How do you become wealthy? This particular question has, of course, been asked through the ages. Who doesn’t want to be fabulously wealthy? In our highly capitalistic society, wealth confers upon those who have it authority and power, not simply because they have the means to do more with what they have, but because there is a presumption, one going back decades, that wealth is a mark of high intelligence, moral greatness, or even some form of divine favor.
The reality is much more mundane, and both disquieting and nonetheless instructive: wealth in general is due almost entirely to luck. A recent MIT study looking at what factors determined that a given person would become wealthy showed that most human traits – talent, beauty, intelligence, hard work and so forth – generally factored in only to the degree that they increased the number of opportunities that a person had to gain (or lose) wealth.
Wealth distribution follows a power law, and more specifically the Parietal Law – 20 percent of the population control 80 percent of the wealth. Of that twenty percent, twenty percent of those in the HAVE group control eighty percent of that (i.e., four percent of the population controls 64% of the wealth) and so forth.
Power laws tend to arise due to normal fluctuations in the distribution of opportunities to become wealthy. You may be born into a wealthy family. People who are will have more opportunities will have better education, more opportunities to network, and when those opportunities come up will also have the means to risk more than people who don’t. They also have more opportunities to fail, sometimes spectacularly, without necessarily destroying their opportunity pool – though enough failures can damage that pool sufficiently that they no longer have the opportunities they once did.
Societal mobility generally takes place when people have the means to take advantage of opportunities at all levels of society. The US is not as upwardly mobile as it once was – wealth is too heavily concentrated for that – but there are still opportunities to be had, and there is still a sizeable updraft for people to move up or down the rungs of success.
Successful entrepreneurship means putting yourself into a position where you can take advantage of opportunities – of luck – when they come. It means recognizing those opportunities, which as often as not are disguised as problems to be solved. It also means remaining liquid enough that you can survive inevitable setbacks and failures.
A number of young entrepreneurs have kept these lessons in mind. They have leveraged the power of networking and the advances in automation to build out businesses, often stumbling along the way. The other aspect of taking advantage of luck is to remain persistent, to adapt your business as opportunities change, and, most importantly to not give up. This article focuses on six young entrepreneurs who are taking advantage of intelligence, persistence and, yes, luck, to succeed.
Nathan Hirsch recognized a distinct problem in how corporations hire contractors, freelancers and consultants. Globally the economy is shifting to one where companies hire specialists to fill just-in-time needs. As more companies find that big staffing agencies often end up putting them into positions where it becomes too costly to draw back from or even fire those agencies, they are moving back towards hiring independent consultants and freelancers.
However, the one thing that the staffing agencies did do was to indemnify their workers, even though taking advantage of that indemnification often turned out to be more complicated (and costlier) than it was worth. Hirsch reasoned, successfully, that there was a business in vetting potential freelancers independently, without also being a service provider. Hirsch and his partner decided to launch FreeeUp and offer a better way to connect quality freelancers with business owners.
Healthcare products have benefited significantly from both AI capabilities and the connectivity and power of IoT. Jeffrey Sawyer Lee observed that the lowly bathroom scale had the potential to be so much more, and so applied many of the lessons learned from wearables such as FitBits to creating more intelligent scales. The scale is able to determine, from a person stepping onto or off the platform, not only weight but more general vital statistics, which could then be used to maintain a more comprehensive health record that could be transmitted to a computer over time. FitTrack, the company he set up to produce and market the scale, is likely to become valued at $120 million by 2020.
One of the central changes that has come about in most industries is the shift from mass production to on-demand manufacturing. For jewelry, this is a surprisingly appropriate model, as jewelry has traditionally been a much more bespoke industry, though for the most part jewelry still tends to be artisanal as well, with designs being sold that came from individual designers but that were in general fairly difficult to change once distributed.
Eric Toz took that model to heart, building up a company (Shine On) on the premise that providing a conduit by which designer and customer could interact remotely before commission of a piece would guarantee higher sales and fewer pieces sitting for potentially years in a jeweler’s inventory case. As with many other e-entrepreneurs his primary challenge came from the perceived disruption of the brick and mortar retail outlets that dominated that space.
Crowdfunding has had a huge impact upon e-commerce. With crowdfunding it becomes possible for a manufacturer to identify a business need and get a sufficient amount of micro-funding to do the initial development work on the product itself, providing these investors both the product early and often times creating a community in the process that can seed broader marketing efforts.
This was the route that Fashion entrepreneur Joel Bijlmer took. He found that when female friends of his went out partying and dancing (often in high heels) by the end of the night their feet were painfully sore. He came up with a new kind of sock with a hardened soul that can be tucked into a purse and slipped on afterwards to help relieve that pain. Dubbing these Aftersocks, he set up a crowdfunding effort that reached its goal within five days, and soon had a base of 4000 happy customers who spread the word quickly to others, including women in retail or restauranteering who might spend much of their day standing.
It’s worth noting how disruptive this model is proving to be, by the way. Traditional first stage investors typically look for opportunities like this because it can often mean getting a stake in the success of a company early, often at the cost of entrepreneurial ownership. Micro-investments, on the other hand, often let entrepreneurs build up a stake of (non sweat-) equity ownership that makes it easier to fund directly from revenue, without needing to go the route of private funding. Growth may not be as rapid, but entrepreneurs keep more control, one of the big reasons they build out businesses in the first place.
Advertising has been profoundly affected by digital transformation. Gone are the days when an ad campaign consisted of a full page photo and some ad copy on a magazine page, or a thirty second spot of a car driving along a winding seaside road. Social media marketing has meant multiple types of formats, each tailored to specific social media, with attention span requirements ranging from seconds to minutes at a time.
Not surprisingly, a whole new generation of advertising and marketing experts have taken on the challenge of creating engaging content for these environments. One of the better known is Depesh Mandalia, CEO of London based SM Connerce, who recognized early on that social media giant Facebook had the potential to be a powerful platform for advertising, but that it would take the development of both new tools and strategies to help crack that market. Today, Depesh has gained a following among media practitioners as his data-driven approach to marketing on Facebook has now grown to a $200 million dollar business.
Like Depesh Mandalia, Joshua Keller recognized that the marketing / advertising industry needed to change. Starting as an ad buyer in pre-social media days, Joshua focused more on the media-buyer’s role, setting up Union Square Media Group as a company that looked at the data aspects of buying media content.
This approach, where decisions are made based upon demographics, sentiment analysis and related fields, becomes especially important given that the growing proliferation of media platforms has also created a voracious appetite for content, and has broadened the range of content and story-telling modalities.