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EPISODE 0079 - APR 21, 2020 Small Business

The Soul of an Entrepreneur

with David Sax
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David Sax is the author of the new book The Soul of an Entrepreneur: Work and Life Beyond the Startup Myth. He comes on the show to debunk the Silicon Valley narrative that only a rarefied subset of people can succeed as founders, and shares examples from his book of business owners whose complex relationship with freedom, risk, and success offer a fuller picture of entrepreneurship.

Read David’s recent op-ed in the New York Times, “The Coronavirus Is Showing Us Which Entrepreneurs Matter.”

Transcript

(00:00:00) Anyone You Meet Normcore Remix by Clip Art plays.

Shaun: (00:00:03) REWORK is brought to you by Basecamp. Basecamp is the all-in-one toolkit for working remotely. Right now you’re probably wondering how you’ll quickly transition your team to remote work. People are stressed, work feels scattered, projects are slipping, and it’s tough to see and manage everything. With Basecamp, everything will be organized in one place. Your team will be working together even though they’re physically apart. You’ll be on top of things and a sense of calm will set in.

(00:00:29) Learn more and sign up at Basecamp.com.

David: (00:00:35) And so everybody created these little unicorn factories. The incubators and the accelerators and venture funds and they were pushing, pushing, pushing this. And so if you go to any university and you’re studying entrepreneurship, often this is what they’re teaching you. Is like, how to make a pitch deck, how to raise money. But that’s not reality for most entrepreneurs and that’s a really unhealthy way to sort of build an economy on this one economic model that only works for a very specific type of business.

(00:01:01) Broken By Design by Clip Art plays.

Shaun: (00:01:01) Hello and welcome to REWORK, a podcast about the better way to work and run your business. I’m Shaun Hildner.

Wailin: (00:01:07) And I’m Wailin Wong. We have a COVID-free episode for you today that was recorded, you know, in the before-times. I sit down with my old friend David Sax. He’s a journalist and the author of a new book called The Soul of an Entrepreneur: Work and Life Beyond the Startup Myth. It is out on the day we’re releasing this episode, April 21st, and the themes he explores in his book are right in the REWORK and Basecamp wheelhouse. Here is my conversation with David.

Wailin: (00:01:41) Where I wanted to start this, actually, is, with the epigraph from your dad. Can you read it and then tell me the story behind it?

David: (00:01:48) “If you lose your job and need to start a business, reading Elon Musk’s biography isn’t going to teach you shit.” – Michael Sax.

(00:01:57) He’s always been an entrepreneur, he’s always worked for himself, my dad. And I was telling him, it is the difference between the myth of what an entrepreneur is and that’s symbolized by Elon Musk, the singular brilliant individual. An inventor who comes along with these radical ideas, takes tons of venture capital money and disrupts the world and sort of makes it better and becomes this hero that people worship.

(00:02:21) And he’s like, yeah, that’s not what an entrepreneur is. An entrepreneur is someone like me, a scrapper, a hustler. Someone who goes into business for themselves. Anyone who goes into business for themselves. I never understood why all these people are so drawn to this. Like, if you lose your job, reading Elon Musk’s biography isn’t going to teach you shit.

(00:02:38) And I was like, Dad, I’m writing that down. I’m taking that for the book.

Wailin: (00:02:40) And you go into this a little bit in the book, but can you talk about the kinds of businesses that your dad ran? And actually, I mean, it traces back even further to that to your grandparents, they ran their own businesses.

David: (00:02:51) Who knows what business my grandparents or my great-grandparents ran in the shtetls of eastern Europe in the 19th century, but on my mother’s side they were Jewish immigrants from Germany that were in the tobacco business in Quebec City and then, like many Jews in Montreal and New York and other places, they entered the schmatte business. The garment business. They were tailors and cutters and they started their own companies. And my mother’s father started a tool company, importing hardware and importing stuff from China and Japan and Korea. We’re talking in the 1950s and ‘60s, and that company’s still around today.

(00:03:31) My father always kind of knew he was going to be an entrepreneur. He worked a lot of places but he’d started some other businesses when he was in high school and university and he started out on his own and sort of started a law firm and found clients, built a practice, had a partner, the partner moved to Florida. Did other things and just started investing in some of the deals he was working on. That’s kind of what he’s done. It’s funny, people always say: what does your father do? It’s like, he’s an entrepreneur, he’s a businessman, it’s not this one defined thing. And it’s always been just him and an assistant or a secretary at times. But it’s never grown into this massive company and yet he’s done very well.

(00:04:09) But even my mother who was a travel agent when I was born and then took time off to raise my brother and I, she had a clothing sale with her best friend Paula. Twice a year, they would sell women’s clothes, which they got at wholesale prices from friends of theirs and people in the family in Montreal who had these sort of clothing companies and warehouses. And they would set up mirrors and racks in the basement of our house and they would invite everybody they knew to come over and have discounted sales, cash only. It came to be this thing, oh, Julie and Paula’s clothing sale. This is something that they did together as friends, it was almost more something she could do with her best friend than it was this necessity for survival. She wasn’t trying to become Donna Karan.

Wailin: (00:04:57) So you grew up with entrepreneurs in your family raising you, basically. Did you feel like you internalized some conceptions of what it meant to be an entrepreneur just based on that upbringing? And then did you bring that into the reporting you did here?

David: (00:05:12) Definitely, and I think that’s one of the reasons why I wrote the book. When you grow up in a family of entrepreneurs, and it’s around you, it’s seen as something that’s normal. It’s not this exotic thing that only a rare subset of super-successful geniuses get to do. It’s the everyday. And it always was sort of an expectation of mine that oh yeah, I could always just do something myself. And so in my own life, I’ve never really worked for anyone. I’ve never had a job. When I graduated university, I applied for some jobs in journalism, nobody would hire me because I had very little to no experience aside from the university newspaper.

(00:05:50) And then someone just said, well, why don’t you freelance, and my dad’s like, just go and start your thing. You don’t have to ask permission from someone. I wanted to be a foreign correspondent. And someone was like, just go move somewhere and so I moved to Argentina where we met, where we were both journalists, Wailin, and we were young cub journalists back in the day. And then as soon as I sold one story, I was like, well, I guess this is what I can do. This is a legitimate thing.

(00:06:12) That really did form the concept of the book. It was always this thing that was possible. Entrepreneurs were sort of around me in my family and the people that I knew and friends and friends’ parents and in the community. And yet, the way we were talking about s entrepreneurs over the past 15, 20 years, was this sort of exalted romanticized thing. Oh, an entrepreneur is this special class of brilliant innovator. I was like, hold on, does that mean I’m not an entrepreneur, what does that mean for my father and my mother and my brother, who had just started a business, and my wife who had just started her own business. Do we count as entrepreneurs? And what is the difference between this myth of the grand entrepreneur, the sort of Silicon Valley-style myth, and the everyday entrepreneurs that represent 99% of entrepreneurship out there? What’s the disconnect here?

(00:07:01) Because when a Kardashian makes it to the cover of Forbes as the youngest self-made billionaire ever, what the hell does that have to do with me or my wife who’s working on her own coaching business. I’d like to make $100,000. How can I be a $100,000-aire?

Wailin: (00:07:16) You know who the real entrepreneur in the Kardashian family is? It’s Kris Jenner’s mom, MJ, who, for many years ran a children’s clothing boutique down in La Jolla.

David: (00:07:26) Well, there you go, MJ, good for you. I feel like my parents have bought my children clothes from that boutique in La Jolla.

Wailin: (00:07:33) Oh, really?

David: (00:07:33) Yeah. Yeah. That have now been passed down to many children.

Wailin: (00:07:38) Going back to where we met as journalists in Argentina, not to make this all about us, but, you were there as a freelancer. I was there with an American media company, like a global media company. I was on staff with a salary and benefits and all of that.

David: (00:07:52) You were a wire reporter, right?

Wailin: (00:07:54) Yeah, I was a wire reporter and the reason that’s my origin story for my very brief career as a foreign correspondent is because my risk aversion is so high as to be through the roof. And so it’s like, I do not have the kind of risk profile of a journalist who would just plot down somewhere new and try to hack it as a freelancer, which was the case with, I think, most of my journalist friends down there, yourself included. And so I feel like it kind of really speaks to something about the risk profile of an entrepreneurial person, and this is something you get into a lot in the book. That question of risk. Do you feel like you internalized some notions about risk or developed a higher risk-tolerance as a result of your upbringing and seeing your parents always being on their own?

David: (00:08:42) No entrepreneur is guaranteed success. No entrepreneur is guaranteed to grow or to innovate or do anything else. But anyone who becomes an entrepreneur is guaranteed two things: freedom and risk.

(00:08:53) The freedom to build and work and do things in the way that you can do them because you’re the only one in charge of it. And so if you decide to build a company, if you decide to freelance or work on your own, you are completely free in how you do that and what you choose to work on. But that freedom is inseparable from the risk, and the risk is you are no longer guaranteed anything aside from that freedom. And that’s financially, obviously, but as well it’s other things.

(00:09:25) Colleagues and benefits and all those other structures of the things that a job, which I’ve heard about but I’ve never had, will give you, are the opposite of that risk.

(00:09:37) Every entrepreneur, whether they’re doing something part time like my mother and Paula with their clothing sale that they had twice a year. Or whether you’re starting a company that you fully intend will grow to be a massive corporation, is it going to have thousands of people working for it. You make that choice and you accept that freedom, which is what you’re going for, and you have to accept the risk that comes with it, and it never goes away. You learn to deal with it. You learn to manage it. You learn to manage your anxieties, but that psychological battle of the entrepreneur and their soul, with that risk, is the inherent trade-off you have to make for the benefit of the freedom.

(00:10:17) And I think it’s different for different people. The truth is that I was in a privileged position. I came from a family that supported me. I was pretty well-off. I went to Argentina because I knew that I could get four pesos to the dollar and if I needed to call my parents and they could send me a thousand bucks to cover rent for two, three months or whatever, I was fine.

(00:10:38) Not everybody has that. And so it’s one thing to say, oh, if you really care about it, give it up and do your own thing. There’s a reason why so many of the people of that Silicon Valley start-up myth are young white kids who went to Harvard and Stanford. Mark Zuckerberg went to an elite private school. He was okay. He could sort of say, yeah, go and fail and do it. A lot of people are like that, the founders of Warby Parker. I mean, it’s like, they did an MBA at Stanford, they did an MBA at Harvard, they did an MBA at Wharton.

(00:11:05) Okay, well, already you’re in a top 3% of people so you’ve catapulted now into the top 1%. It’s not so easy for everyone to take that risk. And so I don’t judge people and I completely understand someone who’s like, look, I would love to do this but I can’t. I have a family to support, I don’t have that backing.

(00:11:24) It’s a reason why only 10% of people become entrepreneurs, right? Only 10% of people go to work for themselves because that risk is a hard pill to swallow.

Wailin: (00:11:33) And I do really like what you just brought up around risk being very different depending on who you are. Because that’s also a thread, obviously, that you follow throughout the book since you start with the Silicon Valley conception of an entrepreneur and then you go and look at some other case studies and different kinds of entrepreneurs. And when you compare, let’s say, a Mark Zuckerberg type, or someone that a listener wouldn’t have heard of. A young person who’s at Stanford trying to start a business. That person’s risk is looking really different than say, the Syrian family you profile that’s opening up a restaurant or the African American woman in, is it New Orleans?

David: (00:12:16) Yes.

Wailin: (00:12:16) —starts her own business. For those kinds of folks, if their enterprise fails, they could fall into poverty. A young white guy is probably not going to fall out of the middle class if his app doesn’t get adoption.

David: (00:12:33) Yeah. And so there’s this narrative that the Silicon Valley start-up myth perpetuates. Like, start something and failure is good and failure will teach you and it’s cool to fail and then you’ll fail upward. Which is easy to say if you are graduating from a university where you’re pretty much guaranteed a six-figure job wherever you land. Then if you do this startup and it fails, it’s seen as kind of this notch on your resume and that’ll catapult you into some other opportunity.

(00:13:02) But for the rest of the entrepreneur out there, the 99.9% of them. The bank’s not going to lend to you again. You’ve squandered your savings, you’ve lost your house, your family is having to move somewhere else. You’re dealing with divorce and depression because that risk is putting that real thing on the line. That doesn’t deter people from doing it. The fastest growing group of entrepreneurs in America is minority women, African American women, Latina women, other women of color, Asian American women and Native American women. And for them, no one’s giving them venture capital funding.

(00:13:39) Do you know what percentage of venture capital funding in, I think it was 2018 was the last statistical year, went to women?

Wailin: (00:13:45) It was in single digits, right?

David: (00:13:47) It was like 2.8%, I think, which is the all-time high. So you’ve come a long way, baby. If you add in people of color, if you add in people who didn’t go to one of five universities, that number drops dramatically. For everyone else out there, it’s like, okay, I’m not even thinking of it in those terms, I’m just going to go out and start this business because of other reasons. It’s an idea I have burning. Or because I want to do something for my community. Or I want a lifestyle that fits with the type of work that I want to do. I want to be able to spend more time with my kids. I want to be able to spend more time doing passion. I want to be able to live out my values through my business. There’s this deeper notion there, than just this narrow version of success.

(00:14:30) Anyone You Meet Normcore Remix by Clip Art plays.

Shaun: (00:14:35) After the break, Wailin talks to David about some of the specific businesses he covers in his book. But first, I thought we’d take a little break and have Lexi, a customer support representative and genuine incredible human being here at Basecamp, share her tips for working remotely.

Lexi: (00:14:50) So I have two tips for working from home. One is fuck structure and two is lean into hedonism entirely. So I live in New York, I logistically do not have space to have a work from home office. My office is where I also eat dinner and write and read and watch movies. And I want my home to still feel like a home. I don’t want it to feel like it’s set up to be an office because it’s my house.

(00:15:20) So in terms of structure, I don’t like doing things like getting up at a certain time, keeping a certain routine. It just felt like defeating the purpose of the benefits of getting to work from home sometimes. I’m a total insomniac so if I slept like shit the night before, why get up at six in the morning, go to the gym, shower and put on clothes. Like, no, I’m going to sleep super late and have better rest and then wake up right before my shift starts. And that works for me.

(00:15:50) I am ordinarily a very structured, organized person. I really thrive on rules and boundaries. So this took me a really long time to figure out about myself and working from home. And it’s very different from the rest of my life and personality. But yeah, fuck structure. It’s not going to work for some people and that’s okay. Don’t feel bad if all the tips you see about working from home are just not working for you because everybody’s different.

(00:16:15) And in terms of the hedonism, I just love eating when I’m hungry and then listening to music when I want to listen to music. Turning everything to focus mode or airplane mode when I want silence. I mean, that’s the luxury of getting to work from home is you kind of get to run the show. So, I just eat when I want to eat and then I use my lunch break to watch a TV show or exercise or do whatever else. And that just works for me.

(00:16:43) So be free, friends. Be free.

(00:16:44) Anyone You Meet Normcore Remix by Clip Art plays.

Shaun: (00:16:45) If you would like to share any of your tips and tricks for working from home, you can give us a call and leave a voicemail at (708) 628-7850. Or, even better, you can record a voice memo on your phone and email it to hello@rework.fm.

(00:17:00) And now, back to Wailin’s conversation with David Sax.

Wailin: (00:17:06) For the lifestyle business, you profile a woman who opens a bakery out in Rockaway Beach in New York, and you look at someone who runs an ESOP, an employee owned company as an example of a values-based business. You take us on a wild ride with this family business, this winery in Argentina.

(00:17:26) Of all these different businesses that you kind of zoomed in on as your examples of each of these categories, was there one in particular that really surprised you in terms of what you learned from that person or the conception of entrepreneurship you started out with? The question of entrepreneurship you started out with when you started talking to that person and then where you ended up on the other side?

David: (00:17:46) I think it was the chapter about values which I had a hard time finding the right company or person to profile. Everyone was like, oh, you should talk to my friend, they have a company, they make yoga mats out of recycled water bottles. Or they make water bottles out of recycled yoga mats. And they raised this money on Kickstarter and they give 1 yoga mat for every one they raised to blind children in Africa. Always just Africa. It’s not a specific country in Africa. It’s just Africa as a place, like they heard it from Bono for the first time.

(00:18:15) And I was like, no I want to focus on the opposite of that. The ones I spoke to, and I focused on companies that were, as you mentioned, ESOP. They essentially sell the company to their employees for less money than they would get selling it to outside investors, to competitors, to private equity. And they do it out of just a deep sense of, I built this company, or I bought this company. I’ve built it up. I’m the owner, I’m the entrepreneur, but all the people who are here on the shop floor, the people in the office, the assistants, the secretaries, the guys who are out there welding things. I couldn’t have done this without them. And I want them to have a bit of that freedom. And I’m going to sell them a bit of that risk. They’re going to become owners in this collective sort of way.

(00:18:57) And what was interesting was, some of these guys were Republican. Some of these guys were Democrats. Some of them were socialists. Some of them were evangelical Christians. I mean, I went into one, it was like a cement company office outside of Philly, so in the suburbs of New Jersey, just across the river. There was stacks of bibles that they were giving out to people. Everything was bible quotes everywhere. This is the furthest thing from a Ben & Jerry’s sort of idea or Toms shoes, and yet, when these men were talking about the act of doing this, and what it meant to them to be an entrepreneur, to sort of take this action. Every one of them teared up.

(00:19:37) I was sitting there with these 60, 70-year-old, rolled up the sleeves businessmen that looked like they were out of a Norman Rockwell painting and they were all crying about this action and what it meant to them. We think of entrepreneurship and we see it so often in these conferences and slogans and articles that glorifies it and it’s this cool, sexy thing. And yet, it’s such an inherently personal emotional journey. More than anything economic. It’s really an internal transformation that people do.

(00:20:10) And they feel it so deeply. And again, that’s the type of thing that the glossy articles and profiles don’t really touch on.

Wailin: (00:20:19) This discussion of values is really interesting to me because I feel like what you described, your experience of trying to find someone to profile that’s a values-based business and then just getting all these leads on companies making yoga mats out of water bottles and stuff. It shows how values as a concept has just been coopted by a certain subset of entrepreneurs to mean something, to mean this kind of bland do-gooder-ism.

David: (00:20:48) Heropreneurship is the word that there’s a woman, an academic I interviewed called Daniela Papi-Thornton and she coined that phrase, which is the heroic social entrepreneur, and it’s become a thing. It’s like, oh, you want to be an entrepreneur that does good? You’re a social entrepreneur, and you’re going to start a company whose main purpose is to do good and you’re going to do good not through charity, but through entrepreneurship. And we’re going to celebrate you and put you on these magazines, and you’re going to go speak on these panels at these conferences.

(00:21:16) But there are tons of entrepreneurs out there who are sponsoring little league teams and just treating their people right and doing something that fits with their values, whatever those values may be that doesn’t fit into that neat mold. It isn’t sexy, but that’s the sort of deeper reality.

Wailin: (00:21:34) Right. And I mean, the endless pursuit of wealth and self-enrichment at the expense of everything else is also a value, but no one talks about that as a value.

David: (00:21:42) For sure. And that is, I think, the standard assumption that so much of entrepreneurial rhetoric fits around, and a lot of the Silicon Valley myth perpetuates, right? That Ayn Randian zero-sum game. But you on Entrepreneur Magazine, or Inc, and it’s like, what are the five books every entrepreneur should read? It’s like, Steve Jobs and Ayn Rand. It’s like, oh my god, we’re going to build a generation of psychopaths. And it’s this idea of you’re an entrepreneur and just by building something you’ve done great. Values are cheap and every company I talked to had their values. Often they were printed on the wall. Oh, courage, determination, customer’s always right, grit, blah, blah, blah, blah, blah.

(00:22:27) The reason I had such a hard part finding a company for that, and an entrepreneur for that part of the book, that chapter, was, I would say, okay, well, great. So how do you put those values into practice? How does that actually change day-to-day? What are times when you’ve made difficult decisions and you had to defer to the values and that might have cost you? That might have cost the company? And it was really hard for people to say that.

(00:22:50) That’s why the employee ownership thing was such a concrete example. It’s like, well, they could have sold this company for $20 million to a private equity company but instead I told for 10 to the employees. It’s still a lot of money, but not a lot of people would leave $10 million on the table. As an employee, you really are limited in how you are able to put those values into practice.

(00:23:09) As an entrepreneur, you still have that freedom. The difference is, it gets tested. And it’s not so much it gets tested, oh, times are tough, we have to cut back. We can’t afford this charitable program or whatever. It’s almost tested more when things are good. When there’s that temptation to go public, to take the next round of funding. To grow in ways that may not be in line with the values.

Wailin: (00:23:31) You’ve written a few books. This is… is this your third or your fourth?

David: (00:23:34) Fourth.

Wailin: (00:23:36) Fourth. Okay. And so, you wrote a book about the Jewish deli, and you wrote a book about—

David: (00:23:42) I like the way you said that, by the way. That was very Jewish. The Jewish deli…

Wailin: (00:23:47) Unintentional. And you wrote a book about analog-based businesses and analog objects and their renaissance. Do you feel like you had to write and research those first two books to get to this book? Do you see your books as all being in dialogue with each other and this is kind of the book that grew out of your previous two projects?

David: (00:24:10) I’ve always written about entrepreneurs, I’ve always been interested in entrepreneurs. I never wrote about big companies like you did, and I think what brought me to this book was thinking about those people and thinking about myself and my family. In contrast to what I was seeing out there in the culture, which was like… I talk about at the beginning of the book, walking into the airport one day in Montreal, and I was going to catch a flight and seeing the cover of Maxim, and there’s Heidi Klum topless and over top of her breasts is written: “Heidi Klum, inimitable entrepreneur!” It’s like, what? What is going on. What is this gap between the celebrity status of someone like Elon Musk and the sort of veneration of entrepreneurship as this golden god-like phoenix thing.

(00:24:58) And all these other people that I was writing about who had food trucks and delis and record stores and publishing companies and businesses that were so inherently personal to them and some of them had grown to have $100 million in revenue. They were big companies and yet, it didn’t fit into that. None of those guys were posing topless on the cover of magazines, and thank God for that, especially the Jewish deli owners.

(00:25:24) It was that disconnect, of like, this is a thing I’ve been dancing around for the past decade-plus that I’ve been a journalist. And I’ve always been interested and always been drawn to it and is it time to tackle this head-on? Because the culture seems to be interested in it, but I feel like I’m only getting part of the story.

(00:25:42) Broken By Design by Clip Art plays.

Shaun: (00:25:49) REWORK is produced by Wailin Wong and me, Shaun Hildner. Music for the show is by Clip Art. Special thanks this week to Roslyn Kufuor.

Wailin: (00:25:58) You can find David on Twitter at @saxdavid, that’s S-A-X. His website is saxdavid.com. The Soul of an Entrepreneur is out right now and if your local independent bookstore is still open for business and shipping, please consider ordering it from them. You can also find David’s book at bookshop.org. A website that supports independent bookstores.

Shaun: (00:26:19) Show notes for this episode and every episode are at rework.fm. We’re on Twitter at @reworkpodcast and we’re still collecting your work from home stories. Record a voice memo and send it to us at hello@rework.fm, or leave us a voice mail at (708) 628-7850.

(00:26:38) REWORK is brought to you by Basecamp. Basecamp is the all-in-one toolkit for working remotely. Because of COVID-19, your company is likely scrambling to figure out how to transition to remote work. It may feel daunting but Basecamp is here to help. We built Basecamp to run our entire company and we’ve been working remotely for 20 years. We know what it takes, we do it every day and we built those learnings into Basecamp. Check it out for yourself at Basecamp.com.

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