[credit provider=”The Business Insider”]
Below is the first chapter of entrepreneur and VC Bo Peabody’s book, LUCKY OR SMART: Secrets For An Entrepreneurial Life. Before you read this chapter, you might want to read a quick overview of Bo’s experience of founding his first company, Tripod: How To Start A Company In Your Dorm Room And Make $580 Million.
You might also want to read the Introduction.
Luck is a part of life, and everyone, at one point or another, gets lucky. But luck is a big part of business life and perhaps the biggest part of entrepreneurial life.
At the very least, entrepreneurs must believe in luck. Ideally, they can recognise it when they see it. And over time, the best entrepreneurs can actually learn to create luck.
Luck in business is different from regular old luck, like when you find $20 on the sidewalk. First of all, “being lucky” in business has an intoxicating underbelly called “being smart.” No one actually believes that he should take credit for finding $20 on the sidewalk.
But when people get lucky in business, they are often convinced that it is not luck at all that brought them good fortune. They believe instead that their business venture succeeded thanks to their own blinding brilliance.
The number-one killer of start-ups is when entrepreneurs confuse “being lucky” with “being smart.” You must possess the humility to distinguish one from the other.
The big challenge is that everyone—the press, your shareholders, your colleagues, your significant other, and your parents—will work hard to convince you otherwise. They will tell you, over and over again, that you are in fact a genius and should take complete credit for all the great things happening to your company.
Why? Because to them, you are one of the following:
- A source of professional gain
- A source of financial gain
- Their boss
- Their lover
- Their pride and joy
None of these relationships provide any incentive for any of these people to tell you the cold hard truth about your entrepreneurial success: You may have gotten just plain lucky.
The second difference between “business luck” and “everyday luck” is that luck in business can be created, whereas everyday luck cannot. You can’t will yourself to find $20 on the sidewalk. But you can create a company that gets lucky more often than your average company. Indeed, there is a pseudo-scientific formula for creating business luck. And the key element is this: Lucky things happen to entrepreneurs who start fundamentally innovative, morally compelling, and philosophically positive companies.
Why? Because lots of smart people will gather around companies with these qualities. As it turns out, precious few of them exist. And the vast majority of human beings, and certainly most of the smart ones, are constitutionally caring creatures who would, if given the chance, prefer to spend their valuable time in a positive setting contributing to the betterment of society rather than in a negative setting contributing to its detriment. Shocking, I know, but true.
And when smart, inspired people gather around a fundamentally innovative, morally compelling, and philosophically positive company, they work very hard. And when smart, inspired people work very hard, serendipity ensues. Serendipity—the faculty of making fortuitous discoveries by chance—causes lots of unexpected things to happen to a company. Some of these unexpected things are good. Some are bad. But because no one planned for the good things to happen, they appear as luck. In other words, the best way to ensure that lucky things happen is to make sure that a lot of things happen. It’s really that simple.
In applying this formula, the entrepreneur has two tasks:
1. Create an environment where smart people will gather.
2. Be smart enough to stay out of the way and let luck happen.
Good entrepreneurs are not, per se, lucky or smart. They are just smart enough to realise when they are getting lucky. It’s a subtle but very important distinction.
Of course, there are entrepreneurs who start fundamentally silly, morally bankrupt, and philosophically negative companies. These entrepreneurs and their ventures fail more for lack of luck than for any lack of raw entrepreneurial skills. These destined-to-self-destruct companies are, first and foremost, about the entrepreneur trying to make a million dollars rather than about doing anything interesting or valuable. As a result, these companies don’t attract the smart people who generate luck.
Much of what makes a company fundamentally innovative, morally compelling, and philosophically positive is not what the company’s business model actually is, but how the entrepreneur communicates the mission of the company. A company’s mission, communicated by the entrepreneur with charisma and passion, is what creates the environment that attracts smart people and gets them inspired in the first place. Which is exactly what gets the luck rolling.
Tripod made what money it did by selling advertising to clients such as Ford and Visa. That was our business model. But Tripod’s mission, as I described it to my colleagues, was to revolutionise consumer media, allowing anyone to publish his or her views to the entire world using the Tripod Homepage Builder. Suddenly, almost overnight, the stories, viewpoints, and opinions of every individual, interest group, or culture could be made available for others to grapple with. “Tripod isn’t here just to make money,” I told my colleagues. “We are here to fight the most important battles on the frontier of the First Amendment!”
Mezze, the restaurant group I later co-founded in the Berkshire Hills of Massachusetts, serves food and drink to locals and to tourists from New York City and Boston. That’s our business model. But the mission of Mezze is larger: to set an example of quality and service for all the Berkshires’ retail establishments. I tell our staff that by working hard to refine Mezze, we raise the bar for everyone. And that by doing so, we will together attract more visitors to our small part of the world.
Village Ventures, the venture capital firm I co-founded in 2000, makes money by taking advantage of the supply and demand imbalance that results from the concentration of venture capital in only a few large cities. That’s our business model. But the mission of Village Ventures is different: to enable entrepreneurs to start companies in the towns where they want to live. Rather than having to flee to Boston or San Francisco to find venture capital, entrepreneurs in Boise, Idaho, and Providence, Rhode Island, can get capital from Village Ventures right in their own hometowns and build their companies in the same place they’d like to raise their families.
Missions such as those of Tripod, Mezze, and Village Ventures create an “aura of authenticity,” which is the elixir that attracts smart people and inspires them. Authenticity is an adjective rarely used to describe anything in the modern business world. But it’s just the thing that people crave most in their work. And there is nothing more authentic in business than a fundamentally innovative, morally compelling, and philosophically positive company whose mission has been crafted carefully and communicated with charisma and passion. That’s because the primary goal of these companies is not to make money but to defend the First Amendment and create jobs in places where there aren’t many. And people love that. No matter what anyone might tell you, all but the most hardened human beings want to believe that they get up in the morning to pursue a goal greater than simply padding their pockets.
But the Holy Grail of business is making money doing something you really believe in. So when people find themselves aboard one of these vessels, they don’t want to get off. They form a fierce protective boundary around it and will do anything to keep the vessel afloat and its inhabitants alive. These people are liberated by finding not only a way to make money but also a way to feel good about it. This is what takes inspiration and turns it into hard work. And the results of smart people working hard are serendipity and luck.
My formula for getting lucky in business is reasonably simple: Start a company that is fundamentally innovative, morally compelling, and philosophically positive. Create an aura of authenticity around your start-up by carefully crafting your mission and communicating it with charisma and passion. Your company will quickly attract smart, inspired people who will work very hard. Treat all these people fairly. Provide them with a clear action plan and give them the latitude to exercise their creativity. The results: serendipity, luck, success, and, ultimately, money. And the only smart thing about this formula is that on a day-to-day basis my brain has very little to do with any of it.