Good morning innovators, change-makers, and entrepreneurs. This newsletter and podcast feature stories about the people – past, present and future – who change the world. They make decisions and take actions enlivened by what I call The Entrepreneur’s Ethic. The Entrepreneur’s Ethic infuses people, organizations and places where the future is created, and the world is made a better place. One of the Entrepreneurs featured in my upcoming book, The Entrepreneur’s Ethic, is John Deere, the historic agricultural entrepreneur. Deere’s fame and fortune resulted from his work innovating the plow over decades, that most ancient of agricultural tools. There are seven parts of The Entrepreneur’s Ethic. Deere’s work exemplifies Ethic 6: Enjoy the Edge. This is the truth-seeking-orientation of entrepreneurship.
Find here an historic case study of John Deere from about 20 years into his entrepreneurial journey. In the late 1850s, Deere decided to get involved in a project to develop what we today call a tractor.
The idea that a machine might pull a plow or another farm implement better than a horse or mule was not altogether original, but a new technology at the time enabled one of the earliest demonstrations of what a tractor might be. John Deere, and others, could see in the 1850s that it would be valuable to have a machine for farm work rather than a horse or mule. But was the technology available to make tractors feasible? It took a long time for all the technical pieces of the puzzle to fall into place and tractors to become effective and affordable machines. John Deere exhibited a great capacity for looking into the fog of uncertainty about the potential for the tractor and navigate how he and his business allocated time and money to it.
How to Get Out of the Elevator and Land That Investment – Marc Randolf
Do Ten Times as Much – Bryan Caplan
Gigs, Jobs, and Smart Machines – Robert F. Graboyes
Three Things I Think (I Think)
While working to start my first business in 1996, E-Markets, I did consulting work for Kodak, the film and camera company. Kodak’s business was growing strongly at the time, and my job was to help them understand how to source a key ingredient used to make film.
I found myself in Kodak’s headquarters in Rochester, New York late in 1996 to make a presentation of project results. The Kodak executives who had commissioned the project were happy with our work, but toward the end of the meeting, my much more experienced project partner asked an interesting question.
“Have you thought about what the impact of digital photography may be on your business?”
I don’t recall exactly what the Kodak executives’ responses were, but it was something like: “We’ve explored a lot about digital photography and even marketed the first commercial digital camera, but we don’t think it will be much more than a niche.”
Digital cameras started to gain traction in 1997 and 1998 and within a couple years began to put a serious dent in Kodak’s film business. Then cell phones started to integrate cameras. Then Apple introduced the iPhone in 2007. In 2010, Kodak declared bankruptcy.
Hang with me here, but I think Kodak in 1996 (and each of us today) can learn some things from how John Deere approached the 1850s tractor project described in this week’s case study.
1. The Value of Asking the Right Questions – I really appreciated the consulting income I made from Kodak in 1996, but looking into ingredient sourcing for making film was asking the wrong question. The right question was about the impact of digital photography on the film business. To be fair, it is very difficult for any business or organization to face existential threats squarely. But if a threat is something that can kill your business, ignoring it only guarantees the outcome. Large language models like ChatGPT may be able to provide good answers to many questions, but they cannot help ask intelligent questions. That requires real intelligence, not artificial.
2. Investing Money – The efficient frontier is a key concept in portfolio theory. The idea is that there is an optimal portfolio that offers the highest expected return for given risk levels. I’m simplifying, but portfolios are often constructed in such a way that something like 2 or 3 percent of assets are allocated to the highest risk investments such as venture capital. I think most large businesses underinvest in higher risk projects, however. One might argue that this underinvestment is what creates opportunities for startup businesses, but I think it's more symptomatic of larger challenges people and organizations have understanding and managing risks.
3. Investing Time – Our most limited resource is time, not money. How do you invest your time? What part of your time portfolio is invested in higher risk/higher potential reward endeavors? What circumstances warrant starting a new project? What circumstances warrant closing down or quitting a project?
Farm to My Table
Alex Hage recently came to my office for a catch-up chat. And he came bearing gifts. He brought me a Sight for the Blind beer four-pack from his Inwood, Iowa brewery, Blind Butcher, in collaboration with Backpocket Brewing. This IPA is really good. Gifts aren’t required to meet me. Really.