We often hear the lament that Kiwi entrepreneurs lack the vision to build billion-dollar businesses. It’s said they suffer from the “3B” syndrome. In other words, they build businesses to an enterprise value of a few $million, cash up and get out. They buy a bach, a boat and a BMW then kick back to enjoy life.
During Covid lockdowns recently I’ve been doing some thinking about this and have two good reasons for asking; what is wrong with that syndrome?
Firstly if, as it is alleged, Kiwis are “3B”s, chances are they’ll live longer, happier lives and not scratch the surface of the planet too much.
It’s not a bad thing to build a business worth a billion dollars, but there’s a price to pay – I don’t know about you, but I have never meet anyone I liked who was motivated by money.
I’m not saying likeability is the most desirable human characteristic, but you do want the people who turn up to your funeral to be mourning your passing rather than making sure you’re dead.
Most of the mega-wealthy I’ve met, who worship at the temple of mammon, are one-dimensional, dull, devious and selfish. The more wealth they attain seems to make them more misanthropic. If they don’t ruin their kids while they’re alive, their departure from this world often sets in motion a bitter battle over inheritance.
Similarly, I’ve never come across a large organisation that isn’t dysfunctional. The bigger it is the more cumbersome, careless, wasteful and ecologically unfriendly it’s likely to be.
Furthermore, almost by definition, a company with a $1 billion market cap is most likely to be a publicly listed entity. As companies increase in size they require commensurate increases in working capital and there are few entrepreneurs in this country who are able to fund billion dollar organisations from their own piggy banks.
There’s the rub, shareholders who invest in such businesses are taking a punt on the expertise and integrity of others. Little do they know how much of the energy in big companies goes into internal politics and self-aggrandizement rather than wealth creation for the shareholders.
The other paradoxical result of building a company of such size is the fact that its most likely future is to be sold off to a multi-national giant, thus taking its value offshore.
So, I want to make a case for encouraging innovation and ingenuity rather than size in corporate life. Particularly in a Post-Covid world.
Just as Covid is causing the world’s major powers to rethink strategy and structure, the explosive spread of the internet has seen different business models drift out of the commercial mist.
Which leads us to the second reason for questioning the benefits of billion-dollar businesses – the emergence of the Long Tail, well described over a decade ago by Chris Anderson in his eponymous book.
The Long Tail was spawned by the ubiquity of the personal computer. Basically, Anderson said that our cultures and economies are moving away from a small number of big brands at the ‘head’ of a demand curve, to a ‘long tail’ of niches through the proliferation of opportunities made possible by the internet and e-commerce. Myriad on-line entrepreneurs are testament to this.
We are moving to an era unconstrained by shelf space and distribution bottlenecks. “Narrowly targeted goods can be as economically attractive as mainstream fare.”
That’s where invention and ingenuity come in and that’s where I think New Zealand businesses can excel.
New Zealand is a nation of SMEs. More than 90% of our businesses employ 10 people or less, it may be that we’re not good corporate animals. Culturally we may be too independent and self-sufficient to fit comfortably into large organisations.
There’s a wonderful World War 2 story told of General Freyberg driving Field Marshal Montgomery through New Zealand troop positions in the Libyan Desert. Monty commented that the Kiwis seemed to be ill-disciplined as they weren’t saluting. Freyberg replied; “But if you wave to them they’ll wave back.”
To me that epitomizes what were about. We’re open, friendly, intelligent, independent and unpretentious. The ‘Kiwi ingenuity’ thing is an overworked cliché, so I won’t labour the point, but I will say that by utilising that inherent ingenuity and the growing opportunities of the web, we can overcome the tyranny of distance and build companies that take advantage of the Long Tail. And by cooperating rather than competing in export markets we can create significant wealth and still retain ownership of the businesses we create.
Clusters of independent entities, rather than monolithic corporations are the way of the future. It’s called the Gig economy, getting its name from the fact that work in the future will come to us in the form of lots of different gigs, rather than a single, salaried job.
Hopefully then, if you’re a “3B”, you’ll be enjoying your life and will probably have enough time to relax and think of another idea that will lengthen the tail.