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79. Steven Phelan on the Many Different Entrepreneurial Journeys

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Steve Phelan has spent a lifetime in entrepreneurship, as a student, a researcher, a teacher, an investor, an innovator and a practitioner. He found that people today — especially young people — are over-focused on the Silicon Valley / Venture Capital / Become A Billionaire model. That’s pretty rare (and may not even be a good model).

He decided, therefore, to classify all the different kinds and flavors of entrepreneurship, to help people think through all the business and lifestyle options. The result is a book called Startup Stories: Lessons For Everyday Entrepreneurs. It’s full of interesting personal interviews and experiences, analysis, data and insights. We’ve drafted a summary of the six levels of entrepreneurship Steven identified below, and in this downloadable Knowledge Map.

Key Takeaways and Actionable Insights

Level 1: The Personal Entrepreneur

We’re all capable of entrepreneurial behavior because we all have resources: our brain, our body, and our time. If we apply those resources to pursue valuable experiences for others and ourselves, we are personal entrepreneurs.

A career entrepreneur is one who takes personal responsibility as the custodian of their own human capital — the economic value we derive from our own stock of personality traits, knowledge, skills and experience, all of which can be developed. Career entrepreneurs invest in their own human capital and chart a path through life to achieve the highest long term return. Personal responsibility lies at the heart of entrepreneurship.

Being an intrapreneur is another way to exercise personal entrepreneurship. An intrapreneur is an employee who acts entrepreneurially — identifying customers’ desired experiences, designing innovative services and introducing new offerings into the market. While the incentives may be lower-powered than for entrepreneurs, they can nevertheless be attractive in the form of bonuses and stock options. It’s a good route to fulfillment for many.

Level 2: The Nascent Entrepreneur

This is the more conventional classification of an entrepreneur starting a business. An embryonic entrepreneur’s business is pre-revenue. They’re engaged in the exciting phase of customer discovery — which can include value proposition development, securing funding, hiring initial employees, assembling a team, planning launch activities, assembling resources, and testing prototypes. They key is action: ideas are plentiful, action is scarce. Embryonic entrepreneurs are action-oriented doers.

Emerging entrepreneurs’ businesses are post-revenue, pre-profit — they are pursuing a scalable and profitable business model. By definition, this stage is temporary — the emerging firm is designed to search for that sustainable model. Constant tweaking and experimenting is the dominant mode. Eventually, emerging entrepreneurs become growth entrepreneurs.

Level 3: The Lifestyle Entrepreneur

Entrepreneurship is a lifestyle choice for many — often driven by the desire for autonomy: to personally direct how to work and how to live. One form of lifestyle entrepreneur that Steven identifies is the craft entrepreneur.

Craft entrepreneurs have a highly developed individual talent, skill or expertise and they find a way to capitalize it and apply it entrepreneurially in the marketplace. They’re always trying to improve the quality of their product or service, and to reinforce their own mastery. If they can add some sales and marketing hustle, business can be very good.

A 21st Century version of the craft entrepreneur is the virtual entrepreneur. This is an individual, team or small business that takes advantage of the modern day digital-driven opportunity to interconnect, build online supply chains and download infrastructure. A virtual entrepreneur can run a business from anywhere where they can connect a device with a screen to the internet. There are plenty of challenges — especially in the fragility of the supply chain and finding trusted partners, but many profitable businesses follow this model.

Level 4: The Employer Entrepreneur

There is a major change in responsibilities, operations, management and personal experience when an entrepreneur takes on employees. Startup Stories explores two examples: family business owners and small business owners.

Family business owners have the advantage of built in trust and loyalty with their employees, which can result in greater stability. However, it may come with more complexity and tensions in inter-family member relationships.

Small business owners who are employers must delegate some authority and decision-making to employees, and therefore must become experts in identifying, hiring, managing and nurturing. Hiring employees can take your business to a new higher level, but poorly managed employees can damage your business in areas like lost productivity or damage to brand and business reputation. Successful small business entrepreneurs must overcome these challenges.

Level 5: The Growth Entrepreneur

Growth entrepreneurs experience the exhilaration of escaping the confines of small business. They can also start thinking about becoming rich if they can sustain the growth. Expansionary entrepreneurs expand to multiple locations, or multiple products line, or to millions of customers on the internet. There are plenty of challenges with managing growth — it may require business model revision; it may consume cash at such a rate that finance management becomes a problem; it may require continual organizational revisions. It can be personally exhausting, as Steve depicts in one of his interviews. But it can also be tremendously rewarding.

Gazelle entrepreneurs, in Steven’s terminology, are those growth entrepreneurs who take venture capital funding to boost growth rates and business acceleration. VC funding enables firms to fly faster and higher. Venture capital is rare and hard to get. It can also be destructive, especially to founders who can lose control of their companies (Steve explained how in the book). Term sheets set up these potentials. Securing venture capital is an exciting and energizing moment and a milestone of achievement. It’s important to read the fine print and think ahead!

Level 6: Super Entrepreneurs

This is the peak of the profession. Steve picks out Mavericks and Heroes. The discussion about mavericks is structured around the question: “Are entrepreneurs born or made?” Researchers have tried to establish whether or not there is an entrepreneurial personality, but the consensus is that there are no common traits that predict entrepreneurial success. But some personality traits may be more common in the entrepreneurial community than outside it. The maverick personality is one of them — willing to think and act differently from others, to pursue a distinctive imagination, to bet on a hunch. And the good news is that personality traits are not fixed — habits and behaviors can be acquired over time, through acting and learning. Entrepreneurs are made through action.

The second classification of Super Entrepreneurs that Steven considers are Hero Entrepreneurs. He makes the link between hero status and PR, and from there to the power of heroes to raise funding. It is possible to craft a hero persona, shaping the perception of others through “impression management”.

At E4E, we believe all entrepreneurs are economic heroes. They aim to better the lives of others, bringing new product and services to the market and responding to the preferences of customers based on their positive or negative response. They sacrifice in the short term, while designing their new solutions, in order to benefit in the long term if they serve customers well. This short term sacrifice for long term gain is not only economic, it’s the essence pf morality. We aim to continue to serve this community of heroes.

Free Downloads & Extras From The Episode

Six Levels of Entrepreneurship: Download Knowledge Map

“The Austrian Business Model” (video): https://e4epod.com/model

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75. Jason Whitlock: A Values-Driven Entrepreneur Shares Ten Principles for Success in the Highly Competitive World of Sports Content

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Key Takeaways and Actionable Insights

There are many kinds of entrepreneurs. They are all instigators of win-win arrangements in which customers are served in innovative ways by enterprising individuals and firms. Lives are improved for consumers and producers.

On this week’s Economics For Entrepreneurs podcast we dissect the path to success of an individual who chose the crowded and highly contested field of sports content production, navigated a way to the top, and then broke out in a new entrepreneurial distribution initiative.

Jason Whitlock shares with us many principles of his success. We highlight just a few of them here to whet your appetite for the podcast.

Jason Whitlock's 10 Steps to Business Success

Choose a field that fits your personality and interests.

We have talked a lot with our contributing economics professors about assembling a unique and competitively advantaged set of resources. Jason’s unique resources were a love of sports, some original thinking, and a distinctive personality that he was able to express in writing. He wasn’t deeply technically trained for his first profession (journalism) beyond writing for his college newspaper. That wasn’t the point. His commitment to the pathway — starting at the very lowest point in the climb — was the point. This is what the textbooks and white papers call effectual entrepreneurship.

Credentials are nice but hard work and experience advance you.

Jason has won a number of prestigious awards over his time on the path to success. He was delighted to receive them. But he stressed that advancement comes not from the credentials but from the hard work and experience-gathering of which they are a reflection. Experience is the most important: learning from others, learning from circumstances and events, learning from setbacks, learning from observing industry trends and what happens to others. At Mises University 2020, Dr. Per Bylund told us that experienced entrepreneurs are the most Austrian (Mises.org/E4E_75_Bylund) — and therefore the most successful in business — because they are able to glean from their experiences what is most important for the success of a business and what is merely incidental or actually detrimental.

Let your values guide you the whole way — define them, write them down, adhere to them.

Jason has thought deeply about — and codified — his own values. He includes them in his personal profile (Outkick.com/Jason-Whitlock) on his entrepreneurial distribution platform, Outkick.com. The entrepreneurial life is a values-driven life.

Your intuition and innate ability to read people are your best tools for managing the future.

We discussed the entrepreneurial act of embracing change and trying to “stay ahead of it,” in Jason’s words. How do you do that? He elevates the role of intuition and empathy over data gathering and predictive analytics. Again, at Mises University 2020, Professor Peter Klein spoke of the elevated role Austrian economics allocates to those two cognitive skills, and even cited academic studies about the entrepreneurial advantages of intuition (“smart intuitors”) among cognitive skills (Mises.org/E4E_75_Klein).

Always, always put your customer first. Be honest with them, be objective, and serve them distinctively.

It is the first principle of Austrian economics in business that the consumer is sovereign and that an Austrian business puts the customer in first role in everything that they do. Jason Whitlock confirmed the same principle without any prompting. For a sports content producer, the customer is the reader, viewer or listener. Jason characterizes his audience as the intelligent sports fan who can appreciate an original take and distinctive reporting on subjects that many other content producers are covering.

He commented on how athletes today don’t understand the principle. The customers are fans who attend the events and enjoy the performance. Athletes sometimes misunderstand and think that “their twitter feeds are their fans” and often go to the point of ridiculing or rejecting or offending their customers. We’d call that a failure to demonstrate empathy, and disrespecting consumer sovereignty. Successful entrepreneurs don’t make that mistake.

These are just a few of the incisive and instinctively Austrian insights from Economics For Entrepreneurs podcast #75 with Jason Whitlock.

Free Downloads & Extras From The Episode

“Jason Whitlock’s 10 Steps to Entrepreneurial Success” (PDF): Click to Download

Start Your Own Entrepreneurial Journey

Ready to put Austrian Economics knowledge from the podcast to work for your business? Start your own entrepreneurial journey.

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27. Cheryl and Cliff Pia on the Economics of Creativity

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Every entrepreneurial initiative is creative. There’s also an entire creative industry in which entrepreneurs can participate and succeed. Today we follow the journey of two very successful founders – Cheryl and Cliff Pia of The Pia Agency.

Key Takeaways and Actionable Insights

There are many, many pathways of entrepreneurial opportunity in creative services, where it is eminently possible to succeed on talent, where big companies are eager to work with small creative companies and individuals, where agile low-overhead business models are thriving, and where technology is the entrepreneur’s friend. 

It’s an exciting time for entrepreneurs to be in the creative industry, say Cheryl and Cliff Pia, founders of the Pia Agency, a leading video and audio production firm working with many of the leading brands and largest companies worldwide. It’s an industry of rapid change – for example from the orderly process of television advertising to the frantic chaos of social media and web advertising and YouTube and Twitter videos. Change is confusing and scary for established businesses, and therefore full of opportunity for innovative entrepreneurial creativity. Centripetal forces of decentralization are breaking up the “Big Agency” structures and their retainer fee-based business model. If you can become the best at a specialized service, many doors are open.

The pathways of the creative industry often start very differently than for more traditional industries. Cheryl and Cliff provided E4E listeners with their creative origin stories.  

Cheryl & Cliff Pia's Entrepreneurial Journey

Click the image to see Cheryl & Cliff’s entire Journey Map.

Cliff played in bands and as a studio musician. He played some jazz and learned the “jazz method” (you don’t know what is coming next so relax and pick it up when it comes to you). He performed comedy in clubs and learned how to act on his intuition, read the mood of the room, and be hyper-responsive to audience input. By “always sitting next to the sound engineer” – and asking questions – he learned the technology and techniques of recording.

Cheryl worked in the music industry because that’s what her friends were involved in, and then in the film industry. She learned about music publishing through another friend, saw an opportunity and started her own publishing company. She also worked in the film industry and the non-profit sector, learning development and fundraising. Learning, learning, learning all the time.

Force majeure can be the catalyst to make the ultimate creative leap to start a new company. The key is to do it fearlessly, with grit and courage. 

Cliff’s position at a corporate was eliminated in an economic downturn. He had started a new division for his company to produce television advertising. Faced with a need, he and Cheryl started their own TV production company: The Pia Agency. “The phone didn’t ring for seven months,” Cliff told us. They didn’t quit. Entrepreneurs embrace that uncertainty and answer it with problem-solving action.

Often, the first problem for entrepreneurs to solve is their own.

The Pia Agency opened in Arizona and the critical mass of clients was located on the East Coast. The new agency found the solution in the adoption of cutting-edge technology for time-shifting and location-shifting (e.g. working with animators and voice talent all over the world) and remote online collaboration (e.g. online real-time video editing with remote studios, which sounds commonplace today but for which the Pia agency had to invent a new digital toolbox at the time).

Growth comes from demonstrating value, and a people-first approach. 

The new system worked, and the Pia Agency began to get work from big name clients like Hewlett Packard and Merrill Lynch, among many more. High quality work generates recommendations – from one brand manager to another in a multi-brand company, and from one company to another when clients change jobs and take their valued relationships with them. Cliff told us that a “people-first” approach – treat clients like people, empathize with them holistically, not just in their business lives – generate not only meaningful relationships but the pass-along recommendations that cause service businesses to grow. Austrian empathy and the role of trust are all pervasive in successful service providers. It’s the human moments that are the most valuable; paydays follow.

Innovation consists simply of new ways to serve clients by responding to their expressed needs. 

Innovation 1: Speed and Responsiveness. TV Production processes were traditionally slow and linear and expensive. But clients preferred speed and responsiveness to rapid market change. The Pia Agency developed speed and responsiveness capabilities (e.g. multiple editors working on the same video at the same time) and a fast-turnaround culture (e.g. hired a key producer from the news industry who was used to high-speed turnaround). This became part of the agency’s unique value to clients.

Innovation 2: Sonic Branding. In the internet age, when we listen on laptop computers, phones and earbuds, audio has taken a second position to video. Consumers put up with generically poor quality. But as voice-shopping evolves, consumers are going to hear brands instead of seeing them. Audio will regain its importance. Cheryl and Cliff understand audio and have developed and invested in capabilities in “sonic branding”: distinctively identifying brands though their audio signature. There is huge growth potential in this new field.

Greater growth comes with adding new external resources. 

Cheryl took an MBA so she could better direct the growth phase of the Pia Agency. She found she was able to apply this resource directly and immediately. And then Cliff and Cheryl merged their agency into a larger global group called Creative Drive, to establish the organization model of the future, an independent collective of content creators, a larger expression of the speed and responsiveness operational model. The Pia Agency has access to a larger client base, a more widely distributed set of relationships, and to expertise in new channels, such as e-commerce. The journey continues.

Cheryl and Cliff recommend their journey map to creative entrepreneurs for consideration. 

If you enjoy music or film or art, and you have a talent, there is every opportunity to do what you love and what you are good at, and the challenge is to learn how to get paid for it. The recommendation they make is to work in an appropriate part of the industry for an established company. For example, you might love music and performing, but you also might realize that music production is more lucrative than performing. The key is to create value, and therefore to understand what others find valuable, and what they will pay for the value brought into their lives. Get a job where you can learn in an area you’re passionate about, and learn what the world will pay for. Start there. Learn more, work with like-minded people. The pathways of entrepreneurship will open up to you.

Creating Freelancers – Check out the Creative Drive Work Market at https://creativedrivefreelance.com and add yourself to their talent pool!

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26. Per Bylund on the Entrepreneurial Opportunity of B2B versus B2C

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Dr. Bylund observes that students, when selecting entrepreneurial projects for his course, lean heavily towards consumer products and services. Does this represent smart entrepreneurial thinking, or not? Is it biased by (lack of) marketplace experience? Is it biased by media reporting and “buzz”? And what can practicing entrepreneurs learn from a reasoned analysis of the profit opportunities in Business-to-Business ventures compared to Business-to-Consumer ventures?

Key Takeaways and Actionable Insights

The economy — measured by Gross Output — is 70% production. That means that 70% of entrepreneurial opportunities arise in the supply chain stages that are prior to the final consumer purchase.

Keynesian economists believe that the economy is defined by consumption. Hence all their policies are justified as supporting or boosting consumption. Austrian economists think differently, and recognize that production is the health of the economy. People produce so that they can then exchange with others — that’s simple way to invoke Say’s Law. Keynesians use the metric of GDP to indicate economic growth or decline, and that metric is 70-75% composed of consumption. Economist Mark Skousen led the charge for an alternative metric, Gross Output or GO to track the size of the economy. GO measures the value of all production at every stage of the supply chain, i.e. every transaction where one entrepreneur or firm sells to another. GO identifies pre-consumption transactions as 75% of the economy. As Dr. Bylund says, it’s where the money is for entrepreneurs.

For the entrepreneur, B2B — producing input for other firms — offers advantages of structure, standardization and scale.

Structure: When an entrepreneur sells inputs for another firm’s production, the customer provides structured guidance on measurements, quality, delivery methods and timing — a blueprint for what they want to receive and how they want to receive it. Demand is codified. If the supplying entrepreneur can meet these codes, and a bid and a supply contract are approved, then a great deal of certainty is created around the business relationship.

This does not mean that there is no room for innovation. That comes in the elements of the business relationship that are not contracted. The creative entrepreneur can innovate in speed, responsiveness, ideation, and spotting new opportunities for efficiency. Innovation occurs at the edges of the structure, while the structure itself provides stability.

Standardization: Once the structured relationship is defined and agreed and the production interchange is established, the supplier-entrepreneur benefits from maintenance of the standard. There is precise knowledge of the ingredients to use, the production process to follow, the production rate and delivery specifications. This adds to certainty, and allows for the negotiation of lower costs.

Scale: Obviously the scale opportunity for the supplier is dependent on the size of the buyer and the size of the contract — it’s in the buyer’s hands. Nevertheless, contract reliability represents scale over time, and future volume assumes some (although not complete) predictability. The supplier can concentrate on efficiency measures to lower costs when there is no need to concern themselves with throughput variability.

These advantages are reversed in B2C businesses, where the trend is towards the opposite of structure, standardization and scale: personalization. Dr. Bylund called the B2C market ephemeral and flimsy. He was referring to the changeability of the consumer. Austrians understand that value is the subjective perception of the consumer. And the consumer is emotional, idiosyncratic and inconsistent in their continual rearrangement of value scales — what they prefer today is often different than what they prefer tomorrow, even if it is not obvious to the entrepreneur what change in conditions has brought this about. Consumers’ moods change and their choices change. Our free pdf points out the techniques required to manage in this context — tight targeting, deep empathy, and micro-segmentation.)

An entrepreneur’s production cycle may be 5 months or 5 weeks, but the consumer can change their mind in 5 minutes. They are on a different cycle. Their demand can not be relied upon. Continuous change is required of the entrepreneur competing for the consumer’s dollar, and continuous change is a tough business model. (Listen to our previous podcast on Austrian Capital Theory for the best tips on how to manage for continuous change.)

There are business channels where both B2B and B2C models are required. Some entrepreneurs find themselves moving their consumer goods to their end-consumer through distribution channels owned and operated by big businesses, such as CPG manufacturers of foods and beverages that sell on the shelves of Whole Foods or Walmart. The Walmart and Whole Foods relationships are B2B, even though the entrepreneur is in the B2C space. It is necessary to focus on producing value for the consumer, and educating the retailer about their benefit in passing on that value, as well as their role in communicating it to the consumer. At the same time, it is necessary to comply with the structure, standardization and scale rules set by the big business. We might call this a B2B2C business. It requires skills for both B2B and B2C.

Competing in B2B remains challenging, of course, but entrepreneurs should consider the size of the opportunity and the reduced uncertainty that are potentially available. In B2B, the entrepreneur is required to compete with other suppliers, to get costs and prices right to meet the customer’s needs, and to work hard to meet supply chain standards and specifications, and to negotiate contracts. Those requirements may be preferable and less uncertain than the ephemerality and flimsiness of consumer markets.

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6. Ricky Porco on Types of Entrepreneurs

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At Economics For Entrepreneurs, we believe that everyone can be an entrepreneur, should they choose to do so. It may take you some time to find exactly your best niche, and a few experiments may be in order. The right mindset, we propose, is to pursue your entrepreneurial goal with belief and commitment, while being sufficiently adaptive to make some adjustments along the path when new information and new learning becomes available.

This week we spoke with Ricky Porco, a young CEO who already has several entrepreneurial experiences to his name. He’s been co-founder of an innovative community-building platform, and of a software development company.  He’s also been a marketing, sales and do-it-all guy at a digital marketing agency, and now he runs a service company to help small businesses make the transition from paper to digital – i.e. he’s an entrepreneur who supports entrepreneurs.

Show Notes

Starting entrepreneurship early in life is an advantage. Ricky tells listeners how he started his entrepreneurial career in college, packing a lot of learning into a short period of time. It’s a permanent advantage he’s carried forward with him into every subsequent stage of his journey.

It might take you a few tries to understand what kind of entrepreneurship is best for you. You might expect to switch businesses two, three, four or more times, changing markets, organizations, and business models. Make sure you make your choices purposefully, and commit to active learning from each one.

You might even try life as an employee to learn by comparison. Ricky switched into the role of employee at one stage. He was able to observe how the boss he reported to struggled with management and growth, and learn from it, while gaining confidence in his own skills through his success as a rainmaker for this employer.

You quickly find out the importance of financial management. Ricky quickly found out that he and his co-founders were good a business model design, product development, marketing and sales, but a start-up is financially immature by definition and can easily run out of cash. Without sound and disciplined financial management, all the other skills and capabilities can count for nought.

And you also quickly find out that effective marketing is essential to every business. Some of Ricky’s clients see marketing as optional – “if there are funds left over”. The opposite is true: marketing is a fundamental requirement.

Organizational structure and design is a critical factor in success, and especially in opening information flows. The biggest threat to the entrepreneurial success of a firm is a clogged information flow, when employees or partners don’t have clear direction or timely data. This can easily happen in founder-centric companies and especially in family-owned businesses that tend to be hierarchical.

Digitization is the best opener of information flows: software is organization. One simple solution to the clogged information flow is digitization. Software solves the problem; there’s no hierarchy in Slack.

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