Academic

The entrepreneur as non-risk taker ...

By Jeff Yates

... or perhaps at least not as big of a risk-taker as conventional wisdom has led us to believe. On the 4HWW blog Tim Ferris reviews "Leap" by Rick Smith of World 50, a senior executive networking company. In the book Smith provides career advice, but also examines the theme of the risk taking maverick entrepreneur. In his review Ferris writes  "Finally, here was a book that destroyed the myth of the entrepreneur as risk taker, using case studies ranging from start-ups that became Fortune 100 companies, to Live Aid and the Girl Scouts." 

Perhaps the most interesting case study Smith uses is Bill Gates. Conventional wisdom tells us that he is a great risk taker who abandoned the safety of a Harvard degree to drop out of school and start some silly computer company that, of course, became the giant that is Microsoft. The reality is that Gates was from a very wealthy family and likely could have returned to Harvard any time he wanted (he didn't drop out,  he took a "leave of absence")  - oh, and I could be wrong, but I'm pretty sure I read that he lived on a quite healthy trust fund. This in no way takes away from his effort, vision, or hard work - but let's put it in "risk taking" context.  Smith tells the story of Microsoft's genesis much better (and you can read more of the "Leap" selection on the 4HWW post):

In the fall of 1973, Gates left Seattle to begin his freshman year at Harvard, part of his preprogrammed life plan. Allen, who almost certainly could have been admitted to Harvard along with his pal, chose a different route. He wanted hands-on experience, but the two remained in close contact, often discussing the potential of one day starting a company, and at the end of Gates?s first year at Harvard, Allen moved closer to Boston so they could continue to pursue the still-vague possibilities. Then, in December of Gates?s sophomore year, the vague future began to take on a more exact face.

On a visit to Harvard, Allen stopped at a convenience store and noticed the current issue of Popular Electronics magazine. On the cover, under the title ?World?s First Microcomputer Kit to Rival Commercial Models,? was a picture of the Altair 8800. Energized as he had never been, Allen showed the magazine to Gates, and within a few days Gates had called the maker of the computer, Micro Instrumentation Telemetry Systems (MITS), and told them that he had written a BASIC computer program that could be used on the Altair.

This was a lie. Gates and Allen were just trying to gauge interest from the company. But MITS was deep in its own deception: the computer shown on the cover had not been developed yet, and even the prototype had been lost in shipping. Still, the magazine article had generated interest far exceeding expectations, so MITS asked Gates and Allen to come in and demonstrate what they were thinking. Only then did the two set out to write the code. Gates focused on programming while Allen worked on simulating how it would work on an Altair 8800, which they didn?t have.

At the meeting eight weeks later, the program worked perfectly, and MITS arranged a deal to purchase the rights to Gates?s BASIC. Gates would later say that it was at this moment he knew the software market had been born. Yet, despite his growing certainty of the opportunity in front of him, Bill Gates waited another 12 months, until his junior year, to drop out of school and, with Allen, form Micro-Soft. And even then, the company might have amounted to little more than a footnote in the history of software without Bill Gates?s mother.

Long active in community service in the Seattle area, Mary Maxwell Gates became the first female president of the United Way of King County and eventually chair of the executive committee of the national United Way, then one of the most influential nonprofit positions in the world. Serving on the exec committee with her back in the early seventies were, among others, John Akers, who would later become the CEO and chairman of International Business Machines (IBM), and John Opel, who preceded Akers in both positions.

Mary Gates mentioned her son?s new business to Opel, who by many accounts then relayed this information to other top IBM executives. There?s no definitive record of what got said when to whom, but only a few weeks after Mary Gates got the ball rolling, IBM took a huge chance by contracting with Bill Gates?s fledgling company to develop an operating system for the company?s first personal computer. The success of both the IBM PC and the Microsoft Disc Operating System (or MS-DOS)?and the sweetheart deal that let Microsoft retain rights to its software?is what ultimately made Bill Gates the richest man on the planet.

Full post as published by The Faculty Lounge on September 17, 2009 (boomark / email).