Lessons Learned From a Failed Ivy League Entrepreneur

A "Case Story" By Chris Cononico
 

Chapter Fifteen

“The moment of victory is much too short to live for that and nothing else.” –- Martina Navratilova

During my senior year, I enrolled in my second Entrepreneurial Management class, which was taught by Professor Michael Brody. A short and stocky man in his sixties with a head full of white hair, Professor Brody was the owner of a dozen small ventures and an animated speaker, who used to warn us to never get a “j-j-j-j-job.” He used to joke that he couldn’t even say the word.

Professor Brody stood before us wearing his signature blue blazer, hands on his hips, periodically glancing down at his pager. A former lawyer by trade, the professor focused his lectures on the impact of entrepreneurship on a founder’s lifestyle. Brody’s pager would buzz non-stop during class and the din was a constant reminder that the “Professor” was not an academic.

Brody’s lectures were peppered with personal anecdotes about his businesses. He once told a story about a breakfast meeting with an infamous “billionaire.” Apparently, the professor’s light fixture company had a mounting pile of unpaid receivables that were owed by the mogul’s hotel and casino.

As the story goes, the billionaire invited Brody to breakfast and informed him the hotel/casino was going to declare bankruptcy. He made my professor an offer to settle the outstanding bills for 30 cents on the dollar, or risk losing the full amount in a bankruptcy proceeding. Unfortunately, 30 cents on the dollar was still a loss for my professor.

You could see the anger in Brody’s face when he recounted the story. Apparently, he told the billionaire to go screw himself. As it turns out, the hotel/casino never declared bankruptcy and my professor was paid in full. Whether or not that was a shrewd bluff or my professor’s good fortune is uncertain. Professor Brody had dozens of stories like that.

At such a late stage in his professional life, Brody provided capital and strategic guidance to his portfolio companies as an angel investor. Listening to him talk about his businesses, I thought he was brilliant in the way he set things up for himself. It sounded like the sort of exciting career I wanted.

It was intriguing to imagine I could share in the “upside” potential of a dozen start-up companies as an equity holder, while also participating as a director on the board. If one company didn’t work out, I could still have others that might become hugely successful. Although I didn’t have any money to invest in start-ups, I was enthralled by the “diversification” possibilities.

Although it was unrealistic for me to think about becoming an angel investor at such an early stage of my career, I considered becoming a “venturepreneur.” “Venturepreneurship” was my way of merging entrepreneurship with venture capital. I believed that if I started a new business, raised capital, and got it running, I could eventually find other managers to replace me, so I could leave and start something else. Theoretically, I could still retain a good portion of my equity stake and a seat on the board of directors. In that way, I could establish a portfolio of start-up companies just like Brody, but I didn’t need to have any upfront capital.

Unfortunately, I glossed over the level of commitment required for an entrepreneur to make his business successful. As a founder, I had to be willing to commit the next decade of my life to my company. During this period, I had to focus exclusively on managing the daily operations of my business, not looking to abandon it and do something else. It was dangerous for me to think about being an entrepreneur who dabbled in a diversified portfolio of companies, because it had the potential to cause me to lose focus.

As part of the class, Brody liked to bring in current entrepreneurs to talk about their experiences. Most of the speakers were at least 10 or 20 years older than us. They came from a broad range of industries and were generally successful. We heard the same message over and over again about how each was glad to be self-employed.

In my view, there seemed to be a recurring bias in forums about entrepreneurship, because the speakers were always successful. Sitting in the audience, we saw ordinary-looking people recount how everything came together for them. I’m sure the brief highlights shared with the audience did not do justice to the perils these entrepreneurs also endured along their journeys. Nonetheless, we were all enthralled by their testimonials.

Some featured speakers touted how they sold prior businesses for big money. There was one entrepreneur, who had been a Wharton undergraduate and took his first company public on the NASDAQ, sold his second company to a competitor for $241 million, and sold his third business to another company for $28 million, only six months after it commenced operations.

As a student who is contemplating entrepreneurship, it’s easy to be motivated by these tales. It always left me with the “If he can do it, then I can do it too” attitude. It not only sparked a competitive instinct in me, but it also made me feel like other jobs would flail by comparison next to the huge opportunities afforded by entrepreneurship. These guest speakers were tangible proof to me that entrepreneurial success could happen.

I reconciled that with the right plan and hard work, entrepreneurship probably wasn’t as risky as it seemed.  As a college student, I didn’t have an appreciation for Murphy’s Law – “Everything that can go wrong will go wrong.” Among seasoned entrepreneurs, this cautionary approach is not the exception, but the rule by which they manage risk. However, as a senior in college, I wasn't expecting life to go wrong. If somebody had to be successful I figured, why not me?

Even if a large percentage of new businesses failed, I assumed I had better odds. In fact, Professor Brody remarked that the probability of success for Wharton students should be higher than the odds for others, because of our education. I had no idea if his sentiment were true or not, but I accepted it as a fact.

Among my fellow students, everyone seemed to want to become an entrepreneur. If these classes were supposed to make us critically assess our personal “fit” with entrepreneurship, then something was wrong. Some of us should have been discouraged for our own good. Clearly, entrepreneurship was not for everyone, but my classmates and I seemed to believe it was a good fit for us. I think we became caught up in the glamour and financial rewards that seemed possible with self-employment.

Among the entrepreneurs who visited as guest speakers, there was one who stood out in my mind. Josh Stein was the founder of a successful basketball apparel company. He was a 5’8’’ white Jewish kid with a Wharton MBA, but the really interesting things about him were his mannerisms. He sounded like someone on an asphalt basketball court underneath the L-train. It just didn’t fit with the way he looked.

His presentation was also unusual because he talked about how much he loved the sport of basketball, and how that motivated him to start his company. Josh told us that he quit his job as a management consultant and he paid himself $1,500 his first year. With no money, he joked that when he asked a girl on a date, it meant, “Come over my place and watch TV.” He claimed that he lived on cans of tuna fish for a year, because that was all he could afford.

Nevertheless, Josh didn’t seem like he regretted anything. Clearly, he was proud of his company and he couldn’t imagine himself having a different job. Josh seemed willing to invest years of his life developing his business. Although he expected his company to be profitable, money didn’t seem to be his main motivator. Simply stated, he loved the sport of basketball and wanted to be involved in the industry.

Josh’s enthusiasm for his business came through in the way he described his corporate culture. One of his main criteria for hiring new employees was whether or not they liked playing basketball. I thought he was insane, but he was trying to find people that shared the same intrinsic motivation he did. Everyday, his staff took a break from work and played full court pick-up games, then went back to the office.

I had to admit it sounded like a great place to work. Even if Josh’s business never made it, you could tell he was enjoying himself and I’m sure his employees were as well. It struck a chord in me that for someone like Josh, entrepreneurship was a way for him to invent a job that inspired him in an industry he loved. It was the freedom to wake up every day and do what he enjoyed.

Unfortunately, even though I knew there was something important for me to learn from Josh’s example, I was unable to put it into perspective at the time. Within a week, I had all but forgotten about him.
 

Copyright  2005 by Chris Cononico
All rights reserved. No part of this manuscript may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval systems, without permission in writing from the author, except by a reviewer who may quote brief passages in a review.