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Editor's Letter: The 2 Paths of Entrepreneurial Success

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In classic economics, there ought to be no such thing as an entrepreneur. If you assume that everyone acts rationally, it’s hard to find room in your model for someone who would launch an enterprise with a 5 percent chance of achieving success and a 100 percent chance of achieving exhaustion. To put it another way: Entrepreneurs are to economics what bumblebees are to physics (in the popular myth): indispensable to the ecosystem but also, somehow, impossible.

That’s why I was glad to be introduced recently to Amar Bhide’s great book, The Origin and
Evolution of New Businesses. Using data from the Inc. 500 and interviews with the honorees, Bhide analyzes in economic terms what distinguishes entrepreneurs who achieve outstanding success from the majority who don’t. It’s a fundamental question--one we at Inc. wrestle with in just about every single story.

In Bhide’s view, two economic factors explain the distinction. The first is uncertainty--the dynamic condition that simultaneously fosters great risk and potential for great reward. This is the path most people see when they picture a successful start-up: A new company enters an industry battered by change, finds a breach in an incumbent’s crumbling walls, and plants a flag. That’s one reason technology firms, the ultimate disrupters, tend to be overrepresented on the Inc. 500.

But most successful entrepreneurs aren’t disrupters, really. For those, Bhide identifies another factor--what he calls the “entrepreneur’s value added,” or, to use a term you won’t find in any economics textbook, what you might call scrappiness. Faced with obstacles, successful entrepreneurs draw on their own powers of improvisation and persuasion: They simply outsell, outwork, outinnovate, and outsmart the competition.

In this issue of Inc., as in all issues, you’ll find plenty of entrepreneurs following one path or the other. Or both, as in the case of Ben Kaufman, the fast-talking hero of Josh Dean’s fascinating story, “Is This the World’s Most Creative Manufacturer?”. Kaufman’s company, Quirky, crowdsources innovation from 500,000 “members” to bring new products to market faster than any other manufacturer we know of.

Speaking of persuasion, we’ve dedicated nine pages to a practical special report, “How to Make People Believe”. It is anchored by Scott Harrison, who has built charity: water into a not-for-profit juggernaut on the strength of a gift for storytelling that irresistibly unlocks the hearts--and then the wallets--of audiences. You’ll also get tutored by famed VC Steve Jurvetson on pitching investors and TV interviewer George Stephanopoulos on getting people to tell you anything. You’ll also learn the proper pose to strike while making a declaration, thanks to a 19th-century rhetoric handbook uncovered by writer Burt Helm. In an uncertain world, as an economist might say, you never know when you might need that.

IMAGE: Christopher Sturman
From the October issue of Inc. magazine

ERIC SCHURENBERG | Staff Writer | Editor-in-chief, Inc.

Eric Schurenberg is the president and editor-in-chief of Inc. Before joining Inc, Eric was the editor of CBS MoneyWatch.com and BNET.com and managing editor of Money Magazine. As a writer, he is a winner of a Loeb and a National Magazine Award.




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