Reza Satchu: Can You Teach Entrepreneurship? A Discussion of Nature vs. Nurture
The nature vs. nurture debate is far-reaching and multifaceted. The impact of this debate can be seen in everything from childrearing to the education system and, yes, it even has applications in business. The study of the human brain is, in many respects, still in its infancy and regarded as one of the final frontiers of scientific discovery. The core of what makes us who we are is still not fully understood.
This poses a fascinating question for the business world: Can you teach entrepreneurship?
With decades of experience, serial entrepreneur and Harvard Business School professor Reza Satchu is well-equipped to discuss entrepreneurship and dissect the necessary qualities of an entrepreneur – whether innate or learned.
Here is our deep dive with Reza Satchu in order to understand the qualities demanded of entrepreneurs:
Q: You have decades of experience in the business world. What have you noticed with all of your experience? Is entrepreneurship something that can be learned or is it a skill of which some people are gifted and others are not?
Reza Satchu: A great definition of entrepreneurship is the relentless pursuit of opportunity without regard to resources currently controlled.
The first part is pretty obvious, it allows for the relentless, unyielding pursuit of opportunity, which signifies persistence and overcoming obstacles, not giving up, all the things that you’d expect of an entrepreneur. However, the second half is equally important, which is that you need to do all of those things without regard to resources currently controlled. What that means is you need to pursue large, difficult opportunities in the face of having very little information, very little capital, very little resources and you’ve got to suspend disbelief and assume that you’re going to make something happen despite these obstacles.
The most important skill an entrepreneur needs is the ability to make decisions with enormously imperfect and changing information and with resources that are massively constrained. This means that they need to make effective decisions quickly without enough information, without enough relationships, without enough capital, without enough people.
That skill set of making decisions at a time when others are scared to make decisions or at the time when others need more information is critical and probably the most important skill set that an entrepreneur needs to develop.
Q: What about the wait-and-see approach? Do entrepreneurs ever get that luxury?
Reza Satchu: The first thing you have to realize is that not making a decision is a decision. People have this view that by just not making a decision, everything is okay and if they wait, then they can make the decision later with no negative consequences. That framework needs to be changed to, “We’re making decisions every day and no decision is a decision.” And so, the trick that an entrepreneur has to learn is how you make these decisions in an environment where you have very imperfect information and very little resources. And also typically in this environment things are moving very quickly: emerging competitors, affecting opportunity whatever it may be.
Now, in my classroom, we go deep into various frameworks around entrepreneurship: what makes a good business model, how to raise capital, how to attract people, go to market strategies – all sorts of things. But at the core, you have to have the mindset where you are willing to make decisions with imperfect information and you’re willing to suspend this belief that the big companies have just missed things; meaning never underestimate the paralysis of large companies. You have to have the mindset that even though you have not spent decades in a particular industry and even though you do not have millions, it is entirely possible that you can come up with an idea that others who have all those things have not come up with.
Q: Why do people want to become entrepreneurs and why do so few business ideas come to fruition?
Reza Satchu: If you ask people why they want to be entrepreneurs, you’ll get answers like, “Well, I want to make a lot of money,” “I want to have power and prestige,” “I want to have control,” “I don’t want to have a boss.” Those things are fleeting, and they are all not that important in the grand scheme of things.
Entrepreneurship allows you to have the freedom to have a positive impact on people you care about – and allows for you to get there faster than most other fields. It’s a core driver for most entrepreneurs – a fundamental human desire to have freedom and to make a positive impact on the people they care about, and that could be their family, that could be their community, that could be their country, that could be the world. I think that if you look into entrepreneurship through that lens, it can be extremely powerful.
Countries like Canada and the US must compete on innovation – we have to do things better for less. Countries that exhibit a high degree of entrepreneurship have higher per capita incomes, and wealthier societies.
There are many benefits to entrepreneurship. I think ultimately there’s a great sense of responsibility for an entrepreneur because you’re providing a service or product that you care about and you have many employees that depend on the business, as do their families – and you’ve got shareholders.
From my perspective, what entrepreneurship did for me was it accelerated my ability, my learning, and I feel like I was put in situations early in my career where I could make real decisions and they were consequential because I was the entrepreneur – part of the founding team leading the business. And secondly, because it worked out, I have the credibility and the resources to impact the people I care about. And so, I can teach, I can give away money, I can found organizations like NEXT Canada. None of these are driven by money, it is driven by impact– and that’s extremely fulfilling to me.
Q: Can you provide some examples you find notable?
Reza Satchu: Jeff Bezos started Amazon by selling books. I can assure you there were thousands of people working for Barnes & Noble who were being paid lots of money to only think about ways to sell more books. And then, there comes a guy who maybe has read a couple of books, who completely reinvents the way in which the book industry operates. Michael Dell is another example of someone who completely disrupted an existing industry: Computers had been sold forever in a certain manner, through retail stores. As a university student, Dell decided to compete against IBM. He was able to figure out how to reduce the distribution channel, ignore retail completely, and sell direct to the consumer.
Q: Everybody has that little voice of doubt. How do certain people push past it?
Reza Satchu: Ideas are everywhere, but what isn’t is confidence – confidence to think that you might have come up with an interesting and worthwhile idea, despite the fact that others who spent decades thinking about that industry didn’t. You need to trust your instincts and imagine the possibility.
Q: What are some misconceptions about entrepreneurs?
Reza Satchu: People will often say that entrepreneurs love taking risks. And I actually think that is completely flawed. You know, I’ve been an entrepreneur since the age of 29, so I’ve built several businesses and what I’d say is that entrepreneurs are incredibly conscious of risk and they are typically obsessed with reducing uncertainty and risk – meaning entrepreneurs calculate risk at all times. Now, they do make decisions once they’ve made the calculations as opposed to being paralyzed, but there’s this mischaracterization of entrepreneurs that they just jump in with their eyes closed and hope for the best. Most entrepreneurs I know – and I’m speaking from my experience – calculate risks very carefully. Frankly, the role of an entrepreneur is truly to reduce uncertainty over time, to reduce risks over time, in as efficient a manner as possible. They are constantly thinking about ways to reduce uncertainty because they have such limited resources and such limited time that they can’t afford to not be very focused on risks.
Q: Creating a team of people to stand behind you and your business is essential. Is it luck or can it be learned?
Reza Satchu: Let’s just start with one of the most important lessons – to the extent you’re going to have co-founders. You must pick co-founders that you trust, that have highly complementary skills, and have similar long-term objectives. There are more businesses that blow up because of co-founders’ strife than for any other reason. And co-founders’ strife is highest not surprisingly during the inevitable points of challenge that every venture faces. And so, doing work early on with your co-founders to talk about long-term objectives, communication, how are you going to work together in the inevitable points of grievances, all those sorts of things are critically important.
One example is I helped build a fixed income broker-dealer called KGS Alpha with a friend who sat next to me in my section at Harvard Business School. We had a brilliant idea but we couldn’t raise money – it took us over a year. It was very painful, but we made a commitment to each other that we were going to make this work and despite the fact that it took much longer than we thought it would and because of the partnership that we had, we were able to persevere and ultimately raise the money and build a successful business that we sold for a significant amount of money to Bank of Montreal. But the point is this: the opposite is also true – many problems for many businesses have been almost invariably around co-founder issues. So, that’s the first lesson.
The second lesson, I’d say is that the people you find and the culture you set are critically important. And as the founder, the entrepreneur, you play an enormous role in setting the culture. You really have to lead by example, and ultimately you’re going to ask people to do things that are completely irrational. You are going to get someone to leave a well-paying job to come and work for your start-up. You’re going to have customers who used to get their products a certain way for years beforehand to take the risk and become your first customer. You’re going to get investors to invest in something that is completely unproven.
You’re going to have to get people to do unreasonable things – and so it is critically important to wonder why would people do these things. The reason they do it is they have to believe that you are a person of integrity and they have to believe there’s massive optionality – that by joining you there’s some path that is tremendously exciting, whether it be financial, learning, whatever it may be. The fact that you’ve got a vision that’s really exciting – and that you truly believe in – will bring people on board. Qualities like perseverance and passion really matter. I say this to a lot of my students: the people who need to support you first are the people who know you best because they actually trust you and can vouch for your credibility.
Thank you for your time and for sharing this information on the core qualities of entrepreneurs. So, to sum it up: Is entrepreneurship more about nature or more about nurture?
Reza Satchu: The answer appears to be a little of both. Innate qualities can be bolstered by grit – the struggles of life that some people try to discount, but actually show people that they can make it through challenges. Entrepreneurial frameworks can be learned while things like integrity, fortitude, confidence, and a strong work ethic are more a part of someone’s foundational core.
This article has been published in accordance with Socialnomics’ disclosure policy.