GlobalEdgeTalk

Daniel Isenberg on Global Entrepreneurship

January 08, 2021 Alex Romanovich / Daniel Isenberg
GlobalEdgeTalk
Daniel Isenberg on Global Entrepreneurship
Chapters
1:57
Global entrepreneur perspective in Daniel Isenberg's book
5:21
Setting up an ecosystem
8:49
The impact of COVID-19 on entrepreneurship ecosystems
15:55
Experience and knowledge of advanced age entrepreneurs versus youth energy and mistakes
24:34
Value-based entrepreneurship and investment
26:46
The post-COVID emptying out of the large cities
GlobalEdgeTalk
Daniel Isenberg on Global Entrepreneurship
Jan 08, 2021
Alex Romanovich / Daniel Isenberg

Today we are joined by Daniel Isenberg, who created the Scale Up Ecosystems methodology and is globally recognized as a pioneer of scale up practices and methodologies, which have been field tested throughout the world. In addition to having been an entrepreneur and venture capitalist in Israel, Daniel has been a professor at Harvard and Columbia Business Schools, Babson College (adjunct), and an associate of the Growth Lab at the Harvard Kennedy School.

For more information, links, social media profiles and other, please visit our website.

Listen now on all major podcasting platforms!

Support the show (https://www.patreon.com/globaledgetalk)

Show Notes Transcript Chapter Markers

Today we are joined by Daniel Isenberg, who created the Scale Up Ecosystems methodology and is globally recognized as a pioneer of scale up practices and methodologies, which have been field tested throughout the world. In addition to having been an entrepreneur and venture capitalist in Israel, Daniel has been a professor at Harvard and Columbia Business Schools, Babson College (adjunct), and an associate of the Growth Lab at the Harvard Kennedy School.

For more information, links, social media profiles and other, please visit our website.

Listen now on all major podcasting platforms!

Support the show (https://www.patreon.com/globaledgetalk)

Alex Romanovich (00:01):
Hi, this is Alex Romanovich, and welcome to the January 6th, 2021 edition of Global Edge Talk. Today we have an amazing guest, Daniel Isenberg. Hello, Daniel.

Daniel Isenberg (00:13):
Hello. How are you, Alex?

Alex Romanovich (00:14):
I am going to introduce Daniel very quickly. Our audience knows that we also will have a landing page and we'll have a lot of information about our guest, but Daniel Isenberg is the author of a book on global entrepreneurship. We'll talk about that. He's a CEO of Entrepreneurship Policy Advisors who launched a number of ecosystem projects and came up with a notion of Scale Up Ecosystem. We'll talk more about that. He is a former professor and the current adjunct professor of entrepreneurship at Babson and Columbia Business School. He's the author of a very interesting relevant, and to a certain extent, controversial article at a Harvard business review on the global entrepreneurship. He is indeed individual investor. We have a lot to learn from Daniel and have a lot to talk about. Daniel, welcome to our studio.

Daniel Isenberg (01:13):
Thank you, Alex. Fun to be here even virtually.

Alex Romanovich (01:16):
Yes. I'm very excited about this because as I started to look up the term mobile entrepreneur, which I'm totally fascinated with, and I think, we can certainly be relevant about this in our conversation. In my search, I came up with Daniel Isenberg, so it really piqued my interest. And I started reading an article and I started reading a book excerpts. Sure enough you back in 2010, even 2006, excuse me, you've coined a lot of very interesting terms and phrases and actually then executed on a lot of those notions. Please tell us about the book and tell us about the term global entrepreneur.

Daniel Isenberg (02:01):
Well, okay. Those are two separate and interrelated topics. The book worthless and possible and stupid is a journey through the world, let's say, through the eyes of entrepreneurs in many, many different countries: Lebanon, Israel, Denmark and many other places. And it takes the perspective of entrepreneurs who are not necessarily focused on the United States as either the source of capital or the target for their products and services. There's a lot of opportunity, a lot of economic activity outside the United States, but until I wrote the book and until I wrote the article most of the attention in the field of entrepreneurship was on the United States as sort of the be all and all the gold standard. Of course, within the United States, two areas, Boston, what was the Route 128, and Silicon Valley. Boston's, I think, undeservedly it's star has faded a little bit and now Silicon Valley is under attack.

Daniel Isenberg (03:10):
But even then, and it was clear to me that entrepreneurship was part of human society, it's a characteristic of when people congregate, which is natural for people. And it's as old as old as human society. And so the book takes the perspective that entrepreneurship is something that people engage in, and now, what is it? So there are many examples in the book, but there's also some theory that is drawn from those examples about why entrepreneurship is based on value creation and value capture by the entrepreneur. We can get into that a little bit later. And so in a sense, I think all entrepreneurship is best viewed from a global or let's say a decentralized perspective.

Alex Romanovich (03:58):
Fascinating, very relevant, I think, because, as you correctly noted, Silicon Valley is beginning to transform, is becoming more of a concept now rather than the geographic location. We now see Oracle moving out of Silicon Valley. We now see Tesla moving out of Silicon Valley, we now see a number of different investors in the community moving out of Silicon Valley and so forth and so on.

Daniel Isenberg (04:30):
But let me just interrupt for a second. There's this notion of Silicon Valley, it's a place. It's kind of ill-defined place, but it's a place. And then people say, well, no, it's not a place, it's the mindset. And then it becomes kind of a useless term. I mean, when you look at the valuable companies, Microsoft, I'm sorry, not a Silicon Valley company, Amazon, sorry, not a Silicon Valley company. So with all due respect to Silicon Valley, a lot is done outside of Silicon Valley. But still people say, well, that's Silicon Valley life. Well, that's a total hogwash.

Alex Romanovich (05:03):
I totally agree. I mean, I always maintain that Silicon Valley can happen. Quote-unquote, Silicon Valley can happen anywhere in the world. And it's about ecosystems. It's about creating the environment, creating the ecosystem. That's what you've been doing for a number of years in a number of countries all over the world, including the United States. Tell us more about what is it like to set up or to start an ecosystem?

Daniel Isenberg (05:26):
Well, it starts with a concept and the concept is that entrepreneurship, it's not about starting a company. A lot of it can be, but that's not the definition of entrepreneurship. The definition of entrepreneurship is the creation of economic value. It can be non-economic value. Let's keep it simple. Let's just talk about the creation of economic value. And it's the capture of some of that value for the creator of that value. And that's at the heart of what entrepreneurship is. And that's in my book, I call that the value-based definition of entrepreneurship, entrepreneurship is value creation and capture. There're a few other words in there as well, but let's keep it simple. If you look at entrepreneurship as value creation and capture, it has to be about growth. If you're not growing value, value creation needs growth.

Daniel Isenberg (06:13):
If you're not growing, it's not entrepreneurship. So wonderful that it sounds very nice. Entrepreneurs get A for effort while they don't, they get A for growth. Now it may take a few misses before you get growth, but if you keep missing and don't get the growth, then it's not entrepreneurship. So if you keep in mind, the notion that growth is what is at the heart of entrepreneurship. And then you say, well, what kind of growth? When you look at it from a regional perspective, there's an argument and some research that says that broad-based prosperity can be better achieved sustainably when more and more local firms, there's a broad-based firms growing more rapidly than there's a growth trajectory, doesn't matter that it's a 1000% growth or 1% growth, but more and more firms going more and more rapidly that leads eventually to broad-based prosperity and other benefits.

Daniel Isenberg (07:11):
So, with that goal or objective immense very important. I know it sounds a little bit like wordsmithing or maybe a little academic, but it's a very powerful organizing principle. And then if you go into a specific region and say, okay, what we're trying to do is create an environment, a system, a set institutions, programs, culture, and, no less important, the examples of more and more local firms going more and more rapidly, then you will eventually get, in economic development terms relatively rapidly you will get a broad-based of prosperity. And that's what we do. We create the system. Now, there are ways I can go into the methodology. That's probably beyond the scope of this podcast, but we have hardened methodologies for working with local leaders of all kinds. That's just government working with a spectrum of local leaders to say, okay, how do we create the ecosystem? That's the term that I popularized the entrepreneurship ecosystem, so that more local firms will grow.

Alex Romanovich (08:15):
Fascinating. And we'll definitely come back to that concept. I've been involved with a couple of projects to assist at the country or regional level in countries like Finland, and Ukraine, and the UK and so forth. So we'll come back to that topic maybe in a future recording. Another question, let's enter 2020, the year of 2020.

Daniel Isenberg (08:39):
We're in 2021. We're already in 2021.

Alex Romanovich (08:44):
Let's go back to 2020.

Daniel Isenberg (08:44):
I'd rather not.

Alex Romanovich (08:45):
Yeah, I'd rather not as well, but I think we have interesting topic to discuss. And the question is what has happened to the entrepreneurship after COVID-19 hit the entire world? What happened to the entrepreneurs, to the ecosystems and what can we expect in 2021?

Daniel Isenberg (09:05):
Well, in a sense, everything and nothing. So let me start with nothing. Entrepreneurs are used to dealing with adversity. Adversity is intrinsic in the concept of entrepreneurship because you enter into a market or create product market fit that didn't exist before. And that's almost never accompanied by applause, and cheering, and purchases. You have to work hard. It's kind of like pushing the ball up the hill, right? You have to work hard to get that ball up. As you probably know from your own experience, entrepreneurship is as one of my friends and all subject in the book says, entrepreneurship is tough, bloody S H *bleep* *bleep*. And it is, that's intrinsic. And you're always dealing with surprises, with stresses, with crises, and occasionally it takes off and goes really well. And that's also kind of a crisis in a lot of ways.

Daniel Isenberg (09:59):
So in that sense, there's nothing new at all for entrepreneurs, it's just more and happening faster, more discontinuously. On the other hand, there are a lot of things that have changed. Of course, markets, they're behaving in a very strange way. But many of the markets have collapsed. Some of the markets have really taken off. I don't think that's changed fundamentally the process of entrepreneurship. One thing that's become very clear. And I think it's because it's just accelerated so quickly is the absolute necessity. It's not a choice anymore. Every company needs to have a digital strategy because that's part of resilience. That's changed because of the companies that don't or didn't have a digital strategy, some presence that can be creating value through digital presence. They had either wiped out immediately or were wiped out slowly or severely handicapped, and maybe are making their way out of it.

Daniel Isenberg (11:02):
So that's one thing that's changed. The second thing that's changed and this gets into global entrepreneurship a little bit is that, and again it's not really new, it's new because it happens so quickly. And that is the transition to a remote world in which you can conclude things, get business done, engage in social activity and all kinds of activity remotely, that was happening anyway. But telemedicine, for example, or the fact that we're having this podcast with Zoom, we're using Zoom et cetera, et cetera. Now and teaching, education is taking place, the business taking place, venture capitalists are closing deals without meeting people face to face, that's anathema. That's against the rules up until now. So all these things are changes. I don't think they changed fundamentally the process, but they changed the way it plays itself out.

Alex Romanovich (11:54):
I totally agree. I mean, we will remember 2020 for a very long time. That's for sure. So what can we expect in 2021?

Daniel Isenberg (12:02):
Well, I don't know. If I don't have a very clear crystal ball and anybody who does, I think, he is probably has to wake up. We don't know what's going to happen. I mean, we think that there seems to be a consensus out there that sometime during the year of 2021 the pandemic will be less dominant, maybe even disappear largely as a factor. But I think we're going to be dealing with the fallout of the pandemic for many, many years to come, kind of like a post-traumatic stress disorder. And so some of the industries that started to take off in 2020, well, they're going to keep taking off, but maybe more slowly. I think some of the industries that collapsed such as airlines and hotels, they may see a Renaissance. We don't know, retail and hospitality, et cetera, may see some kind of Renaissance, but still with the cab bit that everyone, and healthcare is a good example, is going to have to have a stronger way of carrying out business, carrying out its activities digitally.

Daniel Isenberg (13:13):
So other than that, it's clear that China, it's clear to me anyway, that China's emerging is a big winner because it dealt with the crisis, the pandemic with extreme efficiency and conviction and unity as opposed to United States. It's clear that China, at least for a while, is going to benefit. And not just China. I think, Japan, and Korea, Taiwan, all of these countries took the pandemic very seriously. And implemented the social controls necessary to control the pandemic, not perfectly but better than a lot of other countries. And because of that the economic activity is rebounding more quickly.

Alex Romanovich (14:03):
Let's talk a little bit about our country, United States. You've helped a number of regions set up an ecosystem for entrepreneurship, you have a global experience. Is there anything that's different about the United States in comparison to other regions, other countries that you can talk about in terms of setting up the ecosystem, the response, the opportunity across the entire country?

Daniel Isenberg (14:32):
Well, yes and no. I mean, in the United States remains a very open society and that openness is extremely conducive to entrepreneurship of all kinds. So I think that's a tremendous advantage and still makes the United States largely the destination for entrepreneurs who want to be successful. On the other hand, I think the United States suffers, I think a lot of countries do, but the United States, maybe a little more than others, we suffer from hubris. We suffer from pride. We suffer from thinking that we are all and all the guiding light. I think it's clear now that politically that's not true. But I think also from the perspective of entrepreneurship and we have to be careful, we meaning as a society, we have to be careful about letting this go to our heads because we're going to be bypassed. If we're not careful, we need a little bit more humility and a little bit more sense of perspective. And that's one of the reasons I wrote the book to show that there's a lot happening out there outside of the United States. Silicon Valley and the United States are not the guiding lights that we think they are. And there was a lot that we can learn from entrepreneurs and other countries.

Alex Romanovich (15:55):
I totally agree. Let me switch to a different topic. Something that's could be interesting to talk about. And that's the topic of age. When we talk about entrepreneurs and the perception is always young, energetic in their twenties and their thirties, maybe a startup, there are a few other phrases that come to mind and yet we're seeing a lot of the very wealthy entrepreneurs that have been successful in their more advanced age, forties, fifties, sixties even. Let's talk a little bit about the age and whether you feel, you think that a success will come to those with experience and knowledge versus youth energy and mistakes, and we always say that the faster you fail, the faster you succeed, and so forth and so on. What is your opinion?

Daniel Isenberg (17:01):
First of all, about failure, the faster you succeed, the faster you succeed, failure is a by-product of success. It's not a cause of success. Let's not celebrate failure nearly as much as we celebrate success, we get in trouble with that one, an entrepreneur who fails 10 times is not a better entrepreneur, the one who fails once and then succeed.

Alex Romanovich (17:18):
I certainly agree, except that promotes that as let's fail, let's fail five times.

Daniel Isenberg (17:24):
I think that's silly, it's silly. And I think part of it, people just get confused between, well, there's a serious part of it, but people get confused between making mistakes and catastrophic failure. Making mistakes is normal. You don't want to make mistakes, just don't quit, don't get out of bed in the morning. But failure is a different story. But about age, it's interesting. I thought a lot about that, and I'm obviously biased because the older I get, the older I get, right? But I've always thought that youth is overrated. The only thing different about youth, as regards to entrepreneurship, is you have a longer runway and you probably have less to lose when you're young, but as you hinted, the evidence is that middle-aged entrepreneurs simply do better on average than young entrepreneurs, young entrepreneurs are lacking experience. They're lacking perspective. They get overwhelmed by passion and they have trouble looking at things with objectivity.

Daniel Isenberg (18:28):
Passion is also something that I think is overrated, gaining commitment and energy. Passion, if you look at the root of that word, it has to do with insanity, and when you look at the etymology of the word passion. And so, of course, the older you get, then you may have a little less drive, but you may have just as much, you do have more perspective. You do have a worst memory, but you use the research. By the way, I'm a psychologist by background. And that's my academic training. You use that information more effectively. You're less emotional about that information. So definitely, and then there are huge numbers of examples of successful entrepreneurship at older ages.

Alex Romanovich (19:14):
Very interesting topic we'll come back to it a little bit later. Our audience is global, folks in the large organizations, enterprises, chief marketing officers, managing directors and financial institutions. We also have scale-ups and startups in China, in Finland, in Russia, in Europe, Israel, and so forth and so on.

Daniel Isenberg (19:36):
Welcome, welcome.

New Speaker (19:37):
We have a very diverse audience all over the globe. What is your one single piece of advice going forward for mavericks inside of a large organizations, of government agencies or folks that are waking up in the morning in India, in Africa thinking, wow, what am I supposed to do now with COVID and post-COVID. I still have a dream. I still want to pursue it. What is your one single piece of advice?

Daniel Isenberg (20:04):
Well, I have two pieces of advice. The first piece of advice is don't listen to advice. The world of entrepreneurship is, of course, it helps to listen to the experts and people who know a lot, but the history of entrepreneurship is of people doing things, that smart people think are worthless. That's the title of my book Worthless, Impossible and Stupid, almost all of the really successful ventures when they started out, when they've first conceived, very, very smart people thought that they were the worst thing in the world to do and would never succeed. So that doesn't mean that everything. So, if everyone thinks it's a great idea, probably it isn't. If you have one or two at least really, really good detractors, smart detractors, then maybe it is a good idea, a really, really good idea.

Daniel Isenberg (21:05):
And the other hand, if you're at a party and everybody thinks you're drunk, you probably should hand over the keys to somebody else, regardless of what you think. There are such thing as really bad ideas, but the blending to come back to this notion of passion, the ability to blend two very contradictory processes, I think is one of the elements of effective entrepreneurship. And these two elements, I call them the oil and water because they don't mix. One of them is the belief, the conviction that something that doesn't exist today will be very valuable in the future. Call it passion, if you will, vision whatever you want to call it. But it's something that isn't reality today will be very valuable, on the one hand. On the other hand, the ability to look very objectively and very cool-headedly at the facts, at what's going on and continually to question what you're doing is that the right thing. The ability to blend those two, then I think they're fundamentally contradictory processes, is essential for successful entrepreneurship.

Daniel Isenberg (22:16):
And someone called it, I think it was Noubar Afeyan called it paranoid optimism. So that's my piece of advice. We could go into specific. I don't think that's related to COVID in particular. And again, I don't think I have any particular advice other than you need a digital strategy. That's more COVID related and welcome to the world if you can do something in the COVID era, let's say, then you're going to be a pretty strong when things get a little bit better,

Alex Romanovich (22:49):
Speaking of digital strategy for organizations, large and small, entering this post-COVID environment, do you think that this can be a template of the approach as well? In other words, if you're a small business, if you're a restaurant there are certain ways for you to pursue success in the post-COVID environment. If you're a financial institution, if you're a manufacturer, if you're a logistics or distribution company, do you think that someone like yourself or other organizations can actually craft and create a template based approach?

Daniel Isenberg (23:22):
Well, again, I think entrepreneurship, to some extent, or to maybe a large extent defies templating because it's when you have a template and then the entrepreneur comes in and says, I can do it differently. And does it differently breaks the template, so to speak, that's really where you're unlock a lot of value. But a former student of mine who's became a very successful entrepreneur and executive in his own, Eric Schultz, Eric B. Schultz. And I wrote an article in April. I think it was in medium, which I encourage people to read and those new opportunities in the pandemic, and we identified some real fundamental drivers that are going to be long-lasting if not permanent, such as the ability to have be safe, yet physically safe, yet socially together, called PAST, and be flexible, flexibility of supply chains of all kinds as part of resilience, the ability to be flexible in let's say manufacturing or logistics, that flexibility is going to be a premium going forward. And the ability to do things remotely, we identified five of these drivers. And so I think it's useful to look at those that's in medium, under Isenberg and Schultz.

Alex Romanovich (24:34):
You talk a lot about value-based entrepreneurship, value-based investment. Let's talk a little bit more about this because I think it's important topic and I think the investment community, the entrepreneurial community is beginning to listen, is beginning to pay attention. What is value-based entrepreneurship? Tell us more.

Daniel Isenberg (24:52):
So, by your question, I can see that I need to clarify what I mean by value-based. And what I don't mean is I don't mean social values or shared value. That's not what I'm referring to. That's I think a different conversation. I'm very happy to direct entrepreneurship. And this is a little bit unpopular these days, out of fashion, but I think it's there anyway, only to the creation of economic value. I don't think it's contradictory with social value, quite the opposite. I think the creation of economic value gives something called economic freedom, and economic freedom that's the social freedom. So that's overly simplistic also, but I think it's useful. I think most societies around the world will say, let's first of all achieve within the set of rules, within a set of ethics, within a set of no obeying of the what's important to our society, whether it's rules or norms, let's create economic value and let's get as many local firms as possible to grow more and more rapidly. I think many, many societies say, let's first accomplish that that will give us optionality, that will give us the resources, this strength to be able to then say, okay, now let's use those through taxes, or other purposes, or the means, let's use those to achieve other kinds of non-economic social value. The successful entrepreneurship as a region allows you to achieve or solve other problems, not perfectly but more easily.

Alex Romanovich (26:38):
Great, great topics. I can see that we must invite you back for some subsequent discussions and so forth. One more last topic to discuss. We have large cities in the United States. We have large cities in other countries that are getting smaller and smaller now, post COVID we see movement, geographic movement. We see movement based on social unrest and so forth. What is your advice to the mayor of New York City, to the mayor of San Francisco, to the mayor of Chicago, Dallas, and a few other places that are seeing this movement that basically says, we are losing our tax base, we're losing our corporations, we're losing our support structure. What should we do? What should we do next?

Daniel Isenberg (27:35):
Well, first of all, I think that's too big a question for me. I'm not the mayor of New York and I don't know if I would, I'm sure I would not be a good mayor of New York and I don't know what it's like being the mayor of New York. But I think this is primarily a temporary phenomenon that I don't think they have anything in the long run to worry about. The city's emptying out and kind of like a Will Smith, a dystopian movie. I don't think that's going to happen. I think this is happening around the margins and there are short-term problems that I think the mayor certainly in the United States have to deal with, which has a lot to do with the pandemic. And I think the aftershocks of the pandemic are going to be hugely significant that people will come back.

Daniel Isenberg (28:28):
Eventually there'll be more and more economic activity creating a better, bigger tax base. The truth is that cities are wonderful places to get a lot of things done. Now it doesn't have to be New York. It can also be Worcester, Massachusetts, by the way. I'm a huge fan of what you could call the mid-tier cities. I think that they're underrated. In Massachusetts we have this, we have Boston, which is let's say two thirds of the economy and two thirds of the population. If you look at greater Boston of Massachusetts and in a very strange nod to the cities such as Springfield, and Worcester, which are outside of Boston, they're in the West to Massachusetts or New Bedford in the South, well, they call these gateway cities, which is really unfortunate because there are gateways.

Daniel Isenberg (29:21):
These are cities that have economic activity, that are in and of themselves valuable. They're not gave waste to anywhere, they are destinations and can be destinations. So I think regardless of the pandemic, there are huge, huge amounts of social-economic value to be unleashed, what I call the normal cities, the non-elite cities, the Akron, Ohio's, and the Columbus, Ohio's, and the Albuquerque, Mexico's and so on and so forth. And this without criticizing the Bostons and the New Yorkss. And let's say, now the San Francisco's and Seattle's, these are great places and they always will be great places, but there's tremendous amounts of value in the smaller cities.

Alex Romanovich (30:09):
It's been a tremendous pleasure to have you as our guest. We definitely want to invite you back to talk about some of these topics in more detail, and we wish you lots of luck and we'd love to continue this conversation. I want to say that our landing page about you on our website is going to have a lot of information about the book, about the HBR article, it's all available on Amazon. So we're very happy about having you on our program. And we'd love to continue.

Daniel Isenberg (30:50):
Thank you, Alex. It's been a pleasure.


Global entrepreneur perspective in Daniel Isenberg's book
Setting up an ecosystem
The impact of COVID-19 on entrepreneurship ecosystems
Experience and knowledge of advanced age entrepreneurs versus youth energy and mistakes
Value-based entrepreneurship and investment
The post-COVID emptying out of the large cities