Why would anyone want to become an entrepreneur? Is it for the opportunity to acquire wealth? Is it for the fame and recognition from one’s peers and society? Such are the reasons often attributed to why someone would want to become an entrepreneur. Some entrepreneurs do achieve them, even though the majority does not. Here are some sobering statistics.
“20% of small businesses fail in their first year, 30% of small businesses fail in their second year, and 50% of small businesses fail after five years in business. Finally, 70% of small business owners fail by their 10th year in business.”
(https://www.fundera.com/blog/what-percentage-of-small-businesses-fail)
Also, while your family and friends may admire your efforts, in today’s world, few entrepreneurs are admired by society for succeeding in business. Successful entrepreneurs are generally viewed as amoral if not in fact immoral; hardly the kind of accolade to motivate one to become an entrepreneur.
There a number of reasons espoused in society today on both ends of the political spectrum for why someone might want to become an entrepreneur.On the Left, Liberal, Progressive end, becoming an entrepreneur is considered the best way of contributing the entrepreneur’s creative, productive capacities to serve society. They espouse such ideas as the triple bottom line, where the purpose of business is to serve People, Planet and then Profits; similarly referred to as Environmental, Social, Governance (ESG). On the Right, Conservative end, becoming an entrepreneur is considered to have “utility”, because it has been proven to produce the most for society. They claim business may not be moral, but at least it is productive; it has “utility”. What both arguments share is their common premise that to become an entrepreneur means to serve society as an end.
An Objectivist entrepreneur rejects such reasoning from both ends of the political spectrum. The entrepreneur’s moral justification is not based on serving society. Service to others is not their end goal. It is merely a means to an end; that end being the pursuit of their rational self-interest. As Adam Smith stated:
“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”
Adam Smith – The Wealth of Nations
So then why become an entrepreneur? What’s the incentive? What’s the motivation? The economists, Michael Jensen and William Meckling defined agency theory (i.e. incentive) to mean people work in accordance with how you pay them. Yet Fredrick Herzberg defined two-factor motivation theory to mean that people work in accordance with what motivates them. Both may be true, but they are not the same thing. And the distinction between them is important to understand.
Provide enough incentive and someone will do something even if they are not motivated to do so. But if it motivates them they will do the same thing even if there is less incentive. Yes, it is a fair statement that people work in accordance with how much they are paid. In short, money is an incentive for becoming an entrepreneur. However, it is not incentive, but what motivates an entrepreneur that must be the primary reason to become an entrepreneur. Ayn Rand recognized this important distinction when she states:
“Money is only a tool. It will take you where you wish, but it will not replace you as the driver.”
Ayn Rand
More surprisingly, most successful entrepreneurs that achieve fame and fortune never pursued them directly or initially even anticipated achieving them. A biographer of the inventor Nicolas Tesla stated “Tesla was never one to chase recognition — he was after the pure thrill of discovery and creation.” Even today, the current CEO of Microsoft, Satya Nadella states “I view Microsoft as a platform for me to be able to pursue my own passions,”
It was similar for Bill Gates, the founder of Microsoft. In the late 1970’s he was motivated to create software for computers that would someday be affordable by everyone. As Bill states “When Paul Allen and I started Microsoft ….. we had big dreams about software. We had dreams about the impact it could have.” This was the source of his motivation. And even though he is one of the wealthiest people in the world, as pertains to incentive he says, “Money has no utility to me beyond a certain point.”
Nor did Steve Jobs, of Apple fame, create products for customers. He never did market research to determine what customers wanted. He is quoted as saying “It’s not the customer’s job to know what they want.” Steve Jobs’ motivations were entirely personal. He had customers so he could create in his words, “good products”; confident “as a consequence of that people will like them.” It was the creation of the products themselves that motivated him, not the money, even though he became a billionaire.
Additional evidence that entrepreneurship is more about exercising one’s creative skills for the joy of it comes from serial entrepreneurs. Many entrepreneurs who have created successful businesses sell them only to start yet another one. Clearly it is not the money that motivates them as most of them have already made all the money they need. Many people in society have a hard time relating to this because, unfortunately, many view their work as a necessary burden, not a purposeful passion in life. For them work is in fact only about the money. For the serial entrepreneur it is not. It is about their personal desire to continue to innovate and create, either directly in a new company of their own, or indirectly through mentoring, advising or investing in other entrepreneur’s companies. As serial entrepreneur Jefferson Han states “I want to be a serial entrepreneur: Incubate an idea, get it to a good state, and make that an enabler to get to the next state. It’s every researcher’s fantasy.”
But all of this must be especially true for new entrepreneurs involved with a start-up enterprise. Motivation must be the primary reason to become an entrepreneur, as financial resources are usually limited and long term financial gain is uncertain. Just as money is only an incentive for a serial entrepreneur; it can only be an incentive for a new entrepreneur, not what motivates them. For as Steve Jobs also said, “If you don’t really love it, you will give up.”
An entrepreneur that places incentive before motivation places the cart before the horse, effect before cause, wealth before productive achievement. This is why productivity is one of the seven Objectivist virtues and why Ayn Rand includes it in her succinct definition of Objectivism.
“My philosophy, in essence, is the concept of man as a heroic being, with his own happiness as the moral purpose of his life, with productive achievement his noblest activity, and reason as his only absolute..”
Ayn Rand
An Objectivist entrepreneur is motivated by productive achievement. Money is an incentive and a tool, but not the source of their motivation, not their primary reason to become an entrepreneur. They realize that wealth is not acquired but produced. They do not seek wealth directly, but rather the means of producing it, knowing if they succeed wealth will seek out and find them.
For an Objectivist entrepreneur the reason to become an entrepreneur stems from a motivation to pursue an idea of their own for their own purposes. It is the self-actualizing and self-realization of their desires and creative ambitions to produce something of value, which itself is both self-rewarding and self-fulfilling. It is execution of their creative abilities toward a purposeful goal that is the source of their motivation. They build their self-esteem not based on the appraisal of others but by the appraisal they make of them self. With their “happiness as the moral purpose of his life”, whether fame and fortune follows, the Objectivist entrepreneur has already succeeded, if like Tesla, they are pursuing their own individual creative passions for the pure joy of it. For them the journey really is the reward.