My favorite podcast right now is Extraordinary Discourse by Jack Saturday. Each episode is about an hour long and they are essentially associative dreamscapes of audio recordings arranged to explore certain themes. Think Bob Dylan's Theme Time Radio Hour (Dreams, Schemes, and Themes!), but spoken word instead of music and more audio clips instead of a DJ.
Episode 442 explores our relationships with our jobs. The clips provide perspectives on what work does for us, what work does not provide, and the role money performs, among other things. The clip I'm sharing with you today is about the risk involved in entrepreneurship, the spirit that we're all supposed to idolize instead of advocating for social safety nets. More specifically, it is about the form of risk undertaken by the minority of entrepreneurs successful enough in the market for you to have heard of them. The point it makes is excellent: those people's success generally came down to a social risk rather than a financial risk.
Someone was describing the founders of Google as risk-taking entrepreneurs. And then this guy writes a response—this guy, he was also an entrepreneur in Silicon Valley—he points out that they were both PhD graduates from Stanford in engineering in the 1980s. And the phrase that sticks in my head was: "Short of inheriting the throne of England, there is no-one who has taken less of a risk than a PhD graduate in computer science and engineering from Stanford." His point is if you get a PhD in computer science from Stanford in the 1980s, people line up to give you money for whatever you want to do.
They are brilliant guys. They did amazing things.
They did not take risks.
Other people gave them money, which they spent on a whole bunch of ideas which paid off. Right? That's many things. It's not risk-taking.
The risks that entrepreneurs take, I think, are social risks. So, what they do—that was what that article was about—was understanding the risks they take are not material risk. They're very often using other people's money. Or, more interestingly, what makes them brilliant entrepreneurs is they understand a business that's not risky—everyone else thinks it's risky, but it's actually not. Their genius is understanding that something is a far surer bet than the rest of the world thinks. Ted Turner is a good example. Ted Turner was the first to understand—he was running a billboard business and he wanted buy a cable television station.
[Moderator: Incidentally, inherited the billboard business from his father.]
Yes, from his father.
He wants to buy a cable television station. Everyone says "That's crazy. You're gonna lose your shirt." He says "No, I'm going to do it anyway."
What he realized, which we all now understand, is that billboards and television stations are the same business. They're in the business of selling ads. The fit between those two was beautiful. He buys this station for next to nothing and turns it into one of the most powerful, lucrative media properties in the world. The risk he took was social. All the business old guard of Atlanta, when he made that move, essentially ostracized him and called him an idiot. To be called an idiot by your peers is a very devastating thing. If you look at the careers of great entrepreneurs and you look at the moment they took their plunge, the plunge is rarely a great financial or material risk. It's a social risk.
At the moment they started their new business, everyone around them said "you're an idiot." And they had to endure years and years and years of essentially being called a pariah. That is insanely difficult. That's way harder than gambling with someone else's money.
Sam Walton borrows money from his relatives to start Wal-Mart. Borrowing money from your relatives is not a material risk. It's a social risk. If you blow it, and if you're doing something your relatives are rolling their eyes at, every time you go to Christmas or Thanksgiving, your father-in-law is looking daggers at you and saying "are you going to squander my money, son?" That's a risk. But the idea of running a discount retailer where you pay your workers almost nothing and you lock them in at night so they can't go home—that's not financially risky. That turns out to be a fabulous business proposition.
Who knew that exploiting people would make a lot of money?
[Moderator: What an active imagination!]
Brilliant, active imagination.
"I will get stuff from China, where they pay their workers nothing, and I will sell in stores in America, where I pay my workers nothing, and that will translate into a huge amount of money."
One thing I'd like you to take away from this is that their ability to succeed with such social risks instead of material risk is a class privilege. It is one in the long tradition of exploiting advantages to seek further advantage. The wealthy enjoy a relative safety while they accumulate more wealth or start projects which superficially amaze the poor, to whom a life unfettered from money is scarcely worth considering. Children grow up idolizing rustic fictions used to hide the realities of being rich because we don't teach them about class. If someone is born rich, they are surrounded by people who know what it is to be rich and live a life with few fetters. If someone is born poor, that experience from an early age can set boundaries through trauma.
I'm fully aware of the irony involved in sharing this message with software engineers. We frequently exploit information asymmetry to charge incredible, extortionate amounts of money for our services and may experience the mythical class mobility as a result. However, it's important to remember that not everybody makes these sorts of salaries, and not everybody has the opportunity to engage in the social risks of the wealthy rather than the material risks of ordinary life.
Perhaps the world would be better if we designed it so everybody could.