Today's Wall Street Journal celebrated the life of Ted Fortsmann. Fortsmann was one of the founding fathers of private equity and a prominent 'character' in "Barbarians at the Gate," a must-read about the RJR Nabisco buyout.
I'm writing about Fortsmann because his firm perfectly summarized what it means to be an entrepreneur. According to the Journal, Fortsmann Little gave their guests at a 25th Anniversary celebration a silver platter engraved with the following:
"The entrepreneur, as a creator of the new and a destroyer of the old, is constantly in conflict with convention. He inhabits a world where belief precedes results, and where the best possibilities are usually invisible to others. His world is dominated by denial, rejection, difficulty, and doubt. And although as an innovator, he is unceasingly imitated when successful, he always remains an outsider to the 'establishment.'"
This quote perfectly captures entrepreneurship. The opening line - "creator of new and destroyer of the old" - details the phenomena of creative destruction. The second sentence captures the imaginative nature of entrepreneurs; I'm immediately reminded of Steve Jobs who envisioned a world in which every person would have a computer in light of the day's leading tech firms (HP, IBM, Xerox) telling him the computer was a business tool. The third sentence encapsulates the difficult path entrepreneurs traverse. Examples of struggles are bountiful, but my favorite is the Music Genome Project; before pivoting to become Pandora, the company burned through its cash and asked employees to take no pay for a year.
The final sentence is interesting. The imitator effect has a positive but hard to measure impact on the economy. The success of one entrepreneur motivates thousands to strike out on their own to seek opportunities "usually invisible to others." Prior entrepreneurial successes, in other words, signal to current would-be entrepreneurs that the system works. One person in the new class of entrepreneurs then realizes wild success and the cycle repeats itself. If Steve Jobs and Bill Gates were stripped of their wealth or thrown in prison for challenging the statues quo, would Larry and Sergey have been motivated to start Google? And if Larry and Sergey were not able to capture the value they created, would Mark Zuckerberg have been motivated enough to create Facebook?
Creative Destruction, Literally
Yesterday, I watched a building in Cambridge, MA get dismantled. In speaking to the foreman, I learned that 21 Osbourne Street was previously home to two high-tech companies. The original tenant was an iconic brand whose product quickly become irrelevant in the digital world. The next tenant - who has since moved out - is still thriving, but faces huge risks as its product becomes a commodity.
Now, the plot on Osbourne will be home to a fast-growing, cutting-edge company in an entirely different space: pharmaceuticals.
Who will be the fourth tenant? In other words, what will be the next industry to require this coveted piece of land in the midst of MIT's campus?
I shot this iPhone video entitled "Creative Destruction, Literally." This is my first attempt at shooting and editing video, so thank you for your patience.
I'm the Founder and CEO of Peak Support. This blog is my take on early-stage companies and innovation. Every so often, there may be a post about culture, networking, family -- you name it. After all, what is a blog if it isn't a tad bit unstructured.