Starting Your Own Company – Or why I am not a billionaire

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Almost allof us, dream every now and then about becoming the next founder of FACEBOOK,or Amazon, or the next Jack Ma. We all think we have good ideas that will let us start a company and make billions of dollars. I am no exception. During 1984-1994 I actually started my own company with the above dream in mind. Of course I did not succeed but did not lose money either (the initial $10,000 I investment returned $20,000 after ten years when the company liquidated).

By 20/20 hindsight it is clear why I didn’t succeed. There were two major mistakes which I list here to share with any aspiring young scholar.

1. I was not committed. To succeed you need to believe failure is not an option, i.e., 破釜沉舟. But I was doing it part time since I had a perfectly good and comfortable job plus consulting on the side. I was not hungry or desperate. Additional successes are not crucial to my happiness. Such an attitude is fatal.

2. I had the wrong business model. This is crucial. First of all, see: 看山跑死馬- Never mistake a clear view for short distancehttp://blog.sciencenet.cn/blog-1565-28314.html . Second, a good idea must be able to SCALE up if you wish to make billions. In other words, whatever product or service, once dreamed up by you, must be able to be produced or replicated by inexpensive labor ( by ordinary people not nearly as smart as you are) on a large scale or volume. All great commercial successes have this common characteristics. If everything has to be custom made or tailored for every client, then you don’t have the ingredient to scale things up. Thus, consulting cannot become a big business. Anyhow, my plan was to commercializemy idea of Perturbation Analysis (PA) http://blog.sciencenet.cn/blog-1565-29014.html . What I realized only later, that to apply PA to a real problem requires talented person who understands the theory behind PA and adapted it to the particular problem. This cannot be done by run-of-the-mill engineers with just BS degree. In other words, you cannot scale up “brain power”. After several years all I have accomplished is a slightly larger consulting business than my individual effort; created a couple of clerical positions and a small business of several hundred thousand dollar per year. My net income was not any larger than working alone and I have to work harder to support others.

Of course, you would immediately bring up the exception of McKinsey and Company which prospered under business consulting. However, their "successes” are built on a unique insight common to all BUSINESS and training a bunch of new but bright college graduates to do all the grunt work with lowpay. Besides how many of the partners of McKinsey are billionaires and how many McKinsey-like companies are there in the world?

So there you are. I don’t always succeed at what I attempted to do – Rule #5 of my seven life lessons http://blog.sciencenet.cn/blog-1565-5844.html. All aspring young enterpreneuers take note.

Note added 7/30/2015. I thank all the commentors for their remarks. However, it is importajnt not to read more into my article than there is. I am simply relating my own experience and offer, in my opinion, two of the many necessary but far from sufficient requirements for business success. The world is full of "How to succeed in business" books, millions more will be published in the future by expert authors. If there is a sure fire formula to be a billionaire, there will be many more than 500 such persons in the world.

Note added 8/26/2105. Here is another comical reason as to why I am not a billionaire. In 1981 I bought 300 shares of Apple stock (thinking it is a great company) at approximately 1 dollar/share with prcie adjusted for stock splits in intervening years. I sold this in late nineties and early 21st century at average price of 3 dollars/share. I was quite pleased with myself for tripling my money. Today the stock closed at 109 dollars/share even during the recent market collapse. While I consider myself a lucky guy and am quite happy and content in my active retirement, this shows I just don't have the killer instinct to be fabulously wealthy.