The myth of the heroic entrepreneur

I sometimes listen to the podcast “How I built this“, where host Guy Raz interviews successful entrepreneurs like Herb Kelleher, who founded Southwest Airlines, Reid Hoffman of Linkedin, Stacy Madison of Stacy’s Pita Chips, and so on. The story arc of each interview is similar – some scrappy undervalued person comes up with a novel idea and then against all odds succeeds by hard work, unrelenting drive, and taking risks. The podcast fully embraces the American myth of the hero entrepreneur although Guy tries to do his best to extend it beyond the stereotypical Silicon Valley one typified by Steve Jobs or Elon Musk. At the end of each interview Guy will ask the subject how much of their success was due to luck and how much due to their ingenuity and diligence. Most are humble or savvy enough to say that some large fraction of the success was luck. While I have no doubt that each successful entrepreneur is bright, hard working, and possesses unique skills, there are countless others who are equally talented and yet did not succeed. Each success story is an example of survivor bias. We sometimes hear about spectacular failures, like the Edsel , but rarely do we hear about the story of “How I almost built this”.

There is a stock market scam where you email blocks of 1024 prospective marks a prediction of what a stock will do that week. For one half, you say the stock will go up and for the other half you say it will go down. Then for the half for which you were correct, you do the same thing and half of them (one quarter of the original) will receive a correct prediction. Finally after ten weeks, one of the original 1024 will have received 10 correct predictions in a row and think that you are either a genius or have inside information and will be primed to sign up for whatever scam you are selling. The lucky (or unlucky) person is fooled because they lack the information that 1023 others did not receive perfect predictions. Obviously, this also works for sports predictions.

While, I think most success is luck there do seem to be outliers. Elon Musk seems to be one. He manages to invent new industries and succeed with regularity. Warren Buffet does seem to be able to beat the market. However, it is for us as a society to decide how winners should be rewarded. In many industries there is a winner-take-all dynamic, where the larger you get the easier it is to crush the competition. Mark Zuckerberg is clearly skilled but Facebook is dominant right now because it is a monopolist; it simply buys up as many competitors as it can. The same goes for Google, Amazon, and AT&T until the government broke it up. Finance works that way too. The bigger a bank or hedge fund gets, the easier it is to succeed. A small fluctuation that propels one firm a little ahead of the rest at the right time will be exponentially amplified. While, I do think it is a positive thing to reward success I don’t think the reward needs to be so disparate. Right now, a very small difference in ability (or none at all) and a lot of luck can be the difference between flying to your house in the Hamptons in a helicopter or selling hotdogs from a cart on Fifth Avenue.

6 thoughts on “The myth of the heroic entrepreneur

  1. I have mixed views on this.

    I tend to think success is based on merit, talent, innate intellgience, discipline, skills, and hard work, but i do think rewards are perhaps a bit skewed.

    For example I think all people should be required at (or preferably before–don’t procrastinate) birth to choose their parents, zip code, colleges, degrees. awards , prizes, prices, and income — and then you get what you paid for thru due diligence.

    This is called in economics ‘marginal utility’.

    Animals should also be required to choose their ecosystem or zoo–decide if they want to go extinct or succeed.

    I heard Einstein got a good salary of 3000$, / yr for his contributions–wrote maybe 5- 10 well known papers some people enjoyed.
    The inventor of ‘pay pal’ got paid even more because he invented something more useful.
    Amazon is similar.

    ( I love buying books on amazon delivered by FEDex or Uber about the destruction of the Amazon jungle.
    The only issue i have with this is i dont get my books on time because i dont have an amazon account .
    –i do have an almost empty bank account.
    Also they have some sort of issue that you have to pay for these books and delivery.
    (I get all my books free))
    I learned from biology that babies come from the sky dropped by storks.
    I think Amazon should use storks to drop off books and also fill up bank accounts.
    some say storks have a lower carbon footprint than Uber. )


    Talent is not ‘Luck’.
    (Luck(y) is the name of a dog (pit bull) whoi just stopped by for a visit.
    Luck doesn’t bark at me but does bark or more (might back up the bark with bites) at people Luck dont trust).


    In terms of reward for example since i support education (especially STEM) I have to walk a half mile to buy a lotto ticket –buying lotto tickets supports education. (I actually have never bought one for myself but used to buy them for my neighbors using their money–they didnt want to walk there.)
    STEM education involves learning probability so you know how to play or work at the lottery or casino.

    You need to hit the ‘lucky number’. this takes talent not luck. and discipline—a walk to get the lotto ticket.

    The issue with ‘rewards’ is supposing the ‘winning lucky number’ is 2 3 5 7 11 13 (eg primes) but the number you choose is the same except has a 1 at the beggining. 1 is not considered a prime by most standard conventions.

    So 1 number off wins you 0 , whiile other gets milllions$.

    “almost winning the lotto’ is not good enough. 0 for 1.

    (I was told recently over email by a math /biology professor (who’s mantra is ‘spoiled by god’) that my questions about his math program , and writing were incoherent and ‘nonprofessional’ and the academic sources i cited to state my interests —including this blog and many on arxiv– were ‘innacurate’. )

    He also cited the ‘grammatical errors’.

    Elon Musk reminds me of the ‘musk turtle’ or ‘stinkpot’. (see wikipeida).


  2. You have previously written favorably on UBI. One could look at the Covid financial support programs as a test run for UBI. Does the current conditions (approaching inflation, 9 million job openings with ‘now hiring’ signs to be found everywhere) give you any reason to change your views on UBI?


  3. UBI: Yes, as long as it is universal although I would impose wealth and inheritance tax first
    Inflation: Price increases do not equal inflation. Inflation is like a goldstone mode of anticipatory increases in prices and wages
    Covid support and jobs: Maybe they didn’t like their previous jobs to start with and now want to find something better. Quitting rate has also increased (which doesn’t qualify for UI). People have more confidence now that they can find a better job.


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