In 1983, the Harvard Business School published a paper entitled ‘A Perspective on Entrepreneurship’ written by Professor Howard H. Stevenson, that defined the differences between entrepreneurs and employees. It is one of the most articulate articles on this particular subject that I have read. While many differences were examined, I found two in particular to be especially insightful.
The first difference between entrepreneurs and employees is:
1. Employees are resource-oriented. Entrepreneurs are opportunity-oriented.
A person with an employee mindset might say, “I would start my own business but I don’t have the money.” Or “I’d love to invest in that piece of real estate, but I don’t have the down payment.” In both of these examples the person focuses on their resources, in this case their lack of money, rather than the opportunity.
In a similar situation, a person with an entrepreneur’s mindset might say, “Let’s start the business and we can finance the business from the cash flow.” Or “Tie up the property and we’ll find the money later.”
My poor dad was a man who saw many opportunities, but failed to act on them simply because he was resource-oriented. Instead of taking action, he often said, “I wish I could do it, but I can’t afford it.” Or “I would go into business for myself, but I need a steady job. I have a mortgage and you kids to feed.”
My rich dad, an entrepreneur and my best friend’s father who taught me a lot about how the rich think about money, was a man who started with nothing, but eventually became one of the richest men in Hawaii. Today, when you look at Waikiki Beach, you see some of the biggest hotels along the ocean on land his family owns. He said, “If you do not have resources, you need to become resourceful.” That is why he forbade his son and me from saying the words “I can’t afford it.” He said, “Poor people say ‘I can’t afford it.’ That’s why they’re poor.” Instead he insisted we learn to say, “How can I afford it?” He believed that when we said, “I can’t afford it” our minds were turned off and went to sleep. When we asked ourselves, “How can I afford it?” our minds, our greatest resource of all, were turned on and put to work.
The second difference between entrepreneurs and employees is:
2. Employees prefer to manage via hierarchical structures. Entrepreneurs manage via networks, utilizing the resources of other people and organizations.
This means that employee-type leaders would rather hire people and bring their talent “in-house.” Rather than have an outside firm do their creative work, an employee-type leader would prefer to hire the talent and have them under their control. While there are economic reasons for doing this, the report stated that the primary reason is control. This is because employees gravitate to a leadership style that is more suited to a military command-and-control type of organization. My poor dad was successful in the hierarchical structure of the government, eventually rising to the top of the educational system as Superintendent of Education and running for Lieutenant Governor for the State of Hawaii. After losing that race – and his position as Superintendent of Education – he tried his hand at entrepreneurship. He purchased a national ice cream franchise that failed in less than a year. Why? While the reasons were many, one reason was his leadership and management style. When he said, “ Jump” … no one jumped.
Instead of the military’s command-and-control leadership style, my rich dad used a more cooperative and collaborative style of leadership. He encouraged his son and me to learn to lead and manage people who are not required to follow our orders – people who did not need to jump when they heard the word “Jump.” Rather than hire people and bring them in-house, rich dad networked with other people and organizations, which tended to reduce his costs and at the same time increase his resources and influence in the marketplace.
Today, The Rich Dad Company follows my rich dad’s advice. Instead of becoming a stand-alone publishing house, we choose to cooperate via a joint venture agreement with The Time Warner Book Group, as well as licensed publishers around the world who offer our books in 43 languages. In this way, we keep our core staff small, yet we utilize the thousands of employees of publishers around the world.
But leveraging the assets and resources of partners is not enough. It’s important to choose the right partners – ones who are aligned with your goals and values.
Choosing the right partners can make the difference between success and failure – as I’ve learned the hard way.
As The Rich Dad Company has grown, we have worked with partners who have opened doors to opportunities that were much greater than what we could have been able to pursue on our own. In an entrepreneurial spirit, we formed alliances with major media organizations and international promotion firms that leveraged the Rich Dad brand with their worldwide networks.
In doing so, we – as entrepreneurs – stay small, yet increase market share by cooperating rather than competing… by networking rather than hiring employees and bringing work “in-house.”
In 1989 the world changed. That’s when the Berlin Wall came down and the World Wide Web went up. Instead of a world of walls, we became a world of webs… networks of people working cooperatively rather than competitively. It is a special honor for me to be recognized by Amazon.com, a pioneer in the brave new world of the web, founded by a great entrepreneur, Jeff Bezos. We at The Rich Dad Company join in celebrating Amazon’s successes and salute your leadership in this world of webs rather than walls.
There are key, fundamental differences between the mindset of an employee and the mindset of an entrepreneur. One of the great things about this world of webs is that the world is now open for business to billions of people who choose to think as entrepreneurs – rather than employees.