Myths Of Entrepreneurship: Tim Folta at TEDxPurdueU

a favorite book my wife and I used to read our kids is titled friend 'el by Andrew Clements some of you may know the book it's a priceless story about a fifth grade boy who's inspired to get his own word in the dictionary you see his teacher had just explained the social process of how words gradually get incorporated and accepted in the language and he decides that friend 'l will become a word for pen his quest begins one day at a convenience store when he asked the cashier for a friend 'l seeing her confused face he points i'd like that friend oh there behind you well as classmates take up this quest and incorporate Randall into their language and many many years later the little boy's dream becomes a reality and friend all gets added to the dictionary so I'd like your help with my own quest I don't have a word to invent but I would like to revise the definition the word is entrepreneur this is the perfect cohort to help because this is TEDx we all care about the future of tomorrow and its entrepreneurs that are gonna play a key role in taking us there so I'm a faculty member at Purdue I study entrepreneurs and I can tell you they've long been associated with the concept of risk some of you may know that many definitions include the word risk some of you probably also have stereotypes of entrepreneurs as risk seekers I've heard policy makers and even university presidents advocate that we need we need more entrepreneurs we need more risk takers I'd like to ask you to reconsider that stereotype and even suggest that we withdraw risk from the definition entirely it's not that entrepreneurship is devoid of risk the high rates of venture failures suggest otherwise what I am suggesting is that an inherent link between entrepreneurship and risk is problematic for three reasons first it turns out to be wrong research has shown that a typical entrepreneur is not any more risk seeking than a typical manager let's just be clear about what risk seeking behavior represents so play along with me here would you please if I were to if I were to offer you a million dollars or a coin flip with the chance at either two million or zero which would you take I'd take the million dollars too but a risk seeker would take the coin flip now I know many entrepreneurs that would argue vehemently that they are not gamblers in fact I like to describe them as clever risk managers they seek to mitigate risk venture capitalists and angel investors before they invest they evaluate whether entrepreneurs perceive the relevant risks and a venture and have taken steps to mitigate it let me give you some examples some of you may drive zip cars it's a car sharing service that's even here on campus prior to business launch to mitigate business model risk the founder of Zipcar experimented with several different pricing structures to see how customers would respond it turns out that the average entrepreneur changes business models six times prior to launch technology entrepreneurs including students who launch ventures out of my biomedical entrepreneurship course to seek to mitigate product risk through patent searches and filing filing applications for patents to protect competitive advantages tied to technology many other many other entrepreneurs managed management team risk by hiring key employees or building potent advisory boards so entrepreneurs don't seek out risk they don't prefer it they try to manage it through thoughtful experiments and leveraging resources a second reason why entrepreneurship my linking entrepreneurship and risk may be problematic is that it implies that there's something at risk if the venture fails and that's not necessarily the case perhaps an individual may lose his financial resources in fact many people rack up thousands and thousands of credit card debts or have second mortgages but many others get financial investors to shoulder the majority of the burden it might be argued that an individual's time is at risk if an opportunity of what the job is foregone in a study of 40,000 Swedish men we found that over half of those that started new ventures did so while retaining their job and they switched to entrepreneurship fully if the venture took off you might argue that in that an individual's reputation is at risk but these days I think people view entrepreneurial failure as a Badge of Courage so it should not be assumed that resources are at risk perhaps the most troubling element about associating entrepreneurship with risk are the potential social implications what if few fewer people try their hand at entrepreneurship because they believe they don't fit the risk seeking typology what if Steve Jobs was too intimidated to found Apple or what if Jane Chen a graduate student didn't invite invent a medical device to keep low birth weight babies warm in the event the electricity in her hospitals and clinics fails a common occurrence in developing countries losing these marginal entrepreneurs may be catastrophic if they are the ones who revolutionize an industry or save a life at the other extreme if our if our friends and policymakers are encouraging us to take a risk as an entrepreneur might we be more willing to to follow our hunches if we don't conduct the due diligence required for enduring success it might lead us into trouble I heard a funny story recently about a therapist who is convinced that a hotdog stand outside his office was what his clients wanted it turns out that that wrong hunches tend to be the norm in a Purdue study of 4,000 entrepreneurs ninety-five percent felt that their business would succeed even though over half end up failing it seems that they're they're systematically overestimating their likelihood of success they're overly optimistic in my opinion a key purpose of entrepreneurship education should be to temper cognitive biases like over optimism through rigorous analysis that's objective and that weeds out the weak ideas and inspires revisions creatively with their concepts so I'd like to purge the myth that entrepreneurs are risk seekers because I believe entrepreneurs manage risk really well because entrepreneurship is not inherently risky and that and that this misperception may inspire people to act over with overly risky behavior or it may discourage important inventions so here's my proposed redefinition I offer it with the utmost respect for entrepreneurs because after all it's they who are going to take us into this future that has so much potential so thank you and I hope you help me spread the word [Applause]

Channel: TEDx Talks

Views: 67,397

Rating: 4.7659035 out of 5

Keywords: tedx, Tim, ted x, English, tedx talk, ted talks, Define, tedx talks, Definition, Lifestyle, Purdue, History, Folta, ted, ted talk, \Social Change\, Society, \United States\, TEDxPurdueU, America, Culture, Business, Education, Entrepreneurship, Community

Id: pLrXrdUVyPU

Length: 9min 17sec (557 seconds)

Published: Fri May 24 2013