Are Entrepreneurs Smarter, or just Gutsier?

The vagaries of my reading habits had me reading two “How I did it” books last week; Ed Whitacre’s “American Turnaround” and Dave Ramsey’s “EntreLeadership.” Both men are justifiably proud of their achievements, but their differing paths to success are striking.

Whitacre  spent 44 years with the same corporation, rising to the Chairmanship of AT&T by climbing the ranks through management. Ramsey, like so many entrepreneurs, first experienced massive failure before building an organization around his own skills and creativity. Is one road to success inherently more admirable, or more challenging, than the other?

As a lifelong small business owner (not counting “side businesses” when I was young and employed), I’ve signed my own paychecks for over 32 years, I tend to be strongly biased in favor of the achievements of other owners. I frequently point out that taking risks is easier when it isn’t your own paycheck on the line. Yet the successful executives I meet seem to suffer no embarrassment about compensation packages that dwarf those of most business owners. I’ve never heard one say “I only do this because I’m just not smart enough to own a small company.”

Just before the last Presidential election, I attended a speech by David Axelrod, President Obama’s political strategist. His message was plain (even though he was speaking to an audience of conservative Texas business people). He said, or at least intimated that the problems in our country were largely due to the fact that the really smart people, the ones who had chosen politics as a profession, didn’t have enough control over the economy.

He had a point. If I look at his job as getting a secure paycheck while controlling vast sums, having corporations and millionaire entrepreneurs curry his favor, and being able to pass laws to enforce what he thinks should be done, perhaps that is where all of the brightest folks would go if given the choice.

Certainly the three obvious types of financially successful people, business owners, business executives, and elected officials; along with professional athletes, artists, and leading scientists, all have to survive a competitive gauntlet in their chosen fields. Reaching the pinnacle of what you do, whether measured by income or accolades, is pretty Darwinian.

Is there really a difference, then? Are we somehow suited for a specific career path, or are we like the Tutsi and Hutu tribes in Rwanda? There is essentially no ethnic difference between the two. Their tribal identity was determined by British colonists, who issued identity cards based on what they saw as differences in facial features. Yet the fact that there was no real racial distinction didn’t stop the two groups from discriminating, and eventually slaughtering some 800,000 of each other in the Rwandan Genocide of 1994.

Like any other human beings, we first become part of a group and then start focusing on why that group is better. Let’s face it. Small business owners are no smarter than anyone else. Most became entrepreneurs by happenstance. The most frequent reasons I hear for starting a business are 1) Wanted to make more money than my employer paid, and 2) Lost my job and needed to eat.

I also talk to lifelong employees who say “I have always had a burning passion to own my own business.” That’s a crock. No one goes through an entire working career with a unfulfilled burning desire. Those people had a choice between the known and the unknown, and they made it.

That is the single characteristic that defines anyone who has started up a company; a high level of risk tolerance. It may be because the entrepreneur is self-confident, or truthfully because he or she simply doesn’t comprehend the potential downside of leaping into business. Whether it is generated by ignorance, arrogance or merely ebullient optimism, that risk tolerance is the first attribute required of any entrepreneur.Without it, no start-up would ever start up.