Dreamers and Doers

Why do people start new companies?

“Wisteria” by Claude Monet. Source: Claudemonetgallery.org

At the heart of capitalism is the start-up—a new project founded on an idea and some hustle that creates a business out of nothing. If the idea catches on, the founders can make a lot of money. If it flops, the founders learn what doesn’t work and move on.

Many folks fail in their first attempts. It’s a costly tuition. That’s because there are so many ways for things to go wrong: growing too fast, moving too slow, hiring the wrong people, being over-controlling. It’s like science: knowledge grows by proving what doesn’t work through experimentation. But experimenting with your life can be a volatile experience.

Most startups are founded by technicians—engineers, design professionals, real-estate developers—who may understand how to make a product, but who don’t necessarily know how to run a business. They pick up the business skills along the way—or not. Sometimes, the idea is so good that it succeeds in spite of their mistakes. But entrepreneurs don’t usually upend their lives for the money: they do it for the adventure, they have a vision, or because it gives them a sense of control over their own future—instead of wilting inside a bureaucratic structure.

Start-ups struggle to succeed because new ideas often do not scale well—you can’t just add more people to make something big. There may be a payout at the end; more often there isn’t. But a startup allows its founders to dream. And the founders believe, as some have said, that if you can dream it, you can do it.

Douglas R. Tengdin, CFA

Chief Investment Officer

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