Startup lesson

Recently I was involved in (albeit in a rather limited fashion) putting together a mini-entrepreneurship program for a local university. We covered most of the key topics in the startup literature world – lean canvas, business model, market validation, design thinking, fund raising, financial management, etc.  It’s literally a mini-MBA course for startups.

Yet I feel like something is missing.

I have long been of the view that a lot of startup literature is not a good fit for this part of the world – in terms of market and culture. But I feel there is something more fundamental. And finally I figure this is the missing piece of the puzzle.

We need to first teach entrepreneurs how capitalism works and how market forces operate.

Or in a more simple way, understanding why the market behaves the way it has now.

Understanding this basic rule is like recognising gravity in the physical world because we are all influenced by it.

What I have been observing is that, under the glorified banner of startup and innovation, entrepreneurs often lose sight of this very basic but important fact – how the current market is working.  And there are two major reasons that blind them.

First, they over-simplify the market forces. They just blame the existing business (or business owner) to be ‘bad’ or outdated. But the real world is more complicated than that. For example, companies don’t hire child labour because they are bad people or they like child labour. Companies hire child labour because the market forces are making them to keep the costs down, all the way down the supply/value chain. And one of the weakest links down this chain will ultimately give in which can lead to bad practices such as child labour.  It’s often less carefully planned out than most young entrepreneurs think.  But the market forces are strong.  And the market is brutal.  If anything, it is the market being ‘bad’ and most importantly, it is never outdated.

Second, they often fool themselves that innovation or ‘disruption’ to the market allows them to be ignorant about the existing ‘rules’ of the market. This is so wrong. Yes, there are many people (especially in the large corporate world) who are numbed by the market forces and therefore believe nothing can be changed. But the flip side of this does not mean, in order to make a change, we don’t need to understand these market forces. Using gravity as the analogy again, yes, we are all earth bounded because of gravity.  Yet, this does not mean we cannot build planes or rockets.

However, to build planes or rockets that will actually work, we need to understand gravity.  In fact, a LOT of understanding about gravity.

So perhaps the next time we put together a similar course, we should tackle this upfront.

The remaining question is – is this going to scare too many people away?  And if this in itself a good thing or not?

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