It’s Easy To Become An Entrepreneur

by Matthew on June 7, 2011

In a previous post, I talked about how there are only two steps to get rich. I just came across an older but terrific post by Sebastian Marshall about how you only need two skills to become an entrepreneur. You really should read his full post for the elaboration, it’s excellent, but basically you need to receive a portion of the value you create. That’s it.

So what if you work as a salaried employee at a company doing programming? That’s sort of similar, right? You are creating value for the company, and in return you are paid a salary, which is some piece of that value, right? Wrong.

If you are a salaried employee, you are exchanging hours for dollars. Let’s say your annual salary is S. If you create a product for them worth S x 10 you will get paid the same amount of money as if you create a product worth S x 100. Your salary is very decoupled from the value you create.

A couple of years ago I was working for a very large Fortune 500 company and had the privilege of meeting a particularly brilliant engineer. We met in the spring and he had started in January creating a product which would solve some specific needs of his group. Five months later, he had a product literally worthy of a product launch were he a startup. A product easily worth hundreds of thousands of dollars as it stood at that time. Created in five months and, unfortunately, the property of his employer which had no good mechanism to make sure he remained challenged and happy as an engineer. When he sought to move to new, more challenging endeavors within the company, the bureaucracy and nonsense of large companies prevailed and his attempts were frustrated. For the company, this was sheer foolishness. They should have done literally whatever it took to make him happy. Last I heard, he was leaving due to sheer frustration…off to get his PhD or something just to feel challenged. In retrospect, what he should have done was leave the company, create his product on his own, then find a buyer and move onto the next challenge.

Watching that unfold was one of the many things I’ve seen which has galvanized my confidence in the entrepreneur’s ability to best get a return on the value they produce. Corporations, due to their necessary but inefficient management structure, simply cannot be agile enough to even closely approximate a real market.

One of the fears I suspect many folks have in becoming entrepreneurs is…what if they are currently overpaid?…maybe their portion of the value they create would be less than their salary…?

What do you think?

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{ 2 comments… read them below or add one }

Ben June 8, 2011 at 4:52 am

I think it is more an issue of what is best for the individual often differs for what is best for society as a whole. We all grow up in a society and culture that through education is forced to give us a for-the-masses prescription, and that is finish school, go to University, and get a job/career. For me personally being an Entrepreneur was never really put on the table as a serious option throughout my education until I started an Economics degree.

It’s the harsh truth, but many (most?) people don’t really have what it takes to persevere with the risk and failure and uncertainty that the life of an Entrepreneur is filled with. This is why the general recommendation must be the most generic (sort of like most Marketing really!) so as to resonate with the most people. I saw a big poll not long ago about life goals and at no#1 was “Own my own business”. I certainly wouldn’t have guessed that from the “average” person I come across.

Anyway great blog, keep it up. EconTalk in your Recommended Links certainly grabbed my attention! :) I’m a huge Hayekian, and I feel the entire spectrum of emergent order and complexity, wisdom of the crowds, the economy (and the Internet) as simply an extension of nature rather than something separate, all of these ideas give us an edge as Internet Marketers. I’d love to have a chat with you sometime, shoot me an email so I have your contact!

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Matthew June 8, 2011 at 7:52 am

Thanks Ben!
I completely see that many people don’t even understand the entrepreneurial option or even if they do, they might not have what it takes. Traditional employment plays a good part in serving those people, I guess.

Great to hear you’re an EconTalk fan as well! As far as what is best for the individual vs. society, sometimes I think it appears that way when really what is best for the individual might also be best for society in the longer run.

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