Entrepreneurship – Page 109 – artdiamondblog.com

Walt Disney: Motive Was “Fun” (Not “Money”)

(p. 291) Said Bob Gurr, a member of the WED staff: “One big thrust behind our design work for the World’s Fair was the fact that we were going to own all the equipment. In other words, somebody else would build the pavilion, on somebody else’s property, but the show equipment that went in there was Disney’s, and he had a ready-made location waiting for it. The fact that the Fair was going to run two years meant he could build more expensively, and Disney priced these projects in a way that the sponsors were paying for everything for a two-year use.”

Disney approached the fair with a certain skepticism, even so. “You don’t like to do those things unless you have fun doing ’em,” he said in 1961, when work on the exhibits was just getting under way “You don’t do ’em for money.” Robert Moses, the imperious road builder who was in command of the fair, “wanted us to develop the amusement area and we looked at it,” Disney said, ‘but it just wasn’t for us. I wouldn’t want to try to do anything in New York. I’m not close enough. . . . On top of that, I mean I don’t know whether I want to do any outside of Disneyland because you don’t want to spread yourself thin.”

Source:
Barrier, Michael. The Animated Man: A Life of Walt Disney. 1 ed. Berkeley, CA: University of California Press, 2007.
(Note: ellipsis in original.)

Angel Investors Face High Risk and Negative Returns

Some of the difficulties in angel investing are highlighted below. These difficulties support the view that self-financing is likely to remain a crucial mode of initial financing for many high-level entrepreneurs.

(p. B1) An angel investor is anyone who privately provides capital to a promising business, often a start-up, that isn’t run by a friend or family member. Scott Shane, an economist at Case Western Reserve University in Cleveland, estimates that the U.S. has at least 140,000 active angels who collectively invest some $20 billion a year in new businesses.

. . .

Being an angel is hellishly risky. To be sure, one recent study found that 7% of the angel investments with final outcomes went up at least tenfold. And many fledgling angels are driven by the dream of finding the next Google while it still is in the cradle.
But roughly half of all new businesses fail within their first five years, according to the Small Business Administration. Not surprisingly then, researchers have estimated that at least half of all angel investments lose money and 48% of investments with final outcomes result in a 100% loss.
Worse, those returns were earned by “accredited” angels, individual investors with at least $200,000 in annual income and $1 million or more in net worth. The vast majority of the profits from angel investing appear to be earned by the top 10% of angels, who tend to be rich, well-connected veterans of high-growth industries. Unaccredited angels, with less capital to offer and weaker links to expert advice, are likely to see fewer deals with potential for high returns.
Furthermore, these private businesses are illiquid, so angels can’t dump their holdings at will, the way mortals do every day in the stock or bond market. Thus, being an angel takes enormous patience. “Your losers die faster than your winners win,” said Robert Wiltbank, a business professor at Willamette University in Salem, Ore.
. . .

So why would anyone want to be an angel, and who should consider it? “You get to play God a little,” said Paul Kedrosky, an active angel investor and a senior fellow at the Kauffman Foundation, which studies entrepreneurship. “You get the charge of helping to create something exciting, without having too many annoying partners.”

For the full commentary, see:
JASON ZWEIG. “THE INTELLIGENT INVESTOR; Can Angel Investors Earn Heavenly Returns?” The Wall Street Journal (Sat., OCTOBER 31, 2009): B1.
(Note: ellipses added.)

Walt Disney: “I Don’t Care About Critics”

(p. 286) “He is shy with reporters.” Edith Efron wrote for TV Guide in 1965. “His eyes are dull and preoccupied, his affability mechanical and heavy-handed. He gabs away slowly and randomly in inarticulate, Midwestern speech that would be appropriate to a rural general store. His shirt is open, his tie crooked. One almost expects to see over-all straps on his shoulders and wisps of hay in his hair. . . . If one has the patience to persist, however, tossing questions like yellow flares into the folksy fog, the fog lifts, a remote twinkle appears in the preoccupied eves, and the man emerges.”

Here again, as in other interviews from the 1960s, Disney permitted himself to sound bitter and resentful when he said anything of substance: “These avant-garde artists are adolescents. It’s only a little noisy element that’s going that way, that’s creating this sick art. . . . There is no cynicism in me and there is none allowed in our work. . . . I don’t like snobs. You find some of intelligentsia, they become snobs. They think they’re above everybody else. They’re not. More education doesn’t mean more common sense. These ideas they have about art are crazy. . . . I don’t care about critics. Critics take themselves too seriously. They think the only way to be noticed and to be the smart guy is to pick and find fault with things. It’s the public I’m making pictures for.”

Source:
Barrier, Michael. The Animated Man: A Life of Walt Disney. 1 ed. Berkeley, CA: University of California Press, 2007.
(Note: ellipses and italics in original.)

Disney Learned Quickly (Despite Lack of Formal Education), and Impatiently Expected Others to Learn Quickly Too

The story below is very reminiscent of a story that Michael Lewis tells in The New, New Thing about how entrepreneur Jim Clark learned to fly.
Possible lesson: impatience and quick learning may not be traits of all high level entrepreneurs, but they appear to have been traits of at least two.

(p. 213) Seventeen years later, Broggie told Richard Hubler that teaching Disney how to run a lathe and drill press and other machinery was difficult “because he was impatient. So I’d make what we call a set-up in a lathe and turn out a piece and say, ‘Well, that’s how you do it.’ He would see part of it and he was impatient, so he would want to turn the wheels–and then something would happen. A piece might fly out of the chuck and he’d say, ‘God-damn it. why didn’t you tell me it was going to do this?’ Well, you don’t tell him, you know? It was a thing of–well–you learn it. He said one day, . . . ‘You know, it does me some good sometimes to come down here to find out I don’t know all about everything.’ . . . How would you sharpen the drill if it was going to drill brass or steel? There’s a difference. And he learned it. You only had to show him once and he got the picture.”

This was a characteristic that other people in the studio noticed. “He had a terrific memory,” Marc Davis said. “He learned very quickly. . . . You only had to explain a thing once to him and he knew how to do it. Other people are not the same. I think this is a problem he had in respect to everybody . . . his tremendous memory and his tremendous capacity for learning. He wasn’t book learned but he was the most fantastically well educated man in his own way. . . . He understood the mechanics of everything. . . . Everything was a new toy. And this also made him a very impatient man. He was as impatient as could be with whoever he worked with.”
Disney’s lack of formal education manifested itself sometimes in jibes at his college-educated employees, but more often in the odd lapses–the mispronounced words, the grammatical slips–that can mark an autodidact. “For a guy who only went to the eighth grade,” Ollie Johnston said, “Walt educated himself beautifully. His vocabulary was good. I only heard him get sore (p. 214) about a big word once in a story meeting. Everyone was sitting around talking and Ted Sears said, ‘Well, I think that’s a little too strident.’ Walt said, ‘What the hell are you trying to say, Ted?’ He hadn’t heard that word before.

Source:
Barrier, Michael. The Animated Man: A Life of Walt Disney. 1 ed. Berkeley, CA: University of California Press, 2007.
(Note: ellipses in original.)

For a similar story about Jim Clark, see:
Lewis, Michael. The New New Thing: A Silicon Valley Story. New York: W. W. Norton & Company, 2000.

The Long Gestation of the Disneyland Entrepreneurial Idea

(p. 212) Before returning to Los Angeles, Disney and Kimball also went to Dearborn, Michigan, outside Detroit, and visited a village of another kind–Henry Ford’s Greenfield Village, a collection of old and reconstructed buildings that included the Wright brothers’ bicycle shop and a replica of Thomas Edison’s laboratory. Greenfield Village, which Ford established in 1929, had a strong autobiographical element: many of its buildings were there because they had been significant in Ford’s life, as with the school he attended and the scaled- down replica of his first auto plant. Greenfield was, besides, a make-believe village, a mixture of buildings spanning centuries. There was no pretense, as at Colonial Williamsburg, of re-creating the past.

Disney had visited Greenfield Village at least once before, in April 1940, but this time he returned to Burbank with his imagination stimulated. He was thinking now beyond a miniature train for his own home. He drafted a memorandum on August 31, 1948, in which he set out in detail what might go into a “Mickey Mouse park” on the sixteen acres the studio owned across Riverside Drive. Ford’s influence can be felt in Disney’s description of an idyllic small town, anchored by a city hall and a railroad station. There would have been a specifically Disney presence in the park only through a toy store that sold Disney toys and books and a shop where Disney artists could sell their own work.
Disney had been talking about a park of’ some kind, on the studio lot or adjacent to it, for years, perhaps since the late 1930s, the idea being to have something to entertain visitors to a studio that was otherwise very much a workaday place. For the studio to embark on such a project in 1948 was irnpractical, though, given its financial condition, and Disney’s memo had no immediate consequences.

Source:
Barrier, Michael. The Animated Man: A Life of Walt Disney. 1 ed. Berkeley, CA: University of California Press, 2007.

Legitimacy of Capitalism Rests on Rich Earning their Wealth

Luigi Zingales, Robert C. McCormack Professor of Entrepreneurship and Finance at the University of Chicago. Source of photo and information in caption: http://faculty.chicagobooth.edu/luigi.zingales/research/date.html.

(p. A21) Luigi Zingales points out that the legitimacy of American capitalism has rested on the fact that many people, like Warren Buffett and Bill Gates, got rich on the basis of what they did, not on the basis of government connections. But over the years, business and government have become more intertwined. The results have been bad for both capitalism and government. The banks’ growing political clout led to the rule changes that helped create the financial crisis.

For the full commentary, see:
DAVID BROOKS. “The Bloody Crossroads.” The New York Times (Tues., September 8, 2009): A21.
(Note: the online version of the commentary is dated Sept. 7.)

The reference for the Zingales article is:
Zingales, Luigi. “Capitalism after the Crisis.” National Affairs, no. 1 (Fall 2009): 22-35.

Project Entrepreneurs Want to Keep Control

(p. 152) As late as January 1940, Disney still resisted selling stock–“I wanted to build this in a different way,” he told sonic of his artists–but by then his need for money was such that going public had become the lesser of evils. Preferred stock in Walt Disney Productions was offered to the public on April 2, 1940. The money raised helped pay for the Burbank studio ($1.6 million) and retired other debts (more than $2 million). The common stock remained in the Disneys’ hands. The company took out a $1.5 million insurance policy on Walt’s life.

Disney remembered having lunch with Ford Motor Company executives a few days after the stock issue, when he passed through Detroit on his way back from New York. Henry Ford himself joined the group after lunch, and when Disney told the old autocrat about selling preferred stock, Ford said. “If you sell any of it, you should sell it all.” That remark, Disney said, “kind of left me thinking and wondering for a while.” Ford “wanted that control,” Disney said. “That’s what he meant by that.” Disney shared the sentiment, even in relatively small matters. On July 1, 1940, he told the studio’s publicity department: “From now on all publicity going out of this studio must have my O.K. before it is released. There shall be no exceptions to this rule.”

Source:
Barrier, Michael. The Animated Man: A Life of Walt Disney. 1 ed. Berkeley, CA: University of California Press, 2007.

“The Animated Man” is a Useful Account of the Life of an Important Entrepreneur

Source of book image: http://www.michaelspornanimation.com/splog/wp-content/e/a336.jpg

I have always believed, and recently increasingly believe, that Walt Disney was one of the most important entrepreneurs of our time.
One of the most favorably reviewed biographies of Disney is Michael Barrier’s The Animated Man. (At some point in the future, I will briefly discuss an alternative biography of Disney by Gabler.)
I have not thoroughly read The Animated Man, but have thoroughly skimmed it. It appears to be a very useful account of Walt Disney’s life.
I did not want to wait until I had fully read it, in order to highlight a few passages that I think may be of special interest. I will do so in the next few weeks.

Reference to the book discussed:
Barrier, Michael. The Animated Man: A Life of Walt Disney. 1 ed. Berkeley, CA: University of California Press, 2007.

John Mackey: “I Believe in the Dynamic Creativity of Capitalism”

Whole Foods CEO John Mackey. Source of the caricature: online version of the WSJ interview quoted and cited below.

(p. A11) “I honestly don’t know why the article became such a lightning rod,” says John Mackey, CEO and founder of Whole Foods Market Inc., as he tries to explain the firestorm caused by his August op-ed on these pages opposing government-run health care.
. . .
. . . his now famous op-ed incited a boycott of Whole Foods by some of his left-wing customers. His piece advised that “the last thing our country needs is a massive new health-care entitlement that will create hundreds of billions of dollars of new unfunded deficits and move us closer to a complete government takeover of our health-care system.” Free-market groups retaliated with a “buy-cott,” encouraging people to purchase more groceries at Whole Foods.
. . .
What Mr. Mackey is proposing is more or less what he has already implemented at his company–a plan that would allow more health savings accounts (HSAs), more low-premium, high-deductible plans, more incentives for wellness, and medical malpractice reform. None of these initiatives are in any of the Democratic bills winding their way through Congress. In fact, the Democrats want to kill HSAs and high-deductible plans and mandate coverage options that would inflate health insurance costs.
. . .
Mr. Mackey’s latest crusade involves traveling to college campuses across the country, trying to persuade young people that business, profits and capitalism aren’t forces of evil. He calls his concept “conscious capitalism.”
What is that? “It means that business has the potential to have a deeper purpose. I mean, Whole Foods has a deeper purpose,” he says, now sounding very much like a philosopher. “Most of the companies I most admire in the world I think have a deeper purpose.” He continues, “I’ve met a lot of successful entrepreneurs. They all started their businesses not to maximize shareholder value or money but because they were pursuing a dream.”
Mr. Mackey tells me he is trying to save capitalism: “I think that business has a noble purpose. It’s not that there’s anything wrong with making money. It’s one of the important things that business contributes to society. But it’s not the sole reason that businesses exist.”
What does he mean by a “noble purpose”? “It means that just like every other profession, business serves society. They produce goods and services that make people’s lives better. Doctors heal the sick. Teachers educate people. Architects design buildings. Lawyers promote justice. Whole Foods puts food on people’s tables and we improve people’s health.”
Then he adds: “And we provide jobs. And we provide capital through profits that spur improvements in the world.
. . .
“I don’t think anybody’s too big to fail,” he says. “If a business fails, what happens is, there are still assets, and those assets get reorganized. Either new management comes in or it’s sold off to another business or it’s bid on and the good assets are retained and the bad assets are eliminated. I believe in the dynamic creativity of capitalism, and it’s self-correcting, if you just allow it to self-correct.”
That’s something Washington won’t let happen these days, which helps explain why Mr. Mackey felt compelled to write that the Whole Foods health-insurance program is smarter and cheaper than the latest government proposals.

For the full interview, see:
STEPHEN MOORE. “The Conscience of a Capitalist; The Whole Foods founder talks about his Journal health-care op-ed that spawned a boycott, how he deals with unions, and why he thinks CEOs are overpaid.” The Wall Street Journal (Sat., OCTOBER 3, 2009): A11.
(Note: ellipses added.)

Measuring High Level Entrepreneurship

The Measurement Center of the Fraser Institute held a contest on the theme of what most needed to be better measured. I entered the contest, arguing that high level entrepreneurs are crucial to economic growth and human progress, and yet are not often the subject of systematic (as contrasted with anecdotal) study.
It turns out that my one minute video submission was picked as one of four “runners-up” in the contest.

Details of the contest and the winners, can be found at:
http://www.fraserinstitute.org/programsandinitiatives/measurement_center.htm
My minute video can be viewed at:
http://www.fraserinstitute.org/files/videos/Motivation-characteristics-of-high-level-entrepreneurs.wmv