Stuff Matters: Genius, Risk and the Secret of Capitalism. Harry Bingham
certificated, organize manufacturing, retain sales agents, arrange logistics, rent premises, budget cash flows, compile tax returns, or anything else. In the first months and years of a start-up’s life, no problem has ever been solved before. If something needs to be done, then someone has to figure out how to do it. Sometimes that’s a phone call to a known expert. Sometimes it’s something that can be worked around. Other times it’s something to do yourself. Whatever the solution, there is never an established precedent, no one whose job it is to take care of the issue except you.
Indeed, speaking to Paul, I realized that for him creating a product had been straightforward; creating the company had been the challenge. Take, for example, the matter of marketing. Shipping is a global industry and Britain no longer has a significant merchant navy. If Martek wanted to sell its kit, it needed distributors in Singapore, Taipei, Oslo, Rotterdam, Mumbai, Hong Kong, Cape Town, Rio de Janeiro and a whole host of other places besides. That meant somebody – often Paul – climbing onto a plane and looking for local agents. How do you find the right kind of sales agent in Taipei? How do you know you can trust him? What kind of contract should you sign? What kind of income split makes sense? What kind of literature do you need to supply with the product? If you’re part of an established company, then all these questions have answers. There are existing agents, existing contracts, and a body of experience. When change happens, it tends to be incremental, building patiently on the lessons of the past.
An entrepreneur has no such comfort – and no such shackle. Martek’s success demonstrates that more often than not it got the answers right. But not always. No sooner had it launched its products, than rival producers in India simply copied them. The products were securely protected by patent, but all a patent really means is that you have a right to sue. Indian courts can easily take ten years to come to a verdict and the ultimate recovery of funds is highly improbable. Paul didn’t know all that to begin with and spent a few thousand pounds finding out. A more established company would have known that; it would have had a procedure in place telling it what to do.
I left my conversations with Alan and Paul reminded of a basic truth. Entrepreneurs are only rarely and accidentally inventors. Ford did not invent the car. Hoover did not invent the hoover. Rockefeller did not invent any oilfield or oil transport technology. Carnegie was no technologist, nor is Lakshmi Mittal, his modern-day counterpart. Paul Getty, it’s true, did invent the John Paul Getty Special, but that hardly qualifies him for induction into the inventors’ Hall of Fame. Knox D’Arcy, Gerry Lambert, Richard Branson, and Warren Buffett invented nothing. Mr IKEA, Ingvar Kamprad, invented nothing. Michael Dell and Michael Bloomberg invented nothing. Retail billionaires Walton, Sainsbury, and Albrecht (in the United States, the UK, and Germany respectively) invented nothing. They’re not unusual. Most entrepreneurs never do.
Indeed, if we tend to think of invention and entrepreneurship as running hand in hand, that’s partly because there have been one or two major historical exceptions to the rule (notably Edison) and because the modern software industry has made a number of inventive types very rich indeed. If you put the software industry aside for a moment, then not one of the richest people in the world made their money primarily or even largely from invention. Even in software, few people would suggest that Bill Gates or Larry Ellison or Paul Allen have been the most inventive people around. Their skills have been in turning their perfectly acceptable, but not highly innovative, products into the dominant brands of their respective markets. In fact, if you comb the lists of the world’s richest people for genuine inventors, then the only two names that truly qualify are Sergey Brin and Larry Page, the Google twosome – and it’s not a coincidence that the software industry is one where the gap between initial idea and market-ready product is an exceptionally narrow one.
Yet to focus on a lack of invention is to miss the point. For one thing, innovation doesn’t have to be about invention, in the Patent Office sense of invention. Richard Branson of Virgin reinvented long haul air travel, without needing to build a different sort of plane. He simply understood that business travellers were human too, that humans can get bored but like pampering, and he arranged his airline around those insights. Two American entrepreneurs, Herb Kelleher and Rollin King, reinvented short haul air travel via almost exactly the reverse insight: that radically simplifying air travel could hugely lower costs and thereby attract customers. Two sharply different business models. Two hugely successful challenges to the incumbents. Innovation without invention.
It’s this sense in which entrepreneurs most typically innovate. It’s what they do. There is no pre-existing structure so they cannot not innovate. Yet many of the entrepreneurs I met (Paul Luen included) are compulsive innovators in another respect as well. They innovate because existing structures bore them. The joy of creating something entirely new is far deeper than the pleasure of running something already established. It’s an attitude which in many cases will cause them to leave successful businesses before they should, nudge them into over-investing in risky projects. It’s the attitude which makes them what they are. It’s also the attitude which has turned the crazy inventions of others into products that work and sell and fill our homes. It may one day be the attitude that takes Alan Bond’s genius and makes it fly.
For wheresoever the carcass is, there will the eagles be gathered together.
– MATTHEW 24:28, King James Bible
The entrepreneur of these opening chapters seems to be quite some person. He or she needs to be restless and risk-taking, driven and organized, a persuader and innovator and doer all rolled into one remarkable person. You’d think such people would be rare indeed, but you don’t have to be a Carnegie or Edison to make the grade.
Take, for example, one Michael Mastromarino, formerly the CEO of Biomedical Tissue Services of Fort Lee, New Jersey. Mastromarino’s business involved the sale of human tissue – not exactly the kind of business to satisfy a childhood dream, but a perfectly legal one under US law. Sales of skin, bones, ligaments, arterial valves, and other bits and pieces are needed for a whole variety of surgical procedures. Although it may sound a bit creepy to have a free market operating in such things, there are some perfectly sound arguments in favour of the idea and Mastromarino did well at the business. His firm notched up millions of dollars’ worth of revenue and he himself made over $4 million. A textbook example of a free market solving an issue of scarcity, bringing vital products to those in need of them, at a reasonable cost, and driven by no more than a profit-maximizing firm’s desire to make a buck.
Alas, the textbook in question would need to be one in psychopathology. Mastromarino had started out as a talented and capable maxillofacial surgeon, whose main claim to fame was a chapter on bone-grafting in the promisingly titled Smile: How Dental Implants Can Transform Your Life. After suffering a painful fall, he started to dose himself with Demerol, an opioid-type painkiller. He got addicted, his professionalism suffered, and he ended up losing his licence and his livelihood. Fortunately, Mastromarino was restless and a risk-taker. As a surgeon, he’d interacted with tissue banks as a buyer – so why not as a supplier? He had the contacts, the surgical expertise, and that entrepreneurial vim and vigour so essential to the enterprise.
So he set up shop. He found undertakers willing to alert him when they had corpses available. He used his excellent surgical technique to extract good quality tissue, rapidly and without damage. He sold his material to a thoroughly reputable outfit, Regeneration Technologies, Inc. He was in business again. Nothing stood in the way of his success but the lack of raw material.
Driven and well organized, Mastromarino soon found a way round that particular problem too. He started to offer undertakers cash for every corpse they brought in. In poorer parts of the tristate area – the Bronx, Harlem, and Newark primarily – undertakers found the money too good to resist. Of course, there were problems. Tissue needs to be harvested very fresh, and from corpses that weren’t compromised by infectious disease, cancer, or the like. But that’s where the invention and risk-taking came in. Mastromarino learned simply to forge consent forms, to ignore warning signs of disease and cancer, to operate in rooms that were non-sterile on corpses that weren’t refrigerated.