Category Archives: School

Entrepreneurship

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The third and final class I’m blogging about is my Entrepreneurial Thinking class. You know how when you’ve got a really good idea fresh in your head, you have that sort of “fire in your gut” as the professor calls it? That’s basically how I feel all class.

I think I’ve been thinking all wrong. Most of my business ideas begin with winning the lottery. One of my ideas is for a sort of two-way radio “superstore,” one right over the NH border and one in Boston. There are all sorts of neat details and I think it’d do really well. But I’d need a few million to start each of them, after you figure in real estate, labor, and carrying a big inventory. There’s a mall I’d like to buy out, revitalize, and make a killing on, but that’s a few more million. I have a lot of ideas that I think would work very well, but almost all of them involve having a ton of capital up front.

The way to do it, I’ve found, is to spend no money. We talked about SkyMall. Anyone who’s flown will recognize their catalogs, a sort of ‘metacatalog’ of all sorts of neat stores. They spent millions starting the business up, setting up a big IT infrastructure, setting up warehouses at airports for instant delivery, and so forth. The catalog companies were selling them the merchandise at substantial discounts, and he was paying just a little bit to the airlines to carry the equipment. The article we read about them ends with him on the verge of bankruptcy. Obviously the story doesn’t end there, because they now seem successful.

So then the professor told us we could start it in class, using only the money we had with us. We’d sort of already established that the real business was acquiring new customers for the catalogs: SkyMall isn’t a retailer, they hook you up with the appropriate retailers and take a cut of the sales as commission for connecting customer and retailer. So we got that step right in class. But then he asked what was next. No one said anything, so I volunteered that we’d then have to get the airlines to cooperate. He asked me how. “I think they did it right. You pay them a small cut of your profit for each sale, and promise to pay them a modest amount if no one buys anything, to cover their costs of carrying the catalogs,” I told him. “Really?,” he asked. There was sort of a silence, since no one else saw what I had missed.

He proposed that we not pay the airlines anything. I couldn’t understand why the airlines would agree, but he explained that in short answer: passengers are stuck in a big metal tube for hours, and it’s up to the airlines to entertain them. You don’t market it as, “Will you please carry my catalog, I’ll pay you?” You market it as, “Hey, why don’t you carry my free catalog to entertain your passengers! That way you don’t have to pay anything!” And there’s no risk to them–at worst they just throw your catalogs away.

So I was reminded of one of my favorite business models ever. For all I know it’s urban legend, but I don’t think so. Some guy found that some industrial process was being left with some sort of waste that was extremely expensive for them to dispose of. They were paying through the nose for someone to dispose of it. The same guy knew that somewhere else, people were looking for that waste, because it actually had uses. (Sort of like the fruits I mentioned from negotiations class, actually?) So he charged for the disposal, but undercut the competition. And, having just been paid to take it, he then sold it to someone else. Rather than the traditional, “Buy and sell at a markup” model, he was charging at both ends. As the Guinness guys would say, brilliant!

But I guess the other aspect is a sort of “organic” growth. Some things might work if you start with millions of capital upfront, but if you can start a business from the spare change on your desk, you really don’t have much to lose. Your real asset becomes your networking capabilities, not your fundraising capabilities.

Homelessness

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My second class was my “Outsiders and the Law” class. We were supposed to be discussing homelessness that class. Our professor got a group of four people to come from a homeless shelter. The director was one of them, and explained that we’d do a sort of ‘exercise’ first–of the three others, two were staff members at the shelter, and one was a resident of the shelter. We’d get to ask questions, and, at the end, guess which was the homeless person. (Something about “Spot the homeless guy!” seems insensitive, but I digress.)

The first person was a guy, probably mid- to late-twenties. He had several facial piercings, was clean-shaven and well-groomed. #2 was fairly well-dressed. #3 looked a little unkempt. He definitely fit my mental perceptions of what a homeless person would look like. Before we even started, I was positive it was #3.

One of the first questions was something like, “What’s it like to be homeless?” #1 said it could be liberating at times, but that at other times, it was no fun. (I’m heavily condensing answers.) #2 basically said it was a drag. #3 began with, “There’s nothing liberating about it.” I told you it was #3!

Another question basically asked their stories. #1 started using drugs, got hooked, and ended up being homeless. He told us, rightly somewhat proudly, that he’d been clean for 82 days. The inclusion of specific details like that made me reconsider a bit. But then #2 went and gave specific details galore. She was a victim of domestic violence. Her voice was really quiet and melancholy, and she looked at the floor the whole time she talked. She lost her job and ran out of friends to stay with, and her therapist referred her to the shelter. #3 was disabled, and one day his wife decided she didn’t want to be with him anymore. He left with not much but the clothes on his back, no source of income, and he couldn’t work. He receives SSDI, but not nearly enough to pay for an apartment.

All three basically said they were there until they got things together. None intended to stay there a moment longer than necessary, but with no job and no home, there wasn’t much else to do but stay in the shelter until they could land a job and get an apartment.

Someone else asked about the role of families, and why they weren’t with family. #1 praised his family, and said they’d really been there for him, but that they eventually stopped letting him into the house when he was on drugs (most of the time). And when he started stealing from them to buy more drugs, they kicked him out for good. #2 gave a somewhat vague answer, but I think her father was never there for her, and her mother supported her somewhat but usually wouldn’t let her stay over. Just the way she spoke screamed of utter despair. I started to think that it was #2, not #1. #3 was in his 50s, so moving in with his parents wasn’t exactly an option.

I asked about how they spent their days. #1 said that there were some “day programs” the shelter put on, but that there really wasn’t much to do. #2 has a part-time job at Dunkin’ Donuts, but talked about how hard it is to find jobs. You need to list a phone number on the application, which is the payphone at the shelter. It’s not answered too reliably. And everyone knows the address of the homeless shelter, so even though there’s no, “Are you homeless?” question on the application, most employers know it. Worst of all, she said, the shelter has a 4:30 curfew–if you’re not in by 4:30 p.m., you can’t come in. This doesn’t work too well with her job, and she’s also scorned by coworkers. (“She can’t work any later because she’s homeless!”) #3 talked about how he’ll spend some time in the library, and, with all the heat, he’d spend a fair amount of time at the beach, but he noted that it’s not nearly as glamorous as it sounds–with no money and nothing to do, spending time at the beach was really pretty miserable.

When we guessed, #1 received 1 vote. #2 received about 50%, including me. #3 received the other 50% or so.

It was #1. He’s been clean for 82 days, but he doesn’t have much to his name, and he describes himself as still healing. #2 and #3 both work at the shelter, but noted that their stories are a mix of their own past experiences and experiences of those they know.

It was really a good way to break some stereotypes, namely:

  • The homeless person “looked” the least homeless…
  • There’s an image of homeless people as burnouts who stay homeless forever. #1 was working hard to get his life back together, and seemingly making great strides.
  • The perception of the homeless as all being alcoholics isn’t that accurate. Apparently about 30% self-identify as alcoholics, but we saw a myriad of reasons for homelessness.
  • Sometimes the homeless hold jobs, but it’s hard for them to get those jobs, and having a job doesn’t automatically buy them a house.

Negotiations

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This week I’ve had four classes so far. In three of them, I’ve learned something that’s kind of profound in a way. So consider this the first of three posts in a series.

One of my classes is Negotiations. It’s part of my management major, but just talking, a lot of people think it should be a required course, since it’s a skill that’s not at all limited to management majors. I’ve had the professor before. He’s one of those great professors who keeps you engaged and yet doesn’t give much work. And despite the fact that there’s not a lot of work, you really learn a lot. So it’s sort of a win-win class.

When we met Monday night, he talked a bit about negotiations, and then gave us an exercise. We split up into teams of two. The assignment was that we were both bidding on a very rare fruit. I was part of a UN delegation, and we were extracting part of the prune to help grow food in infertile regions. My work would save 20,000 lives, and I was given a budget of $2 million to get these prunes.

It seemed like I had a slam dunk case. My strategy was to not even mention my price, just that I was going to save so many lives. How could he let all those people die?

He represented a major pharmaceutical company. So my strategy shifted a little–he probably wanted to research what was in them. So, in return for him not bidding on them, I’d give him a few of the fruits to study for free. That still left us with most of them, and would satisfy both of our needs.

It turns out that he needed all of them, for a new medication that would save lives, too, by preventing heart attacks. There goes my humanitarian appeal. And his budget? $5 million.

I tried to talk him into splitting the lot. I’d buy 2/7 and he’d buy the remaining 5/7, with our $7 million combined. But he had no incentive to do it–his boss wanted as many as they could get. (He also wouldn’t take a bribe.)

We went back to class and reported on our findings. A few groups, like us, couldn’t find any compromise. A few found bizarre compromises. But only one group found the ‘secret’ of the exercise.

We didn’t need the same part of the fruit. What was a ‘waste’ product to my firm was exactly what the pharmaceutical company needed. We even talked a little bit about our goals, but never got into enough details on what part of the fruit we needed. We just assumed we needed the whole fruit. I won’t be lame and try to point out the morals, but suffice it to say there are several.