of the next Lotus dancing in our heads.
"Some of them are run the way I run my closet, for chrissakes. No wonder they're going out of business." -- Reid Gearhart
Reid Gearhart is editor of Dun & Bradstreet Looks at Business, and compiles the index of business failures for Dun & Bradstreet.
In 1983, the number of failures reached the highest level in history, with the exception of 1932, at the peak of the Great Depression. There were 31,334 business failures in '83.
Our rule of thumb is that a new business basically has a 50/50 chance of surviving past its fifth year. It's the simple things. Is the business managed properly? Do they have a business plan? I've been to many small businesses, and some of them are run the way I run my closet, for chrissakes. No wonder they're going out of business. We used to break out the causes of failure: 0.3% attributed to fraud; 0.6% to neglect; 1.3% to disaster; 9.8%, lack of managerial experience; 9.9%, lack of experience in the line; 23.8%, unbalanced experience; 54.3%, incompetence.
"I think you want to beware of declaring sea changes in our national history on the basis of five years of evidence." -- William S. Rukeyser
I spoke with William Rukeyser, the managing editor of Fortune, just as he was preparing that magazine's annual listing of the 500 largest industrial corporations in America.
Putting together the Fortune 500 is an annual reminder that yesterday's little entrepreneurial companies -- Apple Computer, Advanced Micro Devices, and so forth -- are now very much part of what used to be thought of as the old-line industries of our country. This period has been a time of the fastest growth in recent American history and the greatest creation of jobs. There's just no question that the outcropping of new businesses and new products is a sign of intense health in American society.
Still, I think you want to beware of declaring sea changes in our national history on the basis of five years of evidence. I don't expect any of those things to go away, but neither do I expect all companies to be small, all workplaces to be garages, and all millionaires to be under 25.
"I wanted the paper to say, 'Hey, new people are doing it all over the place." -- Mike Russell
Mike Russell publishes The Kansas City Business Journal, concentrating on small business and the entrepreneur.
I had no intention of starting a newspaper. Then a fellow came to see me and said, "Kansas City needs a business journal." I said, "What the hell is a business journal?" So he gave me a year's supply of The St. Louis Business Journal, and I sat down one weekend and read them. And when I got through I said, "God, how exciting that town is -- and I thought it was just a decaying city."
Kansas City has historically had a real negative attitude about itself. People would stand around at cocktail parties and say things like, "Well, you see, Charlie's been trying to do so and so, and he'll be lucky if he doesn't fall on his butt." All that negative bullshit. Well, I live here; I knew it wasn't so. And I had begun to get a sense of the emerging younger businessman who wasn't going to wait his turn anymore. That's what's happening in this country today, nobody's waiting their turn. The old establishments, the establishment companies, all that's passe, although they don't know it yet. I wanted the paper to say, "Hey, new people are doing it all over the place. And they're winning."
When we first started publishing, people would say to me, "Boy, this is great, but what are you going to write about next week?" You could easily do a 200-page weekly business journal here, if you tried to cover everything that needs to be covered.
"Entrepreneurs used to be next in line to pirates and outlaws. Now they are the new role models." -- Steven Brandt
Steven Brandt, a Stanford Graduate School of Business professor, is the author of Entrepreneuring in Established Companies.
Entrepreneurs in general used to be next in line to pirates and outlaws. But that's no longer the case; they are center stage, the new role models. That's true even in a place like Stanford Business School.
I think entrepreneurs are different from what they used to be, however. The old notion of the entrepreneur in his hair shirt, rolling the dice and mortgaging the house, is like talking about cowboys being John Wayne. It is just not so. Out here on the coast, they are a relatively professional class. They know cash flow, they understand marketing channels and market segmentation. But it's not just happening in Silicon Valley. The fact is, you can't name a business anywhere that can't be improved with some ingenuity and some technology, whether it is flower shops or garages.
"I figured in this country, everybody is running businesses." -- Youa Her
Youa Her hardly owns your average grocery store. Asianfood, such as sweet rice and bamboo shoots, fills the shelves of Zuag's Gift and Grocery Shop, and the traditional art stitchery of her fellow Hmong tribeswomen lines the walls. She fled the fighting in Laos in 1975, and a refugee-relief group found her a home in chilly Wausau, Wis. Then she, too, joined the age of the entrepreneur. She picked me up at the airport in her van, and we talked in the back room of the store.
I figured that in this country, everybody is running businesses. We can go without money for a little bit, but not without food. That is what made me come to start a grocery business.
Second, I was thinking of arts. I thought of the Hmong women doing needlework, helping them sell a little bit. If you don't do this, what is going to happen? Maybe 5 years, 10 years in the future, our children will have nothing to look at.
I didn't know what to do, so I went to the Chamber of Commerce and got some little brochures to read, but then it was too much and too confusing. I thought, why don't I do it my way instead? I went to St. Paul, Minn., and talked to the people at the Hmong food store there. I said, You loan me food at 10% less than retail and I'll pay you back; but your money can move faster because you sell in Wausau and St. Paul. They loaned the merchandise, about $11,000 worth, which I sold in only three months, and I covered all $11,000 back to them. Now all the merchandise I have left in the shelves is my profit.
The fun part is that everyone said, "You must be a genius!" "How do you do this?" "It seems so difficult." And I say, no, it's simple. The women enjoy bringing their things here, and the community enjoys getting the food. That is part of the fun. The community put me in the papers and said that even though I started a little tiny business like this, I decorated their town.