A formula for spotting tycoons is a holy grail

First published in the Financial Times on 21st January 2014. 

Business leaders share many characteristics but defy attempts to be categorised

Whenever I am on a public panel, I am asked one question more than any other: what is the magic that creates an outstanding entrepreneur?

This week Gallup unveiled some of the findings from new research into this question. It has spent a decade on the project, called the Entrepreneurial StrengthsFinder, and interviewed more than 5,000 people. While the full results will be published this year, it says it has identified 10 key innate traits that highly successful entrepreneurs possess and labelled them like this: business focus, confidence, creative thinker, delegator, determination, independent, knowledge-seeker, promoter, relationship-builder and risk-taker.

It is hard to argue with this list. All the winning entrepreneurs I have worked with have possessed most of the above qualities to some degree. I have tended to use slightly different descriptions – ambition, extroversion and self-discipline, for example. Moreover, I think there are some vital characteristics Gallup has missed, such as optimism, numeracy, high energy and a sense of opportunism. But nevertheless, the list is useful.

Unfortunately, such formulas only go so far. By no means every high- achieving business founder has all Gallup’s defined strengths, and many individuals who possess such strengths never become entrepreneurs. And of course Gallup is hardly the first to devise such a prescription. I picked just three books from my shelf which have their own methodologies: So You Want to Be an Entrepreneur? by Jon Gillespie-Brown, the recent Hearts, Smarts, Guts and Luck by Anthony Tjan, Richard Harrington and Tsun-Yan Hsieh, and Profile of the Entrepreneur, or Machiavellian Management by Alan Bartlett – which was published more than 25 years ago. Each has its merits, and all are worth studying. And I am sure there are more such models.

It is one of my missions in life to find out why certain entrepreneurs become tycoons and why others fail. Indeed, such knowledge is the holy grail for every venture capitalist. But the unpredictable blend of brains, behaviour, genes, circumstances and serendipity that delivers a big hit cannot be forecast with scientific accuracy. You never really know before you commit if a project will be a smash.

Many claim, with hindsight bias, that they always knew a particular investment was certain to be huge, and that the management team were destined for greatness. But such assertions are delusional. Picking tomorrow’s industrial titans is as hard as choosing the Oscar or Nobel Prize winners of the future. Markets and competition cannot be predicted; nor can personal tragedies, politics, technology or cultural shifts – among the many influencing factors.
I strongly suspect one of the principal reasons the vast majority of economists avoid the whole subject of entrepreneurs is because these mercurial prime movers cannot easily be analysed, nor their innovations anticipated.

Policy makers and educationalists would also like an accurate test for entrepreneurial breakthroughs. Then they could back the right teams and sectors with government support, and possibly cultivate many more high-performing entrepreneurs. Schools, incubators, accelerators, banks and others could direct their efforts more wisely. Every country in the world would love to replicate the economic impact of entrepreneurial ecosystems such as Silicon Valley. But nowhere has.

Entrepreneurs are not really of a type. They are often intuitive, pragmatic and surprising. They emerge from unexpected places. Their backgrounds are varied; their interests diverse, their motives and methods are multifarious. As a cohort they are impossible to categorise neatly. As Number 6 says in the TV drama The Prisoner: “I will not be pushed, filed, stamped, indexed, briefed, debriefed or numbered.” But the complexity of any entrepreneurial journey, and the imperfection of our understanding of their psychology and distribution, has an upside for people like me. It means there are gaps: from time to time one stumbles across remarkable individuals and situations neglected by all those experts who think there are precise rules about entrepreneurship. That is why the endless search for the next Big Thing is so exciting.