Ace in the Hole: Luck’s role in the success (or demise) of the entrepreneur
“A good idea is about ten percent and implementation and hard work, and luck is 90 percent.” – Guy Kawasaki, author, The Art of the Start
In Guy’s world, luck is an important factor to any business venture, particularly so in the plight of the entrepreneur. Richard Kihlstrom and Jean-Jacques Laffont, two famed economists, would argue further: luck is the only determinant of entrepreneurial success. Through their eyes, an entrepreneur is nothing more than a risk-seeking gambler – some will hit blackjack, but most will bust. Take a quick look at the numbers and you will easily determine that most entrepreneurial ventures fail, so what makes the few who succeed so special? Perhaps they simply got lucky.
It is human nature: we take credit when successful, and allocate blame in the face of failure. My successes are directly due to my hard work and business sense. My failures weigh upon my employees, my investors, the economy. But let’s look through the lens of Kihlstrom and Laffont, where success and failure are equally attributed to pure chance. What do we see?
Did you know that Coca-Cola was originally an attempted cure for headaches? How about that the potato chip was just the accident of an angry chef? Saccharin, Teflon, plastic, penicillin – all were discoveries purely accidental in nature. Malcolm Gladwell, author of Outliers, writes how Bill Gates’ and Microsoft’s success stemmed from an accidental marriage of happy circumstances. Despite the grandiose entrepreneurial spirit we attribute to the Microsoft founder, had Gates been born 20 miles further in any direction, Microsoft might not have ever existed at all.
Accidental successes may be one thing, but if we are to attribute entrepreneurial achievement solely to luck, then we must also witness unforeseeable failures from businesspeople we mark for success. What better example than Thomas Edison, an American icon and holder of 1,093 U.S. patents?
Notably considered the greatest American inventor in history, Edison also fostered one of the greatest business flops the country had ever seen: Edison Records. Edison developed and held the patent to the phonograph, the world’s first sound recording and playback device that single-handedly gave birth to the entire music industry as we recognize it today. Able businessman that he was, Edison also founded the world’s first record label, Edison Records. In the world of music recording, Edison was king. So why did the doors of Edison Records close in 1929? It was due to World War I and circumstances completely outside Edison’s control. As the war consumed the materials Edison needed to create his wax records, other tycoons capitalized on the downtrodden inventor and pushed Edison Records out of business. The king of an industry fell due to an ill-fated lack of wax.
So far, it looks like Kihlstrom and Laffont have a pretty solid argument. We cannot be masters of our own circumstances. A sage may fail, and fools can rise to fortune. But don’t you worry, I am not about to send you back into the world without encouragement. I support that luck takes a back seat to our aspirations (within the milieu of business), and we may even transform bad luck to our advantage.
We know that some entrepreneurs are better set up for success. Industry knowledge and experience, savvy business insight, technical knowhow – these are some of the attributes of the successful businessman. But these are external attributes, advantages that anyone can learn given the right circumstances. In fact, luck may play a big role in providing these benefits to an individual.
If you ask others to define luck, you are likely to hear, “luck is simply being in the right place at the right time.” So why can’t we position ourselves in the right place? Why can’t make the right time now?
Letting luck be the sole determinking factor of success is a sign of laziness, self-limitation, and fear of the unknown. A successful entrepreneur cannot wait for an opportunity to fall into their lap, but must forge through all adversity in the name of their plight. As famous hockey star Wayne Gretzky puts it, you must “skate to where the puck is going.” If you wait for the puck to come to you, you’ve already lost the game.
Once again, we look back to Thomas Edison. Shortly after his invention of the phonograph, Edison spent his efforts trying to perfect the light bulb. Over 1,000 prototypes later, Edison could only keep the bulb lit for just a few seconds, a complete failure of concept.
A colleague approached Edison and asked, “Don’t you feel that you are a failure?”
“Not at all,” Edison replied. “Now, I definitely know more than a thousand ways how not to make a light bulb.” Just days later, Edison had successfully developed a working prototype, the grandfather of the bulbs we use today.
Edison was a gambler. With every prototype, he was rolling the dice and hoping for a big win. 1,000 unlucky roles later, what did Edison do in the face of an unrelenting Lady Luck? He changed his own luck.
Edison was persistent. He never gave up, and the more he tried, the better his chances were. Edison was observant. He learned from the glut of mistakes, slightly improving his model with every failed attempt. And Edison was confident. He believed in his ambitions and abilities, and refused to allow his letdowns to convince him otherwise. It was Edison’s culmination of the true spirit of the entrepreneur that led him to success, not the cast of a die.
It is exactly these kinds of internal factors that will determine the success of an entrepreneur. Look at the numbers one more time: though we see only a small portion of efforts piloted to success, we also recognize the same thriving individuals again and again. These are businesspeople with a history of success. With such lucrative track records, one cannot believe that they were just luckier than the rest. Venture capitalists have recognized these internal attributes as the fuel for success. They have become very skilled at determining what startups will succeed based solely on the character of the individuals who support it.
It is undeniable that luck, chance, is a factor in any business venture. The extent to which these random circumstances can affect us, however, is up to us. As entrepreneurs, we may call upon an army of internal strengths, tools that we use to navigate the tremulous business environment and overcome the will of circumstance.
So, given these entrepreneurial qualities, can we make our own luck? Can we shift the circumstances to work in our favor? Absolutely.
Even in gambling, the entrepreneur always keeps an ace up his sleeve.
Nathan Rubin is a graduate student at Carnegie Mellon University, studying to become a Master of Entertainment Industry Management. He hopes to one day be a producer. When he isn’t studying or working hard on a movie, Nate can usually be found surfing the net or flipping channels, never far from a TV or computer screen. Some of his favorite movies include “Sideways,” and “The TV Set.”