Entrepreneurship is vital not just for economic growth and prosperity, but also for social harmony. It creates jobs and gives peoples’ lives more purpose and meaning. The solutions for many of society’s most intractable problems come not from governments or established companies, but from new companies that unleash the creativity and energy of the human race.

Today, we need entrepreneurship more than ever to help mitigate problems related to climate, energy, healthcare, education, and unemployment. Innovation-driven entrepreneurship should be a top priority that will help Ecuador on all fronts.

As Ecuador seeks to build a vibrant entrepreneurial ecosystem, it is critical to keep the following factors in mind.

1. Keep the Main Thing the Main Thing: The single necessary and sufficient condition for an entrepreneurial ecosystem is entrepreneurs. That is the goal. Success means more, higher quality, and connected entrepreneurs. By high quality, I mean entrepreneurs who have built or are building scalable ventures that sell products beyond the local market. They create exports. Keep the focus on this goal and put entrepreneurs at the center of all efforts. 
2. Create Your Own Model: A common mistake is trying to replicate Silicon Valley in other places. There is only one Silicon Valley and it is customized to the specific assets of that region. Other areas have different assets and should not try to compete, but rather to create their own unique ecosystem. Vibrant entrepreneurship hubs have been created in London (FinTech), Boulder, Colorado (lifestyle), and Pittsburgh (food). Ecuador should understand and leverage its special assets to create something new.
3. Global Perspective: Scalable new companies must have an international capability, so they must be aware of international markets. Ecuador is not a big enough market to create large businesses on its own. Understanding these markets and making connections to enter it is essential.  
4. Entrepreneurship Education and Training: Entrepreneurship is a craft that can be taught. Ecuadorian universities and schools are starting to invest and build their capabilities to provide this curriculum. This education should be complemented with external training and experience. Awareness of current best practices worldwide is not a “nice to have,” but rather is an essential tool to scale the new businesses. Fernando Moncayo Castillo was a successful businessman in Ecuador, but it was the training he received at MIT that enabled him to reach the next level to scale Inspectorio into a global power. 
5. Think Long Term: Ecosystems are systems, which means that they are complicated with many different first-order and second-order effects. Any action that is taken will almost certainly have time delays between the time they are implemented and when positive results are realized. It is crucial that a long-term perspective is taken in implementing a systematic solution for it to be sustainable. Impatient entrepreneurial ecosystem builders who think linearly and only appreciate quick wins might feel good in the short term, but find they are not building long-term sustainable benefits. They may even be making the situation worse than before.

Having been an entrepreneur, taught entrepreneurship, and worked with leaders globally to foster entrepreneurship, I’ve seen first-hand the importance of these steps. They are all critical factors in building an innovative-driven entrepreneurial ecosystem in Ecuador.

Bill Aulet is the managing director of the Martin Trust Center for MIT Entrepreneurship at MIT and a professor of practice at the MIT Sloan School of Management. He is the author of Disciplined Entrepreneurship: 24 Steps to a Successful Startup and the Disciplined Entrepreneurship Workbook.  

You never know what in a day will make your day a great one. Recently, I had on my calendar a meeting with Vicky Hamilton from Scotland Can Do Scale Summer School. It is always fun to see Scottish entrepreneurs, especially after this program because they really treasure the workshop and then go out and work hard to put the concepts to work.

Vicky was in Boston as part of a US state department program at the moment called the Young Transatlantic Innovation Leaders Initiative (YTILI). If you know me well, you know I have a deep skepticism of government programs with fancy names like this. But heck, Vicky was great and she was a Strathclyde and Scale alumnus so I was looking forward to seeing her but to be honest, my expectations were not high. It was going to be a better meeting than I anticipated.

Image courtesy of Adam Gordon 

When the meeting with Vicky started, she told me how much better her business was doing now since Scale. “How specifically?” I asked. What followed is a great case study that I will use in future classes and workshops because it is so easy to understand and is so compelling.

To make a long story short, her business was now growing much faster and much more profitably since she started showing more discipline about who her customer was. Her business is a simple product, kneepads with springs in them so that when you have to kneel down on the ground, not only you are less likely to get hurt but you also are much more productive. Here are illustrations of the product.

Recoil Kneepads – www.recoilkneepads.com

It is an unsophisticated product with a seemingly straightforward value proposition. Vicky had launched the company out of a project at Strathclyde University (great entrepreneurship program there) and was immediately getting sales. What more did she need to learn? People were buying her product on Amazon.

What did the Disciplined Entrepreneurship approach do to help? She had been selling to whoever would buy them. The kneepads cost in the neighborhood of $85 for one pair. As mentioned above, one initially favored channel was Amazon because they could sell directly. This could also be Kickstarter or other crowdfunding/sales sites for new products which I always caution people on. They might be good but understand first the risks. To understand that, you have to know well who your customer is.

What happened with Recoil Kneepad? They got a lot of DIY (i.e., Do It Yourself) customers who might get the product to work on a project on the weekend where they bought their other supplies at a place like Home Depot. 

For this customer, the hundred dollar price point was a high one and if they only worked on an occasional project for a few hours on a weekend they would not get as strong a value proposition as a professional tradesperson (e.g., carpenter, tiler, plumber, etc.). A professional tradesperson could get tens of hours in a week of use out of the product. The tradesperson also has more concrete benefits to doing this because they were in a competitive business where things came down to dollars and cents much more so than a DIY customer.

So the willingness and satisfaction of the professional tradesperson was much higher. The DIY customer was Vicky’s Volvo in the Lamborghini and Volvo story I tell to start off my workshops and courses. It was a distraction and you much focus on one beachhead market at the beginning. Vicky bought into this and then started to test it to see if it made sense in the real world beyond the classroom lectures.

Low and behold, the DIY customer put more pressure for a discount and also wrote terrible reviews on Amazon. Terrible reviews are incredibly damaging to a business as Professor Sinan Aral of MIT Sloan has shown in his research. The discounting of pricing also directly and dramatically decreased profit margins.

Another interesting take away that Vicky got from the Scale Summer School and her work at Strathclyde was to watch the cost of customer acquisition (CoCA – Step 19 in the 24 Steps). She saw that if she focused on the tradespeople market, she could drive her CoCA down five times rather than if she staid generic. 

So in summary, when she focused on tradespeople and did not pursue nor accept the DIY customers, she saw her LTV go up (because of less discounting), her CoCA go down, her customer NPS (Net Promoter Score – a standard way to measure customer satisfaction) go up and her joy in the business went up as well.

This was a very simple and easy to understand product.  It shows clearly and specifically why it is a sound business decision to put your focus on a specific market segment (in this case tradespeople) and turn away the metaphorical Volvo (the distracting DIY) market.

Sometimes those great moments in the day come when you don’t expect and having this great case study fall on my lap was one of them. Thanks so much for sharing, Vicky!

Theranos. The now-defunct company creates a visceral reaction with people when you say its name. Try it. Its story has been detailed in the book Bad Blood: Secrets and Lies in a Silicon Valley Startup by Wall Street Journalist John Carreyrou, as well as the HBO documentary movie The Inventor: Out for Blood in Silicon Valley. I would hope none of my students would ever do such a thing, but how do I know?

Reading the book made me feel very comfortable that they would not – at least without some terribly distorted justification. It was simply fraud pure and simple. The technology never worked and it was terribly misrepresented to others that it did. It was the Enron of Silicon Valley.

The movie, however, presents a much more nuanced and scary picture of how to create a distorted mind that could justify what was done. The Theranos “true believers” could say that they had such a noble “raison d’être” (a French term meaning “reason for existence”) that is could justify short-circuiting basic values in the short term. Didn’t Steve Jobs often use the principle of “fake it until you make it”? Thomas Edison did this as well with the light bulb.

While we always teach that a new venture/endeavor should have an inspiring and unifying “raison d’être,” this must be pursued within the boundaries of acceptable values of honesty and integrity.

Often I see Steve Jobs (or Elon Musk, Mark Zuckerberg or others) worshiping as being used entirely incorrectly and without thoughtful justification. While successful, these people are a data set of one (“n=1” as we like to say at MIT). How do you know that is the factor that made them succeed? You don’t for sure when n=1. There are so many different factors at play to disentangle them and figure out which ones were positive and which were negative is practically impossible with a larger data set and certain not with a data set of one.

I remember a coach once told me “sometimes you succeed because of yourself and your habits and sometimes in spite of them.” Great to keep in mind.

Don’t get me wrong. I am impressed with Jobs, Musk, Zuckerberg, Bezos, and others have accomplished but that does not mean everything they have done, do and will do is gospel. I strongly object to the deification of these people and using their behavior to justify bad behavior elsewhere. Everyone has their own style. Each person has strengths and weaknesses.  Decode carefully and chose the strengths but avoid the weaknesses.

My opinion is as follows. I have written and spoken about the incredible importance of culture. I have written about the primary importance of teams.  These two are intertwined. On team and in a healthy culture, you need to have trust. For trust, there must be honesty and integrity.

For one example, the best salesperson you can ever have is your customer. How can a customer really love you in a sustainable way if they don’t trust you? Underlying ethics in entrepreneurship are not optional, they are the foundation and the guard rails to success.

I give tremendous credit to my friend and colleague at Stanford, Tom Byers, for taking this issue head-on. He has been banging the drum on this topic for a while now and he is not done. His fabulous OpEd piece frames the issues well and begins the dialogue in a productive manner, but we are just at the beginning. We look forward to welcoming Tom to MIT this year to discuss this and move the dialogue forward to accelerate the discussion of this crucial topic especially related to entrepreneurship education.

The mission of MIT is to promote the development of knowledge related to science, engineering, and technology for the betterment of the world. There can be no justification in that mission for fraud. Sometimes it really is black and white.

On September 12, 2019, Martin Trust passed away peacefully in Brookline, Massachusetts. While not a surprise, this was still sad in so many ways, but, as he would wish, there was a positive side to this news. In the big picture, you could not ask for any more from 85 years of life than what Marty Trust got out of it and what he gave back in the process.

He was born into very humble beginnings in the New York borough of Brooklyn and earned a spot in the extremely prestigious Cooper Union for the Advancement of Science and Art. The fact that Cooper Union was free was an extremely important (i.e., essential) element of why Marty could attend. This provided the on-ramp for what would become an extraordinary life of advancement and contribution to society.

After Cooper Union, he was accepted into the MIT Sloan School of Management, but having similar financial constraints, he had to find jobs to pay for his tuition. Fortunately one job was becoming a Teaching Assistant where one of his students was Edward Roberts, who became a friend and later a renowned professor at MIT Sloan and with whom he would have a life long relationship.

Marty graduated in 1958 and launched his business career in the apparel industry. At first, he worked for others who valued his understanding of technical issues, but as he learned the business, Marty became a strong generalist with particular expertise in overseas production. Seeing more and more opportunities he eventually launched his own business in 1970 with the humblest of beginnings. When he secured commitments for a large order of clothing but had no facilities to build it, Marty would not be denied and he and his wife, Dena, set about filling enough of the order in their small apartment in Massachusetts so they could get the first payment and bootstrap the business. This incredible start led to the establishment of what became a global power, Mast Industries.

Just a year later, Mast got another break when they received their first order from the Limited Stores, which was led by the visionary and charismatic Les Wexner. Marty and Les hit it off well; this friendship and business partnership would turn out to change the apparel business forever. Les revolutionized the retail experience, but, as astute industry experts would note, his secret weapon was Mast Industries and Marty Trust.

Mast equally if not even more so revolutionized the production of clothing. The new concepts of building a capability in “speed sourcing” and “supply chain” by fostering strategic partnerships in all parts of the world long before “globalization” was initiated proved to be game changers. Now new fashion trends were not only spotted quickly, but could be delivered upon at a speed and price point that were unheard of and at which others could not compete.

In 1978, The Limited Brands officially acquired Mast Industries making the business marriage complete and they have dominated the apparel industry ever since. That is the business side of Marty Trust, but there is so much more.

The thing I remember when meeting Marty for the first time, which might seem strange but is somehow very fitting, was how incredibly soft his hands were. When you met him and shook hands, they were the softest you have ever felt. While shaking your hand, Marty is smiling and looking you in the eyes and saying something in his soft voice that is very kind. He makes you feel great, special, and his equal. He was as welcoming, personal, and authentic as anyone I have ever met, and yet he is a legend for the business he built. You will not get a warmer greeting in your life and yet there was also a sparkle in his eye that was special.

When I meet people who knew Marty and mentioned his name, they would immediately give me the same warm smile that he had when he would greet you the first time. The staff at our center all adored him as you can see from the picture below.

We have such fond memories of his visits to the center when the staff would get so excited to provide him with the latest pins, t-shirts, or coffee cups with the Trust Center logo on it (more on the logo later). Students would swarm around Marty to take selfies with him and he would smile for each one like it was his first time being asked. I remember David Lucchino, who knew Marty from his being part of the Red Sox ownership group, calling him “Marty, Marty, The one man party.” The staff loved that name and it stuck for many years at our center.

I mentioned our logo and this remembrance would not be complete without the story of the development of its design.  Many years later it has not just stood the test of time, but it is recognized around the world. At the time when we created it, this was the first time I got to really work with Marty. Honestly, it was a painful process that took months because Marty insisted we get every detail correct. There were back and forth conference calls week after week when most human beings would have said “enough!” While I was never in business with Marty, this experience with the logo gave me a sense of why he was so successful. His attention to detail (he never forgot a number) and his stamina to keep pushing until it was perfect was beyond extraordinary. It makes sense. If you are going to ship products to millions of people, every detail matters, and he could not only turn that focus on, but he could keep it on for weeks.

As you might have guessed from the picture with the staff above, all our meetings were not only at the Trust Center. Once a year, Marty would invite the staff to the owners’ box at Fenway Park for a game. It was an annual tradition that our overworked people looked forward to the entire year. Often unexpected guests would drop by, like Pedro Martinez on his recognition night and Curt Schilling another year, but the undisputed most fun guest for us was Marty. He was both such a warm host and a mischievous sort that fit in so well with our team and we all loved him. Here he is with his world championship ring in another one of our favorite pictures.

I have already violated the axiom that “less is more” and I best not go on indefinitely about Marty so let me try to wrap up about someone who had so many dimensions that it is impossible to capture in a short tribute.

He believed in entrepreneurship and he did something about it. He believed that we could change the field 10 years ago if we built a center to advance the rigorous teaching of entrepreneurship and then he stood by us. Today the Martin Trust Center for MIT Entrepreneurship has unequivocally made giant strides and it is only just the beginning of what will be a generational journey to bring the field of entrepreneurship education to the next level.

Marty was both patient and impatient in this process. While he always supported us, he also pushed us to increase our velocity and also our ambition. We would not have been able to get started without his generous gift, and we would not have been able to reach the heights we have today without his continued support. Marty has given us the foundation and initial momentum for the center to carry on his work. We are all so proud that what we do changes the lives of thousands of students every year. This is the part of Marty Trust’s legacy that we have been honored to be part of, but there is still so much more.

Marty has been a steadfast supporter, a mentor, a jokester, and most of all a friend to me personally the past 10 years to an extent that I could never have imagined when I started this job. I will miss him beyond words.

I am sure Marty is most proud that he leaves as a legacy his wonderful family, including his magnificent partner and wife of almost 60 years, Dena. His incredibly dedicated and loving daughter, Laura, and her husband Alan are stewards to carry on the good work Marty started and grow it further. His son, David, and three grandchildren are the additional pride and joys of his life that he so treasured as well.

Marty has always seemed so happy to me, but the last time I was with him in his owners’ box at the Red Sox game with one of his grandsons, he was radiant as he said of the grandson (it could have been any of them), “That boy is going to do great things.”

The same will forever be said about you, Marty, in the past and present tense. You have done great things that will live on and continue to positively affect lives. You did not cheat this world and serve as an inspiration for what we can be when we are at our best. RIP our great, great friend Marty Trust.

Every year at this time, I get this extreme exhilaration as well as a big knot in my stomach. Why? delta v Demo Day.

delta v is our capstone program at MIT for the best of the best student entrepreneurs, the most committed, the ones that made the most progress during the school year. We take a subset of them, about 100 participants, at MIT and in NYC at our Startup Studio and push them to the max to help they achieve “escape velocity”. We give them space, stipends (in exchange for their commitment to work full time), structure and status. (For a fuller description of the program go here.)

We throw all our resources at them to make them the best entrepreneurs they can be … and it is VERY intense for three months. At the end of that time period, for their graduation, if they achieve sufficient progress, they are invited to present to the MIT student body in the largest auditorium on campus to great fanfare. In addition to the full auditorium and overflow crowd getting the proceedings beamed in next door (over 1,500 people in total on-site), there is an equal number watching via live stream, this year from 10 different countries. It is an amazing production effort which has hundreds of different failure points. When done right, it is magnificent, but there it is an entrepreneurial endeavor so there are lots of new things and it could clearly go very visibly wrong if one thing were to go wrong.

Still, every year, the team led by Trust Center Executive Director Trish Cotter and Tommy Long (head of operations) blows people’s minds with how well it goes. This year, there were 24 teams in the program, 17 at MIT and 7 in NYC, and 23 made it to the finish line which is an outstanding accomplishment. Building a new company is a very intense experience and you need a team with strong relationships and commitments. Just like in real life, such stress can break relationships and teams which is very normal and does not reflect poorly on anyone. In fact, it means they are being honest.

After last year’s extraordinary delta v 2018 Demo Day, we were so proud but we immediately had to worry about how we could meet the new standard we had set. That is the knot in my stomach. An uncomfortable challenge is actually a good thing and that is what we had. This was no “gimme” or easy task in front of us. I am proud to report that not only did Trish and her team meet the challenge, they exceeded the challenge! The teams’ presentations were amazing and the logistics were flawless. The students were inspired so we now have our next cohort starting and the logistics were flawless.

You don’t have to take my word for it, you can see it for yourself and see what the best of the best of MIT student entrepreneurship looks like in this full uncut livestream:

Once cut, the team videos will be available (probably by Sept 10 th ) directly here.

To say I am proud and excited by what the Trust Center team pulled off and how the student teams performed would be an understatement. The levels of dopamine in my blood from this event are at unsafe levels. I feel like Chris Farley in this video.: ​ Still, I have a knot in my stomach as well about how we are going to top this next year.

Oh well, we need to get back to work on that for next year, starting now…

Bill Aulet was interviewed on August 23, 2019 by Philip Bouchard, Executive Director of TrustedPeer Entrepreneurship Advisory. This interview was condensed and edited for clarity.

Interview questions and highlights

• What are your three primary roles as an entrepreneurship center director?
• Are the approaches to entrepreneurship and innovation maturing to the extent that standards are being set?
• Are ecosystems the next phase of university entrepreneurship?
• What programs would you encourage directors of emerging ecenters to implement?
• What decisions have you made that you would advise other universities to avoid?
• How can universities enable bigger corporations to become more entrepreneurial?
• How can universities collaborate with big companies?
• What is an “innovation hotbed” and how can a large corporation develop one?

Philip Bouchard: As the Managing Director of the Martin Trust Center for MIT Entrepreneurship, what are your three primary roles?

Bill Aulet: First of all, we are educators. We teach students how to fish, not how to catch a fish. We’re not an economic development agency nor are we an investor. We are focused totally on the student and that’s the number one thing that we need to understand. There are other people who are investors. There are economic development agencies, but our job is to teach skills, to teach people how to fish, and that’s how we should get measured.

The second thing is that entrepreneurship is not a science nor is it an art; it’s a craft. As such, we need to teach students how to do something that creates a unique product that no one’s ever created before. Students can be taught their first principles to do that, but they don’t guarantee success. Entrepreneurship must also be taught in an apprenticeship model.

It’s important that we understand our mission, to understand the nature of the task in front of us and to approach it with both a serious element of being evidence-based, looking for data and being rigorous about it. We need to approach entrepreneurship with a sense of humor so that we don’t take ourselves too seriously because this is an area that’s fraught with failures as you’re running your experiments.

In summary:

• First, we’re educators.
• Second, we have to understand what is the nature of entrepreneurship education. It’s a craft. It’s not a science. It’s not an art.
• Third, we need to do that with rigor, but we also need to do it in an environment that allows people to experiment, fail and learn from that.

PB: The languages of Disciplined Entrepreneurship, Lean Startup and Business Model Canvas are broadly accepted. Are the approaches to entrepreneurship and innovation maturing to the extent that standards are being set?

BA: Not as not as much as they should be. I’m concerned that entrepreneurship is not seen as a serious body of knowledge, as a serious field. Currently, what we are seeing is often the term of the month? Is it Lean or is it Crossing the Chasm? Is it this? Is it that? These things are propagated by people who write popular books. They’re not done by serious academics. I don’t mean that in any negative way towards the people who do those things. I just mean it in a sense that, for example, medicine is not going to be taught and practiced off some popular book that comes out. Entrepreneurship has to be driven by an academic, be evidence based, and with rigor that’s reviewed by other people who do that.

While things have improved, we’re a long ways from entrepreneurship being a respected field of study by academics, by practitioners and by the students themselves.

PB: You have said, “The one necessary and sufficient condition for an ecosystem is entrepreneurs. The essence of a healthy ecosystem is better trained entrepreneurs who are more connected.” Are ecosystems the next phase of university entrepreneurship?

BA: That’s a really good question. When we’re teaching entrepreneurship at MIT, when I first started 10 years ago, the persona that we were expected to focus on was the ready-to-go entrepreneur. An example of that persona was Chris Nolte who was going to start a company. That was our target market and that’s what we built our product towards, that is, our classes, our extracurricular and co-curricular programs and our competitions. We’ve done a good job but that does not represent the interests of all the people that we get in our classroom. That represents 10 to 15%.

The biggest portion of people who are curious entrepreneurs, exploratory entrepreneurs who make up 50% of our class. We need to attract those people, to say to them, “This is what entrepreneurship is. Not to become an extra in Silicon Valley the TV show”. Entrepreneurship is a much broader field than that.

We’ve got ready-to-go entrepreneurs and we’ve got curious entrepreneurs. Curious exploratory entrepreneurs are not a steady state category; they’re going to become ready-to-go entrepreneurs or they’re going to become the persona that we call joiners. Joiners want to be entrepreneurs but they’re not ready to be the first person in a company. They don’t want to be a founder. They want to join a company. Someday they may become the founder. That is a legitimate group of people who we consider entrepreneurs. Also, there are corporate entrepreneurs.

But there’s another category that we didn’t expect. We call these people entrepreneurship amplifiers. Amplifiers are people who are not starting companies, but are enabling environments where people can thrive. An example of this persona was Esteban Lipinski. He was not going to start a company; he was going to take over the family business, but he wanted to be able to get people who are going to be corporate entrepreneurs into his organization. He wanted to be able to work externally under the concept of open innovation with entrepreneurs who were out there doing their startup thing. Esteban Lipinski was such an ecosystem person.

We found that a lot of those people moved on to help develop entrepreneurial ecosystems in government, in the private sector, in corporations and elsewhere. “Ecosystems” has now become an incredibly big buzzword. Ecosystem has a lot to do with policy and what corporations do with their risk capital.

All those things are important but sometimes people lose focus. The single necessary and sufficient condition for business is a paying customer. You should always have your customer at the center of your thought process, of what you’re doing and of your programs.

For an ecosystem, it’s all about getting entrepreneurs, getting more of them of higher quality and having them more connected because that’s how you will create a vibrant entrepreneurial environment or ecosystem.

It is a complicated system with all these parts and stakeholders contributing to it. It’s important that we put entrepreneurs at the center and understand that, not only do we need entrepreneurs, but we need to “up level” them, we need to connect them together and we need to create more of them. Then you’ll be able to have a successful entrepreneurial ecosystem.

PB: For directors of emerging entrepreneurship centers, what programs would you encourage them to implement?

BA: If you’re going to start a hospital in a rural area, you don’t try to recreate the entire field of medicine. You should take all the things that already work, bring them in, use those and customize them to your environment.

Figure out what makes you unique in your school, in our region, in your mission as a school entrepreneurship center. Once you have done that, look at all of the material that’s available. As you may know, MIT makes all of our materials open sourced, available to anyone. MIT provides all of the slides, quizzes, syllabus and videos; whatever you’d like. Take those materials and customize them. Then connect back to this educational community to get feedback on what you’re doing.

As we always say to a start-up, “Stealthy is unhealthy.” If you have an idea you should socialize it with other people. Likewise, if you are an educator, if I have something that’s good, I will gain by sharing it with other people, by getting their feedback and by getting their updates. As educators we’re in the field of producing knowledge that will positively impact the world. We’re in the business of helping to create the next generation of entrepreneurs. We shouldn’t let proprietary egos get in the way of this. We’re not in this for the money. We’re in this to help make the world a better place.

Use what’s out there already. But, before you do that, figure out what is it that is unique about your environment. Take what’s already out there and then have the group give you feedback about how they’re using it. The strength of the pack is in the wolf. Each wolf should be strong in the pack, but the strength of the wolf is in the pack. Meaning that the wolf is much stronger if it’s part of a pack.

We, as entrepreneurship educators, should all work together and we will all benefit from that dramatically. We should have our own “entrepreneurship pack” where we all make contributions and we all give back.

PB: Can you share any decisions that the Martin Trust Center has made that you would advise other universities to avoid.

BA: We have made so many mistakes but those mistakes are not something that we dwell on. We have a development program where we constantly rotate our entrepreneurs-in-residence. I’ve been at the Martin Trust Center for 10 years; I’m the backplane but we’re constantly rotating people because we want to stay current. It is not productive for me to speak with young entrepreneurs about what it was like to work with mainframes and enterprise software. We need to have a dynamic crew of people coming through to keep up with what’s going on.

We also have what we call our “honest broker policy”. That is, we should not be an investor. Let investors invest. Educators make poor investors; investors make poor educators. Play your position. If I’m a goalie in soccer then I should be the best goalie in the world. I shouldn’t be trying to score goals at the other end of the field. If you are Lionel Messi and you are a great goal scorer, don’t try to act like you’re a goalie; play your position. Michael Jordan was a great basketball player. When he tried to play baseball, it didn’t work out so well.

Let’s just be the best educators we can; let’s not get into investing at an organizational level or at a personal level. Even though we can make money, it’s not the right thing. So many benefits that accrue to taking that position because a student never has the perception that you’re out for something other than their own self-interest. They understand that you’re worrying about the “fish that they catch” because you have a financial incentive; that you’re not trying to get yourself a job or a job for some friend of yours. Leave that to the students to make all those decisions; don’t leave any ambiguity.

I wrote a piece called The Brilliance at 100%. When you are a 100% educator, there’s no ambiguity as to whether you are 5% of the time as an investor. Let’s be 100% educators. Let’s keep it simple.

PB: You have said, “Many of our problems in society like healthcare, energy and environment are longer-term problems. We as a society need big companies to become more entrepreneurial. The solution is a concerted effort to foster entrepreneurial thinking. It is important for society that we develop this field of corporate entrepreneurship so that bigger corporations can become more entrepreneurial.” How can universities enable bigger corporations to become more entrepreneurial?

BA: This is one of the big challenges. I enjoy startup entrepreneurship more than I enjoy corporate entrepreneurship. I worked at IBM for 11 years. I know what it’s like. There’s a movie called Silicon Cowboys about this and I’m in it. Corporate entrepreneurship is a lot harder than startup entrepreneurship. It’s not as much fun as startup entrepreneurship. When you are a startup entrepreneur, you got this beautiful clean slate and you can do whatever you want with it. When you’re in a corporation, the canvas is already there and you only get to do some small part. It’s just a lot harder and is more of a grind at a political and at a personal level.

It’s essential that we understand that startup entrepreneurship is just going to get the low hanging fruit. To do some of those bigger things like healthcare and energy, we need organizations that have assets and balance sheets. We need to get them to be more innovative. Entrepreneurial behavior and innovation has been much more prevalent in startups than at big companies. We can’t just accept that; we have to get that to change.

To that end, we are teaching people how to have an entrepreneurial mindset to be different. In a big corporation you are taught to optimize, to de-risk, to make things predictable. That’s what management is. What we’re doing is creating new things which requires a different mindset. But it’s not just the mindset, it’s a skill set. We’re teaching them with, for example, the Disciplined Entrepreneurship approach, teaching them finance, teaching them the basics. You’ve got to have the heart to be an entrepreneur, you have to have the head to know what to do with these principles, and you have the hands to be able to do it.

The last “H” should we talk about is the is the home. How do you create these communities where you can work in a much more efficient way than you’re taught in a big corporation? When I worked at IBM, they said, “Bill, here are your resources to work on this PC project. And Phil over there is the best embedded coder of them all. When Phil doesn’t want to work on the project, he doesn’t exist to us anymore.” We learned that we must own all the resources, control them and then execute in an efficient way. That approach doesn’t work anymore today.

Today, what entrepreneurs have learned is how to work with resources beyond their control. Professor Howard Stevenson defined entrepreneurship as a pursuit of opportunities with resources beyond your control. We teach our students how to be different, how to do it from the fundamentals of market segmentation, total addressable market, building a persona, cost of customer acquisition, all those basic fundamental things. Then we have to teach them how to operate in communities with this efficient distributed operational model.

If you teach the four H’s – Heart, Head, Hands and Home – those people can go into big corporations and they can produce what we call “antibodies”. They are people who, in the face of chaos, in the face of change, in the face of adversity, don’t just survive; they see it as an opportunity and they get stronger. That’s what we’re focused on.

I have an article coming out on the goal of entrepreneurship is to produce anti-fragile human beings.

PB: You’ve also said, “Don’t look at big companies as the enemy; look at them as someone you can collaborate with.” How can universities collaborate with big companies?

BA: Corporations want their problems to be at the focus of student projects. There’s a balance here because I could spend all our time working with corporations, but that is only part of the portfolio of things I should do. I should be working on the startup individual. I should be working on the joiner. I should be working in the corporate entrepreneur. I should also be working on the new entrepreneurship amplifier persona that we’ve talked about.

We have a corporate members program where we don’t take an enormous amount of money from them to be members, but we take enough to get them engaged for an ongoing dialogue. That dialogue is around getting exposure to talent, getting exposure to ideas, taking challenges that they might have and putting them in front of students to see how they might work. This is done in classroom projects called action learning and in extra-curricular programs.

Corporate members also like to – it’s very beneficial for them – sponsor competitions because they get a view into students and get to see what a different culture is like than the culture inside their four walls with mahogany and cubicles and an environment built on efficiency and optimization.

PB: In an MIT blog post, you stated that, “While entrepreneurship can be taught, what is more important is the “innovation hotbed” where entrepreneurs and intrapreneurs, those who are entrepreneurs within established large corporations, develop their skills.” What is an “innovation hotbed” and how can a large corporation develop one?

BA: The word “ecosystem” has become one of these cliche words like “disruptive” and “innovation”. I don’t really know what it means.

What I mean by hotbeds is community. When you walk into the Martin Trust Center for MIT Entrepreneurship, it feels different. People are doing all these different things. There are signs up that say, “It’s more fun to be a pirate than to join the Navy.”

A hotbed is a community of things that are happening. Think of it as Greenwich Village in the in the 1960s; think of it as Williamsburg in Brooklyn today. It’s a place where you go, with lots of ideas and people being different and exploring different things. Not only is it acceptable to be different and innovative and trying new things but it’s cherished. That’s what you’re pushed to do. In his book Influence: The Psychology of Persuasion, Robert Chaldini states that people are more motivated, not by the economic side of it, but by peer influences. Having communities allows people to open up.

For example, no one in my family was entrepreneurial. We didn’t even know what the word “entrepreneur” was. I went to college and I didn’t know what it was. It wasn’t till I got an exposure to it in a community. Mitch Kapor was at Lotus Development Corporation when I worked at IBM. All of a sudden a world of possibilities opened up.

The data is clear. Entrepreneurship is not nature; it’s nurture. And nurture is about being put in an environment to see what’s possible. If other people are doing it, then you keep up with them.

The analogy I would use in sports is look at the Dominican Republic which is amazing for baseball players. Lithuania is amazing for basketball players. Is there something genetically in those countries? No, because you can see places like Romania when Nadia Comaneci became a fantastic gymnast, the fact that there was a role model and people talking about gymnastics and doing it with their friends that all of a sudden Romanian gymnasts stormed the world. Was there some special muscle that they had? No! It was about role models.

This idea of the power of influence and the communities – hotbeds – is important for people to understand. That’s what we do at the Martin Trust Center. We provide that home. I talked earlier about the heart, the head, the hand and this home. It is hard to measure but it’s really, really important.

I would encourage all the entrepreneurship instructors out there to understand that you’ve got to create these communities. That’s the part about networking people together. That’s the magic that happens in places like Cambridge, Massachusetts or Silicon Valley or Boulder Colorado right now or Israel. They are talking to other people and then the whole group moves forward

PB: thank you so very much. This is an incredible interview and I look forward to publishing it.

BA: Thank you very much for having me, Philip, and good luck with what you’re doing. It’s a noble cause; we need to connect the entrepreneurship educators together. We all need to be pushing to help each other. As I always say to my good friend Tom Byers, “The enemy isn’t Stanford. The enemy isn’t Harvard. The enemy isn’t Berkeley. The enemy is people who don’t do entrepreneurship.” We’re all part of the same fraternity. We should all help each other. That’s why I love what you’re doing.

A few weeks ago, I had the good fortune to get an early release of the book That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea by Marc Randolph. Marc and I grew up about 2 miles away from each other and went to the same high school. He was a very good guy and while we were friends, by the time high school arrived and after, we traveled in different circles. I had heard he was a co-founder of Netflix but it was hard for me to visualize how that happened and while curious, I certainly did not know the story. He had done all of this on the West Coast. When I heard he was coming out with book about his experience, I was intrigued. When I sat down and read the prerelease copy not only did I like it, I was blown away. It is fantastic.

I found it to be not just honest and super authentic but also intelligent in how it described the right way to think about entrepreneurship (without all the pomposity – that did not go down very well in our neighborhood). Plus, it was extremely readable. Using the power of the narrative and sublimating his ego, Marc was able to tell the story the way it really happened rather than rewriting it to make himself seem like a superhero. As a result, I found it very helpful as an educational book … but it is also so entertaining and fun to read. I kept thinking of the word “binge reading” while I was reading it as I found it hard to put the book down.

There are so many great points and as I went through, I found myself using the Disciplined Entrepreneurship Canvas to check off the problems the team was solving as they took Netflix from an idea to a juggernaut.

Rather than claim that there is a singular insight to making a successful entrepreneurs, it is clear that it is a complex system and getting many things right in balance and at the right time – and not getting the things wrong that will kill you – is the real key to success. It is not simple but it also has to be manageable and you must be systematic about it.

As such, I am going to highlight 24 reasons (consistent with the 24 step theme) of why I found this book so insightful and a must read for entrepreneurs looking to up level their game.

24 Reasons Why I Loved This Book

1. Raison d’être: It was not clear from the book to me what the exact the “raison d’être” or driving vision why the world would be such a better place because of Netflix but there was something special in the air. They got people to work there for less money and work relentlessly through difficult problems. They made it about much more than the money. They got people who bought into their entertainment mission … with both feet in.
2. Focus, Focus, Focus: There are really two underlying themes above all else in this book that come through loud and clear – and should. Focus and culture. They are not different swim lanes from the rest of the business but rather integrate into everything. Focus is how they survived and, in the end, thrived. At one point, Marc refers to focus as the secret weapon of entrepreneurs. I like that. When he talks about the necessity of focus, he writes “At a startup, it hard enough to get a single thing right, much less a whole bunch of things. Focus is imperative. Even when the thing you’re focusing on seems impossible. Especially then.”
3. Culture Eats Strategy for Breakfast: Marc owns from the very beginning that Netflix legendary culture (there are 19 million views of their culture deck on SlideShare) is fundamental to its success (and not necessarily for everyone). He describes how it got started and how their Chief People Officer, Patty McCord, got pulled in to central core of the founding team very early. They also were very thoughtful and intentional about how they made sure their culture could scale. I won’t repeat what I have written elsewhere on this subject but merely say that Dharmesh Shah has it right when he says that enduring companies thoughtfully build two products: (1) A product for its customers, AND (2) A product for its people (i.e. culture).  There are great insights on how this happened by design and then grew via continued commitment.
4. The Original Idea Doesn’t Matter That Much: As I have mentioned in The Most Overrated Thing in Entrepreneurship article, this book brings the point home in spades with some great caveats (see next point). The original idea needed to morph extensively and there were probably lots of people with the same or similar idea to make an online movie store but Netflix jumped in and figured out the details and executed. That is what matters.
5. However, There are Bad Ideas; You Just Don’t Know Until You Test Them: A key mantra of Marc, especially at the end is that “Nobody Knows Anything”. Sometimes this is taken too far for my tastes but the author’s point is that nobody knows if something is a good or bad idea until it is tested. The name of the book is “That Will Never Work” because that is what Marc’s wife told him about the Netflix idea. In fact, it would not have worked as originally envisioned but after experimentation and implementation, it was clear what would NOT work and then adjustments were made to find something that did work. When the experiments and data show that it is not a good idea, then it is a bad idea and this must be acknowledged and appropriate subsequent actions taken.
6. Entrepreneurship is a Team Sport: To succeed you need to have a team with a of diverse team members – common vision, shared values, and complementary skills. It is so interesting to hear how he built the team that not only succeeded but scaled a pretty good distance. Of course, the intense relationship with Marc and Reed is gripping reading as well but it is not the only key relationship at all. This was truly a team with a common vision and complementary skills.
7. Luck is When Opportunity Meets Preparation: Disruption is overused term but Marc and Reed looked for an opportunity where there would be a market dislocation in the future. Online stores, video viewing, DVDs, constant consumption – a convergence of these was destined to happen in the not too distant future. The Netflix team got to work and were fully committed to lead in this space.  They arrived ready before anyone else so when the opportunity finally arrived, because they had their “10,000 hours of preparation” under their belts to seize the moment.
8. Super Valuable Tests Can be Very Simple & Low Cost: One of the turning points in the story is when Marc mailed a CD in the US Postal Service normal mail delivery to see if would be successfully delivered without damage or significant costs. This was a key hypothesis and easy to test. It worked. This shows that simple, low cost tests can be done to validate key assumptions and they are better than debating competitions.
9. What is Your Core? It is great if you can create value for a customer but you have to think multiple moves a head strategically. You don’t want to incur the expense and effort of creating a market only to have someone else (Amazon?) comes in and reap the rewards of this new market and leave you on the sidelines. If Netflix did not think strategically, this would surely have happened. The story shows how they were constantly anticipating and working this intellectual challenge very hard issue even when it ran counter to their short term interests. Their strategic instincts were excellent.
10. What are Your Moats to Develop Your Core? Along the way, to develop their core (a rental business), but that was not enough. There are were a lot of other things they had to excel into for survival. We call these moats but you can also think of them as necessary capabilities which offer short term competitive advantage. Logistics? They needed to be excellent (and they were) but they knew this was not sufficient to beat Amazon and others. It would not be their core. Comprehensive Library? An excellent short term special feature but again, but not a long term defensible core. Reviews? They must also be excellent in this dimension of allowing people to create them and developing a community but it alone would not be a sufficient to be a defensible core.
11. DVD Sales = The Volvo: In my courses and videos, I usually start with the Lamborghini and Volvo story forcing the class to make a choice.  Do you get distracted and take a customer who has cash and wants you to service her Volvo? People often over simplify that lesson and say you should never take the Volvo. Not true. Sometimes you have to take the Volvo to stay alive for another day but you must understand it is temporary and potentially very distracting short term solution. You have to know it is not a long term strategy and wean yourself off this bad drug as soon as possible. You must have a long term strategy and just use the Volvo, very, very carefully if necessary, as a bridge.
12. Window of Opportunity and Triggers: In the DE Workbook, I have a whole chapter on Windows of Opportunities (WoO) and Triggers.  Without knowing those words, Netflix realized that they had a WoO when a consumer bought their DVD hardware.  They smartly designed a trigger (a marketing campaign and give away) within that Window of Opportunity to capture a customer that would be very difficult to reach otherwise. They had to work hard but they were able to partner with the major (at that time) DVD hardware manufacturers and partners – Sony, Toshiba, Panasonic – that got them their initial lift.
13. CoCA/CAC to LTV Ratio: Again, back to the DE Canvas systems model, once they had figured out who their customer was, how they could produce value, especially uniquely in the long term, and they were starting to get traction in the market, the big question is, “do the unit economics work?” As Reed says so bluntly on page 156, “It’s like a taxi driving all the way to another state just to pick up a four-dollar fare.” Wow, that pretty well captures the essence of unbalance unit economics from a misaligned CAC/LTV ratio. They do get it fixed but first you have to define the problem and have people really understand the issue.
14. Relentlessly Focused to Get to Rentals and Not be Satisfied with the Volvo (DVD Sales): To the point above (#11) about have had the strategic insight to know that they would never beat Amazon if they stuck with DVD sales, you still have to admire their execution. They showed extraordinary intestinal fortitude to get out at the right time and in the right way. This required enormous discipline because it is very hard to give up a cash cow today. But they stuck with it.
15. Ultimately a Business Model and Process Innovation Solves the Riddle: It is ironic that the breakthrough for Netflix was not a technology or a marketing innovation, it was a business model and process innovation. They had thought of themselves as a store and that created limitations in their mental models for solutions (e.g., they carried the inventory like a store). When force to deal with this impossible problem of creating a rental base of customer with a customer base that was conditioned by the Blockbuster brick and mortar model, it took something very creative. Essentially, Netflix had to change customer habits – not something easy at all. (See book The Power of Habits by Charles Duhigg.) Ultimately, it was a combination of three elements (see page 206-207): (1) Home Rental Library (with no late fees) of Four DVDs, (2) Serialized Delivery from a Customized List, (3) Subscription Business Model. It was this completely disruptive approach that finally got Netflix to achieve its goal of being a movie rental company for the first time. It is interesting to note that technology is not always the answer and often is not the best answer when it is.
16. Impressed that Marc and Reed Had the Guts, Smarts and Attitude to Dance with Amazon and Blockbuster – And Come Out Stronger: Some of the most interesting parts of the book are the dances Netflix had with Amazon and Blockbuster when they could easily have been crushed and how they came out better afterwards. I have to say, in my businesses, I steered clear of these meetings and I generally advise others to do so as well until they have some leverage. The fearlessness of Marc and Reed to do this, and how they came out stronger afterwards, is inspirational but I am not sure how to duplicate. They are truly anti-fragile people and they made Netflix in that image as well. Kudos to them.
17. You Have to Keep Doing Your PMR (Primary Market Research): Netflix was never satisfied to stand still and they knew the consumer was not going to either. That was what created the opportunity in the market for them to displace the immensely bigger Blockbuster company. It is fascinating to read in the book how they are constantly trying learn what they don’t know (remember “nobody knows anything”) through testing. They systematically studied the consumer behavior (habits) on an ongoing basis by continually running experiments
18. Surprise! Next Day Delivery Slightly Improves Churn but the Real Value is Bringing Down CAC and Driving Market Penetration: On page 219 and 220 there is a discussion of how Netflix experimented to see the effect of next day delivery. They felt it would have a very positive impact on customer retention but when they ran the experiment, they were confused. They did not see an appreciable improvement in reducing churn for their customers. Then they realized that they were looking at the wrong metric for success for this experiment. They saw that while churn was slightly materially affected, new signups were surging! The program was creating happier customers (essentially, a higher NPS – Net Promoter Score) which created much stronger advocates for their offering in the community which brought down CAC.  The geographic concentration and focus on next day delivery allowed them to improve unit economics and dramatically drive up market penetration. Lesson: You have to measure the right things in your experiments and be open to surprises.
19. The Canada Principle: This is directly related to the focus theme mentioned in #2 above that permeates the whole story but it is still worthy of its own point for the clarity it provides with a specific example.  On page 216, expansion into Canada was considered and it seemed like an easy victory to pick up for Netflix. It would be undemanding to expand there from the US and Netflix would have gotten an instant revenue increase of approximately 10%. Being disciplined and analytic, they did not do it for two reasons. First, it would be more complicated upon a clear minded analysis with currency exchanges, languages differences (they speak French in Quebec) and other logistical and cultural issues. Secondly, the opportunity cost was high. To quote Marc, “If we took the amount of effort, manpower and mind-power Canada expansion would require and applied it to other aspects of the business, we’d eventually get a far greater return than 10 percent.” This phrase (“The Canada Principle”) became one of the mantras and an explicit example for the company of keeping focus. It became a touchstone story to create guard rails when other projects had to be killed that were not the “main thing” (i.e., core business). Having a clear illustrative story like this has power much like urban legends do (see book Made to Stick by Chip and Dan Heath) has real value.
20. Scaling is Hard and Often Involves Two Steps Forward and One Step Back:  Even as Netflix began to succeed and move toward an IPO, that failed the first time, you can see the challenges.  With success, there are more resources and new reasons to get distracted. It is very interesting and common how Netflix essentially over expanded and then had to contract again to back to becoming a high performance company again. This is brilliantly described, starting on page 255, where they have to hit the brakes and then ruthlessly start cutting programs and people that were not laser like focused on the core business. Again, the rich and very specific description of this is powerful as it the metaphor of “scraping barnacles off the hull”. Focus is not just essential at the beginning but also to create profitable and sustainable growth.
21. Two Dreams in Conflict: On of the most powerful points in the book is around the personal narrative when Marc talks openly about the pressure for him to step down as CEO.  He has to sublimate his ego and then intellectually realizes there were two dreams at play in this situation. First was the dream of the company and secondly was his dream running it. These two can by full aligned but as the company grows, it is increasing unlikely they will stay full aligned and then there have to be tradeoffs. For great companies, the team dream must come before the individual dream, obviously, but to start a company successfully takes a significant personal ego by a small number of individuals (called founders). You must take it personally to be great. If you don’t, you will not be as successful as someone who does. Ultimately, as Marc explains on page 185-189, he comes to peace with stepping down as the CEO and teaming with Reed Hastings. It all sounds so logical but I can assure you from having been in this situation and seen many others, it is not simply logical. It is extremely emotional. It takes immense personal maturity but it does start with logic.
22. Take the Business Very Seriously, But Don’t Take Yourself Too Seriously: Not only for the decision in item #21 above, but also throughout the book as Marc jokes around with others and is able to honestly assess himself.  It is yet another example of where you see how important it is for an entrepreneur to use humor, self-effacement and general empathy to be successful.
23. Managing People – Freedom and Responsibility: I love specific examples to illustrate fundamental truths and there is a gem on page 195. Marc talks in many places about the principals of effectively managing and motivating people with a fundamental guiding principal of freedom and responsibility. The example is an engineering manager who asks if he can reduce his hours to support a budding relationship – by increasing his remote work time while still managing a group. Rather than paraphrase, here is the excerpt:
    

    “I don’t care where you work, or what hours you work. Work from Mars, for all I care. If all you’re asking me is about when you work and where you do it, that is an easy answer: it makes no difference to me.” He then continued, “But if what your really asking me is whether I’m willing to lower my expectations for you and your group so that you can spend time with your girlfriend? Well that answer is an easy answer too. No.”

    Well said. As a good leader/manager, you give people direction but don’t tell them how to do the job but also set high expectations and communicate their accountability to the group. It is then their job to execute against this. It is your job as the leader to protect, resource appropriately, reward and hold accountable your people.

24. What really is success?: I won’t ruin the book’s final scene, but let me just say that Marc and his son experience success in the most subtle (and New York City) way. It is not about money. Success is something much more. Money is not the way to keep score.

I could go on and on but you get a sense of the value of the book. It is a rare, honest, entertaining and educational look at what getting a high quality startup off the ground is like. Data shows that the more times you do entrepreneurship (like many other things), the better you get. This is a chance for you to get another experience in a few days (if you binge read) and you will be better off for it.

The book is available immediately for pre-order and starts shipping September 17, 2019 at the latest. It will be available in all kinds of formats and languages.

This past week reminded me yet again of a common pattern in new ventures that is one of the most common killers of new ventures even if they get the 24 steps done well. It is what I call the “tree house mentality”.

I call it this because I remember when we were young and growing up, we would build tree houses—which generally were platforms in trees. They could be more elaborate with walls and open windows and maybe even a roof. You had to climb to get to them but once you got to them, you felt like you were in a world you controlled. It was super cool especially when you invited some friends… you felt like a king!

Well despite the fact that this is much more difficult to do today because of societal norms and pace, the metaphor has never left me.

In a tree house, in part because of the IKEA effect, you naturally felt like your tree house was in some ways superior to others. In a short period of time, it seemed like destiny that you were emotionally going to war with others in a different tree house because somehow you were superior. You would talk down about people in another tree house. People in your tree house would agree with each other and reinforce our opinions until those opinions became facts in our minds. It was so great and we felt so righteous.

The problem was when we came down from our tree house and dealt with others. Things were not as clear in others’ minds and they were not prone to be as quickly true believers. Even worse, there were other tree houses in which people were saying bad things about us and looking down on us. They thought we were inferior or evil in some type of unimaginable (to us) way. They would whip themselves into a near frenzy by from repeating unflattering things about us and our world view with no dialogue with us.

As I matured and thought more rationally (with some distance in time) about these possibly even well-meaning but ultimately nefarious situations, I saw the pattern. I came to see that much of what we were doing was the equivalent of “gossiping”.

The “tree house” mentality, whether tree houses were involved or not, was something that felt very good while doing it but I saw the end result was almost always not productive and certainly not inclusive. It was very destructive and hard to stop once it started.

Today, this modality dominates US politics. It is appropriately called “tribalism” by some. This is where the right-wing people watch Fox News. This group speaks badly about people not in their tribe, or proverbially “tree house”. Likewise, for the liberals, who watch MSNBC, it is the counter tree house. They talk about how incorrect the Fox News “facts” are and then how terrible people in the Fox News tribe are.

Confirmation bias and reinforcement of beliefs run rampant. Emotions get higher and positions become more intransigent. People on each side are unwilling to back down or even listen to another point of view.

I want to scream often, “Damn it, get out of your tree houses and come down and talk to each other!!! Find some common ground and build off it.”

Unfortunately, I see this tree house scenario happening in companies all the time and it kills them. It is perfectly understandable as we are all humans at the end of the day. We get frustrated and like to get a sympathetic sounding board for our grievances. Founders or executives are no different and they form some of the most emotional tribes. They start innocuously talking with others to see if their perspective is valid. Soon this grows until you have warring tribes. Intentions may or may not start out well-meaning but soon things escalate to a point of no return.

To be an entrepreneurial leader, you must know the threat of the “tree house” mentality, you must take steps to make sure it does not form and if it does, deal with it constructively and quickly.

Up to this point, I have described what this threat is and how destructive it can be. The steps to make sure it does not happen start at hiring, and then you have to be vigilant frequently thereafter. When I hire someone, I tell them that I will support them very strongly so s/he can do their job and advance their career … until such time as they start acting against the interests of the group. Then I will be their worst nightmare. The interests of the group are paramount.

Even so, grievances do arise and then they do, they must be dealt with in an open and constructive way. If someone on the team feels that something can be done to improve the collective team, then they have full support to raise the issue and it (and they) will be treated with respect in the process. It is important that they not just come forward with a grievance but also they should propose a solution to be discussed.

In fact, the team member who does this should be commended and rewarded for being creative in identifying opportunities for improvement and proposing (and hopefully implementing) new solutions. What will not be rewarded is simply complaining. Everyone must be productive. No whining. Secrecy is also not acceptable. Gossiping and political behavior is also rejected.

This can be hard for humans as this bad behavior comes naturally in social situations but as a leader, you must consistently and openly reject it in yourself and others. It can be uncomfortable at times as people are trying to be friendly to you or think they are providing you with important information but the job of a leader is not to be everyone’s friend. Your job is to be respected which is different. Recognizing tree house mentality, clear messaging that it is unacceptable from the start and then crushing it once it invariably shows it heads despite your best efforts – will generate the respect of the most valuable kind. If not, it will be a cancer that has a good chance to ultimately undermine all your other efforts so it is imperative to be a great entrepreneurial leader.

Get people out of their tree houses and come down to talk with each other and find common ground and constructive solutions.

This past week, a friend sent me a link to a video talking about how Roger Federer sleeps 12 hours per day. Turns out he is not the only athlete at all who does this. Lebron James, Usain Bolt, Steve Nash, Venus William are in the same boat. I know some entrepreneurs would say that “sleep is for the weak”.

Well, I have been on both sides of this debate and I would just like to comment about this a bit now. For athletes, it is clear that sleep allows the body to rejuvenate itself and keeps athletes at peak performance, which is their livelihood but does this apply to entrepreneurs as well? My experience as I have gotten older is that this is definitely true (but don’t jump to a full conclusion until you have read this full blog post).

I find unquestionably that a good night’s sleep (9-10 hours) makes me unquestionably more productive the next day when I have to write or do heavy thinking. If I do not have at least 8 hours of sleep, I see my productivity go way down. As the great basketball coach John Wooden said, never confuse activity with achievement. I can see this very directly as the amount of output (i.e. quality pages written) is not just related to the amount of time I spend necessarily. I have to be of a clear mind and well-rested to get good throughput.

People ask how long it took me to write the Disciplined Entrepreneurship books all the time. First, it took years to accumulate the knowledge necessary but then when it came down to writing the books, which to me is the real question, an interesting situation happened. When I tried to write the books at MIT or close to MIT, it took me much longer. In part, because I was not well-rested and also because there were lots of interruptions. When I came up to our escape house in New Hampshire, I noticed I was productive after I had gotten some exercise and a good night’s sleep. The pages then flowed. In fact, it only took me a summer to get the first book written and it was the same for the second book. But in both cases, I learned that I needed to make sure to get a good night’s sleep, and then even a little extra, to be successful. I am sure I am not the only one who has experienced this but I have directly and I am now a big believer.

Even when I am in back at MIT, I know work to get more sleep and also sometimes lie in bed when I first wake up visualizing the day ahead. Once I spring into action, it is hard to have that clarity of mind and I am frankly less creative in my solutions.

Now all of this would have sounded so weak when I was younger but I am wiser now. It is clear that the unhealthy culture of non-stop working with a minimal amount of sleep has led to what many have talked about with regard to depression in entrepreneurship. Steve Jobs, Elon Musk and Jack Dorsey are known for their 18 hours days, which does not leave enough time for sleep, but what is the real lesson from this? At least two of these people are known for wildly irrational behavior.

In our MIT delta v program this year, Trish Cotter had included for the first time a wellness component run by former student Kathleen Stetson. Kathleen was a full-on entrepreneur experiencing the pressure to “Do More, Faster, All the Time”. This ultimately did not work for her and she spoke out against it. She found that many others were in the same boat. You can’t be productive if you are not feeling healthy. Entrepreneurship is a long journey and not just a sprint.

That being said, in entrepreneurship, it is necessary sometimes to sprint. This need for sleep overall is certainly true in the long term but in the short term, there will be windows of opportunities that you need to capitalize on. One of the huge competitive advantages of startups is their ability to react quickly to new market conditions and information. The clock speed of an entrepreneurial organization is what makes it able to compete so surprisingly effectively with Goliaths like IBM, Microsoft, Google, and Apple. So the answer is not so simple. There should be some stress in an entrepreneurial organization, just like on a high performing sports team. It is all about balance, like so much in entrepreneurship and life.

So understand the benefits of sleep and don’t get mindless sucked into an unhealthy culture, but there will be times in a high performing entrepreneurial organization where you will have to sprint. Those sprints may well define whether your organization succeeds or not, whether it has the full impact it could or not. You should do everything possible to be ready for those situations and identify them, and be all in when they arrive. In between them, you should build up your fuel tank so you are well-rested and ready to sprint. If you are well-rested and productive in between, you will surely be able to be proactive to win as many of these battles as possible before they even start with smart, creative and already implement plans.

In the great book on leadership The Art of War, Sun Tzu said: “The supreme art of war is to subdue the enemy without fighting.” That is our goal and the way to do that is to be clear of mind and productive before the battle starts. Sometimes, however, no matter how smartly you try, you can’t avoid a battle—especially an unanticipated one—and then you better be ready to go all-in and win the battle. Once done, you can and should go back and rest up but you can’t be fighting battles all the time. Be smart but be prepared to sprint when needed.