The Dark Side of Entrepreneurship

A good entrepreneur is not one who always get it right, but he is one who knows how to make all the mistakes as quickly as possible. If better, he acquires others’ experiences by listening and making sure that he does not make the mistake. Hence, the way to know that is to know the dark side of entrepreneurship.

Contributed by BL

“Fear is the path to the dark side. Fear leads to anger. Anger leads to hate. Hate leads to suffering.”
- Yoda in Star Wars

A few months back, during a lunch appointment, somebody ask me this question,”If you want to teach entrepreneurship, how would you do it?” I did not know what crossed my mind but my reply goes along like this, “The title of the module that I will be teaching will be called ‘The Dark Side of Entrepreneurship’. The course will be subjecting the students to all kinds of con and fraud that your investors, partners and clients would do to you. If you can survive one of the strenous and cruel scenarios that I subject you to, you will pass the module. Otherwise, I will fail you.”

Young entrepreneurs can get conned easily

After that, I thought about it and remembered of a real story told to me by a friend. He narrated the tale about how a group of young entrepreneurs lost control of a startup in Singapore because of hooking up with a bad investor. Here is how the bad investor did his con. He told these group of young entrepreneurs that he would value the connections he made for these young people as equity. Slowly, he sucked them dry of their shares and subsequently secure control of their shares. Eventually, the company collapsed. Luckily, those group of young entrepreneurs did not give up and they started all over again. Today, they own a company on their own. It’s one of the lessons when I do fundraising workshops for my students in NUS. During these role-playing situations, I subject them to strenous grilling and of course, eventually bluff them in giving away equity. One student came to me and complained that I was being too mean because I conned him twice in a row with different twist of the rules. I admonished him with the following reply, “I would rather con you now than to wait for you to come back after graduation and tell me, ‘Why did you not teach us this?’ “.

Not many young entrepreneurs can come back like how they did. Because Singaporeans are intolerant of failure, my bet is that 99% of them will have given up after such a setback. Some of them I know become jaded and bitter about life. Perhaps, that is the part which I do not empathize with them. If you are one who believes that there is a silver lining to every cloud, you should have faith that you learn from your mistakes and move on to build a bigger enterprise. If you want an inspiration, think about Steve Jobs being booted out from Apple at the age of 30. He was fired by the person who he hired.

Most of the time, you hear about the success stories in Singapore from our media. You never hear about the failure stories, except for a recent book by an entrepreneur who got her business folded after winning “Entrepreneur of the Year”. Vanity is definitely the devil’s favourite sin. As a matter of fact, if you dig into the statistics, you will come to a realization that most young entrepreneurs will fail on their first startups. That happened to me as well. As I have written in my earlier article, there are many reasons to why a business can fail. Yet, human error contributed to most of the failure cases.

Most young entrepreneurs will begin with idealism and fervor and work on passion to keep their startup going. Being young and brash, they usually let both successes and failures overwhelm them. Their lack of experience with the real world make them naive about dealing with people. There are many examples in how human error could occur. The first example is that they may not be sharp enough to see that the supplier make more money out of them by delivering lesser goods. Another example involves their business partner are not delivering what they promised. Sometimes, these awkward situations can land young entrepreneurs into a catch 22 situation. Worse, I have not factored in the strong Asian culture of family into the equation. What if you have a lazy and spoilt relative who is a leecher to your business? In all these scenarios, the young entrepreneur are less competent in dealing with such situation.

Now let me sum up some common weaknesses of entrepreneurs:

Common Sins of Entrepreneurs

To defend yourself against the dark side, you need to ensure that you do not possess fatal character flaws. Otherwise, these con-men will turn it as an advantage against you. The four most powerful weaknesses of an entrepreneur (as summarized elegantly in [1]) are as follows:

• Control Freak: Believe it or not, most entrepreneurs desire control. Entrepreneurs are people who want to make a difference in other people’s lives. The motivation to create something new and innovative or redefine how people conceive the traditional markets bring them not only creativity but also the unfortunate trait of possibly being a control freak. Their obsession with control affects their ability to move or delegate demonstrates how badly at times they get along with other people. If the entrepreneur is a maverick in the first place, they will have serious difficulty in dealing with issues on dominance and submission and worst, they are suspicious of authority. Most entrepreneurs are people who want to create their own environment. They do not want to be at the mercy of others, which makes them very intolerant of incompetency. That nicely ties up to my next point.
• Distrust: The desire for control leads them to show strong distrust in people who work for them. If they are too paranoid, they become easy preys for investors, partners and clients who adapt it to manipulate them to gain control. Yet, this trait is a double edged sword. It can make them more alert to the people in the surrounding who might attempt to con them. Don’t you see it all around you: why bosses in small companies tend to be misers compare to those in big companies? They are afraid that when they spend on their employees, they will be taken advantage of. So, being trapped in the state of distrust, their first defence is to ensure that they exploit a lot more from employees. In a society like ours in Singapore where most SME bosses don’t even think of welfare for their workers, it does tell us a lot about this fatal flaw in most entrepreneurs here.
• Vanity, my favourite Sin: Don’t you feel that entrepreneurs are overhyped in the media? If you read their story every morning in the press, it will be about their humble background, how they turned from being a nobody to a success story and if we live long enough, we hear about their downfall. If you want examples, check out the CEO of Livedoor in Japan. Most entrepreneurs feel that they are living on the edge and they feel that their life is under constant tension. So, they need to become a character in Homer’s Illad.
• Ego: Every entrepreneur I know has an ego and usually it is a strong one. If you don’t have an ego, it’s hard to believe that you are an entrepreneur. That’s the unfortunate reality because of the many characteristics which an entrepreneur possesses. However, there are varying degrees of ego in every entrepreneur. Sometimes, personal ego can be detrimental to the growth of the company. It is always important for the entrepreneur to think about how his or her startup as an organization is greater than them. The other is that the entrepreneur has to learn humility through the hard way.

From the above four sins, you might find it surprising to believe that it is their own fault sometimes. Of course, even if you manage to guard it against yourself, there are still ways which most investors, suppliers and partners can make your life difficult. However, that would make the story too long to hold your attention. Hence I will leave it to another time where I can tell you more about the dark side of entrepreneurship.

[1] Manfred F.R. Kets de Vries, “The Dark Side of Entrepreneurship”, Harvard Business Review, Nov-Dec 1985.

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