Five Reasons I Regret Writing About Millennial Entrepreneurs

Recently, I wrote a column about 10 young entrepreneurs.  Originally I titled it “10 under 20” but the Forbes editors thought that was too close to their “30 under 30” column so they changed it to “10 Great Lessons From Millennial Entrepreneurs.”  I didn’t like that title, because it implied these were “great” entrepreneurs, and I really didn’t think they were all that great.  Now that some time has gone by, I really regret having written the column.

1 – PR Inundation

I’ve written this column at Forbes for almost 7 years.  So I am pitched for unsolicited columns every day by PR firms.  On average, about 10 pitches every day. But nothing compared with the onslaught of emails I received after the millenial column.  Firm after firm, and even individuals, contacted me by email, on Facebook, Linked-in, and Twitter to tell me about some incredible young person who just absolutely needed to be written about.  You would think that every high school, and small university, in America had at least one, if not multiple, young prodigies all of which were destined to change the world.  It was an avalanche of pitches, from which I could not even begin to fully read, much less respond.

But, almost universally these businesses were not that fantastic.  Most were the modern day equivalent of someone opening a lawn service in 1960. Simple businesses that had little to distinguish them. Many had no revenues, and many were little more than somebody’s idea of a business they would like to build.  Those that had revenues were so small as to be meaningless, and almost none made any impact on their industry or competition.

The pitches were, without a doubt, the most hyped pitches I have ever received. Over and over I kept asking “why would anyone think this is in the slightest interesting?

Multitasking PR person

The only reason this is being pitched is because it involves someone under the age of 25.  And usually that someone lacks any credentials and offers no new insight to the industry or product.”

2 -Not a sustainable business

Writing an app is not a business.  Even if it sold a few thousand copies. Nor is trading baseball cards, or selling someone else’s stuff on eBay.  Nor is buying bitcoins.  By and large, 99% of the pitches were for one-product opportunities that clearly lacked any sense of being a sustainable business which could produce recurring revenue over multiple years.  Almost none had any employees, and those that did had a mere handful with no plans to scale any larger.

At best most were simply a single shot situation which generated some revenue for the millennial founder. And most could only pay the founder because the business had no overhead and a highly subsidized cost structure due to support from parents.  Many had no, or little, profits and there was nowhere near enough cash to repay traditional investors.  Because there was no cost for financing, overhead or even variable activities like payroll, these businesses could not be considered a success in any traditional sense.

3 – These were not really entrepreneurs

Jean Baptiste Say, French economist

French economist Jean-Baptiste Say coined the term entrepreneur. He used it to describe people who seek out inefficient uses of resources and capital then redeployed them into more productive, higher-profit uses.  None of the pitched businesses actually redeployed any resources.  And none really developed a new industry that created greater productivity.  These were just ideas that manifested into a product that fit an immediate need.  Most used an existing infrastructure, such as an app store, to do one thing – like sell an app.  Maybe someday they’ll write another – but there was no indication any research was happening, customer analysis or market testing to create a long-term business.

Additionally, for entrepreneurs there is some element of risk-taking.  For taking risk, by investing in something where others won’t invest, there is the opportunity for outsized returns.  But these folks didn’t take any risk at all.  It wasn’t their money they invested, but rather their family’s.  Most either lived at home, or lived in housing paid for by family (such as a college dorm room.)  Most had nothing invested in their “business” other than personal time, and if this failed there was almost nothing lost.  And most had minimal gains relative to the size of the risk they undertook with other people’s resources.

And they all lacked any sense of a business plan.  Now I’m all for innovation and trying new things, but business success requires the ability to generate ongoing revenue for a prolonged period that covers all costs and creates returns for investors.  These folks simply promoted ideas with no description of how this was to be a long-term profitable venture that succeeded for customers, suppliers and financial backers.  I found that I would not have been an investor in hardly any of these “businesses” and surely would not recommend readers to back them.

4 – These folks were big self-promoters, not business promoters

Almost to a pitch every story was about some individual – not a business success.  I was told over and over and over about how some 17, 18, 19 or 20 year old was absolutely a genius; a modern miracle of incredible business insight.  Yet, there was little to back-up these claims.  In the end, these were just young folks who had some sense of ambition and fortitude that were doing a few experiments and had (in some instances, not all) sold a few things.  But their stories really weren’t that interesting.

One young fellow washed vehicles.  He got a contract to wash trucks.  And he had expanded his truck washing capability to multiple trucking companies.  OK, ambitious and hard working.  But nothing fantastic.  No technology breakthrough.  Just a basic service that he sold cheaply enough to win some contracts.  But, he was unwilling to discuss his margins, how much he paid himself or others and how he financed the company or paid a return to his backers.  Yet, he was certain that he could franchise his truck washing business and soon enough he would be the next Ray Kroc.  He, and his PR person (and it was unclear who paid her) failed to realize that his story might be interesting in 20 years after he proved he could build the next McDonald’s making himself, his investors and his franchisees rich.

Add onto this the fact that almost all of these people had nothing good to say about anyone older.  For some reason I was informed over and again that nobody over 40 could really understand how brilliant this person is, and how guaranteed was future success.  These people universally had no value for advice from people older than them, senior woman meetingno value for those with experience (all experience was seen as irrelevant to their brilliant insight,) and no value for education.  There was no reason to study business practices, or even business history, much less anything like engineering, because they simply had taught themselves all they needed to know – and if they needed to know anything else they would teach that to themselves as well.

I kept saying to myself “get over yourself kid. You are working hard, but so are a lot of other people.  You really haven’t accomplished anything of merit yet.  And there’s not really anything here that indicates you will achieve great things.  You may win awards for just showing up at school, or at the soccer match, but in business you have a LOT more to prove than you can show up and possibly accomplish some of the basics.  Once..”

5 – No sense of how to build something, or even engage in quid pro quo

Bill Gates built a company that produced software millions of people wanted.  Steve Jobs built a company that made devices (computers initially) that millions wanted.  Henry Ford made cheap cars that millions of people wanted. Mark Zuckerberg created an interaction engine that millions of people wanted (and advertisers would pay to reach.) These founders understood that building a successful business meant combining multiple resources into an organization that functions capably to build products and markets.

If you asked them “why should I write about you?” they would answer, “to tell folks about the improvement in their life from my company’s products.”

When I asked these millennial entrepreneurs why I should write about them, the answer was “because I’m young and great and going places.”

Worse, when I pointed out that in today’s world columnists rely on readers, and therefore columnists want to know the topic will generate reads, they were without even a good idea of how a column on them would generate reads.  When I asked “will you promote this through a large social media conduit to drive readers to the column?” they responded with “but isn’t that what Forbes does, bring in readers?  I think you should write about me so Forbes readers can become enlightened.  Why should I be asked to promote your column, isn’t that what you and Forbes do?”

Conclusions

It was completely unclear to me who was paying for these PR firms.  But to them, and to the hundreds of millennials who sent me Facebook, Linked-in and Twitter messages:

  1. Quit focusing on yourself and actually accomplish something.  Don’t be proud you’re a drop-out, go finish school.
  2. Listen more and talk less.  You really don’t have much that’s interesting to say.  Pay attention to those who are older, wiser and could help you reach your goals.  You need them, and most of them don’t need you.  You’re really not as interesting as you think you are.
  3. Get some education.  Bill Gates and Steve Jobs are my age – not yours.  Every generation needs more skills than the one before it.  Mark Zuckerberg is THE exception, not the rule.  Dropping out of Harvard did not make him great.  Before you decide you have all the answers, go learn what the questions are.  Learn how to think, how to reason, before you decide you know all that’s needed to take action.
  4. Quit living on subsidies.  If your parents or grandparents or aunts and uncles are paying for your rent, or car, or supplies then you still don’t understand basic economics.  Become self-sufficient.  Make enough money to buy your own new car, buy your own house, and pay 100% of your bills – and even enough that you could afford to raise children. Until you are self-reliant it is very hard to take you seriously as a business leader.
  5. Life is NOT a one-round event.  You are very likely to live 100 years.  Do you have the skills to maintain your lifestyle for that full 100 years? Quit crowing about the 1 success (by your definition) you’ve had so far and instead figure out how you’ll lead a productive 100 year existence.  You’re only 20% of the way there.

I hear folks say we need to advance millennials onto boards of directors for public companies.  Or fund their new ventures without business plans or traditional benchmarks. Or put them into highly placed positions of major corporations. I can’t agree with that.  From what I observed, millennials are similar to all other young people. They don’t know what they don’t know.  And only time, failures, successes, education (formal and informal) and hard work will prepare them to be tomorrow’s leaders.

I started my entrepreneurial life while a college junior.  I was lucky enough to hook up with several people at least a decade older, and they found investors that were a generation older.  The company made computer hardware, and largely due to good luck as well as hard work the company was successfull, and was sold for a great return to the investors and some money for the founders.  Simultaneously I completed my undergraduate degree in 4 years, summa cum laude. What made me most excited about that experience was not trying to be featured in any journal, but rather that the folks at the Harvard Business School felt this experience was good  enough to admit me to their institution to complete an MBA.  And there is no doubt in my mind that what I learned in college, and grad school, was incredibly important to generating a lifetime of ongoing business accomplishments – long after that first company disappeared into the dustbin of obsolete technology.

10 Great Lessons From Millennial Entrepreneurs

10 Great Lessons From Millennial Entrepreneurs

There has been a lot of press about Millennial entrepreneurs the last 2 years. Young folks – mostly boys – dropping out of high school to start their own businesses at ages as young as 15. One of these, Noah Miller, who started a sports web site at 15 and later a creative agency asked to join my network on Linked-in. Then he asked me to look into the topic of young entrepreneurs and see what lessons we could learn.

1 – If you are really good at something at a young age, continue to work at it

Ben Pasternak liked gaming, and he liked apps. So at 15 he wrote a game-like app and put it on iTunes. 1.3million downloads later he was a young superstar. Since then he’s created two more apps (Flogg and Monkey.) His young hobby led to building strong programming skills, which when linked to identifying what appeals to Millenials turned into apps people really use.

George Matus started flying drones at age 12. He loved it so much he started modifying drones, and building his own. He published videos of his exploits on YouTube, and convinced drone makers to let him be a tester. After 6 years of working on Drones he now has his own Peter Thiel funded company making drones. So far no products on the market, but he is working at it.

Whether iOS apps or drones will be a long-term career is hard to say. But by building strong skills in new technologies with large markets and high growth rates these fellows created business opportunities. You don’t have to be a Millenial to do that.

2 – Take advantage of trends while they are hot

Collecting sneakers is a remarkably big market. Most older folks would call it a fad, thinking nobody will collect sneakers for long. But, it doesn’t really matter if a trend is going to be long-lived, or not, if you are willing to jump in and help push the trend along.

Fifteen year old Ben Kapelushnik liked sneakers. He wanted money to buy more. So he started buying multiple pairs of collectible sneakers and selling the “extra” pairs at a profit. To grow he networked with sneaker sellers to figure out how he could get in line early and buy many pair. Then he networked hard as he could to find associations with big time sneaker collectors, like rappers and other creative artists. Now he has a business buying and selling sneakers. How long will the fad last? Who knows – but Ben is making money by taking advantage of a hot trend.

Connor O’Neil saw the same phenomenon. He thought “why don’t I go source things people want?” So he created a web site where buyers can request he source sneakers, T-shirts and other items. He then searches the web, sourcing the items manually and with bots that will make instantaneous purchases of hard to find items.  He charges customers a fee to find what they want. By meeting customer needs for trendy items, he finds an opportunity for profit.

At 16 Casey Adams started networking on Snapchat, Facebook, Twitter and other social media.  After he built up a following of several thousand followers he began offering them t-shirts and wristbands.  Pretty soon he was generating $5k/month in revenue.  While many older folks still think social media, and Snapchat in particular, is a time-waster, Casey is making money on the obvious trend toward all things social.  He’s leveraging his social network to sell things – and teaching other people how to do the same.

Are Bitcoins long-term currency? Will crypto-currency replace things like Dollars and Euros? Most older generation folks don’t think so, and view this as another fad.  But Erik Finman saw the trend at age 12, and started buying Bitcoins.  A few trades later and he turned $1,000 into $100,000.  A few more trades and Finman had a stash worth over $1,000,000.  Are Bitcoins the next Tulip bulbs?  You can research the economists for opinions on that.  But as long as the trend is growing, Erik Finman is making money.

bitcoins
facebook ad and teen

Peter Szabo was only 12 when he used a Google search to identify ways to make money on the internet.  He discovered making Facebook ads for affiliates could pay off – in pennies at first, but as volume rose these became dollars.  Since so few older people knew how to manage a Facebook ad budget, by age 18 he created an on-line agency focused on maximizing value (and return) for Facebook advertising.  You don’t have to be a Millennial to recognize the growth of new platforms and help people use them to make money.

3 – There has never been a better time to be a self-promoter

Today anyone can claim to be “great” at anything using the web.  There are so few genuine ways to measure quality and results when it comes to anything on the web that if you say it enough, and find enough testimonials, you can be very convincing.

Noah Miller started a sports web site at age 15 using a group of writers he amassed via Twitter connections.  Sports Crave had some success with USAToday and Google before Noah closed it at age 17.  Based on his claims of great success he’s now promoting his new creative agency, Colour Medium, which has nothing more than a flash page.  But the web allows Noah to position himself at the forefront of creative.

Benji Taylor at age 18 has opened a new on-line creative agency named Next Exit focused on art for the music industry.  By forging relationships with known young musicians he has positioned his agency at the top of the creative spectrum for his target customers.  Given how fast musicians come and go in the limelight, who knows how long his testimonials will stand up.  But as long as people know the name of those who know his name he is leveraging those associations to crown himself the king of that industry.

 

Eighteen year old Josh King Madrid, known as Jet, has built a business on seemingly nothing more than a lifestyle.  It is wholly unclear if Jet has ever actually created a profitable business selling anything physical or digital.  But what he has done is convince lots of Millenials that he knows the lifestyle they want to lead, and he can tell them how to lead it.  So now, largely without any clear source of how he obtained any knowledge about succeeding at business, he is proselytizing how young people can be independent, self-actualized and living the “Jet Set” lifestyle at his events.  Jet is one of the best descriptions of how self-promotion can succeed in today’s social-media world, leading people to believe they should listen to you primarily because of the image you portray.

Overall Lessons from these 10 under 20 entrepreneurs

There is precious little to support the grandiose success claims of most Millennial entrepreneurs.  They claim huge revenues and wealth, but in most cases it is impossible to prove their claims, and most support comes down to number of followers, or testimonials of some celebrity.  But, that does not mean we can’t learn from what they did to achieve their current fame:

  1. Use social media exhaustively.  Over-communicate.  Use Facebook, Instagram, YouTube, Snapchat, Twitter, etc. over and over and over to communicate your value and your message.  These platforms are dirt cheap, so hard work there can make up for few dollars.
  2. Take big risks, especially if you have little to lose.  Most folks are hamstrung by the commitments of family, mortgage, car payments, etc.  If you remove these bindings you can take big risks, like rolling over thousands of dollars worth of crypto-currency.  And if something fails, never call it a failure.  Just a learning experience you’ve moved beyond.
  3. Don’t try to improve something that already exists.  Do something new.  Develop a new app, a new drone, a site focused on selling collectible sneakers.  It is cheaper, and more likely to succeed, if you are an early entrant in something new and growing.
  4. Hype is good.  Pre-announce everything.  And announce that your next thing (whether a drone, a web site, an exchange site or something else) is going to be HUGE.  It will be the VERY BEST EVER.  Do not be deterred by feeling the need to prove any of your claims, just make big claims with tremendous bravado.
  5. Take credit for anything that goes right.  None of these people ever say they were lucky.  Whatever went right was always do to their inherent insight, skill or genius.
  6. Stay out of specifics.  Talk in platitudes.  Especially statements that appeal to other Millenials.
  • “Live your own life if you want to succeed.”
  • “Believe in yourself 1,000%.  That’s what truly matters.”
  • “Don’t trust employers or education. Trust only yourself.”
  • “Self-education is better than schools.  You can learn more on YouTube than any classroom. Teachers are nay-sayers.”
  • “Do what you are passionate about.”
  • “Millennials are special.  Millennials are smarter and better than older people.”
  1. Select good parents.  I was struck by the fact that almost all these young people had parents and/or grandparents that were physicians, PhDs, successful real estate developers, successful business people.   There is no doubt they benefited at their young age from families that had resources and skills that are not available to the vast majority of folks.

Is ongoing success pre-ordained?

I remember the student counsel President of my school, Mr. Popularity, who dropped out of college to open a string of pizza shops.  He received ample praise and publicity for his young entrepreneurial success.  But after a few setbacks the pizza shops failed, he took work as a salesman for a liquor distributor, became an alcoholic and lost his family.  I was glad he found success early, and saddened that he wasn’t the wunderkind many people foisted upon him.

Life is not a one round fight.  It will be interesting to see who among these, if any, go on to do great things in business, politics or another arena.  While they are full of chutzpah today, life has a way of throwing many derailing curves into everyone’s path.  But…

…that does not mean their early success can’t teach us some important lessons that can be applied, regardless of our age.

‘The Founder’s Mentality’ Recommended For Your Summer Reading

‘The Founder’s Mentality’ Recommended For Your Summer Reading

Summer is here, and everyone needs a business book or two to read. I’m recommending The Founder’s Mentality – How To Overcome the Predictable Crises of Growth by two very senior partners and strategy practice heads at Bain & Company — Chris Zook and James Allen. Bain is one of the top three management consulting firms in the world, with 8,000 consultants in 55 offices, and has been ranked as one of the best places to work in America by Glass Ceiling.

Since both authors are still part of Bain, the book is somewhat bridled by their positions. No partner can bad mouth current or former clients, as it obviously could reveal confidential information — and it certainly isn’t good for finding new clients who would never want to risk being bad-mouthed by their consultant. So don’t expect a lambasting of poorly performing companies in this review of global cases. But after reviewing the work at their clients for over 20 years, and many other cases available via research, these fellows concluded that most companies lose the original founder’s mentality, get bound up in organizational complexity, and simply lose competitiveness due to the wrong internal focus. And they offer insights for how underperformers can regain a growth agenda.

founders mentality

Photo courtesy of Chris Zook

Moving From Mediocre To Good

I interviewed Chris Zook, and found him rather candid in his observations. When I asked why people should read The Founder’s Mentality I really liked his response, “Many people have read Good to Great. But, honestly, for many organizations the challenge today is simply to move from mediocre to good. They are struggling, and they need some straightforward advice on how to make progress toward growth when the situation likely appears almost impossible.”

 You should read the book to understand the common root cause of corporate growth problems, and how a company can address those issues. This column offers some interesting thoughts from Chris about how to apply The Founder’s Mentality to eliminate unnecessary complexity and make your organization more successful.

Adam Hartung: What is the most critical step toward undoing needless, costly, time consuming complexity?

Chris Zook: The biggest problem is blockages built between the front line and the top staff. Honestly, the people at the top lose any sense of what is actually happening in the marketplace — what is happening with customers. 80% of the time successfully addressing this requires eliminating 30-40% of the staff. You need non-incremental change. Leaders have to get rid of managers wedded to past decisions, and intent on defending those decisions. Leaders have to get rid of those who focus on managing what exists, and find competent replacements who can manage a transition.

 Hartung: Market shifts make companies non-competitive, why do you focus so much on internal organizational health?

Zook: You can’t respond to a market shift if the company is bound up in complex decision-making. Unless a leader attacks complexity, and greatly simplifies the decision-making process, a company will never do anything differently. Being aware of changes in the market is not enough. You have to internalize those changes and that requires reorganizing, and usually changing a lot of people. You won’t ever get the information from the front line to top management unless you change the internal company so that it is receptive to that information.

Hartung: You say simplification is critical to reversing a company’s stall-out. But isn’t focusing on the “core” missing market opportunities?

Zook: Analysts cheered Nardeli’s pro-growth actions at Home Depot. But the company stalled. The growth opportunities that external folks liked hearing about diverted attention from implementing what had made Home Depot great — the “orange army” of store employees that were so customer helpful. It is very, very hard to keep “growth projects” from diverting attention to good operations, and that’s why few founders are willing to chase those projects when someone brings them up for investment.

Hartung: You talk positively about Cisco and 3M, yet neither has done anything lately, in any market, to appear exemplary

Zook: It takes a long time to turn around a huge company. Cisco and 3M are still the largest in their defined markets, and profitable. Their long-term future is still to be determined, but so far they are making progress. Investors and market gurus look for turnarounds to happen fast, but that does not fit the reality of what it takes when these companies become very large.

Hartung: You talk about “Next Generation Leaders.” Isn’t that just more ageism? Aren’t you simply saying “out with the old leaders, you have to be young to “get it.”

Zook: Next Generation Leadership is not about age. It’s about mentality. It’s about being young, and flexible, in your thinking. What’s core to a company may well not be what a previous leader thinks, and a Next Gen Leader will dig out what’s core. For example, at Marvel the core was not comics. It was the raft of stories, all of which had the potential to be repurposed. Next Gen Leaders are using new eyes, dialed in with clarity to discover what is in the company that can be reused as the core for future growth. You don’t have to be young to do that, just mentally agile. Unfortunately, there aren’t nearly as many of these agile leaders as there are those stuck in the old ways of thinking.

Hartung: Give me your take on some big companies that aren’t in your book, but that are in the news today and on the minds of leaders and investors. Apply The Founder’s Mentality to these companies:

Microsoft

Zook: Did well due to its monopoly. Lost its Founder’s Mentality. Now suffering low growth rates relative to its industry, and in the danger zone of a growth stall-out. They have to refocus. Leadership needs to regain the position of attracting developers to their platform rather than being raided for developers by competitive platforms.

Apple

Zook: Jobs implemented The Founder’s Mentality brilliantly. Apple got close to its customers again with the retail stores, a great move to learn what customers really wanted, liked and would buy. But where will they turn next? Apple needs to make a big bet, and focus less on upgrades. They need to be thinking about a possible stall-out. But will Apple’s current leadership make that next big bet?

WalMart

Zook: One of the greatest founder-led companies of all time. Walton’s retail insurgency was unique, clear and powerful. Things appear to be a bit stale now, and the company would benefit from a refocusing on the insurgency mission, and taking it into renewal of the distribution system and all the stores.”

It’s been almost a decade since I wrote Create Marketplace Disruption – How To Stay Ahead of the Competition. In it I detailed how companies, in the pursuit of best practices build locked-in decision-making systems that perpetuate the past rather than prepare for the future. The Founder’s Mentality provides several case studies in how organizations, especially large ones, can attack that lock-in to rediscover what made them great and set a chart for a better future. Put it on your reading list for the next plane flight, or relaxation time on your holiday.