The unicorn myopia: value is more than moneyAdriano Silva - November 8, 2019
You may see money as an end, as the most valuable thing one can produce in life.
You may see money as the only form of recognition capable of guaranteeing one’s self-esteem.
Or you can see money as a means to build cool stuff.
If you fall in the third camp, money will not be the only ruler measuring your professional stature, but merely an important fuel for you to generate the achievements that will – themselves – establish the real value of your career.
The discussion about entrepreneurship has always been closely linked to money. In general, people see companies in terms of cash. And too often, business people throw themselves into the whirlwind of private enterprise driven by dreams of monetary enrichment.
The pressure for expansion cascades through the organization, sometimes in the form of a carrot, sometimes in the form of a stick.
I have been following this New Economy closely since 2014, when we launched Projeto Draft in Brazil. Like Draft Canada, it’s a digital content platform dedicated to covering the expansion of post-industrial businesses. Through these platforms, we promised to review the narrowness of this vision and to refresh the conversation about entrepreneurship.
It’s a fact that companies have historically been measured by the size of their revenue. Or by their profit margins. Or by their market value. This is a classic move in capitalism – you invest in a company and want the maximum return on your investment.
Then the pressure for expansion cascades through the organization, sometimes in the form of a carrot, sometimes in the form of a stick. Either way, the mentality’s the same: that businesses cannot stop growing. That the best companies are the biggest and fastest expanding ones. And that a company needs to beat the average growth rate of the market in which it operates – otherwise it will lose space and importance.
Here’s the problem. As I read these days, it’s incongruous to expect infinite growth of organizations on a planet whose resources are finite, where global population growth is slowing and the economy in many countries has already reached a level of abundance far above what human beings need to live well.
(The growth paradigm will inevitably be revised in the coming years. In the age of abundance, even technological leaps won’t guarantee us exponential advances – this very concept will make less and less sense.)
In this world, a company’s relevance (and survival) depends far less on its market share than on how well it meets the wants and expectations of its customers and consumers – no matter how many they are.
What do you want to generate with your company: wealth, personal satisfaction or common good?
Entrepreneurship, in the classic sense of 20th-century industrial capitalism, has always been about introducing a new product or service in the market – and once that solution is accepted by customers or consumers, scaling it up to the fullest.
This logic, born with Henry Ford’s creation of the production line in 1913, is still driving startups into 2020: validate a value proposition and then accelerate growth. Not surprisingly, the world of scale-ups (the name startups earn when they enter the phase of expanding their business) is the New Economy territory best understood by the traditional economy.
That traditional economy has a much harder time understanding and accepting the other types of companies that form the New Economy, though – according to Projeto Draft’s map of businesses emerging in the 21st century. Why? Basically, because these companies don’t hold the premise of scaling above all else.
At best, money is the consequence of a job well done. It is not the job itself.
In creative businesses, for example, entrepreneurs find value in making a living out of doing what they most like to do in life. These businesses are often heavily anchored on purpose. As lifestyle businesses, these companies must fit into the founders’ interests and talents.
Social businesses, another territory of the New Economy, seek to transform the world into a better place. They’re about generating a legacy. These companies do not come necessarily from the vocation of their founders, but rather from the entrepreneur’s desire to solve problems for the community in which they operate.
Of course, for both social and creative businesses, growth matters. And of course, the logic of scale is not entirely absent from these companies. Scaling a social business means helping a much larger number of people; scaling a creative business means delighting a broader community.
But in neither of these two territories is the entrepreneur’s primary mission to grow revenue in quantum leaps, to capture ever more money from investors and to inflate their market value. This is, at best, the consequence of a job well done. It is not the job itself.
While creative and social businesses are not very salable because they depend so much on the vision and performance of their founders, startups and scale-ups often seem like they’re designed to be acquired. Here is an interesting opposition at the heart of the New Economy: on one hand, it’s something companies dwell in; on the other hand, it enables companies to sell out.
Fast and infinite growth, ever-rising revenue and shrinking costs – or don’t even talk to me
The whole value chain set up to foster entrepreneurs – accelerators, incubators, venture capitalists, angel investors, etc. – focuses on startups and tends to define the term “entrepreneurship” as companies driven by wealth generation and ready to engage in wild goose chases after money.
At first, leverage comes from capitalist partners, which doubles the stakes and multiplies the pressure for “financial maximization” (a problem pointed out by Yancey Strickler, co-founder of Kickstarter, perhaps the world’s largest crowdfunding platform, in both his speech at Elevate in Toronto and his first book, which just released).
Then comes the rapid acquisition of consumers and market share, sometimes in a financially unsustainable fashion – a paradox, as these are precisely the companies that have dollar signs running through their veins.
The use of terms like fintech, healthtech, cleantech, retailtech – the list is enormous – adds to this trend that a good startup must be built on a highly scalable technology solution. Fast and infinite growth – or bust.
In the Toronto-Waterloo corridor, where we launched Draft Canada, the conversation is all about “tech companies.” What the ecosystem values are startups that develop intellectual property: proprietary technologies on which businesses can seek exponential growth. These are the projects investors want – business models that promise ever-rising revenue and ever-shrinking costs.
How about entrepreneurship as creative self-expression, as personal development, as a powerful tool for creating and sharing happiness?
Although we need organizations that grow fast to generate jobs and taxes at the same speed, my point here is that this is not the only viable or valid business model.
This myopia has turned the conversation monothematic. Fundamental themes have been thrown in the trash: entrepreneurship as a form of expression and creativity, as a space for personal fulfillment and individual development, as a way of contributing to a better world and creating a legacy, as a powerful method of producing and sharing human happiness.
Creative businesses, for example, prove that entrepreneurship can save lives and reinvent careers – and that it’s never too late to ask, “What do I really want to do with my life?”
2,000 small entrepreneurs earning $500,000 a year generate far more prosperity and well-being than a single megacorporation earning $1 billion.
Creative businesses can also be very scalable. There is much more room and demand in the world for people to be happy and make money, sometimes as a one-person business on a self-employment model, than for unicorns valued at $1 billion.
Here’s the equation: 2,000 small entrepreneurs earning $500,000 a year generate far more prosperity and well-being than a single megacorporation earning $1 billion. However, the market devotes its full attention and resources to support the creation of the next $1 billion company, and regards smaller companies as trivial or, perhaps, ventures that have not developed as well as they should.
The future of business does not lie in the concentration of economic power and resources. (It’s remarkable how, as we approach 2020, the unicorns still follow the same logic that created Standard Oil in 1870 or United Fruit Company in 1899.) On the contrary, it lies in the decentralization of opportunities, in the distribution of access to entrepreneurship tools to an increasing number of people.
Social businesses, in turn, show us like no other kind of enterprise how entrepreneurship can offer meaning in one’s life. They understand the daily reward of knowing that you positively impact many other peoples’ existence. This type of entrepreneur hardly wonders: “Why am I doing what I’m doing?”
In my point of view, there can be no greater success than being able to answer this question yourself promptly and with a smile – it doesn’t really matter if the company, in the opinion of the market, is not worth 50 times its revenue.
The unicorn myopia and the deification of money
The hegemony of this startup logic over other business models in the New Economy can be translated as the deification of money, often at the expense of the physical and mental health of the people who work at the company, the people who consume the company’s products and the company’s suppliers.
This sounds to me as old as the Second Industrial Revolution, as the contamination of the New Economy by the logic of old capitalism – which, in general, makes us believe that if the pocket is reasonably full, it does not hurt that the soul is completely empty.
It’s time we start seeing the obvious: human beings are not a means to money generation, much less in exchange for their quality of life and dreams. It’s time to embrace the opposite of that tradition: money is a means to generate a happier existence to human beings.
With the help of (self) imposed pressures, the field of entrepreneurship has abandoned fundamental assumptions like work satisfaction and the balance between career and all of our other interests. It is a dangerous mistake. Entrepreneurship is here to free us, not to enslave us even more.
It’s time we start seeing the obvious: human beings are not a means to money generation
This “moneyist” way of looking at companies is, in short, very narrow and archaic. Growth is good, of course; it allows, for example, better pay for employees. Scaling up is welcome, of course; it allows, for example, more consumers to access the benefits a company puts out at lower prices.
But businesses, especially in the New Economy, cannot be measured solely by their size. The value of a company cannot be reduced to its ability to increase numbers. Those are important yardsticks – but they are not the only ones.
(I suspect I have created Draft to challenge that misconception and to spread this new, counterintuitive idea. I hope Draft can be successful in delivering its contribution to the entrepreneurship ecosystem, now here in Canada as well.)
After all, companies are people. Businesses are created by people to serve people. Take people out of the equation and we have nothing. Crush people in the process, put an end to their joy of building new amazing things, and where once there was a freshwater spring you will find only dry sand.
When money is the only goal, entrepreneurs become employees in their own company. When we work without passion, without a cause, when the businesses we bring into the world offer no greater meaning than increasing sales, when entrepreneurs don’t see their DNA printed in what they do, entrepreneurship turns into the worst of jobs.
Where once there was a freshwater spring you will find only dry sand.
Entrepreneurship is about ambition, but also about generosity. An enterprise is not a way of grabbing and accumulating the resources that flow in the market, but a means of serving the community in which you operate, of delivering value to others by solving problems for them.
Companies exist to generate human happiness for everyone involved – founders, clients, employees. Money is a means for the entrepreneur to accomplish this goal – and to get accomplished along the way. Money will never be a good enough reason or goal… nor can it ever be realization itself.
Adriano Silva is Co-founder and Chief Creative Officer (CCO) of Draft Canada. He is also the Founder and CEO of Projeto Draft, launched in Brazil in 2014.