THE IDIOT ENTREPRENEUR THEORY

THE IDIOT ENTREPRENEUR THEORY

From Chicken Soup for the Entrepreneur's Soul

The Idiot Entrepreneur Theory

Our modern age has romanticized the concept of “entrepreneur.” The idea is that the best and the brightest of each generation sets out to change the world by building world-beating innovating corporations. Mr. Hewlett and Mr. Packard built Hewlett-Packard (HP to the rest of us) into a multibillion-dollar computer company. Mr. Dell started Dell Computer in his university dorm room. Bill Gates, the quintessential nerd, started Microsoft with equally nerdy friend Paul Allen after dropping out of Harvard. They all became heroes and are studied in the nation’s leading business schools.

The problem with all of these examples is that they are exceptions to the rule. All three of these companies were founded by really smart guys who either got, or were on track to get, advanced degrees from leading universities.

The fact is that most new companies are started by guys more like me. We are the guys (and women) who drag along in the bottom of the class academically. We have few, if any, accomplishments outside of the classroom. During job interviews, panel members roll their eyes, wondering, How did this idiot get past our résumé screeners?

The reason I founded my first company was to actually get a job. My reasoning was that if you start your own company, you can employ whomever you like. So in order to reassure my mom that I was not completely destitute, I made a trip to the courthouse, filed incorporation papers, then went to the local quick-copy printing shop and ordered business cards that read “Bob Young, President.” My new unpaid job came with a good enough title that my mom could brag about me when talking to my aunts on the weekend, aunts who had always liked me, but who worried about whether there was a government program that would look after a likable, but obviously unemployable, idiot of a nephew.

The first two companies I helped build were in the computer rental and leasing business. They went okay for a while. But I was not very smart, so I didn’t realize that the computer rental and leasing business is a bad business. I defer to the definition of “bad” in the way that Warren Buffet, arguably America’s greatest businessman, would use: Mr. Buffet defines a “good” business as one for which he can hire mediocre managers and still turn a profit.

While working the computer rental and leasing business, four out of five of our competitors went out of business. At first we thought they were just not very smart. But when we also ran into financial difficulties, our respect for the talents of our former bankrupted competitors rose immeasurably.

With this in mind, an interesting question was posed: how do so many people who fail at school eventually become competent and successful entrepreneurs? My thesis is as follows: Those of us who work well within the system learn to do so at a young age.

Let’s begin in kindergarten. Because you are able to complete kindergarten reasonably well, minding all the rules and expectations, your teacher passes you with a glowing recommendation to the first-grade teacher. The first-grade teacher is already predisposed to liking you because you showed up for the first day of class on time. Given that all the great class behavior skills you learned in kindergarten are easily transferable to first grade, you do well there, too. So the first-grade teacher passes you with good marks and a glowing review onto second grade. As long as you continue to learn to work the system throughout your school years, your marks and your reviews continue to reinforce those system-approved behaviors.

Now consider the idiot. I, ah, wait, he typically starts out badly in kindergarten. He then graduates to first grade with a whispered warning from the kindergarten teacher to the next teacher: “Look out for this kid; he’s an idiot.” He isn’t really sure what he has done wrong, because he’s only five years old at the time, but it’s obvious already that the “system” does not work for him. So he daydreams and goofs off and otherwise looks like an idiot to the first-grade teacher, who passes him along to second grade with a similarly poor review and warning, and so on and so forth.

So after twelve years of these constant reminders that he is not as talented, smart, or accomplished as the kids who get great marks, he graduates from high school knowing only one thing—namely, that he is an idiot.

But here is where it gets interesting. Knowing that you are an idiot is, believe it or not, a huge competitive advantage in business. The advantage is simply due to the fact that all your competitors don’t know that they’re idiots, too.

In the early days of the Open Source software movement, there were only a few companies trying to build a business selling “free” software. Open Source software consisted of software that was built collaboratively by engineers cooperating across the Internet and was shipped with both binaries and source code, all under a license that allowed anyone to modify the software. This was a very different model for software than that found in the existing software industry. Software was previously sold without source code (which you need in order to make changes) and came with a license that threatened to put you in jail if you even attempted to make any changes to the software.

At Red Hat, we were one of the few companies who thought we might be able to build a business supplying this Open Source software to our customers. We supplied an operating system called Red Hat Linux, made out of the Open Source software that was being worked on by engineering teams across the Internet. We collaborated with this community of Open Source software developers by giving away all the software we wrote under the Open Source license, as the software we were using. We believed corporate customers would want the benefit of having control over the software they were using to build their networks and infrastructure on, which the Open Source software model gave them.

Suddenly and out of nowhere, a well-funded competitor appeared, led by a couple of very talented and very experienced software industry executives. Without going into any of the details, our little company (funded via our credit card balances) had, within three years, run circles in the market around our larger, much better funded, competitor.

As near as we could tell, we were able to achieve this success not by being smarter than our competitor, as we were measurably less talented and less experienced. We simply avoided the mistakes they made. This competitor, trained in the existing software industry, chose to surround the Open Source software they were using in their products with proprietary binary-only software. They believed this additional software added functions and uses to their software that made it more complete and useful. But as it came without source code and with a proprietary license, it also meant the customer could not make any changes to their software. As a result, this deprived their customers of the unique benefit Open Source software offers—namely, control over the software they are building their businesses around.

Our competitors’ success earlier in their careers in the existing software industry blinded them to the rules of the new environment they found themselves operating in. Hence, a perfect example of my original theory—in effect, our competitors did not know that they were idiots. Good students are taught to believe that they are clever. Sixteen years (they all went on to college) of having teachers and parents tell them how clever they are results in them thinking they are actually clever. They can’t help not knowing they are idiots, because no one in their entire academic careers ever pointed that obvious fact out to them.

Yet given the pace that business operates at, which is several times the pace academic studies operate at, we are all idiots when we first launch our business careers. We have few if any skills that are transferable to the business world. It is why smart, talented guys like Sam Walton of Wal-Mart fame failed until he was forty years old. He had to unlearn all the bad advice and bad feedback he’d received in his star-studded childhood when he was the best athlete and smartest guy in his class.

But it is also why so many of those expensive retirement properties in Florida are owned by entrepreneurs who never graduated from high school. They knew they were not very smart when they came out of school, and on top of that no one would hire them, so they had to start their own businesses to get a job, just like me. And it can be a very badly paid job at that, because when you start a business, by definition you don’t have any customers or any revenue or profits in order to pay yourself a salary.

Again, we dumb students knew one thing our smarter classmates didn’t learn: we were idiots. But many of us were paying attention to the teachers who drummed into our heads that the only way to get smarter was to work harder. So we kept on studying in our own academically challenged way, too dumb to realize that we were too dumb to succeed.

But sometimes, just sometimes, we did go on to achieve remarkable success.

Bob Young

EPILOGUE: Robert “Bob” Young is the founder and CEO of Lulu.com. A true technology entrepreneur with four successful, multimillion-dollar start-up companies on his résumé, Young also knows how to have fun; he is the owner of the Hamilton Tiger-Cats, a Canadian Football League team based in Ontario. Young and his champion football team are very active in their Canadian province, sponsoring and supporting many charity events and causes.

As cofounder and former chairman of Red Hat Software (1993–2000), the largest provider of fee-based Linux products and services in the world, Young was responsible for the early success of the company. A true Open Source visionary, Young’s success in developing Red Hat into a household name won him prestigious honors, including having been named one of Business Week magazine’s “Top Entrepreneurs” in 1999.

Before founding Red Hat in 1993, Bob spent twenty years at the helm of two computer-leasing companies he founded. That experience as a high-tech entrepreneur, combined with his innate marketing savvy, gave rise ultimately to Red Hat’s success. His book, Under the Radar: How Red Hat Changed the Software Business—and Took Microsoft by Surprise (Coriolis Group Books, 1999), chronicles how Red Hat’s Open Source strategy successfully won wide industry acceptance in a market previously dominated by companies that offered proprietary binary-only systems. After Red Hat went public in 1999, Young founded The Center for the Public Domain, a nonprofit foundation that supports the growth of a healthy and robust public domain of knowledge and the arts.

Then in March 2002, Young launched Lulu.com (www.Lulu.com ), a Web site that allows businesses, educators, artists, musicians and others to publish and sell their own books, images, multimedia and music. According to Young, Lulu challenges conventional publishing models by allowing content creators and owners to bring work directly to market without surrendering control of their intellectual property. The enterprise is driven by Young’s strong commitment to information access as a foundation for knowledge advancement, whether in education, computer code or other realms.

To learn more about Bob Young, please visit www.Lulu.com.

Dahlynn McKowen

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