Thomas Hellmann

Professor Thomas Hellmann is a member of the faculty at Saïd Business School, University of Oxford, where he is the Academic Director of the Entrepreneurship Centre. His areas of expertise are entrepreneurship, venture capital, innovation, contract theory, strategic management and public policy.

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Thomas Hellmann

Professor Thomas Hellmann is a member of the faculty at Saïd Business School, University of Oxford, where he is the Academic Director of the Entrepreneurship Centre. His areas of expertise are entrepreneurship, venture capital, innovation, contract theory, strategic management and public policy.

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Can an entrepreneur learn from the academic study of entrepreneurship?

There are two questions. One is, can entrepreneurs learn? The other one is, where do they learn the most? Some people argue that entrepreneurship is something that you’re born with, so entrepreneurs are born and cannot be taught. I think that is fundamentally wrong.

We have increasing proof that entrepreneurship is a learnt behaviour. We know it from certain studies, which show that having entrepreneurial parents gives you an edge in becoming an entrepreneur yourself. We’ve seen a huge rise in institutions that help people to refine their entrepreneurial skills both in university and increasingly in the private sector—such as the accelerator programmes that are in fashion today.

Then, there is all sorts of other evidence. Venture capitalists prefer entrepreneurs that have done it before: serial entrepreneurs. And entrepreneurs, themselves, say that they get better at it. So, clearly, there is a lot of learning that happens.

“Rather than starting with entrepreneurship itself, I want people to get the really big picture of why we are doing this and why entrepreneurship is important for the world”

The question then is, can academic study or, more broadly, scholarship add to that? I would say both yes and no. It is, in some sense, a trade where a lot of the skills are acquired through experience, just in the way that you cannot become a good tennis player unless you play tennis. But, at the same time, in that learning process, there is an enormous amount of waste, wasteful time and wasteful efforts, that can be prevented by having the right frameworks and concepts in place.

That’s where people interested in entrepreneurship can learn a lot from books, courses, and personal conversations with mentors—all of which are trying to point them in the most promising direction.

Tell me about the books you’ve picked. Is there a story you had in mind with these particular choices?

Entrepreneurship is difficult to define and a diverse area of interest, both in terms of practice and in terms of scholarly work. So, what I tried to do in choosing my books, is to deliberately bring in books of very different authors, very different audiences, and very different approaches. Not everybody would consider every book to be about entrepreneurship, and different people will have different views on what ‘entrepreneurship’ is and what it isn’t, but the point of the selection of books is to bring in the incredible diversity of thought that is out there and the benefit that we can get from different kinds of inspiration.

Let’s find out a bit more as we go through the books. Your first choice is The Discoverers (1983) by Daniel J. Boorstin. I haven’t read it, but it’s supposed to be amazing.

This is probably the least obvious pick of the five, but it is the book that I often recommend to students who come to me with a true curiosity. It’s arguably more about innovation than about entrepreneurship per se. (Here we already have a question about whether entrepreneurs are innovators. Yes, a lot of them are, but not all of them. Are all innovators entrepreneurs? Absolutely not!)

The Discoverers is about the origin of a lot of entrepreneurial activity, which is human curiosity. It’s an amazing book that covers several thousands of years in human history.

It looks at human history through the angle of innovation and how much people struggled to identify new ideas and concepts—ideas and concepts that we take for granted. It’s that process of struggle and going down the wrong lane and having all sorts of surprises along the path that is so intrinsic to the entrepreneurial process.

Rather than starting with entrepreneurship itself, I want people to start there and get the really big picture of why we are doing this and why entrepreneurship is important for the world.

“My favourite part is about Christopher Columbus. That really is an entrepreneurial story”

I’ll give two or three examples from the book and chapters that are particularly interesting. One part of the book I really like is called “Time” and it describes the history of how mankind discovered the concept of time and started measuring time. And this is very unobvious—and it clearly has nothing to do with entrepreneurship—but it is incredibly relevant because it is about discovering the ambiguity and difficulty that a human has to make sense of something. But once you have it, it becomes so clear.

Today, for us, a clock is the simplest thing in the world. We teach five-year-olds how to read them—but for thousands of years people didn’t have clocks and they didn’t have this sense. There were so many aspects that were required for people to understand and then measure time. This is an eye-opener for the kind of challenge that we, as humans, can face and solve. It’s amazing how we can measure time today.

The part of the book I love the best is the story of the explorers. It’s really fun, but the book does an exceptional job in explaining how difficult the major discoveries were. My favourite part is about Christopher Columbus. That really is an entrepreneurial story. Here is an entrepreneur who spends a lot of time trying to find the money to do an exploration. He’s looking for the western route to the Indies. The notion of discovering a new continent never occurred to anyone in the entire process until they found land and in fact mistakenly took it for India.

That is a beautiful analogy of the entrepreneurial process. First, you have to put a lot of effort in to get something going. And then when you get something going, something else can happen and it can turn into something completely different to what you expected.

So, those were some of the things that really opened my mind about innovation and this process of going from not understanding and not knowing to something that we understand and take almost for granted.

So, with your students, do you tell them that, rather than looking at spreadsheets, you’re all going to take a big step back and think about the huge scope of history and think about ideas to open their minds? Is that part of your work?

Yes, we do some of that. We certainly teach them and try to alert them to the immense part of things that we don’t know. In fact, we sometimes give them practical tools for figuring out what they don’t know, and for generating listening and observational skills that will open them up to the things that are not being said.

And then, when they are studying the entrepreneurial process, it’s all about looking for the gaps. It’s all about looking for the things that are not there.

Like what? What might be not there?

Let me give you a practical example. There’s a group of students who were thinking about starting some kind of medical device company. Instead of saying, ‘Here’s a solution to a problem where we don’t understand the problem and we’re not sure if our solution works’—which is the bad way of doing entrepreneurship—they started by being very careful about trying to understand what the underlying practice is.

They spent some time being a fly-on-the-wall in an operating room and observing surgeons doing surgery for a couple days. They discovered that certain movements of the surgeons were taking a lot of time, delaying the operation and were probably unnecessary. The surgeon kept facing the patient but then having to look at pictures that were located somewhere else in the operating room.

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They then came up with a solution because they understood a problem that nobody was aware of. Surgeons who had been doing this procedure for years were never aware of the problem. They figured out that by projecting the image that the surgeon was looking at onto the body of the patient, they could improve the efficiency of the operation.

That’s an example where nobody knew the problem really existed. You could have just come up with a new device, but what the actual surgeon needs is something very different.

The next book on your list is Steve Jobs (2011) by Walter Isaacson. I have to admit I’ve never been particularly interested in Steve Jobs but I started reading this book and now I am. It’s completely engrossing.

I must say, I love this book. I have incredibly ambivalent feelings about Steve Jobs the person but the book is fascinating for anyone. Steve Jobs has become a cult figure and a lot of things are projected onto him—both good and bad—that probably don’t really apply. Walter Isaacson really makes a sincere effort to get to the truth but, at the same time, highlights all the interesting parts of his life.

He focuses on why Steve Jobs was such an unusual character but also to what extent he represents the spirit of Silicon Valley and modern entrepreneurship. I think Steve Jobs is, for all his flaws, almost a symbol—and certainly a role model—for a whole generation of young people who want to be entrepreneurs.

What’s so interesting about Steve Jobs is that there’s a lot of going against the grain. He defies all the classic definitions about what you would expect from an entrepreneur—certainly for a businessman—so that is beautiful. This is the hippy who comes to business meetings without shoes.

“Every entrepreneur faces severe frictions, and I think what Jobs shows is that he is willing to tackle those frictions”

It certainly brings out the personal side of entrepreneurship. One of the things about entrepreneurship that I put a lot of emphasis into teaching is that it’s not a thing, it’s a process. It’s not one act; it’s often a career.

And here you see, basically, a person’s life work. And it doesn’t go in a straight line—it’s an incredibly crooked path. For every thousand people, one is Steve Jobs and the other 999 have similarly crooked paths but without the success that Steve Jobs had.

I think Walter Isaacson is very good because he’s very open about bringing out all the human flaws in Jobs. In fact, some of the people were not happy about the way he portrayed Jobs. He basically got an agreement from Jobs to write what he saw and what he knew, and he did so. I think that, as a journalistic effort, it’s also quite remarkable.

It’s quite funny as well.

It’s extremely well-written. It’s a page-turner. You actually want to know how the story ends. And funnily enough, at the end, you like Steve Jobs. You feel guilty about liking him, but you do like him.

He’s impossible. He cries a lot and has temper tantrums to get his way. To be a successful entrepreneur, do you need a very forceful personality? In talking about Jobs, there seems to be a lot about his perfectionism and his willingness to say, ‘That is just not good enough, you’ve got to do better.’ I guess what I’m asking is—is part of what’s unlikable about him also part of the reason he succeeded?

There is an element of that. I don’t endorse some of the practices that Jobs had. He was at times mean and disrespectful in ways that are quite unnecessary.

The other thing to say is that there is no one style of entrepreneurship. Having had the luxury of meeting thousands of entrepreneurs over my career, I have seen people who are a bit like Steve Jobs and also people who are incredibly different— maybe incredibly dull or incredibly polite…It’s very hard to generalise.

“One of the things about entrepreneurship that I put a lot of emphasis into teaching is that it’s not a thing, it’s a process. It’s not one act; it’s often a career”

But every entrepreneur faces severe frictions, and I think what Jobs shows is that he is willing to tackle those frictions. That’s why he says, ‘It’s not good enough’ or ‘Let’s do the impossible’—they talk about this ‘reality distortion field’ that he had. I think entrepreneurs all need something of that kind. It doesn’t have to be the way Jobs does it, but they need something of that kind to get them through, because innovation is about breaking through barriers.

Just like in Boorstin, it’s about people doing extraordinary and often unexpected things in order to achieve these major breakthroughs. Unless there is drive, nothing happens. And Jobs was extremely driven.

Let’s move on to your next choice, which is The Lean Startup (2011) by Eric Ries.

I call The Lean Startup the Bible of the modern entrepreneur. And I say that tongue-in-cheek because I’m sure five years from now we’ll have a new Bible. But I think it’s a very good book—a very useful book—and it tells you how to start a company using this ‘lean startup’ methodology.

Eric Ries wrote it up very well. There were several people around him who were developing this methodology as well. This is not rocket science. It’s very straightforward: build-measure-learn. Basically, it says do something, try it out, and learn from it.

That process is incredibly powerful, but it turns out that a lot of entrepreneurs don’t do it, or at least don’t do it properly. Eric Ries makes a very simple case for why you should do it and how you should do it. So I give this book to every entrepreneurship student. Most of them are familiar with it—there’s a whole industry around the ‘lean startup’. You can find tons of webpages, books, courses and all sorts of other things.

“I call The Lean Startup the Bible of the modern entrepreneur”

It has got some limitations, and that’s why I’m sure five years from now we’ll have a new Bible. Eric Ries comes out of the software world, where some of these methods work particularly well. I think the lean startup works well for the vast majority of companies that have very identifiable targets that can be achieved in a reasonable amount of time.

But there’s a big question about whether it works for the really long-shots. A lot of science-driven and long-term innovation companies will find the details of the Lean Startup difficult.

An exercise I give to my class involves familiarising the students with the concept of the lean startup and then going back to Steve Jobs and asking them whether he used the lean startup. And the conclusion is generally, no, he didn’t. He didn’t use the methodology that Eric Ries did, although you can have an interesting debate about that. Steve Jobs also did some things that Eric Ries says you shouldn’t do. So, I think there remains some healthy controversy about which 80 per cent of this book is true.

The lean startup method is ultimately about constant experimentation to see what works, is that right?

Exactly. Eric Ries doesn’t point this out but—and as a university professor I cannot help saying this—actually, he rediscovered the scientific method for entrepreneurs. The scientific method is: make a hypothesis, test it, validate it, and then figure out why it works the way it works and when it works and when it doesn’t. It’s actually very consistent with the way we teach people to think in a university. I think the beauty of Eric Ries is also that it’s not just about thinking, it’s about doing—as a scientist and, to some extent, as an entrepreneur.

Another point he seems to emphasise is that entrepreneurship is management. Is that of interest to you?

Yes, that’s music to my ears because I work in a business school! I think some people have a narrow interpretation of management and think of line management or general management and say that entrepreneurs themselves are not managing. But if you don’t have that specific notion of management then, yes, entrepreneurship is about managing a whole set of activities.

“Think of entrepreneurs as generalists. They sometimes call them jack-of-all-trades. As an entrepreneur, you’re responsible for everything”

I think the complementary piece to this is to think of entrepreneurs as generalists. They sometimes call them jack-of-all-trades. As an entrepreneur, you’re responsible for everything. In that sense, you’re managing because you’re putting the whole project together and you’re responsible for everything.

Now we have The Founder’s Dilemmas (2012) by Noam Wasserman.

First, full disclosure: Noam Wasserman is a co-author of mine. He wrote this book while we were working together, so a little bit of our material made it into the book.

The Founder’s Dilemmas is a nice complement to Eric Ries’s book. It looks at the human or personal aspect of entrepreneurship. He’s using a modern and fairly fresh perspective that will speak to all generations.

The Founder’s Dilemmas is based on Noam’s research which is qualitative: a substantial number of in-depth case studies of entrepreneurs and what they went through when they started their companies.

He looks at all these human problems that come up, from career decisions about whether to become an entrepreneur, to numerous decisions about how you’re going to manage a team, all the way to how you deal with failure and success and transitions, towards the end of the entrepreneurial process.

“You have to realise that, as an entrepreneur, there is no distance between business and personal life. That’s the beauty of this book and some of the stories”

It’s got lots of these little stories that make it very personal and very easy and fun to read but, at the same time, it tries to extract some of these core questions that an entrepreneur has to ask him or herself about, why I am doing this and how do I deal with that side of the business?

So, Eric Ries basically is talking all about the business side but he doesn’t touch on the human aspect of it. And Noam doesn’t really touch much on anything that Eric Ries talks about—how you start a business in terms of business model and customers and finance and all of that. He is really looking at that human side. And so, for me they complement each other very nicely.

Tell me something that’s in it. I read the bit about somebody starting a company with his girlfriend, where Wasserman discusses whether it’s better to start a business with friends or strangers.

You should see Noam in class. He can dramatise these things and put people on the spot. You have to realise that, as an entrepreneur, there is no distance between business and personal life. That’s the beauty of this book and some of the stories. You cannot separate business decisions from personal decisions because the business is two people and a dog. And if they’re married to each other, then a bunch of marriage problems are going to enter the business, and a bunch of business problems are going to enter the marriage, like it or not.

Noam himself had worked for a venture capital fund that basically said, ‘we will never invest in a company where the founders are married to each other.’ That’s an interesting indication, that those investors believe that companies with married founders are doomed.

There is a sequel that could be written to Noam’s book; Noam’s book is very focused on a western—and, in fact, a US-centric—world and I think some of these issues play out very differently in other cultures. That’s something I’ve experienced with my teaching. Some of these family issues would be viewed extremely differently in an Asian or African context. So, there’s more to be said about this topic. But Noam does a very nice job of bringing alive the human conflicts.

Give me a good example of a conclusion he reaches that is quite surprising.

One of the things that Noam looks at is the decision in a team of whether they’re going to split the ownership equally or not. He has several stories and we have our research that looks at the issue more deeply. Basically, while it may seem very intuitive and natural to go for a quick handshake that says we’re all the same, it turns out that that decision is very problematic.

The stories and our data evidence point to equal splits being tempting as a strategy for sweeping issues underneath the carpet that will come back to haunt you later. And so, what we find is that teams that face this very difficult question of who should get more or less early on overcome a very important first hurdle and actually have a better chance of building a strong team. So, basically, his advice is, ‘Don’t just take the equal split. Don’t just shake hands and say we’re all equal. Spend some time working through it and building a plan that acknowledges differences within a team, even though that conversation can be very difficult.’

I’m not sure how you do decide.

Well, you have to make sure these aspects are considered.

One of the beautiful examples that Noam has is a well-known one from Zipcar where the two founders shook hands and split the business 50/50. It turns out that one of them did 95 per cent of all the work and the other did five per cent of the work. And, clearly, the one who did 95 per cent of the work felt terrible about this.

Part of it was that life brought surprises. The one who didn’t do any work became a mother. They didn’t think about that when they were doing it. On the other hand, it also seems that the one who didn’t do any work could have done a lot more work and just didn’t want to. She knew she had 50 per cent of the business and didn’t have to work for it.

I’m not familiar with the intimate details of it, but Noam just shows you: ‘Look, these are human problems that come about and you should spend some time thinking about them before you agree to something.’

I love the quote he has at the beginning where he says, “if entrepreneurship is a battle, most casualties stem from friendly fire.”

I don’t have a scientific way of measuring this but I’ve seen my share of it too. It is a huge issue.

He collected and analysed data from 10,000 founders—so, presumably, it’s really a serious, analytical study.

Yes, and let’s break that down: he spent an enormous amount of time on 30 to 50 entrepreneurs, many of whom are discussed and named in the book, and then he’s also got a database—that’s the database that we worked on together—in which there is a much larger number and that’s, obviously, statistical analysis.

Your last book is Boulevard of Broken Dreams (2009) by Josh Lerner. This is about how governments can help or hinder entrepreneurship.

If you think of the first two books I chose as providing broad inspiration and the second two books as targeted at entrepreneurship and how to deal with the process, my fifth choice takes an economic and societal perspective and asks, ‘Is entrepreneurship something good? And, if so, should the government do something about it?’ So, it asks the bigger societal questions.

Again, in the interest of full disclosure, I know the author very well. We have been colleagues for over 20 years and I think Josh did a wonderful job in putting this together and verbalising a really important topic and giving it some coverage. At the same time, being 20-year colleagues, we have our healthy disagreements and continue to debate some of the details and conclusions of the book with which I beg to differ a little bit.

I think the important contribution—and why I think this is a great book—is that it covers a broad range of policies and government efforts in many countries. Josh is a well-travelled man who has seen a lot of these efforts to promote entrepreneurship across the world.

“There is a myth in Silicon Valley that it was all done in the private sector. That is plainly wrong and other authors have started to debunk that myth”

He tries to draw lessons at a point in time where it’s quite difficult to evaluate these programs on a scientific basis. I think he draws a wealth of conclusions from it about the pitfalls of governments being well-intended, but causing more damage than benefit by supporting these programs. On balance, Josh thinks governments are bad and his message is quite clearly to limit the amount of government intervention.

I come down slightly more positively on governments and have done some research, that came out after this book, that supports the notion that it’s not quite as bad as Josh makes it. That there are many nuances to the costs and benefits.

Isn’t one of the points he makes that even with Silicon Valley, the role of government was key to its success?

Yes. Going beyond the book, I think there is a myth in Silicon Valley that it was all done in the private sector. That is plainly wrong and other authors have started to debunk that myth. Silicon Valley has benefited enormously from government programmes and funding support, especially in the early post-war years, and through having the military as a customer. Also, in setting a good institutional framework. The popular notion that is sometimes portrayed about Silicon Valley, that this is all without the help of the government, is just wrong.

What the book does as well—and I think this is very important—is that it talks about how these government programmes can go wrong. In Malaysia, enormous investments were made without thinking about what was really going to happen and how entrepreneurial policy works. There Josh has some very positive messages that I like a lot.

He says, think of the government as setting the table, the boundary conditions and the institutional environment—especially things like rule of law, clarity, low taxation—that allow entrepreneurs to do what they want to do and then move back.

That is a very important message and I think Josh has helped to get it into policymakers’ minds. Today, the way that most policymakers look at the role of government for promoting entrepreneurship has matured considerably, relative to where it was 20 years ago.

What about the difference between Europe/UK and America in terms of entrepreneurship? Is the US much more entrepreneurial, from a data point of view, and is that because of government policy?

There is a difference between the US and Europe, for sure. Research continuously finds that. I think it is true that the government plays a larger role in Europe than it does in the US today. Some people say that’s why Europe is less entrepreneurial—because of the large role of government—but I’m not convinced. I think that Europe is less developed and that is why the government has stepped in. So, I see the causality going the other way.

There continues to be inspiration that comes from the US, but I think there is intelligent use of government policy in Europe that can help and has helped. In fact, the UK is one of the most entrepreneurial European countries. All policies have their problems, but the alternative of withdrawing a lot of government support could be quite disastrous for the future of Europe. I think, on balance, some of these government policies really did help. And nurturing an entrepreneurial economy remains a top priority in these turbulent times!

Interview by Sophie Roell

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