Wednesday, 25 March 2015

Entrepreneurship

In this exclusive interview series, we speak to Sir Richard Branson (Founder of Virgin Group) and Robin Li (Founder of Baidu). We discuss the fundamental nature of entrepreneurship, entrepreneurs themselves, and the role of entrepreneurs in society and the economy. We look at the key sources of entrepreneurial ideas, characteristics of successful enterprise and the role of wealth in the entrepreneurial journey. We also look at how entrepreneurship has changed, what the future holds and how entrepreneurs are addressing some of the world's most pressing problems from poverty and economic crises to climate change and health.

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Vikas Shah, Thought Economics, March 2015
Updated from original edition, published January, 2013

"...Over 28% of all the 'history' made since the birth of Christ was made in the 20th century." noted the Economist in June 2011, adding "... Measured in years lived, the present century, which is only ten years old, is already 'longer' than the whole of the 17th century. This century has made an even bigger contribution to economic history. Over 23% of all the goods and services made since 1AD were produced from 2001 to 2010..." Google's Executive Chairman Eric Schmidt also notes that, "...every two days now we create as much information as we did from the dawn of civilization up until 2003."

The evident growth in humankind led early economists such as Thomas Malthus to foresee a future of doom for our burgeoning civilisation. "Extermination, sickly seasons, epidemics... and gigantic inevitable famine..." were considered near-certain as a result of an increase in human density on our planet. The truth is that Malthus (and his counterparts) were (largely) wrong. While the astonishing growth of our species' numbers over the past century has come at a heavy price (resulting in hunger, conflict and more)- it has also delivered incredible economic and social growth. As at March 2015, the combined market capitalisation of the 10 largest companies in the world was US$ 2.86 trillion- the equivalent of around 50% the size of the entire world economy in 1960 (and less than 4.5% of the world economy today).

"When conjectures are offered to explain historic slowdowns or great leaps in economic growth, there is the group of usual suspects that is regularly rounded up-prominent among them, the entrepreneur. Where growth has slowed, it is implied that a decline in entrepreneurship was partly to blame (perhaps because the culture's 'need for achievement' has atrophied). At another time and place, it is said, the flowering of entrepreneurship accounts for unprecedented expansion." (Baumol, 1990) There is historic precedent for this... "From the fall of Rome (circa 476 AD) to the eighteenth century, there was virtually no increase in per capita income in the West. However, with the advent of entrepreneurship, per capita income grew exponentially in the West by 20% in the 1700s, 200% in the 1800s, and 740% in the 1900s..." (Murphy, 2006).

Conservative estimates state that over 400 million people in 54 countries are actively engaged in entrepreneurship- (loosely defined as starting and running new businesses). This figure doesn't include the (potentially) hundreds of millions more engaged in forms of pseudo-entrepreneurship in science, medicine and politics- their contributions no-less important to our society's economic, social and intellectual growth.

So what is the role of entrepreneurship in society, economy and the story of our civilisation?

In this exclusive interview series, we speak to Sir Richard Branson (Founder of Virgin Group) and Robin Li (Founder of Baidu). We discuss the fundamental nature of entrepreneurship, entrepreneurs themselves, and the role of entrepreneurs in society and the economy. We look at the key sources of entrepreneurial ideas, characteristics of successful enterprise and the role of wealth in the entrepreneurial journey. We also look at how entrepreneurship has changed, what the future holds and how entrepreneurs are addressing some of the world's most pressing problems from poverty and economic crises to climate change and health.

Sir Richard Branson is Founder of the Virgin Group. Virgin is one of the world’s most recognised brands and has expanded into many diverse sectors from travel to telecommunications, health to banking and music to leisure. There are now more than 100 Virgin companies worldwide, employing approximately 60,000 people in over 50 countries.

Branson has challenged himself with many record breaking adventures, including the fastest ever Atlantic Ocean crossing, a series of hot air balloon adventures and kitesurfing across the English Channel. He has described Virgin Galactic, the world’s first commercial spaceline, as being “the greatest adventure of all”. Space travel has been a dream for Branson since he watched the moon landings on TV, and he registered the Virgin Galactic name in 1999. Testing for commercial service is underway, with Branson planning to join his family on the first space flight.

In 2004 he established non-profit foundation Virgin Unite to tackle tough social and environmental problems and strives to make business a force for good. Most of his time is now spent working with Virgin Unite and organisations it has incubated, such as The Elders, Carbon War Room, B Team and Branson Centre of Entrepreneurship. He also serves on the Global Commission on Drug Policy and supports ocean conservation with the OceanElders. Branson was awarded a knighthood in 1999 for services to entrepreneurship.

Robin Li is the Co-Founder, Chairman and Chief Executive Officer of Baidu, Inc. Since founding the company in January 2000, Robin has led Baidu to be China’s largest search engine, with over 80% market share. Baidu is the largest Chinese search engine globally and the second largest independent search engine in the world. China is among the four countries globally—alongside the United States, Russia and South Korea—to possess its own core search engine technology.

In 2005, Baidu became a NASDAQ-listed public company and in 2007 was the first Chinese company to be included in the NASDAQ-100 Index. In 2007, The Financial Times listed Baidu as one of the Top 10 Chinese Global Brands, with Baidu being the youngest company as well as the only Internet company in the top ten.

As one of the pioneers and leading figures in China’s Internet industry, Robin’s achievements are widely recognized. In 2013, Robin became a member of the Chinese People's Political Consultative Conference. He currently acts as Vice Chairman of the All-China Federation of Industry and Commerce and Vice Chairman of the Internet Society of China (ISC).

Q: What does ‘entrepreneurship’ mean to you?

[Sir Richard Branson] Entrepreneurship is about taking risks, pushing boundaries, and not being afraid to fail.

I tend to go with my gut feeling and by personal experience- if I relied on accountants to make decisions, I most certainly would have never gone into the airline business, most certainly would not have gone into the space business, and I certainly wouldn’t have gone into most of the businesses that I’m in. In hindsight, it seems to have worked pretty well to my advantage!

[Robin Li] I have a strong desire to do what I like to do. I think that happens to be a necessary quality for entrepreneurship. For me, entrepreneurship is about doing what I can to positively impact people’s lives through technology. I come from a technology background, so naturally I feel that I can make the most meaningful impact through tech, but depending on their background and their abilities, others might choose other approaches. I also believe that whether it’s innate, or it's an something that wells up later in life, the urge to entrepreneurship only bears fruit when you plant the seeds at the intersection of passion and ability—the overlap between the things that you love, and the things that you’re really good at.

Entrepreneurship means a constant willingness to keep learning. It’s about maintaining that start-up spirit—where you’re forever young, and forever in crisis. It’s about always having your mind on the business: Lying in bed and constantly asking yourself, “What should I do?

Q: What is the role of entrepreneurs in an economy and society?

[Sir Richard Branson] It's my strong belief that those with the power to help should be encouraged to do exactly that: It’s important for entrepreneurs to nurture talent, to provide advice and to provide investment where required. Increasingly we are hearing more about how big business needs to play its role in society for the greater good. We all have a role to play and it makes business sense. In fact, consumers demand that business be responsible.

[Robin Li] Entrepreneurs have been absolutely essential in the transformation of the world we live in. By creating new businesses and new markets, they’re real change agents in history. This is something that’s been happening for many hundreds of years. As an entrepreneur you have a certain perspective and real motivation to see what’s in store for the future. And in trying to anticipate the future, entrepreneurs are chief agents in bringing the future about. It’s really been the role of the entrepreneur to take the measure of what people will want in the future, and to change the way people think and behave. They are and will continue to be a vital force in defining the world of the future.

That’s a lot of responsibility, and entrepreneurs need to demonstrate a consciousness of their importance and the potential they have to do both good and evil. They have to have a greater sense of social responsibility, especially in times of crisis, whether we’re talking about economic, environmental, or social crisis. Entrepreneurs should be focusing their efforts on creating a more equitable, just, and sustainable future

Q: What are the key drivers for an entrepreneur?

[Sir Richard Branson] It’s a combination of passion, vision, creativity and a sense of adventure.
I have said on many occasions the reason to start a new business should not be about making money! You need to have a passion for the project and want to make a difference.

At Virgin we enter into new markets to stir up the competition and offer a choice and transparency to the consumer.

[Robin Li] I don’t think that those who set out to create companies with nothing in mind other than making money are apt to succeed. That’s not going to get you out of bed, eager to get to work. It has to come from a higher place. In my case, I knew that I had the ability, through these technologies that I understood well and could confidently implement, to make a real difference in the access ordinary people had to information. And I knew that connecting people to information in the easiest, most convenient way would make a tremendous difference in the world. It wasn’t an abstract desire to create. And money is just an afterthought. What drove me to it was this desire to make a difference in an area that badly needed it, and my recognition that I was the right person to step on and take on that challenge.

Q: What are the characteristics of a great entrepreneur?

[Robin Li] I think that only a very small handful of entrepreneurs are “born” with all the requisite abilities they need to succeed. Most of us have many skills that we’ve needed to learn along the way. In an incredibly dynamic industry like the Internet, you’re faced with the constant possibility that you, the disruptor, will quickly become the disrupted. You have to be ready to embrace change, and to be ready for it not just in terms of your business, but psychologically ready for the kind of change—excited by, and attracted to, change itself. I think an entrepreneur needs to have finely tuned sensitivity to what change is coming. You have to have almost a precognition of what’s around the next bend. But you need to balance this with an ability to shut out noise, to avoid distraction and to stay focused on what you’re doing. It’s not easy in such amid the great clamor and the rapid change.

Great entrepreneurs thrive and feel truly alive when they’re in the heat of competition. They have an intense desire to do everything they do to the best of their ability. They are not afraid of losing. They take risks, but informed, calculated risks, neither heedless nor needless.


Q: What are the sources of entrepreneurial ideas?

[Sir Richard Branson] There are many things that can inspire an entrepreneurial idea - for example if you receive poor customer service you may be inspired to create a better product or experience.

Listen to friends and family - they often have great ideas and can offer invaluable advice.

I always carry a small notebook to jot down thoughts, ideas and conversations I have with people when travelling or working. The idea to start an airline came when I was stranded in the Caribbean and decided to charter a flight out - I sold seats to the other stranded passengers to pay for the charter.

Have an open mind as you never know when an opportunity or idea might present itself.

In the next 10 years, we will all head into unknown territory as we face a vast increase in our demand for energy, yet remain worryingly over-dependent on oil. If entrepreneurs go into the field of renewable energy for the right reasons, along the way they are likely to create some very exciting new technologies and successful new businesses.

[Robin Li] Opportunities generally arise from landscape change. But entrepreneurial ideas can come from anywhere. They can come from recognizing where the pain points, the bottlenecks, and the inefficiencies are. They can come from late-night conversations with friends, or from random eureka moments. But for me and for Baidu, one source of entrepreneurial ideas has been the need to serve the underserved population. Serving the underserved is a real impetus for innovation. Making technology accessible to people who aren’t inherently tech-savvy, and who might be far from fluent with technologies that educated and wealthy urbanites now take for granted, isn’t about making simplified, dumbed-down versions. It actually poses technology challenges. A great example of this is speech input for mobile phones. Speaking is the most intuitive interface of all, but there’s a real challenge in being able to capture words accurately—and an even greater challenge in actually understanding the meaning of those words, and their intention. I think that in today’s world, looking to serving the needs of the next billion Internet users—or even the next three billion—will generate many of the greatest entrepreneurial ideas.

Q: What do you feel are the characteristics of a successful enterprise?

[Sir Richard Branson] I believe that success in business can be measured by if you enjoy what you are doing; create something that stands out; create something that everyone is really proud of.

A great company needs to have an excellent product or service at its core; needs strong management to execute the plan and a good brand to give it the edge over its competitors. It also needs excellent people who really believe in what they’re doing. People are at the heart of all Virgin businesses. Often entrepreneurs can create a good product and a brand but need to bring in management to help expand and create a truly great company.

[Robin Li] From my own experience, I think success comes from focus and persistence—in my case focus on and persistence in technology. I’ve really done one thing for well over 20 years now. I’ve always believed that hard work and the ability to stick to it can overcome almost any differences in natural intellect among people. Success comes not from IQ but from values, passions, willingness to learn, motivation to improve, and dedication.

Focus is not at all easy. There are countless temptations along the way, and often an entrepreneur will waver and be tempted to pivot to another opportunity. For Baidu, in our crucial years, we resisted the siren song of things like wireless value-added services and games, which many of our Chinese peers were seduced by. It may have meant good short-term revenues, but it took them off mission while we continued to stay very focused on search.

Every company is going to experience the ups and downs, and be plagued by all manner of troubles and problems. But if you hew to your ideals and believe in your future, that can go a long way toward getting you through the difficult stretches.

I would also add that a strong core company culture is really important. It’s the glue that can really hold a company together. For us, that core culture has always been about “simplicity and reliability.” Simplicity means that we encourage a real directness and candor in speech. We don’t use any honorific titles, and we keep the organization very flat. There’s an abhorrence of any office politics. Reliability means that every Baidu employee brings a spirit of professionalism and we expect and deliver nothing short of excellence.

Q: What does wealth mean to you as an entrepreneur?

[Sir Richard Branson] Money is not my first priority - I have always pursued what I am passionate about whether that will make me money or not, my fascination is learning and discovery more than being rich and powerful. I believe that success in business can be measured if you enjoy what you are doing; create something that stands out, create something that everyone is really proud of; be a good leader and be visible.

Wealth may improve aesthetic aspects of life in terms of being able to over indulge and travel to luxurious locations however, true success in life can only be gauged by something which is priceless; how much love you have in your life – I am truly fortunate to be surrounded by extremely loving and fun family and friends and nothing beats spending time with the people I love.

[Robin Li] I didn’t start with anything, and I do the things that I do because I believe profoundly that they are of tremendous value, and because I’m good at what I do. That’s why I stay up late and get up early, excited still every morning when I wake up. A lot of people work through the week just waiting for the weekend. Not me. I’m exactly the opposite: When the weekend comes, I can’t way to get back into the office. I see change happening in the world every day, and every day I see that things that we’re working on impacting people’s lives. This is what gives me a sense of fulfillment. So no, I don’t work for money. My personal definition of wealth and fortune are very broad. Money is not nearly the most important piece of it. What matters is that you’re doing something that you love and finding fulfillment in that.

Q: What is the role of philanthropy in entrepreneurship?

[Sir Richard Branson] I’ve always regarded business as a powerful tool for delivering positive change in the world; so in my opinion entrepreneurship has a crucial role in addressing these Global challenges and many others besides. Public funding and open-ended research is absolutely crucial for coming up with better ideas, novel technology and progressive policy, but it seems only the markets are capable of pouring resources into truly scaling things up; and those markets began with entrepreneurship.

Prizes can be a real catalyst for moving an idea along, especially if it’s a novel but profoundly important area. The X Prize foundation are a shining example of how prizes can incentivise innovation, and we liked the concept so much we even have our own equivalents, like the Virgin Earth Challenge, a $25m prize for ways of removing greenhouse gases from the atmosphere to help tackle global warming and help people and the planet.

[Robin Li] Naturally I support and encourage philanthropy on the part of entrepreneurs, and I’m very glad to see that engagement with broader social issues, giving generously to worthy causes, and working for a common good are now things very much expected of corporations. I would add that the best thing an entrepreneur or company can really do is to build in a real nobility of mission from the very outset. If you set out to do something where your company’s success also means bringing tangible benefit to society, that’s really the highest form of philanthropy. Baidu’s a great example of this. When our business does what we set out for it to do—to provide the best and most equitable way for people to find what they’re looking for—then we’re doing great good in the world.

Q: How does entrepreneurship manifest in the arts?

[Sir Richard Branson] I think within the arts and entrepreneurship you have to show a desire to be creative, to stand alone and follow your passions, even when those around you might not share your idea or vision.

I believe we need to encourage all young people to consider an alternative to the traditional career path, and I think entrepreneurship offers some hope. I identify with these young people. As a young businessman, I faced my fair share of difficulties when I was starting up. Our music mail-order business was almost brought down by postal strikes in the early 1970s, but we adapted, and that prompted me to start Virgin record stores.

Q: What is the role of education and mentoring in entrepreneurship?

[Sir Richard Branson] In 2010, we launched Virgin Media Pioneers, an online community for young entrepreneurs, with the aim of helping young people realise their potential. By championing a cause that is both close to my heart and vitally important to the future of the UK's economic recovery, we are providing easy access to peers, practical advice from experts and tangible support for young entrepreneurs

I still find it strange that you can access money as a young person to go to university but that level of funding or even a fraction of that amount is not available to people with good ideas to set up a company. We must try to make early stage finance more available and ensure the banks do look at micro-financing or low rate long term loans for aspiring business builders. Together with Virgin Media Pioneers, we are campaigning for a fund for young entrepreneurs on similar terms as student loans.

Q: What are the key differences you see between entrepreneurship across cultures (e.g. USA vs. China)?

[Robin Li] One thing you notice among the more successful private enterprises in China is that their CEOs tend to be their founders. It’s not like any of them are doing it for the money: These are all people who are already very well off by any standard. They continue to work hard because of a kind of idealism. While in the U.S., founders often either cash out or are moved aside by their boards in favor of professional managers at the first sign of difficulty, in China that’s not often been the case at all. I understand this very well, personally. I doubt that many professional managers would have made some of the decisions that I’ve made as Baidu’s CEO over the last 15 years—decisions that have proven to be the right ones for the business.

We’re starting to see convergence, especially in culture, between U.S. and Chinese companies in the Internet space at least. I often travel to the U.S. and always meet with leading Internet companies there—from founders and CEOs down to ordinary engineers—and I’m finding that they’re increasingly interested in what’s happening in China, and much more receptive to working together with Chinese companies like Baidu. Despite the well-known obstacles, I nevertheless see communication and cooperation across the Pacific growing, and that’s very encouraging.

Q: What is the role of government and policy in entrepreneurship?

[Sir Richard Branson] Governments and policymakers usually have an important role to play in creating the fertile grounds for entrepreneurs to succeed. Many of our Virgin businesses wouldn’t be able to operate without the rules and regulations that govern their sectors. Though as with many instances in life, one must generally find a balance between enough policy and regulation and not too much.

An analogy I find useful is to think about entrepreneurship like a game of football. There are certain rules of the game which you must follow, such as there being two halves, running for 90 minutes and not being able to use your hands, but when it comes to how you arrange your team, and what strategies you use to score goals, it’s completely up to you. The same should be true for business: policies and regulation can create the pitch and the rules and then entrepreneurs can play how they like.

Many democracies go hand in hand with entrepreneurship, though I’ve seen many examples of people building successful businesses in less democratic political regimes. Like nature, even if the environment isn’t ideal, entrepreneurship will find a way.

[Robin Li] Speaking here just of our home market, China, the government obviously plays a supervisory and market-regulatory role. At the same time it can and often does play an important role in providing support to companies. The government should create an environment in which companies can foster innovation and grow. It should create systems that are conducive to creativity and fair competition, including a legal system that safeguards the rights and legal interests of entrepreneurs. I believe that innovation flourishes best under a system that gives maximum free play to entrepreneurship.

Q: How do you feel entrepreneurship has changed over the last quarter-century, and what do you think the future holds?

[Sir Richard Branson] The big change to entrepreneurship over the past 25 years has been technology. Now, more than ever, anybody can create their own business and be up and running in the time it takes to register a website. The growing start-up community has fostered a spirit of creativity and collaboration where everyone feels they can become a successful entrepreneur. And they’re right – they can! In the future I think entrepreneurship is going to become even more widespread than it is today. More and more people are realising the way to get ahead in the business world is to get out there, be brave and make things happen.

Q: What would be your message to future entrepreneurs?

[Robin Li] This is something I speak about quite often, and I always emphasize that entrepreneurs should focus on what they believe is worthwhile, exercising their own judgment without blindly following the crowd. Find that sweet spot at the intersection of what you do best and what you love to do the most, and your odds of success are immediately much higher. If you do what you excel in doing, you’ll be better than your competition. And if you focus on what you love to do, you’ll be doggedly persistent even when faced with strong competitors, reversals of fortune, and beguiling distractions.

Not everyone makes it. There’s no small amount of risk, and failures large and small along the way are inevitable. But if you really have the ambition to become an entrepreneur, if you’re someone with a dream planted firmly in your heart, if it’s something you want so badly you can taste it, if you believe you can make it, and if you’re sure that you’ll be bringing something great into the world that will benefit society, then you shouldn’t let anything stop you, and you should just reach for it.



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"The essential point to grasp is that in dealing with capitalism we are dealing with an evolutionary process...." wrote Joseph A. Schumpter in his seminal work 'Capitalism, Socialism and Democracy' (1943). He continues to write that "Capitalism... is by nature a form or method of economic change and not only never is but never can be stationary. And this evolutionary character of the capitalist process is not merely due to the fact that economic life goes on in a social and natural environment which changes and by its change alters the data of economic action; this fact is important and these changes (wars, revolutions and so on) often condition industrial change, but they are not its prime movers. Nor is this evolutionary character due to a quasi-automatic increase in population and capital or to the vagaries of monetary systems of which exactly the same thing holds true. The Fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates."

Schumpter also noted that entrepreneurship (as the engine of capitalism) cannot be studied in isolation from time or context.

"First," he identifies "..since we are dealing with a process whose every element takes considerable time in revealing its true features and ultimate effects, there is no point in appraising the performance of that process ex visu of a given point of time; we must judge its performance over time, as it unfolds through decades or centuries. A system—any system, economic or other—that at every given point of time fully utilizes its possibilities to the best advantage may yet in the long run be inferior to a system that does so at no given point of time, because the latter’s failure to do so may be a condition for the level or speed of long-run performance." He continues to explain that "...since we are dealing with an organic process, analysis of what happens in any particular part of it—say, in an individual concern or industry—may indeed clarify details of mechanism but is inconclusive beyond that. Every piece of business strategy acquires its true significance only against the background of that process and within the situation created by it. It must be seen in its role in the perennial gale of creative destruction; it cannot be understood irrespective of it or, in fact, on the hypothesis that there is a perennial lull..."

Humanity is quick to forget the context by which it moves forward ‘on the shoulders of giants’. Our rationalistic and reductionist thinking mean that we see phenomena (such as economies) in isolation, and break them down into components. This process may help an observer understand how a thing or a system works (at any given moment in time), but will give you little indication of what led to its being, or the context in which it exists. Understanding- for example- what makes Sir Richard Branson successful is not a matter of analysing the performance of each component of his businesses now, but rather requires an understanding of the cultural, social and economic contexts leading those businesses to emerge from the abstract space of the mind into reality… in other words, their story.

In much the same way as its biological counterpart, entrepreneurial evolution is a story of the success of good ideas. Billions of iterations occur, and those which add value to the system of humanity flourish, and become part of our culture- and increasingly quickly. The Wright brothers made the first powered flight in 1903 (over a distance of 120ft). Just 66 years later in 1969, two humans were stood on the Moon looking back at earth - and in 2012, almost 3 billion air passengers were carried a combined distance of over 5 trillion kilometres (enough to get to the sun and back over 16 thousand times). In a similar feat, our species progressed in less than 70 years from the first basic digital computer in 1941 to having the total sum of human knowledge in a globally connected amorphous cloud of computers.

Our innate capability to generate ideas is potentially the most powerful faculty our species has at its disposal. Entrepreneurs are simply those who take a gamut of resources (capital, knowledge, tools, infrastructure) and transform their ideas into physical or virtual assets which can then be absorbed into society and wider culture.

Put simply, "We are what we think. All that we are arises with our thoughts. With our thoughts, we make the world...." (Buddha)

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