Should you be humble to succeed as an entrepreneur?
There is a company called Segway. It was started by an inventor who is considered to be a genius because of the wide variety of successful products he has developed. The investors in Segway were considered to be the premier firms in the venture capital industry. They invested, and lost, about $160 million in the deal (MercuryNews.com, Jan 16, 2010). Why? From what I have read, the investors thought that the world would adopt the Segway as the way to travel in urban areas. Cities were even considering changing zoning laws to give greater access to all the Segway users who never materialized. The hype during the launch was tremendous. But the world did not change its habits. It did what it has always done. When the perceived benefits of a switch did not outweigh the huge costs of buying, they did not buy. There have been comments about how some of the insiders thought that the rest of us were not smart because we did not buy the Segway and change our cities. Maybe we are not. But they are the ones who lost $160 million.
Contrast this with the case of Horst Rechelbacher, the founder of Aveda, and one of the entrepreneurs profiled in my book, Bootstrap to Billions: Proven Rules from Entrepreneurs who Built Great Companies from Scratch. Horst was a champion hair designer even as a teenager in Austria. When he came to the U.S. in his early 20s, his first job was as a hair designer in Minneapolis. He quickly gained a following and one of his banker-customers offered to finance his salon. Horst started the salon, hired designers, trained and paid them while they were being trained, and expected his business to soar. Instead, after he had trained them, most of his designers left to join other salons. He tried the process again with a new batch, and the same thing happened. Horst saw reality. He decided to sell off his salons and opened a school to train hair designers. He then contacted the salon owners who had stolen his designers and asked them to send their new recruits to his new school. They did and he showed a profit from day one in his new school. He then expanded to add schools, beauty products, and opened retail stores. This simple decision to close his salons and open a school was worth over $300 million – the amount that Horst received when he sold Aveda to Estee Lauder. So have the humility to see the world as it is, not as you wish it to be.
Why is this difficult? Many entrepreneurs think that they know more than their customers. Have the humility to know that they are spending their own money, and don’t have to follow your thinking – even if you have a high IQ and have been touted as a genius in the press.
An even more dangerous time to lose your humility is when you have reached the first rung of success and own a successful business. After Earl Bakken had developed the heart pacemaker and Medtronic was on its way to glory, they still kept track of all the other developments in the field. They found others such as the Chardack-Greatbatch advanced battery that extended the life of the pacemaker and licensed the technology. This caused the next growth spurt for Medtronic. They did not have the arrogance of many large corporations that think that all the world’s great brains reside in their company and avoid acquiring or licensing technologies developed outside. An article in Fast Company (April 2007, p. 99) notes that “Merck has to go outside for help because it can no longer claim all the best scientific brains, or all the answers.” Wow, note the hubris in this sentiment. This is also known as the “Not Invented Here” syndrome. Medtronic, to this day, continues this culture of monitoring technologies developed externally and acquires or licenses them as needed, in addition to using the technologies developed at their world-class labs.
It is tough to be humble when you have a few hundred thousand, or billions, in the bank. That is precisely when you do need to be humble. Look at Toyota. According to news articles, their reputation for quality went to their heads and they were immersed in their own arrogance.
Humility is not just its own reward. It is also a tremendous business asset. So fear arrogance. For entrepreneurs, the choices are not fear or greed as they are for investors. They are fear or arrogance.