MIT track freshman record falls after 16 years

With John Noland, Andrew Romain, and Ed Patron, I helped set the 3200m relay freshman record at MIT in 1992 at 8:05.13.  We had broken the previous record, set the year before, by 17 seconds.  Sadly, 16 years later, our own record has been broken by 8 seconds (and the same team has already broken their own record by 3 more seconds).

Congrats to Prevost, Welle, Conrad, and Kleinguetl!

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The race recap:

The freshman 4x880 relay team of Richard Prevost, Paul Welle, Shawn Conrad and Kevin Kleinguetl wanted to go for the MIT freshman record of 8:05.13 set back in 1992, also at Harvard. Prevost, primarily a distance runner, led off with a fine 1:59.2 and handed the baton to Welle in third place. Even though the handoff was a bit sloppy, Welle got out well, took the lead halfway through and held on to first place, running an outstanding 1:57.6. Conrad held onto the lead for a while but could not stay with the top two runners in the final 200, handing off to Kleinguetl in a distant third despite running 2:01.5. Kleinguetl could not close the gap despite a 57.4 first 400 and finished with a 1:58.8 for a new freshman record of 7:57.23.

Are entrepreneurs crazy idiots?

I recently enjoyed Nassim Taleb's books after reading Stu Phillips’s thoughts about them. Taleb describes himself as a "skeptical empiricist", which means, among other things, he recognizes many difficulties of using past data to predict the future. A lot can change quickly and completely unexpectedly. An analogy he uses a lot is a turkey that gets a full meal every day and begins to think that it will always be comfortable and well fed - then Thanksgiving arrives and the turkey’s head comes off. In the financial world (Taleb is an "applied statistician and derivatives trader-turned-philosopher"), these "Black Swans" have shown up recently in a big way the credit markets. If only the CEO of IndyMac had read some of Taleb! He wouldn't have had to blame the ratings agencies for systematic underestimation of mortgage credit risk – or he at least would have been better prepared.

At the same time, though, I’m an entrepreneur. Entrepreneurship is about jumping off the cliff into the unknown (when Leo and I started Clickshift, right before his first child was due and after I turned down some low-risk opportunities, we named our first network "Two Lemmings"). Every investor meeting I go to is filled with all the reasons why the company won't make it. Statistics show the investors are probably right, since most companies fail. There is always more chance of failing than succeeding and no matter what we do, we can’t accurately predict the future from the past - but I take the leap of faith anyway. I’m even enjoying it a lot more these days while working on far and away the riskiest company I’ve ever tried. WTF?

As I get ready for my entrepreneurship class, I’ve been thinking about whether entrepreneurs are crazy idiots. Is there a way to be Taleb-loving rational, skeptical empiricist (a perspective I think you need to have to be a good entrepreneur, even if luck ends up as a major determinant of "success"), and then still jump off the cliffs anyway? Should we all go be dentists or lawyers or accountants and earn a nice living without all the risk? Being crazy or ignorant is certainly one path – it’s easier to jump off the cliff and in some cases, you’d get lucky enough after jumping that everything would work out. You’d be “successful” even though you’re really just crazy or stupid (or both) and lucky. I think that’s the pessimistic view of entrepreneurship, that only the crazy or ignorant people jump and then it’s all luck. Not even Taleb goes that far. No question luck plays a big role in any outcome, but that’s a bit unsettling for someone who makes a career in entrepreneurship. We’d like to think that we can do something to influence the company trajectory along the way. We want to be entrepreneurs, not just gamblers.

At a high level, gambling for a living is much less crazy than entrepreneurship. You can calculate the odds in cards and get your money in the pot when you have the best expected value. Especially after reading Taleb, it seems impossible to be even remotely accurate in assessing your chances of success as an entrepreneur. You have to jump, and the risk adjusted right choice on your first attempt will almost always be not to jump. (If you’ve been successful, whether by luck or otherwise on the first attempt, it can make sense to do it again – your financing options and odds of success are very different your second time around.)

In a few cases, jumping off the cliff can be the rational choice. As a student, for instance, you can take big risks, and if they don’t pan out, you just finish your degree (even if you dropped out of school to start the company) and have a normal career. Students can jump for free. So can some people with cushy jobs who can start companies in their spare time. You can also plan to jump more than once (unless your first one is a wild success and you end up on a beach somewhere). Chances are, any individual jump into entrepreneurship will fail. But the payoff can be quite large for the jumps that don’t. So like a venture capitalist who makes a bunch of bets, where some go to zero and some generate fund-making returns, a sensible entrepreneur needs to plan to make a portfolio out of his or her career. Instead of thinking to yourself as you step off the cliff "if this one fails, I'll get a real job", think "if this one fails, I'll take what I learned and swing for the fences again." If you're only willing to try it once, you're just buying lottery tickets. That can be fun, but it’s not rational.

You don’t have to be a crazy idiot to be an entrepreneur, but if you’re focused only on the outcomes, it rarely makes sense to take the leap. Do it because you love it and because you enjoy the process. As Taleb says about irrational things, do it for the aesthetics. Don’t do it for the returns.

Technorati: entrepreneurship

Syllabus - LAWS 61702 (Entrepreneurship for lawyers)

I'll be posting a bunch of stuff here for my class at Chicago. I'm hoping that by doing so, I'll enable a broader dialogue on the topics we're covering. At any rate, the syllabus is below. Class starts March 31st, and I'll post the teaching material and interesting discussion points as we go.

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Syllabus – LAWS 61702
The Business of Entrepreneurship for Lawyers
John Rodkin

OVERVIEW: The course will focus on the legal and non-legal tactical details of entrepreneurial endeavors. The legal specifics of corporate formation, tax, contracts, etc, are well covered by a variety of other courses at the Law School. Students who are interested in either starting companies or working with startup founders as their legal counsel will solidify their foundations in this course. There will be no textbook – course materials will include Powerpoint slides, readings from various entrepreneur and venture capital blogs, sample business plans, and other sources.

The class will meet Mondays, 4-6, in Room A through May 19th.

CREDITS: The course can be taken for either 2 or 3 credits at your option. Initially, all students are registered for the 2 credit option. If you’d like to take the course for 3 credits, you must let me know no later than April 11, 2008. Once the registrar changes your registration, you will be unable to later opt back in to the 2 credit option.

GRADING: Grading will differ depending on the number of credits you choose:

· 2 credit option: There will be a 3-hour open book exam on 5/28.

· 3 credit option: You will be required to present a business plan to a panel of me and a group of 2-3 others (which may include classmates). The presentation, including Q&A, should be approximately 60 minutes. In addition to the oral presentation (with accompanying slides), you’ll need to turn in a written mini-plan (executive summary, lead generation, sales, and marketing) (no more than 5 pages), a capitalization table (current and after at least two more future rounds of financing, all the way through an IPO), a long term financing plan with corresponding milestones for each round of investment, and written follow-up for any unanswered questions during the presentation. The business can be entirely made up and infeasible (e.g. a franchised dry cleaner that uses robots to wash, fold, and iron), but the market analysis must be real and the other documents must be internally consistent. You can do the 3 credit option in groups of 2, but you are not required to work in a team. Both members of the team will receive the same grade, and teams will be expected to be a bit more thorough than individuals.

Deadlines for the business plan presentation (you can schedule me for anytime between 5/28 and the deadline):

Graduating students: Monday, June 2nd.

Non-graduating students: Monday, June 23rd.

For both grading options, students who are particularly and consistently thoughtful during class discussions will receive 1 extra point on their grade. (Note: I’ve been in classes where participation was a major part of the grade. We’d like to avoid some of those side effects here, if possible.)

ATTENDANCE: The standard Law School policy is that you should miss no more than 1 seminar period. I doubt you’ll want to miss any sessions of this class since we’ll be having fun, but if something comes up and you need to, please let me know in advance. Except in special circumstances, you’ll lose 1 grade point for every absence after your second.

COURSE MATERIAL: The material for this course will primarily be web-based. I will disseminate the next week’s readings a week in advance and post my slides within 48 hours after class. I’ll endeavor to use Chalk, but I also maintain a blog (blog.rodkin.com) on which I’ll post the material, and I’ll tag the web readings with del.icio.us as well. (For instance, to find week 2 web assignments, go here: http://del.icio.us/jrodkin/laws61702, and click on the “week 2” related tag or go to http://del.icio.us/jrodkin/week2 and make sure it’s for this class.). Where blog posts are the required reading, please read the comments as well – a lot of the meat ends up in those.

In addition to the weekly readings, please read Nassim Taleb’s Fooled by Randomness. (http://www.amazon.com/Fooled-Randomness-Hidden-Chance-Markets/dp/0812975219) We won’t discuss the book directly, but its concepts will add a useful perspective to our discussions. At least one substantial exam question will be drawn from the book, and the perspective will help those presenting a business plan.

Finally, I’d recommend subscribing to PE Week Wire if you want to work in or around startups or private equity firms. (http://www.pewnews.com/hybrid.asp?typeCode=82&pubCode=3). This is a daily newsletter describing a variety of hot VC/PE topics, recent deals, personnel changes, and occasional industry drama.

PREPARATION: I realize that it’s Spring Quarter and you’re almost out of here. The workload for this class is not high. It will be less fun for all of us if you have to listen to a monotone lecture instead of a vibrant discussion, so please come to class prepared. I will begin each class by randomly asking a different student to summarize each reading. Since there are likely to be 8-10 readings and less than 20 of you, your odds of getting asked to summarize a reading almost every week are quite high. The second time you are unable to summarize, I’ll count it as a missed class (likewise for any difficulties after the second). See the “Attendance” section above.

MY CONTACT INFO: You can reach me at XX. My cell phone is YY. (Please remember, I live in California, so try not to call when you roll out of bed in Chicago). If you have any questions about the readings, class, entrepreneurship in general, please let me know. I travel frequently, so I may need 48 hours to respond to some questions, but I’ll usually be much faster.

Section 1 - Forming a business

Week 1 (March 31)

Topics: Should you or shouldn’t you? The founding team.

Readings:

Available for free on the web, with links to them here (remember to read the comments of the blog posts and to read both pages of the del.icio.us links):

The Pmarca Guide to Startups, Parts 1-7 (Pmarca is Marc Andreessen, founder of two multi-billion dollar companies).
“Why Early Stage Venture Investments Fail” – blog post by Fred Wilson, Union Square Ventures
“No Exit” – blog post by Dick Costolo, founder of Feedburner (acquired by Google for $100M)
“In Search of Inexperience” – blog post by Guy Kawasaki, Garage Technology Ventures
“Founders and Management” – blog post at Union Square Ventures

Available at Harvard Business Online (Go here and search for the titles. There is a cost to download these articles. If you can't find them, let me know before class):

The Founder’s Dilemma – by Noam Wasserman, Harvard Business Review article
Natural Born Entrepreneur – by Dan Bricklin (founder of VisiCalc, the first spreadsheet), Harvard Business Review article

Week 2 (April 7)

Topics: Initial employee documents; Business plan / slides

Readings:

Available for free on the web, with links to them here (remember to read the comments of the blog posts):

F2 Restricted Stock Purchase Agreement
F2 Stock Option Grant Notice
“The 10/20/30 Rule of PowerPoint” – blog post by Guy Kawasaki, Garage Technology Ventures
“The Pitch Deck” – blog post by Stu Phillips, Ridgelift Ventures
“A Pitch Deck Does Not Stand Alone” – blog post by Stu Phillips, Ridgelift Ventures
“The Zen of Business Plans” – blog post by Guy Kawasaki, Garage Technology Ventures
“How NOT to write a business plan” – blog post by David Cowan, Bessemer Ventures
“Should you hire someone to write your business plan?” – blog post at Ask the VC.

Week 3 (April 14) – Financing strategy and execution; Cap table.

Section 2 – Running a business

Week 4 (April 21) – Personnel (and documents). Compensation. Intellectual Property (NDAs, PIIs, patents); Non-competes, non-solicitation, and non-disparagement.

Week 5 (April 28) – “Working as the legal counsel for a startup” – Guest Speaker (Peter Werner from Cooley Godward Kronish)

Week 6 (May 5) – Marketing and sales plans. Board meetings and interaction

Section 3 – Exiting a business

Week 7 (May 12) – Acquisitions

Week 8 (May 19) – IPO (if there’s time, guest lecturer)