Could many wealthy entrepreneurs repeat their success? How much luck is involved?

Great Debates
1

Whether this belongs in GD, IMHO or even GQ, I don’t know, since I have no idea what sort of answers I’ll get or what data there is to support them. GD makes for the most interesting threads, I think, so let’s hope it fits in here nicely.

As a bit of backstory, here in the UK we have our own version of The Apprentice, but instead of Donald Trump we have Lord Sugar, previously known as Sir Alan Sugar. He presents himself as a successful entrepreneur with an almost godlike understanding of business. I’m not sure about how Donald Trump is presented in the original version - is it similar?

Although I know a lot of this is theatre, what little I know about Lord Sugar and Amstrad especially seems to suggest that he actually isn’t very good at business at all. But he still made millions in the first place.

This is just an example, and by no means the only time I’ve seen successful entrepreneurs touted as geniuses of business. This thread was actually inspired by the thread on Ayn Rand. I haven’t actually read Atlas Shrugged but I read the whole thread with interest and got the impression the book presents entrepreneurs as highly competent people quite capable of reproducing their success.

So, could many wealthy entrepreneurs repeat their success, if forced to start from scratch again? How many remain successful because of their abilities, and how many are simply able to stay rich because they’re already rich?

2

You should read The Black Swan which covers this. Silicon Valley is full of people who made a mint with their first company and crash and burn with their second. Sure, you hear more about those few who do it twice. And you seldom here about the vast majority who don’t even do it once.

I don’t think it is totally luck - successful entrepreneurs have to avoid making mistakes. But many are bad at running companies day to day where luck is much less involved.

3

There is always ‘luck’ involved. How much luck varies. A great businessman should only need a little bit of luck, some successes are almost all luck. If the success is rapid it’s likely that the luck level is high.

4

I’ve wondered about this. Arnold Schwarzenegger has succeeded in several areas. He succeeded in bodybuilding, real estate, business, film and politics. However many of those areas involve skill in marketing. But the fact that he reached the top of one area, then went into a different area, then the other, etc. says a lot about his life skills. I’m sure there are others like him who are essentially polymaths at business, but he succeeded in 5 different fields. Six if you count getting laid. Again, marketing.

However I really don’t know how much is luck. Hasn’t Malcolm Gladwell written about the fact that much of the successful entrepreneurs we hold in high esteem had a mix of luck (being born at the right time in the right location) behind their success.

5

I would guess that entrepreneurship is a lot like poker. Poker is a game that has significant amount of luck involved, but is clearly also a game of skill such that in a given tournament luck plays the largest role and the chance of the most skilled player winning is relatively low, but over a sufficiently large series of tournaments, the more skill players will tend to perform best.

We may not see a professional poker player win the WSoP Main Event again, at least not in the near future, yet the amateurs that win become famous and well known and cannot repeat, but the professionals often get deep into that tournament and often get deep into or win other smaller WSoP events. And I think that’s where we would see a lot of entrepreneurs. Chances are, most of the biggest and most famous ones are just overwhelmingly lucky, they may or may not have some skill, but so many of them were just in the right place in the right time.

Take Microsoft for instance, if they hadn’t gotten the break they did, I seriously doubt the founders would have become billionaires. And there’s tons of other supposedly revolutionary ideas that were either just the one that got big or were only slightly ahead of competitors or whatever. Consider other technologies like search engines or social media. There really wasn’t anything overwhelmingly better about Facebook than many of it’s competitors, but it ended up getting to the critical mass that made it popular. Even if it was a better product, it still takes a certain amount of good fortune in the market.

6

Yeah, but success in one area pretty much led to him being successful in another. That’s more cumulative advantage more than skill in many cases. One thing about being successful is that you get offered opportunities, and come into contact with other talented people and good ideas. Arnold just happened to be in body building when people seemed to care about such a thing, and when it could translate into a movie career. Years later, that path opened up for WWE wrestlers, and now, it’s probably MMA fighters. Can you even name a top bodybuilder nowadays? But either way, Arnold is a bad example because he is essentially a brand/product that is marketed and defined by other people.

Take an even more successful guy like Magic Johnson. He is (by most accounts) a hard working guy who has been successful in a numerous areas, but it’s largely been because he was a great basketball player, so people want to trust and work with him. It seems like it’s more luck, and money attracting money.

Gladwell was mostly talking about extreme outliers like Bill Gates and Rockefeller.

7

Microsoft (Bill Gates) succeeded largely because its then competitors (Xerox and Apple) failed to patent a lot of key inventions. Ford succeeded because of an unwavering commitment to cut costs-that startegy nearly sank Ford in later years.
Why did Facebook win over Myspace? Good luck and timing.

8

  1. No.

  2. A lot.

9

He was also lucky enough to make his foray into politics at a time of extreme upheaval, when a non-politician with a name could do the best. And notice the streak ended - he is out of politics for good, and back to movies seemingly not as big as the ones he was in when he entered politics. If he tried to run for Senator, he’d get trounced.

10

Part of being successful is knowing when to stop, rather than continuing to pursue something that is no longer profitable. By that sentiment, Arnold bowing out of politics when he did is just as much a strategic move as going into it as he did.

11

He didn’t " know when to stop", he wasn’t asked/allowed to continue. Big difference.

12

Not even close.

13

Yes, they do better than others. “Hypothesis 2a, which argues that more talented entrepreneurs are more likely to found high performing firms, controlling for experience. We find significant (β=0.842, p<0.001) and positive support, and thus confirm that talent is also likely to improve firm performance.”

“Our core contribution is to highlight the importance of entrepreneurial talent for venture performance. Specifically, we disentangle the effects of talent and experience. We find that both are germane, and that it is important to theorize about the role the context plays in models of venture performance”

14

Elon Musk succeeded with Paypal. Then he started Tesla, and so far has succeeded where many other firms failed. Then he started SpaceX, which has to be the most successful private space company ever.

Steve Jobs helped start Apple. Apple was very successful until he was kicked out. Then it started to tank. In the meantime, he started Pixar, one of the great success stories in movie history. He also started NeXT computers, which, while you couldn’t call a success, did not fail spectacularly and much of its technology made its way into other products. it also earned him a lot of money.

Then he went back to Apple and saved it from near bankruptcy. Then he re-invented the firm with the iPod, then the iPhone and iPad.

Richard Branson made his first money with a magazine aimed at students. Then he founded Virgin Records. He made a fortune with that, then opened Virgin Atlantic Airways - moving from publishing to music to starting a new airline - the vast majority of which fail. He succeeded. He then created Virgin Mobile, a successful phone company. Then he financed the first successful private manned space launch and formed Virgin Galactic, which is on track to become the first private manned spaceflight company. In the meantime he’s the owner of several world records in aviation.

Evan Williams created Blogger, then sold it for millions and ‘retired’. He then came back later with a little web site called "Twitter’. You may have heard of it.

Henry Kaiser started at a young age with a successful road paving company. Then he formed a new start-up making cars. Then he created a shipping company. Bored with all that, he veered of into health care, pioneering the concept of the HMO. Along the way he also started a steel business.

Thomas Edison formed General Electric, but he was also involved in many other successful ventures.

Andy Bectolsheim formed Sun Microsystems, then Granite Systems (which he sold for $220 million), then a company called Kealia, which was bought by his old company Sun, then Arista Networks - all successful.

Wayne Huizenga created Blockbuster Video, turning it into a billion dollar corporation. He also created another startup, Waste Management, which also became a multi-billion dollar company. A third startup, AutoNation, also became a billion dollar company. He’s now 74, and has yet another startup - this time a cleaning company.

While luck certainly plays a part in everything we do, successful entrepreneurs do things and behave in ways that maximize their chance for success. Harvard Business School has studied serial entrepreneurs, and he’s an article about what they found: Why some startups succeed and others fail.

15

Maybe but there’s also a degree of people started getting into bodybuilding because Arnold was in it and marketing it well. And was hella cool in Pumping Iron

16

J.K. Rowling wrote her latest book “The Cuckoo’s Calling” under a pseudonym because she wanted to publish a book without the expectations, pre-acclaim and marketing frenzy that comes with being the author of Harry Potter. Even though the books were critically very well received, they sold rather poorly until the Sunday Times outed her as the author, after which sales went up 41,000%. No, that number is not hyperbolic.

ETA: I forgot to mention how that relates to the OP in my mind: even though she is a very good author and the books were well-received, she could not replicate her previous success with Harry Potter. So that’s one data point for Yes, there’s a lot of luck involved.

17

There was actually just an article about this exact subject here. It’s short and very interesting:

http://www.bloomberg.com/news/2013-07-19/j-k-rowling-and-the-chamber-of-literary-fame.html

18

Thanks for all the replies to quite a vague question. There’s lots of interesting stuff here, although some things mentioned appear to be examples of an entrepreneur succeeding using their previously-earned money, rather than starting from scratch again. I imagine that’s a lot easier.

19

Schwarzenegger already was a self-made millionaire by the age of 30 thanks to a string of successful business ventures, before his Hollywood career took off. Not bad for an immigrant who barely even spoke English when he moved to the US at age 21.

So even if you consider the bodybuilding, the movies and the political career to count only as a single success because they all build on each other, I think you still need to give him credit for at least two independent “success streaks” in very different fields.

20

Not to mention that there are two sets of skills involved here. One set is the, often, creative and high-energy skill set to create something, and another set is the, often, experience and patience to actually run a successful business long term.

Some people have one set, some people have both sets, and some people have neither. And some people may start out with only one skill set, but manage to pick up the other skill set.