| As a 21-year old college student at Wharton, the | | | | to be willing to put checks and balances on my |
| business school of the University of Pennsylvania, I | | | | activities for the good of my company. That meant |
| embraced the ideals of entrepreneurship so | | | | being clear about my company's values, creating |
| whole-heartedly I started my own company. My | | | | more structure in my organization, and including |
| classmates and I managed the company for two and | | | | independent directors on our Board. In short, I |
| a half years and it became our full time job after | | | | needed to take corporate governance a lot more |
| graduation. We wrote a business plan and believed | | | | seriously and make it just as important of a goal as |
| we had a unique concept, a strong management | | | | my quest for profits. |
| team, and a viable "business model." | | | | 3. Outlook (or Attitude) |
| Unfortunately, despite some initial success, my | | | | After becoming an entrepreneur, I often compared |
| business eventually shut down. Our fate isn't | | | | my life with those of friends who accepted the |
| surprising when you consider the challenges faced by | | | | types of jobs I turned away. While I slept on the |
| entrepreneurs starting new companies. Like many | | | | floor of my office, ate the cheapest thing on the |
| entrepreneurs, we lost a lot of money invested by | | | | menu, and was buried beneath a mountain of credit |
| friends and family. For two years, we lived in our | | | | card debt, my peers had apartments in the city, |
| offices, sleeping on the floors, working day and night | | | | corporate expense accounts, and were improving |
| with no personal lives. In the end it seemed as if | | | | their credentials in the job market. I began to fear |
| those sacrifices had been for nothing. | | | | my friends were developing better resumes than I |
| Lessons Learned | | | | was, while I worked twice as hard for a fraction of |
| I think the failure of my company can be attributed | | | | the pay. |
| to inadequate leadership among its founders. After | | | | Comparing myself to others created a lot of unrest, |
| years of reflection, I've asked myself to define what | | | | because I was a competitive person and I didn't |
| being a "leader" means to me. My definition follows: | | | | want to feel like I was "falling behind." Although I |
| A Leader is someone with sound judgment, integrity, | | | | think it's natural for entrepreneurs to contend with |
| and a sense of responsibility for others. A leader | | | | self-doubt, these emotions only impaired my |
| motivates others towards common goals, provides | | | | judgment. They made me impatient, because I was |
| hope and inspiration in times of uncertainty, and helps | | | | scared of "wasting" years of my life as an |
| the organization to adapt to an ever-changing | | | | entrepreneur, but never becoming "successful." |
| environment. | | | | After the initial excitement of writing a business plan |
| While some degree of technical competence is | | | | and setting up my company, I was almost depressed |
| necessary, these attributes mostly stem from | | | | to be sitting in my small office handing out debit |
| increased self-awareness. It was Sun Tzu who said, | | | | cards to college students. I didn't really have an |
| "Know your enemy and yourself and you will win 100 | | | | appreciation for the work. In my mind, I had earned |
| battles; know the enemy and not yourself and you | | | | my degree from Wharton to become the manager |
| will lose every time." Unfortunately, as a first time | | | | of a tiny debit card office, but I probably didn't need |
| entrepreneur, there was a lot about myself I didn't | | | | to go to college to do that. It made me feel as if I |
| know. While a lack of self-knowledge isn't so unusual | | | | wasn't living up to my "potential." Therefore, I |
| for someone in his early twenties, it's a huge problem | | | | wanted to put my head down and focus on growing |
| for an entrepreneur. | | | | my business faster. |
| I have always found that a good acronym helps me | | | | It sounds ridiculous, but a founder must train himself |
| to remember things. For example, "ROYGBIV" and | | | | to find meaning in his daily toils, not just in the dream |
| "Please Excuse My Dear Aunt Sally" have locked the | | | | of his future victory. Otherwise, he'll feel powerless |
| colors of the rainbow and the mathematical orders of | | | | every time the business takes an unexpected turn |
| operation into my brain since I was a high school | | | | and leaves his prospects worse off than before. If a |
| student. As I was writing this manuscript, I wanted | | | | founder feels that he is powerless and at the whim |
| to create another mnemonic to help me remember | | | | of fate, his psyche can easily become easily |
| the mistakes I made so I don't repeat them in the | | | | damaged by the emotional roller coaster of potential |
| future. | | | | failure and success. The stress can lead him to make |
| I have categorized these entrepreneurial mistakes | | | | bad decisions. |
| into five elements (the "E CODE"). These five areas | | | | Experiencing failure is an inevitable part of success. |
| are as follows: | | | | Therefore, an entrepreneur has to view adversity as |
| Egomania | | | | a necessary step that helps him to learn, to grow, |
| Corporate Governance | | | | and to become a stronger leader. In that regard, |
| Outlook (or Attitude) | | | | challenges and struggles can be hidden blessings, not |
| Deeper Meaning | | | | curses. Entrepreneurs need to observe someone like |
| Emptiness | | | | Nelson Mandella, who survived many years of abuse |
| 1. Egomania | | | | and imprisonment, but never allowed the situation or |
| As a college student, I heard stories how Michael Dell | | | | his captors to break him. Rather, he used adversity |
| started his company from his college dorm room, and | | | | as a tool to transform himself and grow stronger. |
| how Bill Gates dropped out of Harvard to start | | | | There are lots of stories of prisoners of war and |
| Microsoft, and how many of the wealthy | | | | concentration camp victims who use their |
| benefactors of my university had been | | | | experiences to their advantage. As Warren Bennis |
| entrepreneurs. While I couldn't possibly know the | | | | and Robert Thomas noted in their book, Geeks |
| hardships and brushes with failure these men had, I | | | | & Geezers, leaders often use periods of |
| latched on to their larger than life images of | | | | difficulty as opportunities for reflection that allow |
| "success." After all, I wanted to believe I could | | | | them to look deeper into themselves and make |
| accomplish anything with my future. I wanted to | | | | discoveries about their own character. It's ironic, but |
| believe in the unlimited potential of entrepreneurship. | | | | without moments of desperation, many leaders |
| In my mind's eye, these tales were all that came | | | | would never have the opportunity to find their inner |
| close to meeting the "extraordinary expectations" I | | | | strength. |
| had of life. I was convinced that entrepreneurship | | | | By looking at hardships as opportunities to conquer |
| was the single greatest wealth-building opportunity. | | | | ego, an entrepreneur can mitigate the emotional |
| At 21 years of age, I wanted to make my own | | | | swings. As Carlos Castaneda observed with his |
| decisions, to be my own boss, and to have a financial | | | | concept of the "petty tyrant," life is filled with lots of |
| stake in the outcome of my work. At the same | | | | petty obstacles and challenges, so we might as well |
| time, I didn't want to spend 10 or 20 years slowly | | | | learn to use them to our advantage and not allow |
| climbing the corporate ladder. By starting my | | | | them to drag us down. In fact, obstacles and |
| business, growing it quickly, and selling it, I believed I | | | | hardship can teach entrepreneurs to keep a sense of |
| could have my cake and eat it too. | | | | humor about their plight. It can teach founders to |
| It was Bill Walsh, former head coach of the San | | | | laugh at life's surprises, both good and bad. |
| Francisco 49ers, who remarked that "ego" is a | | | | In his book, Man's Search for Meaning, Victor Frankl |
| misused word in the United States. He said, "We | | | | describes how life demands things from us, not the |
| Americans throw that around, using that one word to | | | | other way around. Therefore, we should condition |
| cover a broad spectrum of meanings: self-confidence, | | | | ourselves to find meaning in answering life's daily |
| self-assurance, and assertiveness... But there is | | | | callings and use them as opportunities to live with |
| another side that can wreck a team...That is being | | | | dignity and find meaning in every moment. Learning |
| distracted by your own importance... [It] ends up | | | | to enjoy the unpredictability of life can enable an |
| interfering with the real goal of any group ." | | | | entrepreneur to appreciate the path chosen rather |
| As a young entrepreneur, I considered it my right to | | | | than stress about the uncertainties of future |
| serve my own self-interest. Since I was "taking the | | | | outcomes. |
| risk," I believed I was entitled to the rewards. | | | | It was John Keats who said the most important |
| Therefore, I was very controlling about who I | | | | attribute of a leader is the ability to be in |
| allowed to get involved in my business. Even if | | | | "uncertainties, mysteries, doubts, without any irritable |
| recruiting a larger team added benefits, I sometimes | | | | reaching after fact and reason." I wish I had a better |
| hesitated. After all, I viewed it as "my company," so | | | | sense of humor when I was an entrepreneur. Not |
| I didn't want to share the upside with others unless it | | | | only would I have had more fun, but I would have |
| was absolutely necessary. If I had checked my ego, | | | | been less likely to feel sorry for myself when my |
| I would have been more likely to recognize my | | | | company faced challenges. Instead of wasting my |
| limitations and concentrate on assembling the right | | | | energy worrying, I would have been poking fun at |
| team of people, even if it meant slowing things | | | | my anxieties, strengthening my character, and living in |
| down. | | | | the present. This outlook would have kept me more |
| Unfortunately, my exorbitant expectations of | | | | even keeled and better able to make good decisions. |
| entrepreneurship were difficult to meet. Soon, I | | | | 4. Deeper Meaning |
| became embarrassed to show people I worked in a | | | | It was Benjamin Disraeli who said, "The secret of |
| small office with only a handful of employees. I | | | | success is a constancy of purpose." I believe an |
| wanted to live up to my lofty ideal of a "real | | | | entrepreneur must choose a "cause" to which he's |
| entrepreneur." So, I rushed to rent larger office | | | | willing to devote himself, even in the face of failure. |
| space and expand my business prematurely. When | | | | It should be a broader purpose that's worth the fight |
| the image I had in my head failed to live up to reality, | | | | regardless of the outcome. After all, of the |
| I panicked. Why? Because I was far more excited to | | | | approximately 1.8 million new businesses incorporated |
| chase a "rags to riches" fairy tale than I was to | | | | every year in the United States, less than a few |
| hunker down and slowly build a business over a long | | | | thousand receive venture funding and a fraction of |
| period of time. I wanted results in a hurry, but it | | | | those ever go public. Clearly, there are no guarantees |
| wasn't going to happen that way. It was time for | | | | of success, so a founder's reasons for choosing his |
| Peter Pan to grow up. | | | | journey have to be about more than the allure of |
| At the end of the day, an entrepreneur has the | | | | financial gains. |
| responsibility of stewarding his company and its many | | | | In fact, there is so much volatility embedded in |
| stakeholders, not just himself. There's no room for | | | | entrepreneurship that it can be difficult for founders |
| large egos, because they lead to bad decisions. | | | | to stay motivated by the prospects of riches. Too |
| Entrepreneurship is not so different from other | | | | often the company will be in peril and the founder will |
| career paths as many of us would like to believe. It | | | | be forced to reinvent aspects of the business. If the |
| still takes many years to build a reputation and a | | | | entrepreneur is only motivated by financial success, |
| strong client base. It still requires the founder to start | | | | then he'll probably lack the necessary staying power. |
| at the bottom. If anything, it's less glamorous, | | | | In fact, most new ventures would probably never |
| because there are fewer people around to help and a | | | | get started if a founder's motivations were based |
| lot less resources at our disposal. | | | | purely on the risk-adjusted economic merits of the |
| 2. Corporate Governance | | | | project. |
| My partners and I had little corporate governance | | | | At the end of the day, I believe the motivation to |
| and no written policies or procedures. Oftentimes, we | | | | pursue a business has to come from a genuine |
| lacked the independent perspective necessary to | | | | commitment to serving a cause that's bigger than |
| critically evaluate our thinking. "GroupThink" was | | | | ourselves. There has to be a responsibility we feel to |
| rampant, whereby everyone was entranced by the | | | | serve others in a certain way. From my experiences |
| same views, so no one was thinking independently. | | | | I learned that even the best business plan can |
| Although we didn't think we needed advice, my | | | | become a burden if you don't believe in what you |
| company would have benefited from including | | | | are doing. Our motivation can't just be about |
| independent directors on our Board. It would've | | | | benefiting ourselves, because when the company's |
| forced us to share our assumptions with outside | | | | prospects diminish, most of us will be inclined to quit |
| professionals. Inevitably, we would've had to test our | | | | and do something else. |
| theories, identify potential risks, and slow down our | | | | History is filled with tales of people risking their lives |
| growth plans. At the very least, independent | | | | for causes in which they believe. By comparison, very |
| directors would have forced a system of checks and | | | | little is written about mercenaries performing such |
| balances. | | | | acts of courage. Those who perform the greatest |
| Although no entrepreneur wants to create | | | | feats do it for reasons which hold deeper meaning to |
| bureaucracy, having some structure in place is | | | | them, not just for money and accolades. Therefore, |
| essential to a healthy organization. Unfortunately, my | | | | an entrepreneur should choose a purpose for his |
| partners and I thought the primary value of having | | | | business that comes from someplace deep inside of |
| independent directors was to tap into their business | | | | him. Unfortunately, that was not something I did. |
| contacts. We weren't concerned about corporate | | | | Rather, I was simply trying to make money, so I |
| governance. Instead, we wanted directors to help us | | | | could "cash out" and move on to something else. |
| get financing or drum up new business. When it | | | | That's why I believe an entrepreneur with a |
| became difficult for us to recruit these | | | | long-term dedication will ultimately reap the benefits |
| "well-connected" people, we gave up looking. | | | | of his commitment. The right opportunity will |
| As founders, we couldn't afford to pay ourselves | | | | eventually present itself. The long-term players will |
| high salaries, so we were financially dependent on the | | | | weather the storms and be in better positions to |
| value of our stock. While our ownership stakes were | | | | take advantage of the new opportunities when the |
| nearly worthless at the time, we assured ourselves | | | | clouds finally part. |
| that "equity" was the best motivational tool. | | | | 5. Emptiness |
| Unfortunately, being solely dependent on the value of | | | | There is an interesting poem from the Tao Te Ching |
| our shares made us more inclined to embrace riskier | | | | that I have come to appreciate since my |
| strategies. After all, our stock could never be worth | | | | experiences as an entrepreneur. It follows: |
| less than zero. In that sense, it resembled a "call | | | | "With a wall all around |
| option," so adding volatility to our business was a | | | | A clay bowl is molded; |
| way to boost our equity value. | | | | But the use of the bowl |
| Ultimately, I grew so concerned with protecting my | | | | Will depend on the part |
| ownership that I turned away venture capital. Rather | | | | Of the bowl that is void. |
| than selling a large chunk of my equity, I preferred to | | | | Cut out windows and doors |
| embrace a highly leveraged operating strategy. Now, | | | | In the house as you build; |
| I realize that anyone can bet his entire company on a | | | | But the use of the house |
| risky financing strategy. The real whiz can capitalize | | | | Will depend on the space |
| his business in a way that doesn't "sink the boat" if | | | | In the walls that is void. |
| things take an unexpected turn for the worst. | | | | So advantage is had |
| I also realize that my company's corporate culture | | | | From whatever is there; |
| lacked discipline. My partners and I were generally | | | | But usefulness arises |
| unkempt - we showered everyday at the gym and | | | | From whatever is not. |
| we slept on the floor of our office. We didn't keep | | | | --The Tao Te Ching |
| regular business hours and we had no planned | | | | Like the poem from the Tao Te Ching, |
| schedules. As a result, the environment we created | | | | entrepreneurs must see the importance of |
| lacked professionalism. Unfortunately, our lack of | | | | emptiness, which requires a different way of looking |
| discipline manifested itself in a negative way | | | | at the world. While emptiness can be uncertainty, it |
| whenever we faced stressful situations. | | | | can also represent opportunity. |
| Tense arguments between founders would turn into | | | | As an entrepreneur assembles the pieces of his |
| screaming matches. We became hotheaded and it | | | | business into place, there will inevitably come a time |
| spread into the way we managed our business. We | | | | when the viability of his company is in doubt. New |
| were prone to knee-jerk reactions and quick changes | | | | markets are difficult to break into, customer needs |
| of strategy. Although we viewed our nimbleness as a | | | | are always changing, and the threat of new |
| competitive advantage, we lacked the emotional | | | | competition always seems to be lurking about. |
| intelligence to realize when we were behaving | | | | Sometimes, it's hard to look into the unknown and |
| irrationally. Unfortunately, we lacked the balance in | | | | see opportunity. It's easy to doubt ourselves and be |
| our culture to keep us grounded. | | | | scared. |
| As founders, it was our job to mold the company's | | | | As a 22-year old entrepreneur, I looked into the |
| values after our own beliefs. Unfortunately, we listed | | | | unknown and I saw only two possibilities. I saw the |
| corporate values in our business plan, but they were | | | | possibility for personal success or failure. Working at |
| just words on paper. Now I realize that corporate | | | | my desk until the early hours of the morning, my |
| values are not pieces of PR fluff that companies put | | | | mind's eye was able to craft detailed scenarios for |
| on their websites to appease investors. When these | | | | each. Either sleeping on the office floor was going to |
| values are held deeply by managers, they help in | | | | be part of a story I would tell guests on my yacht |
| making difficult decisions. | | | | one day or I was wasting my potential with a |
| I think of the nationwide Tylenol recall by Johnson | | | | business that would never succeed. |
| & Johnson whereby 7 people in the Chicago | | | | Unfortunately, I didn't understand there was more an |
| area died in 1982 because their Extra-Strength | | | | entrepreneur could see in his unknown future if he |
| Tylenol had been laced with cyanide. J&J made a | | | | focused on something other than his "personal |
| $100 million decision to do a nationwide recall and | | | | success." He might also see the opportunity to fight |
| take its products off the shelves. J&J wanted | | | | for a cause that inspires him, regardless if he wins or |
| to send a strong message to its stakeholders that | | | | loses. Whether he becomes rich or not, the future |
| customer safety came before profits. No doubt, it | | | | represents an opportunity to make a difference in |
| was a difficult decision, but senior management relied | | | | the world. |
| on the company's corporate values to guide them | | | | That's why the true "fire in the belly" of an |
| through the crisis. At the end of the day, shared | | | | entrepreneur should come from a vision that the |
| values are a much more reliable way to control | | | | future, while uncertain, holds possibilities for each of |
| behavior in unpredictable situations than are extrinsic | | | | us to make an impact on the lives of others. To |
| controls. | | | | have maximum power, our vision shouldn't be just |
| Undoubtedly, part of the allure of self-employment | | | | about our own success or failure. It's not about |
| had been the feeling of freedom from not having a | | | | personal greed. To be truly inspirational, we need to |
| boss to which I was accountable. However, the | | | | see how our efforts will benefit the lives of others. |
| reality was that such freedom didn't exist, because I | | | | By sharing that vision, we'll be able to influence those |
| was still accountable to my stakeholders. I couldn't | | | | around us to join our cause. |
| just behave however I wanted. Therefore, I needed | | | | |