Is it just me or does this look like a massive advertisement for Steve Blank's books and program? That's not to say that the books and programs aren't necessarily good, but still.
Agreed. I kept thinking "well, where are these insight then?" No such luck. Why this scores so high is beyond me. I suppose a lot of people didn't bother to read the entire article which is without ANY insights.
"massive advertisement for Steve Blank's books and program?"
To which I say "chicken dinner"!
Disclaimer: I worked with Steve. He obviously has a nose for marketing, pr all that stuff. So of course he will always be angling for anything that will raise his profile. Which is, as you said "not to say that the books and programs aren't necessarily good".
It seems to me that the industries most kinds of 99% businesses enter is zero-sum, which means helping new businesses only hurts the profit of other new businesses or incumbents. Ergo I question what value from an overall economic perspective helping individual entrants to the 99% market holds.
(Here I use as examples the industries defined from the article: construction, retail, health care, lodging, food services)
For instance, if 10 businesses are started, and there is only room in the market for 3, then 7 will inevitably fail. It is possible to improve each's individual odds of success, but to what end? Unless the market these businesses are in grows, any successfully-started new business only increases competition for the others. So lets say that we improve the odds for these new entrepreneurs by educating them. We will also assume incumbents have access to the same knowledge and benefit equally. If the new competitors all enter the market together, all we have done is raise the competitiveness level in the industry, and the odds of failing are still the same.
This is what Peter Thiel discusses in his "perfect competition" argument. (If you haven't read his CS183 notes yet, please do so. They're insightful).
Peter Thiel likens competition to athletes or soldiers beating each other up. They compete to win and that is what they know how to do. But in the end there is only one victor. The rest are losers. And if you improve the competitiveness level of these athletes, all you have done is make the competition fiercer. Now that could be a good thing as it could provide better value for consumers. But the businesses themselves don't benefit from that!
All this program is doing is making more perfect competitors, although what will probably happen is not all will benefit the same amount, as certain businesses will learn and apply these lessons better than others. But from a birds eye perspective, the result is stil the same: the same number of failing businesses. Even if these new businesses you help succeed do in fact "make it", they don't increase the size of the industry (barring technological breakthroughs). They only add more players to a limited pie.
People by nature care more about themselves. Thus they care more about entrepreneurship rather than innovation per se. Entrepreneurship without innovation is about beating up the other guy, simply outcompeting him through energy or maneuvering. Innovation is about doing something better, freeing up time or resources to do other things, which grows the pie for all.
In summary:
Sure a new business may add value by providing a better service than the competitor it beats, but the overall wealth pie of this nation doesn't increase. Encouraging just entrepreneurship without technological innovation is not that useful from a macro perspective. What we need are new entrants who change the game via technological or process breakthroughs. These are precisely the kind of companies that Peter Thiel seems most interested in, according to his CS183 lectures. And I submit that these are the kinds of businesses startups should focus on. Not the other 99% which only increase competition for everyone else.
This is why R&D and innovation are the key to growing the economy. Simply calling for more entrepreneurs, without a corresponding emphasis on innovation, is a flawed long-term strategy.
I'm more than a little confused by your comment. In several areas either you or Thiel (I'm not familiar with his thinking enough to know which) are completely disregarding some very basic economics...
It seems to me that the industries most kinds of 99% businesses enter is zero-sum
Um, no. Nothing in the economy is zero sum. Wealth is constantly being created and transferred. I think you are confusing this with the idea of a mature-market at an industry level, but those markets are almost non-existent because they destroy themselves like anti-matter.
Unless the market these businesses are in grows, any successfully-started new business only increases competition for the others.
Well, for one thing, if the market isn't growing we are in a recession, and recessions simply aren't permanent states. Recessions destroy themselves, because they are simply forced efficiency finders. Secondly, increasing competition increases pressure to become more efficient and/or innovative, which in turn drives market growth. The whole idea of helping and soliciting help in business is an act of innovation.
In short, your initial point - that of a zero sum market - is flawed, and therefore all your other arguments are too.
Increasing the quantity of entrepreneurs by default increases the quality, because it increases the pressure to compete, and therefore leads to the very innovation you feel is the real solution. You are arguing against the very solution you seek.
This is what Peter Thiel discusses in his "perfect competition" argument.
That's not Peter Thiel's argument. That's Peter Thiel delivering a remedial microeconomics lesson. 'Perfect competition', 'monopolistic competition' and 'monopoly' are technical terms which don't necessarily mean what they might appear to. In perfect competition, for example, all goods are fungible. It's a good model for the commodities market, since one barrel of oil is very much like another (there are different grades of oil with different sub-markets, such as 'Brent crude' or 'west Texas intermediate', but you don't care which particular company extracted which particular barrel of oil from the ground within a given market).
Now once you introduce the element of skill, you have something more like monopolistic competition. Pizzerias are in competition, and they're selling a similar product, but they can compete on everything from the quality of the pizza dough to the comfiness of the seating, so different customers may end up strongly preferring one to the other. Maybe I'm price-sensitive and prefer Mario's bargain slice, but you're a gourmet and you prefer Luigi's home-made flavor. Someone else prefers the fancy service at Gino's, and so on. This is why towns can have so many different restaurants and why supermarkets can sell multiple different brands of what are essentially similar products: you can differentiate products and services, and anchor consumers to a particular combination.
Sure a new business may add value by providing a better service than the competitor it beats, but the overall wealth pie of this nation doesn't increase.
Oh yes it does, because now the wealth is being allocated more efficiently. Commodities are one-size-fits-all, but relatively few goods are commodities. Consider, for example, that there are relatively few companies in the business of wheat production (commodity) but a great many different bread companies, in line with the wide variety of different bread products.
Please, pick up a microeconomics textbook. Macroeconomics is so flawed and obtuse that a lot of people dismiss the musings of economists, but microeconomics is a very robust discipline that is almost criminally underappreciated. If I could back to high school and give my teenage self some advice, it would be 'learn microeconomics.'
All true. But with a customer development focus, they'll see failure more quickly with less resources.
For example, instead of renovating your restaurant and reopening it with your personal conviction that it is now better, why not test different redesigns before investing.
In a certain practical sense, aren't "the 99%", i.e. people without any significant cash cushion, precisely the ones who can't as easily take this non-VC, lifestyle-business route? If you need to pay rent and buy individual health insurance, it's a lot easier to do that if an angel or VC is fronting enough money to pay you at least a modest salary.
I believe the article is referring to 99% of small business ventures being outside tech and not referring to the income disparity of the recent referred to in the occupy movements.
I welcome efforts to help small business owners, but we shouldn't pretend that small business in general drives the economy. The huge jobs and productivity growth that we associate with startups comes from a very small % of disruptive companies, mostly in high tech. (I wrote a bit more about this here: http://bostinno.com/2012/02/17/bailouts-for-startups-tough-l...)
Small businesses drive employ almost half of all employees (and more than half during boom cycles).
The technology sector has an overinflated sense of the value it provides to the economy in terms of jobs created or productivity growth. Note that the article you cite does not refer to technology startups, it refers simply to new businesses under the catchall "startups."
He forgot to mention that 90% of all startups produce waste (leveraging VC's money), while 99% of small businesses produce real value simply because they don't have a choice.
The Lean Methodology is what small businesses have been doing since companies were created. I assumed that they took it and adapted it to tech business.
[+] [-] casca|14 years ago|reply
[+] [-] digitalengineer|14 years ago|reply
[+] [-] paulhauggis|14 years ago|reply
[+] [-] AznHisoka|14 years ago|reply
[+] [-] larrys|14 years ago|reply
To which I say "chicken dinner"!
Disclaimer: I worked with Steve. He obviously has a nose for marketing, pr all that stuff. So of course he will always be angling for anything that will raise his profile. Which is, as you said "not to say that the books and programs aren't necessarily good".
[+] [-] friendstock|14 years ago|reply
[+] [-] freshnote|14 years ago|reply
[+] [-] intellegacy|14 years ago|reply
(Here I use as examples the industries defined from the article: construction, retail, health care, lodging, food services)
For instance, if 10 businesses are started, and there is only room in the market for 3, then 7 will inevitably fail. It is possible to improve each's individual odds of success, but to what end? Unless the market these businesses are in grows, any successfully-started new business only increases competition for the others. So lets say that we improve the odds for these new entrepreneurs by educating them. We will also assume incumbents have access to the same knowledge and benefit equally. If the new competitors all enter the market together, all we have done is raise the competitiveness level in the industry, and the odds of failing are still the same.
This is what Peter Thiel discusses in his "perfect competition" argument. (If you haven't read his CS183 notes yet, please do so. They're insightful).
Peter Thiel likens competition to athletes or soldiers beating each other up. They compete to win and that is what they know how to do. But in the end there is only one victor. The rest are losers. And if you improve the competitiveness level of these athletes, all you have done is make the competition fiercer. Now that could be a good thing as it could provide better value for consumers. But the businesses themselves don't benefit from that!
All this program is doing is making more perfect competitors, although what will probably happen is not all will benefit the same amount, as certain businesses will learn and apply these lessons better than others. But from a birds eye perspective, the result is stil the same: the same number of failing businesses. Even if these new businesses you help succeed do in fact "make it", they don't increase the size of the industry (barring technological breakthroughs). They only add more players to a limited pie.
People by nature care more about themselves. Thus they care more about entrepreneurship rather than innovation per se. Entrepreneurship without innovation is about beating up the other guy, simply outcompeting him through energy or maneuvering. Innovation is about doing something better, freeing up time or resources to do other things, which grows the pie for all.
In summary:
Sure a new business may add value by providing a better service than the competitor it beats, but the overall wealth pie of this nation doesn't increase. Encouraging just entrepreneurship without technological innovation is not that useful from a macro perspective. What we need are new entrants who change the game via technological or process breakthroughs. These are precisely the kind of companies that Peter Thiel seems most interested in, according to his CS183 lectures. And I submit that these are the kinds of businesses startups should focus on. Not the other 99% which only increase competition for everyone else.
This is why R&D and innovation are the key to growing the economy. Simply calling for more entrepreneurs, without a corresponding emphasis on innovation, is a flawed long-term strategy.
[+] [-] run4yourlives|14 years ago|reply
It seems to me that the industries most kinds of 99% businesses enter is zero-sum
Um, no. Nothing in the economy is zero sum. Wealth is constantly being created and transferred. I think you are confusing this with the idea of a mature-market at an industry level, but those markets are almost non-existent because they destroy themselves like anti-matter.
Unless the market these businesses are in grows, any successfully-started new business only increases competition for the others.
Well, for one thing, if the market isn't growing we are in a recession, and recessions simply aren't permanent states. Recessions destroy themselves, because they are simply forced efficiency finders. Secondly, increasing competition increases pressure to become more efficient and/or innovative, which in turn drives market growth. The whole idea of helping and soliciting help in business is an act of innovation.
In short, your initial point - that of a zero sum market - is flawed, and therefore all your other arguments are too.
Increasing the quantity of entrepreneurs by default increases the quality, because it increases the pressure to compete, and therefore leads to the very innovation you feel is the real solution. You are arguing against the very solution you seek.
[+] [-] anigbrowl|14 years ago|reply
That's not Peter Thiel's argument. That's Peter Thiel delivering a remedial microeconomics lesson. 'Perfect competition', 'monopolistic competition' and 'monopoly' are technical terms which don't necessarily mean what they might appear to. In perfect competition, for example, all goods are fungible. It's a good model for the commodities market, since one barrel of oil is very much like another (there are different grades of oil with different sub-markets, such as 'Brent crude' or 'west Texas intermediate', but you don't care which particular company extracted which particular barrel of oil from the ground within a given market).
Now once you introduce the element of skill, you have something more like monopolistic competition. Pizzerias are in competition, and they're selling a similar product, but they can compete on everything from the quality of the pizza dough to the comfiness of the seating, so different customers may end up strongly preferring one to the other. Maybe I'm price-sensitive and prefer Mario's bargain slice, but you're a gourmet and you prefer Luigi's home-made flavor. Someone else prefers the fancy service at Gino's, and so on. This is why towns can have so many different restaurants and why supermarkets can sell multiple different brands of what are essentially similar products: you can differentiate products and services, and anchor consumers to a particular combination.
Sure a new business may add value by providing a better service than the competitor it beats, but the overall wealth pie of this nation doesn't increase.
Oh yes it does, because now the wealth is being allocated more efficiently. Commodities are one-size-fits-all, but relatively few goods are commodities. Consider, for example, that there are relatively few companies in the business of wheat production (commodity) but a great many different bread companies, in line with the wide variety of different bread products.
Please, pick up a microeconomics textbook. Macroeconomics is so flawed and obtuse that a lot of people dismiss the musings of economists, but microeconomics is a very robust discipline that is almost criminally underappreciated. If I could back to high school and give my teenage self some advice, it would be 'learn microeconomics.'
[+] [-] laglad|14 years ago|reply
For example, instead of renovating your restaurant and reopening it with your personal conviction that it is now better, why not test different redesigns before investing.
I'd call it teaching the scientific method.
[+] [-] _delirium|14 years ago|reply
[+] [-] run4yourlives|14 years ago|reply
In fact, my hunch would be that most are started with personal savings and family money.
[+] [-] WettowelReactor|14 years ago|reply
[+] [-] wfrick|14 years ago|reply
[+] [-] rprasad|14 years ago|reply
The technology sector has an overinflated sense of the value it provides to the economy in terms of jobs created or productivity growth. Note that the article you cite does not refer to technology startups, it refers simply to new businesses under the catchall "startups."
[+] [-] isalmon|14 years ago|reply
[+] [-] djt|14 years ago|reply
[+] [-] guscost|14 years ago|reply