September 13, 2009    Business

What Is The Point of Building A Business?

Why would you start and run your own business? You might say, “Money. What else could it be?” Well, that is the common assumption but this isn’t true for everyone, and depending on your answer, the path you take may be quite different. It sounds like common sense, but I see some very successful business people make bad decisions because they didn’t ask this question.

Creativity and Public Company Don’t Mesh

I learned only recently what happened to Ben & Jerry’s. They faced a hostile takeover from Unilever, a multi-national corporation who owns many well-known food brands, so Ben Cohen tried to take the company back to private ownership but his attempt failed. Ben & Jerry is now just another company that turned goodwill into a marketable commodity. Ben and Jerry should not have taken their company public in the first place.

Once you take your company public, it has to become all about money. You are legally obligated to make decisions based solely on the bottom line. Personally, I like money but not so much to the point I would set aside my creative needs. I want my business to be a creative outlet that supports me financially.

Public corporations do not concern themselves with providing creative outlets. That’s why most creative businesses are not fit to go public. It’s a fundamentally bad match. For instance, most great chefs are not interested in building public corporations, because as soon as they go public, they would have to turn their restaurants into a national franchise.

One notable exception is Apple. Apple is obviously a creative outlet for Steve Jobs, but he took his company public. When he got pushed out of Apple in 1985, he probably regretted doing so. Many financial advisers don’t like Apple because it relies too much on Steve Jobs. In other words, Apple is too personal for it to be a proper public company.

Richard Branson took his company (Virgin) public, and soon after, he realized his mistake and took it back. He obviously knows how to have fun through his business ventures. I suspect that taking his company public made it more difficult for him to have fun, because his shareholders don’t care about fun; they just care about the bottom line.

For the same reason, George Lucas would probably never take his company, Lucasfilm, public. From one of his interviews, I got a sense that he sees money as a tool for his creativity, not the other way around. Beyond allowing him to do what he wants to do, I don’t think his business has any other purpose for him. Despite his company’s enormous success, I don’t think it would make a good subject of analysis for MBA students.

Creativity, aesthetics, religion, spirituality, humanism, happiness, social welfare; these are personal values. Although many people might share the same values, ultimately it is impossible and impractical to define them in a manner that can be clearly communicated to the public. If the ultimate purpose of your business is one of these personal values, then taking it public would be a mistake, and in some sense irresponsible because, with investors’ money, you are trying to finance your ulterior motive that is deeply personal in nature.

Unless the investors are your parents/relatives, most investors are just looking to make a lot of money in exchange for taking a big risk. So, they don’t care (nor should they care) about how creatively fulfilling your business is. It’s common sense. It’s too good to be true; why would some stranger give me a lot money in order to pursue something creatively fulfilling for me? If doing something creatively/spiritually/emotionally fulfilling is important to me, I shouldn’t expect anyone to invest in my business. “Bootstrapping” would be the proper way to go.

That Intangible Thing Beyond Money

If your objective in life is to be happy, money certainly isn’t the most effective tool. To be sure, money does secure a certain level of happiness, but as you make more money, you reach a point of diminishing return. Beyond it, you must seek something else. What that “something else” is, is different for everyone. This is the process of self-discovery. Without pursuing some degree of self-discovery, we become lost and confused.

I reached the point of diminishing return at around $40,000 in the 1990s. This is when I was single with no kid. Once I started making 40K, money became invisible to me because it was more than I could spend. I stopped checking my bank balance because I knew it was only going up. Also, concepts like bonus and pay raise lost meaning for me. It was only after I had a child that making money received a renewed meaning, which also made it more fun to make money (because there was a real point in making more money.). It’s fun because it allows me to shift my attention away from the painful questions about myself, because I can put off the process of self-discovery (probably until my daughter becomes independent.). I want to strike a good balance where I’m not just lost in the game of making money. I need to also think about what I’m getting from my business creatively and as a person. In short: Am I growing as a person at the same rate as my bank account is growing? (Well, my bank account ain’t growing at this point in time.)

I’m not trying to diminish the importance of making money. Money is often underrated by those who see it as evil or dirty. Money can function as a validation of your contribution to your society. Granted, it’s not accurate by any means, but if you are not making any money from what you are doing—that is, if nobody is willing to pay for what you are offering—there is a good chance that you are not contributing anything meaningful to your community. This is why we all wish to make money from anything we pursue seriously. Ultimately it’s not the money we are yearning for; it’s the validation that we are not just masturbating.

This topic is relevant to the current debate on our health care system, particularly on “public option.” The argument against health insurance as a business is that profit shouldn’t be the ultimate objective for health insurance. Money is a very simple concept to grasp for most people. It’s a tangible objective, so it’s easy to measure the progress, identify problems/solutions, compare results, motivate people, and unite people around it. On the other hand, things like happiness, contentment, welfare, and creative fulfillment are nearly impossible to measure. So, building and maintaining an organization around them is very difficult, and in most cases they fail, especially in the US where everyone is conditioned to see everything in terms of money. Success of such an organization would largely depend on the ability, the character, and the talent of its leader, which is too unpredictable and unsustainable for public corporations. From my point of view, ideally speaking, health insurance organizations should be non-profits run by leaders who are able to communicate their personal values and get others to organize around them.


“Smartups” by Rob Ryan is a book about the world of venture capital (”VC”) published in 2001. Ryan founded Ascend Communications in 1989 and sold it to Lucent for $25 billion in 1999. He then started Entrepreneur America to help small entrepreneurs prepare for venture capital. The book explains the inner workings of the VC world.

It’s a great book. It made me realize seeking VC money is not what I should be doing in my life. The book explains rather bluntly what venture capitalists are for, and what they are looking for. The ultimate point of VC is to make the largest possible returns on their investments. In most situations, this means taking your company public, or selling it to a large public corporation. The bottom line is money.

If we were to analyze the significance of Ryan’s achievements strictly based on what he created, not many people would be impressed. (He created industrial size dial-up modems.) He even admits in one of the chapters that his competitors were essentially making the same thing. Even if Ascend did not exist, the world today would not have been any different because someone else would have simply filled their hole. I don’t think Ryan would disagree strongly here.

In comparison, the influence Steve Jobs had in the world of computing is unmistakable. Never mind the fact that he is a great businessman; just studying what he created impresses us. If I were to ignore how much money Ryan made, I would be more impressed by the great Vietnamese sandwich sold for $5 on my block than the dial-up modem he made. (No offense to Ryan; I’m just stating how I feel honestly.) As a matter of fact, in reading all the accolades about Rob Ryan, you don’t come across people talking about his products; all they talk about is how much money he made.

In the book, he explains why he prefers business-to-business (B2B) as opposed to business-to-consumer, mainly because it is far easier to project the profitability with B2B (especially when customers’ cost-savings are quantifiable). This makes perfect sense, and it is indeed a great piece of advice, but this is only applicable for those who have no real passion for their creations. In other words, this advice is for those who would rather make millions of dollars by selling fast food through a national franchise than to build a restaurant that serves real food with passion.

Ryan’s book is actually a more meaningful product than his dial-up modems. His personality comes through in his writing, and that’s a big part of what’s interesting about the book. In fact, my friend who let me borrow the book only remarked about what he felt about Ryan, not about the actual subject of the book. In the end, how we influence others through our emotions is much more powerful than what we achieve with our money. The more time passes, the less meaningful his dial-up modems will be. At least his book will retain some degree of emotional values for the future readers.

We value timeless things because what appeals to our emotions do not change much over time. And, the deeper it touches, the longer it lasts. We still enjoy music, literature, and visual arts that were created hundreds of years ago. Practical and logical problems come and go, and we don’t ultimately care as long as we come out alive. This is not to say we should create everything for our future generations. This “test of time” is actually for ourselves to figure out what would nurture our souls. The time factor is only a test, not an end in itself.

I would summarize Ryan’s modus operandi as this: Do whatever customers want. There are all kinds of needs and demands out there that nobody is paying attention to. Ryan’s method is to find them and fill the void before anyone else does. While I agree that it’s important to consider what our society want/need, it can’t be all about that either. I find the balance to be important.

The Chain of Purpose

True creativity has to come from where there was nothing, no need, no purpose. And this creativity spawns all the other needs and purposes. People like Rob Ryan simply serve somewhere along these chains of needs and purposes. Instead of starting his own chain of purpose out of nothing, he likes to serve within a pre-existing chain, precisely because it’s more predictable and safer. As an investor, it’s a great strategy. But if everyone did this, where would the original need and purpose come from?

Do we need Thomas Keller’s The French Laundry? (Considered one of the best restaurants in the US.) Does The French Laundry serve a purpose? Practically speaking, we don’t need it and it serves no purpose. (In fact, we don’t need any restaurants.) Yet, Keller’s restaurants have been highly influential. There is a chain of vendors that supports the needs of The French Laundry. It is certainly easier to jump in and identify the chain of needs after the chain has been established, but this is also why it’s creatively mediocre, emotionally forgettable, practically replaceable, and personally unsatisfying, although you might make a lot of money from it.

You might argue here that running a business requires creativity too. I agree. When presented with a practical problem, you can solve it creatively or execute the solution that you’ve learned from someone else. This way of solving problems creatively, is what I would call “passive” creativity because the problem was given to you. On the other hand, Thomas Keller’s desire to open his own restaurant, I would call “active” creativity. I believe both are necessary in our process of self-discovery. Creativity goes hand-in-hand with self-discovery because creativity is an expression of something truly unique about yourself. I believe that, unless you deliberately suppress such an expression, self-discovery leads naturally to creative expressions.

Active creativity is what spawns the chain of purpose. Without the people who express active creativity, we would all be twiddling our thumbs waiting for a purpose to serve. The most common form of active creativity is having a child because it has no purpose, but think of all the purposes your child generates. Not just you, so many businesses serve the needs of your child (diaper manufacturers, schools, book publishers, toy makers, etc..).

It takes a certain amount of courage to do something purposeless. Living purposefully is actually the easier path in life. Most people cannot take purposelessness and that is why many people resort to joining organized religions, because it is the quickest and the easiest way to find purpose in life. When the point of living is self-evident, you don’t need a purpose to justify the fact that you are alive. To me, this is the type of business I want to pursue. A business whose values (fun, joy, excitement, etc.) are so self-evident to me that it does not need any purpose to justify its existence.