My New Entrepreneurship Book

I’m very pleased to announce the launch of my first book in the field of Entrepreneurship: “The Myth of the Idea and the Upsidedown Startup: How Assumption-based Entrepreneurship has lost ground to Resource-based Entrepreneurship”.

http://bit.ly/upsidedownstartup

Book Myth Idea (500Kb)

This brief 150 pages book is addressed to graduate students and practitioners around the globe. Resulting from years of work and observations, the book briefly summarizes what we have seen in the last few decades with regards to the creation of innovative new businesses, including Design Thinking, Effectuation and Lean Startup.

Although I started these observations by watching my father as the founder of many companies and by experiencing myself starting different businesses after that, the book was actually born in 2007, when I started my doctoral studies with a field trip to Haiti in search of clearer relationships between access to scarce resources and entrepreneurial innovation.

The book was written from the point of view of a young Brazilian researcher who had the chance to travel throughout more than 50 countries in the last years, while meeting with aspiring, successful and past entrepreneurs. The main point shown in the book rightly refers to the use of social resources such as contacts, experience, expertise and passions as the triggers of new businesses, edging out “The Idea” as the starting point of the entrepreneurial process.

With the support of FGV (Brazil) and IE Business School (Spain) the book will be launched around the world, with events organized initially throughout Europe and the Americas. You can engage with the book content here and also through these channels:

Facebook: https://www.facebook.com/upsidedownstartup
Twitter: @phdnew

The Entrepreneurial Process by Alfred Marshall

While working on my book (in which I will talk about the global status of entrepreneurship and innovation today) I came across this extraordinary passage, from the economist Alfred Marshall (1842-1924) in the beginning of the last century. He describes the Entrepreneurial Process brilliantly, in just one paragraph, talking about the role of trust, resources, capital, credit, scale, marketing and innovation on it. Even luck (“assisted by some strokes of good fortune”) is covered, passing almost unnoticed at the beginning of the epic reported:

“An able man, assisted by some strokes of good fortune, gets a firm footing in the trade, he works hard and lives sparely, his own capital grows fast, and the credit that enables him to borrow more capital grows still faster; he collects around him subordinates of more than ordinary zeal and ability; as his business increases they rise with him, they trust him and he trusts them, each of them devotes himself with energy to just that work for which he is specially fitted, so that no high ability is wasted on easy work, and no difficult work is entrusted to unskillful hands. Corresponding to this steadily increasing economy of skill, the growth of his form brings with it similar economies of specialized machines and plants of all kinds; every improved process is quickly adopted and made the basis of further improvement; success brings credit and credit brings success; success and credit help retain old customers and bring new ones; the increase of his trade gives him great advantages in buying; his goods advertise one another and thus diminish his difficulty in finding a vent for them. The increase of the scale of his business increases rapidly the advantages which he has over his competitors, and lowers the price at which he can afford to sell.”

New ranking, book chapter and “crazy” papers

At this moment, exactly 2 years ago, I was finishing my PhD and heading to some great vacations in Iran with my wife. I gave myself these last 2 years of “peace” to think about new intellectual endeavors, after almost 5 years of struggle to keep up with that endless program.

I keep thinking about what to research, despite of not having time to do so. I love reading, thinking and debating about many things but mainly about education, entrepreneurship and emerging economies.

What annoys me most at this moment is that something keeps telling me that I should avoid spending time on traditional social science research. Traditional scientific process leads you to spend years to prove something very close to common sense and unfortunately I don’t have patience for that.

In my opinion, in social sciences, the consequences of this established modus operandi for research are perverse, with millions of dollars and thousands of people researching things that are useless and will probably never be applied at any group of people worldwide.

During the PhD, colleagues and professors kept telling me that I should just “follow the crowd” and try not inventing crazy research topics, methodologies or theories that would invariably lead me to fail in the program.

In summary, I had to learn how to do comprehensible and (mainly) publishable research, not setting myself too much apart from prevailing theories and methodologies. You just have to protect yourself with a “great” respectable theoretical framework and lot of stupid standardized SPSS statistics and everybody will be happy with your research. In my humble opinion, this is just the perfect way to screw with science.

Findings in social sciences are too much limited in time and place to justify the effort of spending years in something not much different from what has been said. In other sciences, when you are able to prove that cell Alfa produces protein Beta if exposed to Gamma rays, you’re clearly advancing in a field. But when you discover that certain human actions have some impact on specific organizations, this finding is very limited to a certain social group in a specific period of time. If it was not, economists, psychologists and sociologists would be able to predict economic downturns, human behavior or wars, for example.

Managing education and technology became a profession to me. Studying entrepreneurship – and its father capitalism – became a kind of a hobby: understanding this period of our history. Emerging economies won’t always be there to be researched. At the end, most of the economies of the world will be very similar by 2050. I don’t want to spend 5 years trying to prove that the obstacle X is responsible for the outcome Y in country Z, when this knowledge will certainly become useless in few decades.

Image

We have to produce fast and useful debatable knowledge about this. What’s the downside? That there are not right answers for our questions, I’m sorry. We will have to accept that the right answer doesn’t exist and all we can do is to get the closest we can from the answer, with multiple approaches.

So, for the next 10 months, if I’m lucky to keep healthy, I plan to give these three tiny steps to share with people interest in the subject: create a practical ranking for MBA students interested in investing their resources and careers in emerging economies, collaborate with a book about the Brazilian economy – hopefully with a nice chapter about “Entrepreneurship in Brazil”, and producing a couple of “crazy” papers discussing about two things I’m interested in the field:

–          The positive impact of obstacles to entrepreneurs normally perceived as negative.

–          The death of the idea as the key starting point of an innovative business.

I won’t submit these texts to antiquate 20th century journals; I will simply share them with people interested in the subject – academics and practitioners – and then publish here for critics and consultation. I’m tired of bureaucracy.

ps: I took the picture from: http://delbertbikessouthamerica.blogspot.com.es/

The burden of size

I’m at the Lisbon airport, about to embark back to Madrid, where I’m living. During the last day of my trip around South America I had the opportunity to give an interview to one of the most important journalists of Uruguay, from the local newspaper El Pais. A person of great wisdom, with decades of experience interviewing people from all over the world.

It was truly a great pleasure to talk to him about Economic Sociology, Entrepreneurship and Emerging Economies. Together, we almost got to the conclusion that Uruguay could arguably not be considered an emerging economy, as we discussed about levels of corruption, bureaucracy and freedom to start a business in the country.

At certain point we caught ourselves wondering if violence and corruption in many places of Latin America weren’t easier to get hidden behind the crowds of the large and overpopulated cities. Murders and corrupt politicians (I put them in the same category on purpose) get protected by the anonymity within these large amounts of people, with illegal incidents flooding inefficient courts of justice incapable to solve problems before new ones arrive.

With little more than 3 million inhabitants, Uruguay has an upper class of about 300 thousand people. These people meet each other in theaters, movies and restaurants, knowing easily each other’s family members and actions.

Honor still has its value and people don’t want to see their names used in an inappropriate way. In Uruguay, it is still better to be a respectable medium or upper class citizen than a rich corrupt “ghost” that will have to avoid facing society and have his/her family and history marked.

I was thinking about corrupt and violent countries with small populations (there are plenty) to see if this naïve hypothesis would apply but it doesn’t. So the burden of size and the freedom to do wrong things in anonymity alone unfortunately does not explain these social problems. Religion doesn’t either. Education or lack of huge social inequalities perhaps?

What does religion have to do with Entrepreneurship?

Well, why is all of that religion discussion so important to me? Because you can’t understand most of the underdeveloped or developing economies of the world – and be able to dialogue with people living there – if you don’t consider under which social standards or value systems their logic are based on (I’m assuming you were raised in a western developed country).

What motivate their/our efforts? (I include myself here in the group of developing nations) What makes people to start profit-based or non-profit-based ventures there? If you simply rely on the fact that they/we are as capitalist as you, you will be incurring in a tremendous initial mistake. You won’t get their/our trust, and if you don’t get their/our trust you won’t make good business with them/us.

Here I show few superficial differences in starting ventures in emerging economies. Please, remember that these entrepreneurs were raised in the countries they started their ventures and therefore they were embedded in their local social systems. As an out-comer you would have to interpret their realities, something they did more naturally:

Silicon Valley with IE Business School: Part II

A lot of hints to share in this post… I’m angry because yesterday I already had 3 paragraphs written when suddenly the WordPress for Blackberry shut down… Grrr! I will get an iPhone!

Well, after the first – already mentioned – day with visits to Google, Electronic Arts and Symantec, in the next day we had a busy day meeting other members of the Silicon Valley ecosystem. We visited Plug and Play Tech Center, an inspiring incubator-like type of place, designed to support tech ventures in their early stages, check it out.

Visiting Plug and Play Tech Center

Visiting Plug and Play Tech Center

They call themselves “Startup Accelerators” or a kind of a “Silicon Valley One Stop Shop”, providing pre-seeding support and eventual partnerships with local Venture Capitalists. In 2010 alone, more than 150 million dollars were raised for some of the 170+ start-ups sharing the space. More than 3,000 business plans apply for a spot in the place in a single year.

Although I liked a lot the whole thing, in my humble opinion – as member of the e-learning “industry”, I think they are still too brick and mortar, promoting countless face-to-face events but very few online activities (it sounds quite contradictory, don’t you think?). In the picture you can see some of the most famous companies that started at Plug and Play: Logitech, PayPal and Google.

Entrance Plug and Play Tech Center

Entrance Plug and Play Tech Center

However, the most useful exercise was to listen to some of the founders of ventures currently hosted at Plug and Play: PasswordBank, Userzoom and iCharts. Their insights were really interesting as they explained all the process they had to go through to get to the level they are now, in a positive path.

Summarizing, their hints were:

– Just move to California if you have customers, competitors, investors and would like living in the US;
– Venture Capitalists are increasingly emerging in your home country, take advantage of them and your local network;
– Hire people with experience in small companies, not in big ones;
– In the US hire Americans;
– Don’t show up only with an idea. Ideas worth nothing. Bring a product;
– Clients in the US like to ask for a POC Prove of Concept (click here).
– Start by selling your product first (or gathering users); if you have growing sales/users, that means something;
– Try to hire software engineers in your own country, in the US they are expensive and you will compete with large corporations for talent;
– Try to start B2B before B2C (even if your business is B2C);

Well, I have more notes to share soon. Just would like to show something before. I had the chance to visit the Intel Museum and found this little chip in there, one of the first (material) things that I fell in love (!) in my life: a 386. I know it sounds really geek but I was really dreaming about this little thing when I was 15 years old.

Intel 386

Intel 386

Silicon Valley with IE Business School: Part I

Since 2010, with the arrival of more people dedicated to improve everything related with Blended Education at IE, changes have been occurring to a number of programs and processes. Some important changes where the change of the second face-to-face week of the Master in Digital Marketing (MDM) from London to the Silicon Valley. The other one was the possibility of Global MBA (GMBA) students to join the MDM group as well as some MDM alumni.

I decided to join the group to see this new “feature” of these programs but also to meet some friends in the Bay Area and to look for activities in the Online Education and the Online Media industries. Almost 50 people formed this nice group of students, all with that ”crazy taste” of diversity that characterize all IE groups. They had some classes on Monday and Tuesday so I joined them on Wednesday, for the first series of visits to companies and players throughout the Silicon Valley. We started by visiting the famous Google Plex (see picture), where we were received by one of the many IE alumni working in the company: Marco Marinucci (International Executive MBA, 2004).

Marco is in Google since 2006 – a long time for the industry standards – and showed us the installations and the history of the Silicon Valley. After that, we got into an important review on the latest trends on mobile advertisement, with the Head of Gomo (Go Mobile). At the end I stayed with some key sentences from this visits: “Innovation is about what’s going to be next”, “Talent + Money + Creativity = Innovation” and “you cannot plan innovation, all you can do is try hard to be in the right place and prepared”.

Newton at Google Plex

But the day was just starting. We still went to EA, previously known as EA Sports. It is an amazing company, now struggling to quickly identify small innovative players to either acquire them or work with them, all over the world. From that visit I got with the sentence: “Videogames = Math + Art”. Where “Art” is the unpredictable variable.

Unfortunately I missed the last visit at Symantec where students were going to discuss about security systems. Overall I considered this first day a great welcoming day to start feeling what was the Silicon Valley about. I confess I knew a lot about it from my previous visit to the region and from many years of studying the subject, but still, it was a great day.

My first research findings

The second part of the interview I gave last week (please see lat post).

Reporter: What were the findings?
Newton Campos: The main conclusion was that the social context, in this case “Latino”, had more importance in the process of enterprising than the level of economic development of countries and their institutions. That is, the incentives and obstacles that innovative entrepreneurs obtain from their networks in these countries are relatively similar, regardless of the country’s level of development, when comparing entrepreneurs who started from similar social classes.

The view from my window at the hotel in Campos do Jordao where I spent about 14 weeks (in about 12 trips) in order to have the dissertation done.

Reporter: Why considering the work relevant?
Newton Campos: Because it might enrich the global knowledge about the initial process of innovative entrepreneurial success in Latin countries. That is why I decided to follow a specific methodology that enables future comparison between entrepreneurs from different countries, and wrote the dissertation in English. Thus, a Chinese, Mexican or Indian could replicate the study for their region or compare their findings with ours. A proper debate on this process in emerging and developing countries is still starting.

Reporter: What was the theoretical contribution?
Newton Campos: In addition to confirming that the “social” is more important than the “economic” also in the Brazilian and Spanish context, as previously mentioned, I think it was the opening of a new line of research, the one I’m working today. This theory argues that the obstacles to entrepreneurs may be as important as the incentives that governments around the world relentlessly try to bring down today. These governmental bodies and universities should also be identifying obstacles that will generate truly innovative entrepreneurs in their regions instead of thinking only in breaking down barriers and even erroneously encouraging the emergence of new entrepreneurs who contribute nothing to the sustainable development of the world.

Why I joined the academy

I just gave an interview to the magazine of the business school where I did my Ph.D., FGV-SP Fundação Getulio Vargas de São Paulo. Since the interview will be published in Portuguese and only in São Paulo city, I think I could make it public in advance in English for people interested in some debate on entrepreneurship. Since it is a bit long, I will publish it in two parts: one today and another next week.

Reporter: Why did you decide to join the academy?
Newton Campos: Because I was dissatisfied with the loss of focus on the intellectual journey that I was having after the MBA. The MBA is an eminently practical training, but that indirectly makes you think too much in the development of capitalism worldwide. I started reading authors each day more interesting and more complex, but could not follow an investigative line that could kill my doubts, I felt I needed guidance to facilitate my intellectual evolution and realized that the academic career would be one of the few which would value this type of questioning. So I started the doctoral program in 2006.

Reporter: What was your research question? I wanted a brief summary of your dissertation.
Newton Campos: My research was directed to the social context that surrounds the entrepreneurs during the development of their businesses in Latin countries. As “social context” one may consider the entire network of contacts established or used for business success. I need to clarify that I do not consider entrepreneur those who own small businesses or companies, these are micro or small business owners to me, which eventually may even become entrepreneurs. The research tradition that I follow considers entrepreneur only that person or group of people who innovate during the process of building a project or an organization. Plus, this innovation has to be considered socially or financially successful, otherwise we neither would be talking about an entrepreneur yet. Moreover, much of the existing literature on entrepreneurship in 2006 also put the entrepreneur in a “developed” social context, usually the U.S. or Europe, where the “rules of the game” (market rules and institutional ones) are established in a specific manner, usually very different from the rules that exist in different parts of the world. It was from this observation that I got my research question: How does the social context influences the entrepreneurs at the beginning of their enterprise in a developing country? But the claim was only one stage in the search for this response. During the search, before I even started the dissertation I made a trip to pre-earthquake Haiti (in 2007) to see if it would be possible to observe innovative entrepreneurs in a social context as politically and socially unstable as in a country like Haiti, which was already at that time among the 10 world’s poorest countries. To my surprise I found many innovative entrepreneurs, some even known throughout the Caribbean. Amazingly, the market innovation was there, present in one of the most miserable places on earth. After that, in the thesis itself, I did a comparative study between two countries relatively similar from a cultural standpoint, but different in terms of social and institutional development: Brazil and Spain.

In the next part of interview I will talk about findings and theoretical contributions of my research.

We all want to be young!

The first video exposed by this post was published in the end of 2010 by the Brazilian born research/consulting group BOX1824. It shows how new generations – including those in emerging economies – are being heavily influenced by new technologies, and how they theoretically influence older and younger generations. Although a bit Americanized in its first parts, I think most of its arguments are valid and pretty updated, specially for middle and upper social classes.

The lighter but somehow interesting Chinese version came out just few days ago. It is interesting to see how researchers leaded by firms from two large “emerging” markets like Brazil and China observe the parts of the same phenomenon.

From these places where time is money

Benjamin Franklin’s famous quote “time is money” summarize very well what I observe when exposed to places such as New York, Amsterdam or London. It was in those cities, among few others, that the monarchs, politicians and entrepreneurs of the last centuries “invented” capitalism. I am spending this weekend in London due to an MBA fair and a couple of meetings and again, as usual, I always get surprised to see how this quote is intrinsically present around these places.

Just a stupid example: do you remember when, during hotel check outs, you had to wait for somebody to verify what you consumed from the refrigerator in your room? Some hotels just ask you about it so they can avoid this “verification” cost. Well, in this Hilton I’m staying, they’re using an automatic refrigerator that counts the things you consume so nobody needs to verify any consumption or to ask you anything about it. The curious thing – for me – is that I always see something like this when I visit one of those places where “time is money”.

In most of the so called emerging markets and even in some developed markets this is not the case yet. Things are changing fast, but usually, still, time is definitely something else than money. Just ask a Brazilian during carnival or a Spaniard or an Italian during summer. I remember the case of an American entrepreneur who moved to Bahia – in the Brazilian Northeast – during the 1960’s. Since salaries were so low and everything was so cheap, he had the idea to build a factory over there and export something I don’t remember now. According to his memories, he started paying little money to the employees but they didn’t perform well and couldn’t keep coming to work for more than two weeks. So, he started a productivity bonus, paying bonus to employees in the case they reached some objectives. It didn’t work either. He raised the bonuses and dropped objectives but employees still didn’t show up or were not committed to the work. So he gave up bonuses and simply raised the salary of everybody. Still, after few weeks or months people would get tired of the work and would abandon the job. The conclusion was that people didn’t really need money to live relatively well in the coast of Bahia at that time. They preferred to have their time to sleep, play cards or whatever without money than struggling to get a salary, whatever it was. I think you see what I mean: time was not money at all in Bahia back then. The funny thing is that I read this story while staying in a ryokan – little hotel – in Japan. Do you know why I found this book there? Because this guy decided to leave Brazil and go to Japan to start his business. He ended up being a successful entrepreneur in Japan and I was reading his memories.

Entrepreneurship and Latinity

As I travel around and read about capitalism I can’t avoid seeing some patterns in the recent development of some regions. Entrepreneurial ventures in Latin culture-based countries with long Catholic tradition are different from those created under other social contexts and I believe that at least two former state cities of Asia exposed to European Anglo-Saxon and European Latin cultures in the last centuries can be used to illustrate that: Macau and Hong Kong. Macau as a former Portuguese colony and therefore exposed to an European Latin set of values and Hong Kong as a former British colony, exposed to an European Anglo-Saxon set of values. Both cities are located in the delta of the same river, the Pearl River in China, lying down just in front of each other. Both cities were passed to Chinese authorities recently, Macau in 1999 and Hong Kong in 1997 after many decades or even centuries of foreign European rule. The Portuguese established a permanent settlement in Macau in 1557 and Hong Kong was occupied by the British in 1841, both as commercial trade posts between Europe and Asia. Nowadays, it is interesting to witness the urban and material result of the development of these two societies in loco, through satellite images from Google Earth or even through typical tourist pictures of both cities’ downtown.

First picture: Downtown Macau, by Holger Mette.
Second picture: Downtown Hong Kong by Oksana Perkings.

Despite of obvious historical differences between the commercial power of the Portuguese and the British empires along the last centuries, both regions developed together, exposed more or less to the same kind of trade until the first half of the 20th century. Since the British took over, the people from Hong Kong enjoyed a freer economic environment than the people from Macau, but that was not an important variable to their history until the Chinese communist revolution of 1949 took place and both regions attracted capitalists from all over China. With preference for the British settlement, which was more business friendly, Hong Kong became one of the world’s leading financial centers and ranked the freest market in the world by the Index of Economic Freedom for 15 consecutive years (The Economist), disputing today this position with Singapore, not coincidently another former British settlement. In 2009, for example, the Hong Kong Stock Exchange, the 6th largest in the world, raised 22% of the worldwide IPO capital. Under the official policy of positive non-interventionism, Hong Kong is often cited as a successful example of laissez-faire capitalism. Not surprisingly, the same phenomenon can be observed when comparing the development of Goa in India to Mumbai or East Timor to Singapore, the last both in the neighbors Indonesia and Malaysia.

This text in simplified Chinese and Portuguese (via Google translator) Continue reading