to go on burning cash. By early 1908, however, even Burmah had had enough. It asked D’Arcy to put up more funds or close the whole operation down. He complained, ‘Of course I cannot find £20,000 or anything’, but stubbornly ignored the deadline. He just allowed it to pass without action or comment. The gambler refused to leave the casino.
Burmah, in turn, ignored their partner’s refusal to cooperate and on 14 May 1908 sent a letter to the drilling team in Persia informing them that they should close up shop, sell everything saleable, and come home. The letter took weeks to travel from Glasgow to Persia. And after it was sent but before it arrived, the drilling team struck oil. They hit a gusher so big that the spout of oil jetted fifty feet higher than the steepling drilling rig itself. Shortly afterwards, the second exploration well struck oil too, and also on a prodigious scale. When George Reynolds, the tough, single-minded genius of the drilling team, received Burmah’s communication, he wrote back sarcastically, ‘[Your] instructions…may be modified by the fact that oil has been struck’, and refused to act on them. The age of Middle Eastern oil had begun. D’Arcy recovered the funds he’d sunk into the sands of Persia and received shares worth some £895,000 to boot. The company that emerged went through several name changes since those early days, but is still alive and well today. The company is now known as BP and is worth approximately $175 billion.
I’ve told this story at length because it’s dramatic and because it makes a point. A moment of risk, of opportunity is not enough. Given the right opportunity, any of us may succeed to a certain extent, but the world has not been shaped by those whose ambitions run ‘to a certain extent’. D’Arcy’s ambitions were large when he speculated on land, larger when he speculated on gold, and almost boundless when he speculated on oil. You or I would have needed to conquer our aversion to risk to have done even one-tenth of what he managed. He, however, conquered nothing. He wasn’t averse to risk, he needed it. When he had all the wealth anyone could ever want, he put himself through almost a decade of financial loss and heartache simply to feel the thrill of that spinning roulette wheel one more time.
The need for risk isn’t unique to entrepreneurs, but it’s the mark of the breed, all the same. When speaking to entrepreneurs in the course of writing this book, I’ve asked how much of their capital they put at risk in that first crucial investment, the one that launched them. They all answered the same way: they invested everything they had and in many cases borrowed heavily too. If their business had gone bad, they’d have been wiped out, walked away owning nothing more than fresh air and sunshine. That’s the answer I’m given, but in almost every case I’ve noticed a tiny pause before it comes, one of those micro-habits which supposedly reveal a truth beyond mere words.
What is that hesitation, that nanosecond of delay? I think it comes down to translation. To you and me, who’d much rather not be wiped out, the question about that first investment has many possible answers. For entrepreneurs, that’s not the case. There’s only one first investment you can make, which is as much as you have. That answer is so instinctive, it takes a moment for them to remember that not everyone thinks the same way. They have to translate their answer from Risk-Think into regular Human-Think, and the pause for translation accounts for that micro-delay.
Allied to risk, and inseparable from it, is restlessness. For most humans, comfort is defined in static terms. The log fire. The hot drink. It’s a pastoral ideal, the ideal of a people who will sleep tonight where they slept last night, do tomorrow what they did today. No doubt entrepreneurs like log fires too, but their instincts aren’t remotely pastoral. Modern science has discovered a type of neuro-receptor (called the 7R variant of the DRD4) which seems highly linked to Attention Deficit Disorder, as well as novelty-seeking and food- and drug-cravings. In the modern Western world, this receptor isn’t one you’d want your kids to have. It’s not the sort that promises wonderful educational outcomes or stable career prospects.
People who have this kind of brain receptor, though, aren’t ill. The genes responsible for it are doing their job just as nature intended. Since nature has a tidy habit of ensuring that poorly adapted genes are competed into oblivion, then those genes must once have been doing something useful. The question is what.
Enter the Ariaal – not a misspelled font style, but a tribe of semi-pastoral nomads in Africa. Some Ariaal continue to be true nomads, wandering the arid plains of northern Kenya, herding camels, cows, sheep and goats. Some of their brethren, however, have settled down and become farmers. The two groups are genetically identical; it’s just the lifestyles that have diverged. Scientists have studied the two groups and found that nomads who had the ‘novelty-seeking’ receptor were stronger, healthier, better nourished than nomads who lacked it. Among farmers, however, it was the other way around. The novelty-seekers were worse nourished and less well adapted. In short, if you have a wanderer’s genes, you’ll do well as a wanderer but struggle if asked to settle down.
As far as I know, no one has ever taken cheek swabs from billionaires to conduct the same study, but they’ve come close. Twin study analysis conducted jointly by St Thomas’s Hospital and Imperial College in London and by Case Western Reserve University in Cleveland, suggests that around half somebody’s propensity to become self-employed is attributable to their genes – perhaps a rather lower score than you might expect. (Intelligence, for example, is about 75 per cent genetic.) On the other hand, it’s not clear that twin study tests such as these are methodologically accurate. Nearly all identical twins share an upbringing, so it’s hard to tease out genetic from environmental factors. In a world well set up for such experiments, there would be a plethora of identical twins forcibly separated at birth to make the data analysis easier, but alas such twins are far too rare to generate statistically meaningful results.
What’s more, self-employment is not entrepreneurship. Indeed, much entrepreneurship isn’t really entrepreneurship. A plumber, for example, or a lawyer, or an accountant may be self-employed, and may choose to house their occupation in a wholly owned, legally incorporated company. But neither self-employment nor corporate status is the test. The test is ambition. It’s all very well to start a business in your garage, but unless you start it dreaming of the corporate skyscraper you’ll move into one day, you are not an entrepreneur. (And this, by the way, is the real secret of American enterprise. The United States does create a lot of entrepreneurs, but so do some other countries. Almost nowhere, though, do entrepreneurs dream on a bigger scale, as measured by the employment growth expected by an entrepreneur over the first few years of the business’s life. Those outsize dreams have a lot to do with what makes the United States what it is.)
Other scientific studies have perhaps got closer to the mark. A very intriguing study conducted by Cambridge University studied the brains of 17 ordinary corporate managers and sixteen entrepreneurs, each of whom had started at least two high-tech companies and who therefore passed any reasonable test of entrepreneurship. Asked to make a series of routine decisions, the managers and entrepreneurs scored about the same. These were sensible people, analysing problems in a sensible way. As soon as they were asked to make decisions involving considerable risk, however, the entrepreneurs were consistently bolder. Knox D’Arcy would, no doubt, have been off the scale.
Bold, please note, is not the same as intelligent. Indeed, it’s a commonplace in the venture capital industry that founder-CEOs should be gently eased out of the hot-seat as soon as possible. Noam Wasserman of Harvard Business School quotes one venture capital type as saying:
Upfront, I ask founders to level with me. If they are interested in working with me on the basis of [their] being a big shareholder, then I am interested. If they are interested in working with me because they have to run the company, then it’s probably not going to make sense for us to work together.
This attitude, a common one in the industry, would make no sense if that entrepreneurial boldness was the same thing as profit-maximizing genius. It isn’t. It’s gambling, linked (as Wasserman also points out on the basis of careful study) to the tendency among entrepreneurs to be markedly more optimistic about outcomes than their peers.
The trouble is that any attempt to measure optimism in laboratory conditions founders on a basic difference between entrepreneurs and the rest of us. It may, indeed, look to us as though entrepreneurs are ‘too’ optimistic, yet that’s to make the mistake of looking at their