Of interest to entrepreneurs « discourse and notes

It can be an amusing exercise sometimes to second-guess causes, effects and other matters of relativity in the economy. For instance, is this now being pulled down by consumer deleveraging or are consumers deleveraging because of a soft economy? Further, if leverage at all levels should never have risen to where it rose in the first place, is the economy technically soft or just where it belongs? When we refer to a Depression or a Great Recessions we imply something about economic unhealth, disruption, and abnormality; but what if the abnormal state, the disease, the disruption are not in the down-cycle but rather the period and circumstances preceding it? I suppose we refer to those periods and such corresponding elements as bubbles, but we tend not to be particularly fussed about these when they occur. We treat bubbles with a tone of academic detachment, we debate their existence, we sometimes joke or make up silly names, and after they pop we look for economic cures to the ailment.

I am vaguely reminded of the business school adage by way of ancient Chinese wisdom: the battle is won or lost before it is fought. This has to do with preparation and strategy, at least in the business school context, but it also relates to causality in the sense of issues raised in the previous paragraph. In that same spirit, I sometimes wonder if the causality begins and ends with leverage, with bubbles, or if these too have been an effect rather than a cause, a manifestation of a deeper fundamental driver. Conventional wisdom has dealt with this very issue often enough, and the conclusion is usually along the lines of short-term orientation in the market, short-term oriented compensation structures for those who impact the market’s directions, and at the consumer level the multitude of fads that come and go and the variety of programs that tend to blur the line between necessary and discretionary spending. But this either doesn’t delve deeply enough into the subject or more likely fails to connect the dots, as it were, for a more complete picture.

To complete the picture, or at least to add depth to it, there is another quality that must be considered, which has something to do with efficiency, competency, and the counterpart to these things, apathy. To illustrate, let’s look at a selection of corporate news stories from the past week: One major international bank is suffering a multi-billion dollar loss as a result of poor executive supervision, one major technology company is replacing its CEO and reversing his strategy after less than one year on a job for which he was not actually interviewed by the board, one major Internet company is firing off conflicting emails to its employees about the future of the company as it currently steers without a clear path, one major entertainment and information hub has become its own scandalous story, and one of the highest-profile IPO candidates is having to restate its gimmicky filing now for the third time while its executive ranks unsettle. To underscore the point with contrast, we concurrently lament the departure of modern industry’s most successful executive, who led the development of the world’s most valuable company with vision as well as attention to detail.

The examples cited bring home, I think, all of the issues raised: short-term and long-term orientation, efficiency and apathy, bubbles and fundamentals, causes and effects, battles won and lost. When we consider the state of the economy – worldwide – we should not dismiss such issues as irrelevant simply because less quantifiable than aggregate leverage and money supply. Economies are based on enterprise, and the principal lesson all good entrepreneurs can recite by rote is that success and failure is all about execution. It’s time for this lesson to be applied with utmost seriousness and urgency across all segments, private as well as public, because when circumstances change as drastically as these have in the last few years even the most mature entities contain elements of the startup.

To understand a complex system it is sometimes useful to isolate its characteristics in a simplified example and let the imagination wonder from there. Recognizing that enterprise, economies, and markets are highly complex and intertwined systems, let’s investigate two simplified extremes – at polar ends of a continuum – and proceed to draw conclusions.

Let’s assume that there are two types of enterprise: the pure startup and the perfectly mature. The pure startup is made up of pure possibility and nothing actual, and the perfectly mature enterprise is completely actual and has no potential outside of that. At one extreme, thus, all value is option value, and at the other the business value is the value of the underlying asset (in its most fundamental state). The pure startup represents the most speculative form of equity and will be funded with the most flexible form of capital, and the mature asset will be funded with debt because it is completely predictable and has no upside at all.

Beyond this, the two isolated ends of the described enterprise continuum also differ in operational and strategic ways. There is, for example, a difference in management style required – as has been touched upon in a previous article here – with vision and leadership ranking high for the startup, where nimbleness, competitive positioning, and direction in a volatile scenario are all critical to growth. For the mature business, pure operating management and maintenance of the status quo are the necessary executive objectives. The respective management teams will accordingly require different types of boards, different forms of advice, and different offerings from its assorted service providers: On one hand a highly strategic, forward looking, aggressive and anticipatory approach; and on the other a conservative method based on historical observation, predetermined formulas, and careful asset conservation. To state this slightly differently, the difference is between entry and exit.

Now, while there are countless real examples of the two extreme scenarios, the vast majority of enterprise is likely to fall at one point or another in between. At such points there will be greater or lesser emphasis – combinations and permutations – of the characteristics described above. Depending on where an enterprise exists along the trajectory from entry to exit, as it were, it will have to be analyzed, managed, funded, and serviced accordingly. Sometimes there is a challenge in doing so effectively, because analysts, managers, funding sources and service providers are commonly only prepped and ready in one thing. This is especially true in an era of high specialization, and sometimes this disconnect is exacerbated by revolutionary changes that take place within whole sectors or, even more notably, as whole new sectors are born. To take the subject to an even higher plateau, the described nuances may even be manifest at the macro-economic level.

Regardless of one’s perspective in such matters – whether it is analytic, strategic, operational, financial, (political), or service oriented – it would be, I believe, a correct approach – maybe even the most correct – to first and foremost isolate the subject of one’s perspective and try to find its place along the evolutionary continuum. As hopefully demonstrated herein, not all such places are to be handled identically and not all such places demand cookie-cutter solutions. From a very high level looking down, one could even argue that our global economy, our technology, and our capital markets, are at a general point that is closer to the startup extreme – and all this signifies – than the other. The greatest mistake anyone can make – assuming one has an interest in the subject – is to fail to recognize this reality. Consequences and repercussions are multiple.

In a television interview to promote his new book, the author, consultant, venture capitalist and student of technology trends, Geoffrey Moore, describes the difference between management and leadership. He uses this contrast to shape a perspective of recent events at Yahoo!, as well as other Silicon Valley notables – from the current headlines, Hewlett-Packard and Cisco, and from the archives, Netscape. In Mr. Moore’s opinion, the difference between management and leadership is the difference between using one’s existing resources with optimal efficiency, and knowing how to reallocate such resources for anticipated changes ahead. The former is management and the latter is leadership. Stated differently, management parallels execution and leadership reflects vision.

The conversation touches on an additional variant – integral to any analysis of such distinctions – which is the pace of change in the external environment. It being a television interview of limited scope and time allotment, the discussion is unfortunately choppy and superficial, but the principal point can be surmised: In an extreme scenario in which there is no change at all, management alone suffices; while at the other extreme (i.e., pure and constant change) leadership (which is to say, vision) is the only necessary feature of enterprise success. Reality is never at either of these ends, and so the question is more about combining the right mix of management and leadership to correspond with the pace of change, and with the way an enterprise performs in response to its opportunity.

There was a time, not long ago, when the technology sector – at least so far as technology was defined as the evolution of the Internet and those things associated with it – was in a state quite close to absolute transformation. The state was never absolute, (these states can never be quite absolute, either one way or the other), but it tended that way and, such being the case, qualities of vision, imagination, and recognition of possibilities comprised the leadership profile for success. The needle has moved since then, and although we are nowhere close to the opposite extreme of a static environment, the segment is steadily distancing itself from the point of birth (where the rate of evolution is highest).

As a sector and with countless individual exceptions, technology may now be at a point where a blend of vision and management is the correct enterprise recipe. This is a very difficult environment in which to compete. Extremes are always easy because they’re obvious and follow simple precepts. The gray areas, where nuance and mixture take over, are more delicate and comprise a myriad variables, any of which can shape direction and throw the vessel (temporarily or permanently) off course. We have seen illustrations and case studies of this theme in recent events in the Internet world, and many have been quick to point out the issue in such cases.

Beyond technology, however, the time has arrived to recognize that the same issues apply in all aspects of the global economy. There have been enormous changes underway in capital markets, for example, and management alone is no longer sufficient. Similarly, the monetary disruption that began in 2008 is far from over, and its impact on economies and systems is yet to be fully understood. If technology is in a state of motion away from the extreme of perfect transformation to a more stable point along the continuum, these other fields are moving towards the same middle-ground but from the opposite direction. Settling on an equilibrium to combine leadership with management is now a universal challenge, transcending individual segments, reflecting an era singularly defined by change at a combination of multiple velocities.

The case is being argued again that entrepreneurship and venture investing are insulated. The turbulence that happens in markets (and otherwise) apparently does not matter, (although the good things that happen in technology, and otherwise, apparently do). Almost as if in direct response to the bubbly argumentation, almost as if to demonstrate that everything in actuality does matter, that everything is related and codependent, Standard & Poor’s has downgraded the long term debt of the U.S. Treasury for reasons both external and internal to it. The rating downgrade itself (or its consequences) is for purposes of this discussion less interesting than the rationale and the litany of issues raised by the analyst institution.

Here is a sampling, in no particular order: There is concern about the effectiveness of management, there is concern about the realization of financial assumptions, there is concern about future funding needs and market receptivity thereto, there is concern about the veracity and reliability of historical results, and there is concern about the relative quality of the asset in comparison to its peer group. In addition, the possibility has been raised that certain entities that are dependent upon the risk profile and wellbeing of the U.S. Treasury will, through a sort of domino effect, also be downgraded. These same institutions, by the way, happen to be many of the usual and customary limited partners (LPs) of venture funds and other private investing vehicles. It’s all connected you see…

Which brings us full circle back to entrepreneurship and why capital markets (and many other things) do matter. Even if it were the case that an enterprise is fully funded and is as a result no longer subject to outside whims and flows of capital sources, an enterprise functions in a broader context and is reliant on an economy for revenues, the levels of operating expenses, and the very nature of operations (technical & otherwise). Capital markets are not only a reflection of all these things, but impact them directly. Much more critically, however, an enterprise is rarely if ever fully funded. Not even the U.S. Treasury is so, apparently, let alone a seed- or venture-stage project.

This drives the argument straight to the core of where the risk and potential disingenuousness lies, of insisting that entrepreneurs should not bother about capital markets. (And we are all entrepreneurs, really; even, apparently, the Secretary of the U.S. Treasury.) As long as a business is funded by external capital â€“ to some extent, of course, all capital is external – the markets very directly matter. Whether in relation to immediate or longer-term investment sources, whether in relation to the mood and liquidity of current investment sources (remember the Sequoia slides?), or whether just as a means of anticipating the behavior of a customer base that is itself pushed and pulled by all of the same issues, fund flows and market swings are critical. Paying attention to these, even if outside of any direct sphere of influence, is not only necessary but one of the principal criteria by which an entrepreneur (of any stage) should be measured.

Why some would insist that the capital markets are irrelevant to entrepreneurship, and especially as these are sophisticated investors making such claims, is frankly baffling. These are not investors who can guarantee the permanent funding and wellbeing of an enterprise in a manner independent of external variables. As we now understand, “guarantee” is a strong word, and no investor can firmly stand behind such a commitment in a “risk-free” manner, not even the U.S. Treasury. Investors of lesser stature ought to be more cautious handing out advice that is at best careless, and at worst cavalier swagger. There comes a point when lack of planning catches up, even for the most advanced and solid of startups.

True curmudgeonliness has gone out of style. Maybe the abundance of apps and jocular pastimes killed it. Or maybe it was Twitter and its implied prodding of blurbs and wit. Who knows, really? Causes and effects are sometimes all mirrored backwards. For whatever reason, the level of seriousness has seemed to suffer. And I say this despite – or rather because of – news from our capital filling the airwaves every minute.

Once in a while, albeit rarely, one does still stumble upon curmudgeonliness of the grand variety. At such rare times the heart fills with emotion. I’ll give you and example: Just the other day I was thinking a witty thought about the coffee that burned my tongue and I was wondering why I always deprive my followers of such gold, when I clicked on a link to the Founders Fund homepage and landed on this caption:Â ”What happened to the future?” it asks. “We wanted flying cars, instead we got 140 characters.” Yes! Immediately I was hooked. I clicked through to the manifesto and it has become a source of ongoing inspiration. If you haven’t had the pleasure, you owe it…

Then there is this new profile article in Business Week about a certain Silicon Valley inventor who has “found a way to increase wireless capacity by a factor of 1,000.” Skimming around the ensuing narrative about his coming of age and so on, I landed upon the following nugget for the soul: “He figures that [Silicon Valley] once teeming with risk-takers has grown soft… succumbed to Internet eye candy at the expense of breakthrough inventions.” A curmudgeon after my own heart! (And don’t get me started on high-frequency trading and structured finance product – faux breakthroughs that brought us to the precipice, as it were.)

But we need more, we need more. We need a large-scale seriousness that is real and substantive. (There is plenty of the other kind, the kind that is more probably self-serving and over-the-top propaganda, and that passes for something elseÂ altogether.)Â We need the real variety for the sake of progress that is more than 140 characters deep. This isn’t only about Silicon Valley anymore, and it isn’t about gadgetry, wit, and gizmos. For the first time in our lifetime the debt of the U.S. Treasury is going to lose its AAA rating. It is a thought that – independent of market repercussions – should make us a bit more sober. It’s the official end of an era, and maybe also a wake-up call: the tomfoolery has gone too far.

Heading into Independence Day weekend and with Zynga, MySpace, Google, and Facebook all in the news with some kind of social network activity, I can’t help but wonder what the founding fathers would have thought. It took them about a month to pass a letter around between Philadelphia and Boston, and still they innovated a form of government. They sort of understood something about electricity and kites, and the startup they co-founded survives more than two centuries later, without a single pivot. Sure, that the British were coming would have been more effectively tweeted than shouted from a horse, but then again, this presupposes Twitter. Maybe Revere’s followers would have been busy LOLing or rather FTWing, or heavens knows what else, or maybe the message would have DM-failed. Or whatever.

Here we are, two hundred thirty-five years later, and half of the technologists plus most of the entrepreneurs are trying to solve the mystery of Facebook. Others are merely hoping to imitate it successfully. Google probably falls into both categories. MySpace is too late for either one. Zynga does pretty well as a focus-group. And much of the rest of consumer media is, in one way or another, defining itself in relation to where Facebook stands on the position: That’s overstating it, not Facebook per se, but perhaps social media generally. I wonder what the founding fathers would have thought. It’s fair to ask this, I believe, because they were entrepreneurs with a track record, and they were moreover visionary, energetic, polished, and understood how to build something from nothing.

What is most marvelous about the birth of our nation, more inspiring than the battle itself and the politics that led to it, is the system that was established with little true precedent. (This is perhaps an exaggeration, there is always precedent, depending on how literal or figurative one likes it. Suffice to say that there was less precedent for the form of government that exists to this day than there has been for Google+, or even for Facebook (alas, poor MySpace, we knew you well).) With limited precedent, John Adams and his colleagues invented an approach that works almost timelessly, and while entrepreneurs and other business students are digesting the methods of any variety of technology pioneers and startup founders, the lessons of the founding fathers may be included in the same curriculum without risk of time inadequately spent.

Ironically, one of the principal lessons is this: In preparation for their monumental achievement, the founding fathers were universal scholars. They did not keep within limited circles to themselves, but rather, they branched out. There was little of what we these days refer to as groupthink, yetÂ there was virtually endless debate. The scholarship that prevailed and that factored into every-day discourse was extensive; The Declaration of Independence stands as proof.Â There is a lesson in this, as there is also a distinction between invention and progress. The latter always includes the former, but the reverse is not always true.

There are little businesses and big businesses. (Sometimes big businesses are also little.) Little businesses, whether big or little, should start small and expand. Big businesses – that is, the truly big – have to begin large. An example of a big business is aircraft manufacturing, or satellite communication, or other such enterprise that is based on heavy capital investment and a large addressable market that must be tackled in masse. An example of a little business is daily deals. Sometimes little businesses behave as though big, and that is a mistake.

The daily deal business is a local business. It is built on relationships with local merchants and the local consumers who may or may not purchase goods or services from them. It is a an easy business to understand and, relative to higher technologies – say, robotics or nanotechnology – it is not dependent on leading-edge innovation. To execute the model, the publisher has to serve two masters. The consumer has to be shown good deals, and the merchant has to be delivered good customers. Little businesses are not simple, no business is simple if well executed, but little businesses are little.

The complexity of a little business, oftentimes, lies in the delicacy required to handle little things. It is such delicacy, after all, that differentiates good execution – a quality service provider – from the less good in a business that – unlike, say, capital intensive satellite communications, or high-tech driven robotics and nanotechnology – has few if any barriers to competition. Delicacy is not only a matter of detail and quality of service, but also flexibility. It is a matter of testing and iteration, and it’s dependent on limiting one’s mistakes to tiny ones.

When little businesses have perfected the trade, in a small market or in a given sector – perhaps, and even ideally, a combination of both – these businesses may begin to branch out, little by little, or otherwise consolidate. In this fashion, over time, little businesses grow and in some cases become dominant. For example, Facebook: a little business that launched its enterprise modestly, on only a few college campuses, while figuring things out. For example, newspapers: local market flyers that grew and consolidated and in some cases became national, later on.

The daily deal business has much in common with both newspapers and social media. Like newspapers it is at its core a local business, as stated, and one that is not substantially different from local flyers. Like social media it is reliant on virality and network effect, both of which depend on a platform that hits a fickle market just right. That many local newspapers have started to offer daily deals is not coincidental, nor is it random word selection that daily deals are often referred to as social commerce.

The daily deal segment has the potential to become a formidable force in modern commerce. (For purposes of this commentary, daily deals and group buying and flash sales and all such related offerings can be used interchangeably.) Although the concept is not strictly speaking new, the technology exists and the market is ready for daily deals to thrive. The process will be evolutionary, and it is almost certain that the present format will be tweaked and further molded, maybe even reshaped. There will be winners and losers, as we like to say, and in the long run consolidators and consolidated.

The most visible symbol of this sector, for the time being, is Groupon. The jury is out – although there is chatter that isn’t heartwarming – and the initial verdict will be delivered when the company’s IPO is priced. Then we will see how the company performs in the days, months, and years that follow. In the meanwhile, one could make a case that Groupon has grown too big too quickly, and that this constitutes the root of all criticism against it. One could make a case that Groupon is a little business that has behaved as though big, and will as a result face the challenge of nimbleness and flexibility and, in short, delicacy, while having to steer an enormous vessel.

It seems like a distant past, or maybe fantasy, perhaps something that only happened on screen. Entrepreneurship led its financing rather than the other way around, and entrepreneurs thought larger than a product. Take, for example, Tucker, take Howard Hughes, take that young visionary in The Social Network. Presumably these characters, as portrayed in film, had some basis in actuality. Presumably these were cases of real founders who succeeded because of big ideas, big vision, that caused capital to form. These entrepreneurs were passionate about building big businesses, rather than completing big financings, and the finance arrived on its own. In contrast, according to studies that may or may not be less fictional, entrepreneurs are now focused on the exit. Usually this means a relatively small and quick turnaround, driven by market conditions, one or two steps after funding is in place.

The differences in execution style are multiple between one case and the other. On one hand, the attention to exit is an attention to the venture community and the satisfaction of its needs. It is an approach to entrepreneurship that caters to the interests of financing sources, that seeks instruction from investors, and that requires permission more than vision. On the other hand, and in this context, the duality is also one of going public versus selling to a strategic buyer. If the ultimate goal were to build a business for the long term and to operate it independently, with a view to greatness rather than exit, that is an IPO in the making. When the IPO market is closed off one must look to M&A, and in this scenario the end-goal is different. It is closer to building a product than building an enterprise. The business acquires, the product gets bought.

It is then, to some extent, due to circumstance that entrepreneurial style may have shifted. Although IPOs are picking up, these are still only accessible by a limited sub-segment of the start-up universe. These are companies with substantial revenues, that surpassed the product stage years ago and that were committed to becoming large and robust even when others were shying away. This approach was a rare thing and as the IPO market remains an exclusive club, the entrepreneurial mind-frame still isn’t (generally speaking) molded these days for long-term independence. The issue is circular and it remains a question of building to a vision, or building to an exit.

Stripped down to the core, the issue is one of definition, as is so often the case. And by definition I also mean scope. What drives what, who drives whom, where goes how, etc. and so on. If, rather than catering to the whims of funding sources – which are fickle and short-lived – entrepreneurship (broadly speaking) would remember its permanent place, its purpose – that is to say, its nobility and beauty, its essential role in economic progress, the reward it offers to successful entrepreneurs in itself when the job is well done – then the tables may be turned, as they should be. In other words, entrepreneurship should then be the driver rather than the driven, and should be a means and an end, rather than merely the former. In this way, maybe unwittingly, new enterprise becomes both a better investment for the venture community and an exit, as it were, unto itself. The chips will fall well where they will.

This was the third in a casual series of unrelated articles. The first two are here and here.

With one social media IPO complete and two popular web IPOs recently filed, the argument that had almost been forgotten has been remembered again. Is there or is there not a tech bubble, so it goes, and as much as we can all have a good time dissecting this tired specimen, the nature of the argument on both sides is doing more to butcher than to analyze. In the not-bubble camp, the case is more or less as follows: “With Apple trading at a multiple of about 12x trailing operating income, how can it be a bubble when LinkedIn is trading at about 400x? When in the 90s all you had to do was call yourself “dot-com” to secure a venture round, how can it now be a bubble when only a select few can raise $41 million on the basis of an almost-baked idea?” Do you see the rationale? Eh, whatever, it sounds much better when you hear it in real-time.

On the other side, the argument is no less unstable. It is presented in roughly this fashion: “When significant sums at not insignificant valuations are being offered to pure startups without too many questions asked, this is a bubble. When investors without access to financial information are fighting for private shares as though for crown jewels, this is also a bubble. When a company that is more than ten years old and still operates at a loss can expect to go public with a market cap of some $1.5 billion, this is not symbolic of rational market behavior.” Well, maybe that’s all true, it is anyway food for thought, but the mistake is not dissimilar to the opposition’s case. Namely, it is a lapse of generalization, it is an absence of finesse, it is painting with bold strokes what really warrants delicacy.

To start with the not-bubble argument demolition, comparing 2011 to 1999 in an industry segment that was born in, say, 1995 and has since progressed at unprecedented speed, is to ignore (in disturbing fashion) the relative growth opportunity, and how this evolves with time. In other words, the popular web is no longer in its infancy, and if certain investors are now clamoring to inject tens of millions into few new ideas – that are imitations of others that are themselves less than groundbreaking – this is not a phenomenon to take lightly. It speaks to a maturity in the innovation cycle, and a potential failure by some to acknowledge its reality (while others make up for small target-zones with flavor-of-the-month focus). Comparison of the past era to the current is nostalgia at best. Apple trades at the multiple it does for a reason.

On the other hand, the counter-argument (i.e., in support of a tech bubble) is not correct simply because the not-bubble crowd is wrong, or at least wrong in the rationale presented. The reality out there in the trenches is that the market’s love affair with LinkedIn and Facebook – and others of similar marquee profile – does not spill over into the second tier. At least not universally. On secondary private exchanges, it’s still a core handful of names that attract attention to the trade, and in post-startup venture capital it is for most still a hard and heavy push to raise the next round or the one after. We read about the glamorous successes, but there is a large and growing crowd that is not nearly as well covered… and that’s simply because there isn’t a whole lot to read about.

The subject of a bubble, or not-bubble, and the distinction between a bubble and a herd, have been written about here – as almost everywhere – before. As the weeks roll on and the theme has had time to gel, increasingly it seems that the argument should not be one of bubbles, but rather about haves and have-nots. This is a topic that has been extensively dealt with in areas of economics, politics, general market flows, and so on, but not much (if at all) in relation to technology investing and its drivers. When we point to a tech bubble that seems to be in the making, we are really pointing to the haves. When we point in the other direction, we are usually using the have-nots for evidence. As the IPO market is starting to blossom, as secondary private trade and seed investing continue to forge ahead, the chasm between the two sides is growing. This is the more important issue, and one that warrants more extensive study than some light and easy back-and-forth between apples and oranges leading nowhere.

The legend of the Tower of Babel is, among other things, a morality tale about excessive specialization. Civilization had become technically so advanced as to lead us to contemplate challenges of almost unimaginable proportion, and in so doing we discovered the advantages of focus. This was taken to an extreme, and the result was an atmosphere of misunderstanding, an environment in which the specializations were no longer able to connect. The tower project failed.

Anyway, this is one way of looking at it. For purposes of current discussion it will do. The recent state of affairs has not been dissimilar, (which shows the lasting value of the classics, among other things). A list of examples would border on very large numbers, so we’ll stick to one industry segment and one aspect. To wit, media and its financing. From newspapers to radio to television to online to mobile, from advertising to direct commerce, from analog to digital, in all these trends the degrees of specialization and sub-specialization have increased to a point of segmented isolation. A mobile commerce executive, say, would find it hard to relate to the radio business model, and vice-versa. (Yet these businesses are not vastly dissimilar, and even share a heritage. Radio is the precursor of mobile, and its ads were the predecessors of promotions. Of course there are differences, major differences, but the contrast is not like between healthcare and natural resources, certainly not like speaking different languages.) Put these two in in the same room together, and you’ll discover the sound of absolute silence, or something worse.

But this is only an example from a high level. We could easily step further down and observe similar motifs. Take, for instance, the founder of a business that is based on social apps. Will this executive be equipped to operate an advertising exchange, or manage a daily deal platform? Maybe, depending on the person and circumstance, but it isn’t something to take for granted. Not in the same way that a radio operator could probably buy into television or newspapers and hit the ground running back in the day. Both the technology and the business models are more complex now, and the technical and business development expertise picked up in one digital field won’t necessarily translate to a head-start in another.

In finance, the same issues apply. Risk mitigation, valuation analysis, deal structures, syndication processes, governance, investor networks, these are all vastly different as we move around capital supply categories – venture capital, leveraged buyout funds, banks, angels, strategic buyers, hedge funds and other public market investors – and as we move from stage to stage of the enterprise lifecycle. What’s more, although these in many ways influence each other through a domino effect or through occasional interaction, the further apart they are on whatever continuum one would choose to place them, the less they are in tune. For example, angels and banks. For that matter, VCs and banks, or even VCs and LBO firms. Or hedge funds and strategic buyers. And as these groups are impacted by economic variables that also are enormously complex, economics study too requires several specializations of its own.

The point of this discussion is neither to suggest that specialization is a flawed approach – on the contrary, it is necessary – nor to imply that an individual could not be versatile enough to cover multiple subject areas or to migrate from one to another. On the contrary, the point is that in the described environment – and precisely because we are very capable – an effort has to be made, an effort to steer clear of the confines of focus. Or, stated differently, to steer clear of insularity. Although the odds are stacked against us – because we must compete and demonstrate top credentials – a cross-disciplinary profile could be the next step and a differentiator in the evolution of our competition. If so, it will be for a constructive cause, depending on how you interpret the old story.

discourse and notes

Category Archives: Of interest to entrepreneurs

Inefficiency at the root of an ailing economy

Adaptation of perspective along the evolutionary path

Managing with leadership in a time for both

Because everything matters, lack of vision catches up

All good fun until it isn’t

Entrepreneurship in the movies (3)

To have and have not in a bubble

The short path from focus to insularity