The entrepreneur’s motivation: Not what you think…
Show me the money? Entrepreneurs
don’t always look at financial rewards as the best thing in being their own
bosses.
In the 1990s, it was Bill Gates. In
the 2000s, it was the late Steve Jobs and the Google boys, Larry Page and
Sergey Brin. Here in the 2010s, it’s Facebook founder Mark Zuckerberg. These
men not only produced revolutionary technology, they also changed the way
people worked and interacted, and became cultural phenomena. Most importantly,
they became fabulously rich: on Forbes’ latest billionaires list, Gates was No.
2 (US$61 billion); Page and Brin tied at No. 24 (US$18.7 billion each);
Zuckerberg was No. 35 (US$17.5 billion), while the estate of Jobs was worth
some US$9 billion, good for No. 100.
These ultra-successful businessmen
are often held up as examples of the archetypal entrepreneur: huge appetite and
tolerance for risk, with corresponding monetary payoff to match. However, that
has always been an assumption, and academics have not been able to prove so or
otherwise. INSEAD Assistant Professor of Entrepreneurship, Hongwei Xu, undertook a study of over 60,000 individuals at Stanford
University, and found it to be otherwise.
Not
just the money
The study, which was done in
partnership with Martin Reuf at Princeton University, looked at two groups of
people: those who have just started their own businesses vis-à-vis the general
population. To gauge their risk tolerance, these two groups were given three
options for venture investments: “a profit of US$5 million with a 20 percent
chance of success” (option 1); “a profit of US$2 million with a 50 percent
chance of success” (option 2); and “a profit of US$1.25 million with an 80
percent chance of success” (option 3).
General perception of the
risk-seeking, nothing-ventured-nothing-gained entrepreneur would dictate that
most business owners would plump for option 1. But the study proved otherwise.
More nascent entrepreneurs opted for option 3 – a higher chance of profit, but
less of it – than the general population, while a higher proportion of the
general population actually opted for option 1 instead of the business owners.
So if money alone isn’t enough to
make someone start their own business, what would? “Creating a business is very
risky, it’s very uncertain,” Xu told INSEAD Knowledge. “Non-pecuniary
motivations are more important than monetary motivations for people to start a
new business. One is autonomy: People want to be their own boss. The other is
identity fulfillment, which is more about people having a vision about a
product or a service. But their employers do not give them the freedom to
develop within the company structure. That is a key driver.”
Why
start a business?
To test that assertion, this writer
spoke to a few entrepreneurs. Former music executive Austin Ng quit his job to
become a photographer: “I cannot deny that autonomy and identity fulfillment is
a huge part when it comes to being self-employed. Neither am I saying that
making more money isn't nice, but getting to do something that you love and
making money out of it is simply an extremely liberating thing to do.”
“As for entrepreneurs being less
risk-seeking than society make them out to be, it took a huge leap of faith for
me to make the transition from employee to being self-employed; to me that's a
high risk move," he adds. "Therefore I would think that entrepreneurs
are bigger risk takers but with an ambition.”
Former public relations manager
Daniel Goh quit to start The Good Beer Company, which operates out of a stall
at Chinatown Complex in Singapore. “I definitely agree with the first posit
about autonomy and identity fulfillment,” he says. “It's about setting and
going for priorities in life instead of having them set for you. The difference
between an entrepreneur and a non-entrepreneur is, in my opinion, having gone
through the entire consideration path of considering - and accepting - the
risks that entrepreneurship brings.”
Tough
ride ahead
It must be noted that neither Ng nor
Goh are necessity entrepreneurs i.e. forced to start a business to make ends
meet. It is here that Xu advises would-be entrepreneurs: “If you want to make
money, don’t create a company because you won’t go through the process; it’s
very painful and uncertain with lots of ups and downs like an emotional roller
coaster.”
“If you have an MBA, it is very
likely that when you face difficulties, you will stop and get a corporate job
instead - be a consultant, leverage your network. Creating a company only works
if there is a passion - such as pursuing the vision for a product or service to
change the world, to change people’s lives. Only then will you go through the
(difficult) process and survive the downtime. Otherwise you will stop because
you will see the difficulty before you see the money,” he warns.
For people such as Austin Ng and
Daniel Goh, they saw the difficulty, but they also saw the non-financial
rewards that came with being one’s own boss. They might not have the vision to
change the world like Steve Jobs or Mark Zuckerberg did, nor do they have a
tiny fraction of their riches. But then again, money is not everything.
Hongwei Xu is Assistant Professor of
Entrepreneurship and Family Enterprise at INSEAD.
By Alvin
Lee http://knowledge.insead.edu/innovation/entrepreneurship/the-entrepreneurs-motivation-630
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