Entrepreneurship – Page 89 – artdiamondblog.com

Workers Want to See Compensation Related to Contribution

This is a great example contra (or at least qualifying) Daniel Pink’s claim that all you need do for knowledge workers is provide them enough money so that they can provide for the basic needs of themselves and their family.

(p. 145) The public offering process brought details of the intended allocation of Pixar stock options into view. A registration statement and other documents with financial data had to be prepared for the Securities and Exchange Commission and a prospectus needed to be made ready for potential investors. These documents had to be reviewed and edited, and it was here that the word apparently leaked: A small number of people were to receive low-cost options on enormous blocks of stock. Catmull, Levy, and Lasseter were to get options on 1.6 million shares apiece; Guggenheim and Reeves were to get 1 million and 840,000, respectively. If the company’s shares sold at the then-planned price of fourteen dollars, the men would be instant multimillionaires.

The revelation was galling. Apart from the money, there was the symbolism: The options seemed to denigrate the years of work everyone else had put into the company. They gave a hollow feel to Pixar’s labor-of-love camaraderie, its spirit that everyone was there to do cool work together. Also, it was hard not to notice that Levy, one of the top recipients, had just walked in the door.
“There was a big scene about all that because some people got (p. 146) huge amounts more than other people who had come at the same time period and who had made pretty significant contributions to the development of Pixar and the ability to make Toy Story,” Kerwin said. “People like Tom Porter and Eben Ostby and Loren Carpenter–guys that had been there since the beginning and were part of the brain trust.”
Garden-variety employees would also get some options, but besides being far fewer, those options would vest over a four-year period. Even employees who had been with the organization since its Lucasfilm days a decade earlier–employees who had lost all their Pixar stock in the 1991 reorganization–would be starting their vesting clock at zero. In contrast, most of the options of Catmull, Lasseter, Guggenheim, and Reeves vested immediately–they could be turned into stock right away.
“I decided, ‘Well, gee, I’ve been at this company eight years, and I’ll have been here twelve years before I’m fully vested,’ ” one former employee remembered. ” ‘It doesn’t sound like these guys are interested in my well-being.’ A lot of this piled up and made me say, ‘What am I doing? I’m sitting around here trying to make Steve Jobs richer in ways he doesn’t even appreciate.’ ”

Source:
Price, David A. The Pixar Touch: The Making of a Company. New York: Alfred A. Knopf, 2008.
(Note: italics in original.)
(Note: my strong impression is that the pagination is the same for the 2008 hardback and the 2009 paperback editions, except for part of the epilogue, which is revised and expanded in the paperback. I believe the passage above has the same page number in both editions.)

For Daniel Pink’s views, see:
Pink, Daniel H. Drive: The Surprising Truth About What Motivates Us. New York: Riverhead Books, 2009.

Regulation Sunset Would Aid Entrepreneurs

John Mackey is the entrepreneur behind the Whole Foods Market.

(p. A17) The success of economic freedom in increasing human prosperity, extending our life spans and improving the quality of our lives in countless ways is the most extraordinary global story of the past 200 years.
. . .
Economic freedom is declining in the U.S. In 2000, the U.S. was ranked third in the world behind only Hong Kong and Singapore in the Index of Economic Freedom, published annually by this newspaper and the Heritage Foundation. In 2011, we fell to ninth behind such countries as Australia, New Zealand, Canada and Ireland.
The reforms we need to make are extensive.
. . .
According to the Small Business Administration, total regulatory costs amount to about $1.75 trillion annually, nearly twice as much as all individual income taxes collected last year. While some regulations create important safeguards for public health and the environment, far too many simply protect existing business interests and discourage entrepreneurship. Specifically, many government regulations in education, health care and energy prevent entrepreneurship and innovation from revolutionizing and re-energizing these very important parts of our economy.
A simple reform that would make a monumental difference would be to require all federal regulations to have a sunset provision. All regulations should automatically expire after 10 years unless a mandatory cost-benefit analysis has been completed that proves the regulations have created significantly more societal benefit than harm. Currently thousands of new regulations are added each year and virtually none ever disappear.

For the full commentary, see:
JOHN MACKEY. “OPINION; To Increase Jobs, Increase Economic Freedom; Business is not a zero-sum game struggling over a fixed pie. Instead it grows and makes the total pie larger, creating value for all of its major stakeholders, including employees and communities..” The New York Times (Fri., November 16, 2011): A15.
(Note: ellipses added.)

Myhrvold Left Work with Hawking for the Excitement of Entrepreneurship

(p. 139) Microsoft was represented ¡n the discussion by its senior vice president for advanced technology, a thirty-five-year-old Nathan Myhrvold. After finishing his Ph.D. at Princeton at age twenty-three, Myhrvold had worked for a year as a postdoctoral fellow with the physicist Stephen Hawking at Cambridge, tackling theories of (p. 140) gravitation and curved space-time, before taking a three-month leave of absence to help some friends in the Bay Area with a software project. He became caught up in the excitement of personal computer software and entrepreneurship and never went back. In Berkeley, he co-founded a company called Dynamical Systems to develop operating system for personal computers, which struggled for two years until Microsoft bought it in 1986. At Microsoft, he persuaded Bill Gates to let him establish a corporate research center, Microsoft Research, with Myhrvold himself in charge.

James Morrison Was a “Retailing Genius”

Source of book image: online version of the WSJ review quoted and cited below.

(p. A13) Morrison was not an inventor-capitalist but a retailing genius, more Sam Walton than Steve Jobs. He catered to England’s growing consumer class by diversifying his wares and, in his ever-growing network of shops, introducing luxurious showrooms. He was a disciple of volume, seeking “high turnover, small profits, and quick returns.” He sent his traveling men not to find buyers, as was typical, but to find the best suppliers. Advantageously purchased in bulk, goods would sell themselves. Morrison’s buyers were specialists, anticipating the practices of later department stores. He kept his finger on the pulse of fashion and on “market making” events. Legendarily, he was never caught short of black crepe when a member of the royal family was ill. “The Duke of York has died most conveniently,” he once quipped while tallying profits.
The “Napoleon of shopkeepers” went on to found his own merchant bank and accumulate a prodigious investment portfolio, much of it in American bonds. Strategic lending to broke aristocrats greased Morrison’s way into Parliament, where he served as a “radical Whig,” championing political reform and free trade.
. . .
. . . Morrison conducted both his retailing and his banking business with impeccable transparency. The investments he sold were honestly structured, and the risks he ran were his own, backed by sufficient collateral. Morrison’s was an era before bailouts, an era of some moral luck but little moral hazard. Markets rose and fell with reasonably predictable effects. For him and many of his contemporaries, credit remained a personal matter of the highest consequence. In this, alas, a character such as Morrison now seems more alien than familiar.

For the full review, see:

JEFFREY COLLINS. “BOOKSHELF; King of the Shopkeepers; The lessons of a merchant prince and a brilliant retailer whose wool, linen, silk, thread and lace flew off the shelves.” The Wall Street Journal (Mon., March 5, 2012): A13.
(Note: ellipses added.)

The book under review is:
Dakers, Caroline. A Genius for Money: Business, Art and the Morrisons. New Haven, CT: Yale University Press, 2012.

Oswald the Lucky Rabbit Returned to Disney After 78 Years

Do you recognize this rabbit? Source of image: online version of the Omaha World-Herald article quoted and cited below.

The story of Oswald the Lucky Rabbit is one of entrepreneurial resilience. Walt Disney was duped out of his legal rights to Oswald. Instead of fighting it out in court, or giving in to discouragement, he shortened Oswald’s ears and transformed him into a mouse with a new name.

(p. 2E) LOS ANGELES (AP) – One of Walt Disney’s oldest drawings is seeing the light of day after being locked away for nearly 40 years.

A rough 1928 image of Oswald the Lucky Rabbit, the wacky predecessor to Mickey Mouse, was brought out of the Walt Disney Co. archive this week and showcased at an event unveiling “Disney Epic Mickey 2: The Power of Two,” an upcoming action-adventure game for the Wii, PlayStation 3 and Xbox 360 that allows players to control both Mickey and Oswald.
The mischievous Oswald was co-created by Disney before Mickey, but he was lost in a 1928 contract dispute with Universal Studios. Oswald hopped back to Disney in 2006 when CEO Bob Iger brokered a deal that sent sportscaster Al Michaels to Universal-NBC. Oswald’s first appearance since his return came in 2010’s “Epic Mickey” as the ruler of a forgotten realm.

For the full story, see:

DERRIK J. LANG. “Disney image displayed for first time in 40 years.” Omaha World-Herald (Sun., March 18, 2012): 2E.

The Project Entrepreneur Does Not Sell Out Soon

“Dropbox founders, Arash Ferdowsi, left, and Drew Houston, won Best Overall Startup at the Crunchies in San Francisco earlier this year.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. B6) Arash Ferdowsi was a Massachusetts Institute of Technology student when he met fellow MIT student Drew Houston through a mutual friend.

The pair collaborated, working from a Cambridge, Mass., apartment, to solve a modern-day problem.
They created a virtual file cabinet that would make it possible for users to access piles of documents, spreadsheets, photos, music and videos from their laptops, tablets or personal devices.
After launching Dropbox Inc. in June 2007, they relocated to San Francisco. Mr. Ferdowsi dropped out of MIT.
. . .
WSJ: Before Steve Jobs of Apple Inc. died, he approached you with a buyout offer. Why did you turn it away?
Mr. Ferdowsi: The problem that we’re trying to solve is a problem that only an independent company can solve. We want to let you use a Mac, or Windows PC, or iPad, or Android, without having to think about any of the technical details. It isn’t a problem any of those larger companies is going to be as inclined to solve in the same way we are.

For the full interview, see:

ANGUS LOTEN, interviewer. “HOW I BUILT IT; Dropbox Seeks Big Solutions.” The Wall Street Journal (Thurs., March 15, 2012): B6.
(Note: ellipsis added; bold in original.)
(Note: the online version of the interview is dated March 14, 2012.)

Diamond to Teach Economics of Entrepreneurship in Fall 2012

Some Questions to Be Discussed:

• How can policies encouraging innovative entrepreneurship help us recover from the current economic stagnation?

• Are innovative entrepreneurs smarter, or less risk-averse, or more intuitive, or more determined, or more frugal, or nobler, or greedier, than the rest of us?

• Can economic historian John Nye defend his claim that successful entrepreneurs are “lucky fools?”

• What is the role of entrepreneurship in the process of creative destruction, and what is the role of creative destruction in making our lives longer and better?

• Would labor be better off in an economy in which innovative entrepreneurship is encouraged?

• Why does economist Will Baumol believe that too much higher education can discourage successful innovative entrepreneurship?

• What are the most promising sources of financing for successful innovative entrepreneurship?

Lasseter’s Success Came from Seeing How the Details Affected the Storytelling

(p. 138) “I had no reason to think it would be any good,” recalled Barzel, who was then a recently minted California Institute of Technology Ph.D. on the lighting team. “I knew John was absolutely brilliant as a animator of shorts. But I’ve read authors who write good short stories and crummy novels; I figured it’s a different skill. I had no reason to think John would have the skill to pull off a full-length movie.”
He expected something that animators and animation buffs might find interesting, but that probably would not have a particularly wide audience.
“I joined because I wanted the practical experience,” he said, “I thought, Well, it’s going to be the first full-length [computer-animated] movie, so it’ll be a fun thing to have been associated with, however it turns out.”
What finally made Barzel a believer was watching Lasseter at work. He found that Lasseter had an uncanny ability to shift between the macro level of the entire film and the micro level of whatever detail he was dealing with at the moment. “Looking at an individual frame — it’s meticulous work– he would always be aware of its role in the larger context of storytelling,” Barzel recalled. “He’d say something like, ‘This is the first time this character responds to that situation; it’s really important that he get the right glint in his eye.’ ” Barzel started to think, John knows what he’s doing. This movie could be really good.

Source:
Price, David A. The Pixar Touch: The Making of a Company. New York: Alfred A. Knopf, 2008.
(Note: italics and brackets in original.)
(Note: my strong impression is that the pagination is the same for the 2008 hardback and the 2009 paperback editions, except for part of the epilogue, which is revised and expanded in the paperback. I believe the passage above has the same page number in both editions.)

Lean Start-Ups “Ruthlessly Cull Failures”

Eric Ries and his book. Source of photo: http://nemonics.files.wordpress.com/2011/11/eric-ries-lean-startup.jpg?w=584&h=262

(p. D3) “What’s different in the Valley is that we’ve found a quasi-scientific method for reinventing businesses and industries, not just products,” said Randy Komisar, a partner in a leading venture capital firm, Kleiner Perkins Caufield & Byers, and a lecturer on entrepreneurship at Stanford University. “The approach is much more systematic than it was several years ago.”

The newer model for starting businesses relies on hypothesis, experiment and testing in the marketplace, from the day a company is founded. That is a sharp break with the traditional approach of drawing up a business plan, setting financial targets, building a finished product and then rolling out the business and hoping to succeed. It was time-consuming and costly.
The preferred formula today is often called the “lean start-up.” Its foremost proponents include Eric Ries, an engineer, entrepreneur and author who coined the term and is now an entrepreneur in residence at the Harvard Business School, and Steven Blank, a serial entrepreneur, author and lecturer at Stanford.
The approach emphasizes quickly developing “minimum viable products,” low-cost versions that are shown to customers for reaction, and then improved. Flexibility is the other hallmark. Test business models and ideas, and ruthlessly cull failures and move on to Plan B, Plan C, Plan D and so on — “pivoting,” as the process is known.

For the full story, see:
STEVE LOHR. “Looking Backward to Put New Technologies in Focus.” The New York Times (Tues., December 6, 2011): D3 & D4.
(Note: the online version of the story is dated December 5, 2011.)

Ries’ recent book is:
Ries, Eric. The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. New York: Crown Business, 2011.

Blank’s books are:
Blank, Steve. Not All Those Who Wander Are Lost. CafePress.com, 2010.
Blank, Steven Gary. The Four Steps to the Epiphany: Successful Strategies for Products That Win. 2nd ed: CafePress.com, 2005.
Blank, Steve, and Bob Dorf. The Startup Owner’s Manual: The Step-by-Step Guide for Building a Great Company. K & S Ranch, 2012.

Another relevant book is:
Maurya, Ash. Running Lean: Iterate from Plan A to a Plan That Works. 2nd ed. Sebastopol, CA: O’Reilly Media, 2012.

“Being Able to Work on a Great Project”

(p. 133) Recruiting was brisk; the magnet for talent was not the pay, generally mediocre, but rather the allure of taking part in the first fully computer-animated feature film. “Disney gave us a very modest budget [$17.5 million] for Toy Story,” Guggenheim said. “Although that budget went up progressively over time, it didn’t afford for very high salaries, unfortunately. We tried to make the other working conditions better. Just the enthusiasm of being able to work on a great project is as often as not what attracts artists and animators.”