Rich versus King: The Entrepreneur's Dilemma (2006) [pdf] | Hacker News Reader

Rich versus King: The Entrepreneur's Dilemma (2006) [pdf]

people.hbs.edu

58 pointsrokhayakebe8 comments

Everyone likes rules of thumb, here's mine the probability that you are in a bubble correlates with the ratio of opportunistic investors to craftsman investors.

               "opportunisitc entrepreneurs"
   P(bubble) = -----------------------------
                 "craftsman entrepreneurs"

Or more precisely craftsman(people?) entrepreneurs are more driven to change the world and have a "purer" motive for what they do, opportunistic entrepreneurs simply grow the number of startups similar to the ones started by the craftspeople.

What happens when there are more of the numerator than denominator? Can't be a probability ;-)

Indeed, it should be:

                              "opportunisitc entrepreneurs"
   P(bubble) = -------------------------------------------------------------
                 "craftsman entrepreneurs" + "opportunisitc entrepreneurs"

While I think we all like the idea of the pure, un-corrupted "craftsman" entrepreneur, it is very rarely that person who actually is: "driven to change the world."

Wozniak et al. loved computers and technology and wanted to share that. Jobs wanted to rule and change the world so that's what he did - same with jobs etc...

Wish it were the case like you postulate, but I don't think it is - I also don't think your formula = bubble. Bubble has less to do with who is an entrepreneur and more to do with who is an investor.

If you find this interesting, Wasserman expanded his thesis into a book[0], an academic study of startups. Highly recommended.

[0]: http://www.amazon.com/The-Founders-Dilemmas-Anticipating-Ent...

Of course, the most common outcome is Neither Rich Nor King.

I think this study and resultant book are flawed because the metrics do not exist within the same reference frame.

For example, from the abstract:

The two major motivations to start a new venture are the profit motive and the control motive. This paper examines how entrepreneurs’ choices that increase their potential financial gains (i.e., achieve the profit motive) should conflict with their ability to achieve the control motive.

In this case, the profit motive, is independent of the organization and would be compared to the mathematical global "wealth" variable. That is, comparisons for relative profit are not made between the founder and other founders, investors or employees within the organization, but rather within the universe of the larger economy.

Alternatively, the control motive in this study is being compared within the organization, between the founder and the investors, other founders and employees.

So the reference frames are not equivalent. One is in the broader economy and the other is within the organization.

What should be compared is either, relative profit competitive between the founder and the other parties (investors etc....) or power within the broader economy, that is for example more political power, economic power, etc...

I would be interested to see that study.

The book is great - highly recommend it.

Reply on news.ycombinator.com