The Entrepreneurs’ Dilemma: To Quit or Not to Quit?

Unfortunately, entrepreneurs get bad advice all the time. There are many misperceptions around success and the journey of building a company, such as ‘entrepreneurs take big bold risks’ (they, in fact, take very calculated risks) or ‘failure is good’ (there’s nothing good about failure, but sure you can learn something from any experience). I can’t address all of them here but the one I’d like to focus on is ‘never give up’ (we’ve all heard it before).

True, in theory, if you never give up, you technically can’t fail. But you can end up spending a lifetime pursuing the wrong dream or being blinded from the stark reality of what it is you are doing.

 

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Source: gratisography.com

Entrepreneurs – or worse yet, people giving advice to entrepreneurs, like investors – often like to present themselves as heroes or villains. The ‘macho’ daring people who had the guts to do what others couldn’t. Hence, they like to keep hammering this ‘we never give up’ mantra while drinking their  own cool-aid. It boosts their ego.

 

 

The reality is that knowing when to quit is super important and quitting sometimes just makes absolute sense. ‘Quit while you’re still ahead’ is much better advice, in my opinion. And here’s why: everyone is capable of having bad ideas. Even the best entrepreneurs, like Richard Branson, did and still do. Virgin Cola was not a success, so he shut it down as one should. Would it be smarter to spend the rest of his life and valuable dollars trying to beat Coca-Cola just so that he could save his own ego?

Equally, even the best ideas may simply be attempted at the wrong time, or with the wrong group of people. There are so many ingredients that are needed to make a start-up work that no one (however smart) can predict or be in control of them all.

So the question then is when does one throw in the towel? For me, the acid test is these two questions:

  1. Do your micro-fundamentals stack up?
  2. Are the macro-fundamentals there?

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The sharing economy is growing the pie!

A big misperception about the sharing economy is that it’s totally substituting the incumbent way of doing things. In other words it’s a ‘zero sum game’. Turns out that in most it’s cases it’s actually growing the pie considerably.

Take hotels for example. Despite the unquestionable success of Airbnb, the hotels business in big metropolitan cities like London and NYC is booming. They can’t build hotels fast enough. Try booking a hotel in either and you’ll see -you’ll be lucky to get a room. Mean time Airbnb has captured a mere 5% of the inventory in NYC and less so in London.

An analogy outside the sharing economy is low cost Airlines. If you’ve ever flown on EasyJet or Ryanair in Europe you will know that there’s a distinct difference in the passengers to traditional airlines. When was the last time you saw men dressed as peacocks getting drunk and rowdy in the corridors of a BA or Virgin flight? Do they just flip and change pending on what airline they’re on? No. Many of those people would previously not travel or travel much less. With a drop in air fares now they do (unfortunately!). Low cost airlines undoubtedly increased the total pie of travellers.

It’s the same with Airbnb. People who would seldom book a hotel before – possibly for a myriad reasons, cost being one of them but also the comfort factor(many people don’t feel ‘homely’ in a hotel to the point where it would put them off travelling) – now have an alternative.

We see the same in the Gig economy in which we operate in. Numerous stats now show that 1 in 3 people in the working population are freelancers. In smaller companies less than 20 people in size 50% of the headcount are temporary / contract staff, and even in larger companies now HR managers foresee that as much as 20% of their head counts in the future will be freelance staff (a figure which I believe is grossly understated). Does that mean that Employment as we know it is over? Is it the death of PAYE? Many of our peers keep pushing that message to get more PR and buzz but I question whether they truly believe i. It would be the equivalent of Airbnb saying Hotels will die, completely and forever.

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Reflections on 2015

If there’s one sentence that summarises the past year for me it’s this: everything happens for a reason, and mostly for the best!

 

My key lesson of the year, cliché as it may sound, is, once again, that our ability to turn a negative into a positive in a split second, to drive instant and radical change in our lives when something doesn’t go our way, is potentially one of the most powerful forces in life and a key determinant of success and happiness.

 

A lot has happened in 2015, including moving my base from predominantly New York back to London in September, opening up offices in Berlin and New York, becoming a British citizen, appearing on BBC World news to talk about the sharing economy, hiring some amazing people to grow our team at PeoplePerHour, and having had the luck to travel to some incredible places and meet some truly great people.

 

2015 reminded me that short of our health and time with our loved ones, one’s best investment is in new experiences. They really enrich our lives so much more than anything we could possibly buy. My best ones for the year were: skiing in St Moritz where I started off the year, visiting Art Basel in Miami, (definitely going back!), skiing in Deer Valley (my first time skiing in the west coast of the U.S.) and staying in the super-cute Salt Lake City which I totally loved, visiting Santa Monica, Beverly Hills and the gorgeous Malibu in L.A. (where I managed to find myself – involuntarily- dining at a cute Greek restaurant called Tony’s), followed by San Francisco and Silicon Valley for a tech. power-shot, a rainy yet magical Costa Rica, Montauk, the beautiful Greek islands of Skiathos and Mykonos, Ibiza in Spain, the breath-taking island of St. Lucia in the Caribbean, attending Summit @ Sea on the world’s 8th largest cruise ship with a group of some of the most prominent and inspiring tech entrepreneurs on the planet, attending SXSW in Austin Texas for the 4th time in a row, attending European Young Leaders 2015 forum in Dublin, celebrating my b-day in Vegas and watching what was supposed to be the fight of the century between Manny Pacquiao & Floyd Mayweather, watching Klitschko – the worlds Boxing heavyweight champion- fight in Madison Square gardens, and ending the year with a fabulous family Skiing trip to Val Thorens in France.

 

Things that almost happened and thankfully didn’t: I came a stone’s throw from extended my stay in NYC for another year. On the 1st September I was due to move to a new apartment which I totally fell in love with, whose lease fell through in the final hour. My gut instantly told me it was a sign that my time was up and I literally planned my relocation back to London within hours and left a few days later. I shipped my apartments contents to Athens where I had decided – and again came a stone throw’s away – to buy a place to take advantage of the plunge in real estate prices. That too fell through, or rather I walked away, when the owners – in typical Greek fashion- kept moving the goal post and made signing a deal near impossible. Looking back it was a blessing in disguise, for more reasons than one. Again, a negative turned to a positive.

 

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Why culture matters – again!

In a previous post of mine I write about Why Culture Matters. This was back in 2011. My company PeoplePerHour was in a totally different stage back then, and so was I. As we’ve progressed and grown up I’ve reflected back on this post to compare the then and now.

In short, the more we grow, the more we mature, the more I’m convinced of the main thesis of that post: that if you get culture right, almost nothing else matters.

You may ask: really? That sounds too simplistic and bold. What about people? What about the product ? What about the market, processes, etc etc. What about all the other stuff business schools and books rant about?

First, lets not forget that culture cannot exist without people. Culture is the fabric that brings people together to do great things. So of course you cannot have a culture without people. And for culture to work you need like-minded people who are simply ‘on the same page’. Bonded by chemistry more than by hierarchy, roles and definitions.

Similarly, without a product you can’t have people either. So yes, product is the starting point of any business. You build a product, you amass a team, and then its about growth and scaling. THAT’s when culture becomes the key ingredient.

Why? Because it renders a whole host of things that are just impossible or too painful, time consuming to get right, almost obsolete. Like rules and processes. Like lists of do’s and dont’s. As a young business you will not have time to compose a thorough ‘how to’ manual for everyone to follow, and even if you did you wouldn’t (and shouldn’t) have the time to train everyone on them, and even if you did you would not be attracting or retaining the right people in the first place! Smart people operate much better in a climate where they know the overarching goal, they see the destination, but they’re given freedom as to how to get there.

The role of the leader

Defining the role of a great CEO or leader has and will remain a subject of much debate. The more I mature as a CEO I see my key responsibilities narrow down and crystallise to these 3 and these 3 alone.

  1. To hire the smartest people I can for each role
  2. To provide a clear vision and very clear & tangible goals (vision and gaols are different)
  3. To set the right culture for them to work together to get there.

If you do those 3 things right you almost don’t have to do anything else. Or in the very least you will have more leeway for all the other things you’ll get wrong. It’s very refreshing. You will find (as I did) transcending from managing to leading. From doing too many things yourself to just setting scene and the actors for them to get done without you. A great CEO as they say should make him/herself redundant just a little more every singe day. That’s a sign that you are doing those things listed above.

Often confused: vision is not the same as goals. Some CEOs think that a bold, magnetic vision is enough. Its enough only to get peoples appetite going. Its not enough to feed it. It’s enough to inspire people but inspiration is not enough. They need goals & targets that take you collectively closer to that vision. Vision is how you imagine the future to be and how you and your company are changing it. Many entrepreneurs make the mistake of thinking that everyone can see what they can — they cannot. And thats a good thing! A world full of visionaries would mean nothing gets done. Its your job as an entrepreneur to translate how that vision manifests itself into reality by setting milestones along the way.

So in short, if you do that, and hire the smartest people you can who are like minded, culture will take care of everything else.

What is culture?

Culture itself can be a vague idea. For me culture comes down to practical things like: what you as a leader expect of people; when should they ask and when should they get on with things; what sort of ‘reasons’ for things not happening do you tolerate… Think about they way you are with your friends, spouse, or kids if you have any… If a kid misbehaves and you tolerate it that sets the tone for future action. If a friend is always late and you tolerate it, they will carry on being late. If you answer every little question that comes your way, you can be sure that more will come.

Culture therefor is not this abstract idea that lives up in the either. Its the collective behaviour of your team and it’s defined 100% by the tone the leader sets.

I will illustrate by reflecting on our culture at PeoplePerHour so its not just a vague concept.

  1. Brutal Honesty: I tell my team: I do not tolerate anything BUT brutal honesty. I cant stand ‘wishy-washiness’ and beating about the bush. I can smell BS from a mile and it makes me want to puke. So we have a very direct and outspoken culture, without fluff and waffle. Everyone in my company knows that waffle and BS doesn’t fly with me. It’s not for everyone. But for those who do fit in it amplifies results and cuts back on time wasting. And no doubt it stems from intolerance of anything other than brutal honesty
  2. Numbers, Numbers, Numbers: Similarly we have a culture around strong numeracy and measurement. We are all quite a numerical lot, and everything we do must be measured. I don’t tolerate people’s request for something unless its benefit can be quantified. I am allergic to pie in the sky kind of thinking thats not rooted in some form of ROI measurement. Hence that’s part of our culture. And again that’s probably my engineering background and obsession with knowing exactly what I get out of something I put in.
  3. Ownership & Accountability: We have a culture of accountability and ‘can-do’ attitude. Again. The tone is set by my lack of tolerance for‘reasons why something isn’t done’. I’m astonished how common this is in other companies. They foster a culture of ‘effort matters’. It doesn’t! Life does not reward you for effort: not in sport, not in the arts and not in business. You dont make it to the Olympics juts because you tried! You make it because you achieved a good enough result. Anyone who’s worked with me will know that when they come to me with a laundry list of why something didn’t happen (even though they tried hard) they well get shot down. Brutally and openly . Often humiliatingly. Is it right? I don’t really care. It’s irrelevant. Its how I do things and it sets the tone and expectation for the whole team. Come to me with results, and why things DID happen or WILL happen (at worst). I hire smart people and so I expect more than excuses from them. Otherwise i may as well hire gibbons and pay less.
  4. Less is more: We have a culture succinctness, snappiness getting to the point. I joke about the ‘3 lines rule’ : that if an email doesn’t get to the point within the first 3 lines i stop reading. It may be said half jokingly but its largely true. The result: people get to the point or get ignored. That avoids time wasting on long convoluted emails, memos, talks, presentation that have little substance in them
  5. Openness: everyone can and is encouraged to voice their ideas or concerns about something. Often this results in long team email trails, chat groups, and lengthy debate but, again, as people know that we also have a no BS, no fluff culture almost always these debates are for good cause and lead to something. It may be a new practice, a product feature, a new / team event, a new process… Its shows that people care more than just getting their own job done. They care about the overall outcome
  6. Humour: we tolerate and encourage people to laugh, say silly things and have fun while working. It wasn’t always like this, in the early days I think the company and team were too highly strung and intense. We weren’t having fun. Why ? Because I was too highly strung and intense. I probably still am compared to most people but compared to myself back then im now a Budhist monk on coolaid! Why ? Because the worst part is gone, the company is out of the red and whilst there are still many challenges a huge weight has been lifted off my chest knowing that come what may, unless we REALLY screw up, we will stay in business. And also because I’ve simply grown up! Again: the tone is set by you! If you are stressed, everyone else is stressd. If you crack a joke, and have fun others will too.

The list can go on and on. There is no definitive limit to what defines culture. It simply is the way you behave, its the way you do things, Its the things you do and you don’t do. If you have a tightly defined culture the litmus test is to ask yourself: would this (whatever ‘this’ may be) fly in the company? If the answer is a definitive ‘yes’ or ‘no’ then you have a tight culture. If it’s a ‘hmm not sure’ then you don’t.

Alas, with the right overarching vision and goals, with the right people culture is all that’s needed.

If you want to build a ship, don’t drum up people to collect wood and don’t assign them tasks and work, but rather teach them to long for the endless immensity of the sea”. — Antoine de Saint-Exupery

Valuation vs. Value

 

There is no question that tech valuations are frothy (to say the least) at the moment. People however try to argue that ‘this time it’s different’, amongst other reasons a commonly cited one being that tech companies today deliver ‘real value’, have real revenues, scale etc etc.

 

Firstly : there’s never been a bubble in history during which a certain few were not convinced that ‘this time it’s different’. Unfortunately for the rest of the people those ‘certain few’ are often the influencers and not surprisingly the ones with the biggest vested interest in profiting from the inflated valuations that they so help drive. In the subprime mortgage bubble it was the same: a certain few convinced themselves that ‘this time it’s different’, fundamentals don’t matter, and that people could be handed mortgages way above their affordability , no matter if they couldn’t repay them, because ‘this time it’s different’.

 

It’s easy to cook up why this time is different. It’s harder to de-clutter the noise and figure out why the fundamentals still remain the same (as they always do).

 

Whilst I don’t disagree for one second that todays tech companies do actually deliver real value (after all I am a tech entrepreneur myself and I see that both in my products – PeoplePerHour.com & SuperTasker.com and the ones I use so avidly), whilst I don’t disagree that the way we live and do business is rapidly changing and being disrupted by tech, I think the ‘Valuation vs. Value’ argument is intrinsically flawed for a few reasons

 

  1. Value is not enough

 

Its not enough to just deliver value. You need to do it in a way that’s sustainable in the longer term and builds on fundamentals. You can shoot for the moon overnight and fall to ashes just as fast if you’re building a business without fundamentals. Many examples come to mind, from Fab.com, Colour, Joost to more recent from our space – HomeJoy – who filed for bankruptcy a few months ago after raising ca. $100m. All of these were once amongst Silicon Valleys darlings, had multi billion valuations and some achieved hundreds of millions in revenues. Yet that wasn’t enough.

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Renewed interest!

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My latest Art Work

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The true debate around worker classification in the Sharing Economy

The numerous law suits against companies like Uber and HomeJoy (which actually forced it to liquidate as a result last week) has spurred huge political debate around the sharing / on-demand economy, Employee classification and protection.

 

The arguments against companies operating in this space are mainly that they disguise employees as independent contractors therefore resulting in loss of protection for the workers and – more to the point – less tax income for the IRS.

 

I think this argument is very skewed and in fact hypocritical. Firstly, Tax income IS the real concern for the government NOT worker protection, yet subtly forgotten in the debate. Secondly, in an nation that’s thrived due to peoples appetite for risk with the inevitable loss of protection for the pursuit of upside it’s far too populist and goes against the grain of what made America great. Why do we celebrate and praise Entrepreneurs yet we pity the  ‘Solopreneur’ and want to protect them. Both choose to forego the perks of a secure job for the freedom to work for themselves, determining their own times and patterns of work and in many cases earning more.

 

On our site PeoplePerHour.com for example consistently over 80% of our 1m+ freelancers polled tell us that they would never go back to secure employment. Our top earners make north of $10k per month in net earnings which in most cases exceeds what they made or still make in their 9-5 job. Numerous conversations I’ve had with Uber drivers testify to the same, and I’ve recently met one person (of many others I’m sure) who made more money renting out his place on Airbnb that he quit his job and turned that into a business!

 

The real question that’s missed therefore is that of real ‘choice’. One in three people are now members of this freelance economy, a number backed by Mary Meeker’s latest report. Of those the vast majority choose to do so for some of the reasons mentioned above.

 

Yet, unquestionably, there are some edge-cases where companies force this ‘contractor’ engagement on Workers, whilst stripping them of the freedom to dictate their own work conditions. In these cases the argument that they are in essence employees in disguise stands correct. FedEx was one such example, losing a long standing suit instigated by its drivers which was settled in 2014 forcing it to reclassify their workers as employees.

 

The distinction needs to be understood though. There is a big difference between an Employer dictating when you turn up at work, what you wear (in this case a uniform), the hours you work and whom for, or how you perform your duties. These are the elements that define the level of control an organisation exerts on the worker. The litmus test is to ask ‘how different would it be had that person been an employee’. If the answer is ‘not materially different’ then its Employment in disguise.

 

The answer is different for most participants of the tech-powered on-demand economy today because of exactly that: technology empowers workers to make that choice theirs, and be truly independent. In the digital economy, in which we are participants, this holds absolutely true. Freelancers on PeoplePerHour or SuperTasker CAN AND DO choose when to work, for whom, the location from where to work, and they can choose to work as much or as little as they want and for what rate. In fact 95%+ of the work gets done remotely and the lack of physical dependency means that they can also be performing multiple jobs simultaneously (whilst a cleaner for HomeJoy or a FedEx driver cannot be at two places at the same time)

 

Uber arguably does dictate the ‘where’ by routing drivers to a specific location but we forget that the drivers choose when to toggle in and out of the network. They have that self-chosen freedom. De Blagio’s decision to drop the claim this week was therefore – in my opinion – correct.

 

So in short, I believe that some regulation is indeed needed to monitor and prevent these edge-cases from going mainstream and protecting workers’ rights (and Uncle Sam’s coffers), but they should not be misunderstood as being the norm, else we run the risk of over-regulating a growing and very promising market, destroying healthy businesses and limiting choice for the consumer.

 

The sharing economy is not a fad. It’s a truly revolutionary movement that unlocks waste in an economy, or ‘spare capacity’, be it people’s skills or time, their spare bedroom, their car sitting in the garage or their closet. Its putting idle resourced back to good use for the benefit of society. I often think of the sharing economy as ‘Recycling 2.0’. What recycling did for physical consumables is now – unbeknown to most – generating half a trillon dollars and touching everyone’s lives, plus making the world a better place. Out of what would have been just trash!

 

The sharing economy has the potential to do exactly the same for intangibles and physical assets. What machines did for trash, the internet and software is doing for almost everything that surrounds us. And that will certainly make the world a better place.