Why Ilon Musk is the exception rather than the rule

Judging by the success of Ilona Mask in various industries, including PayPal, Tesla Motors and SpaceX, one might think that the transition between such different technologies as digital payment technology, innovative automotive industry and space is quite smooth and easy.

Research by Professor Eggers (JP Eggers) suggests that Musk, like other highly gifted entrepreneurs, such as Richard Branson, are rare exceptions to the rule.

According to Eggers, failure, of course, is much worse than permanent success, but it can bring much more valuable lessons. It turns out that for many, it is probably better to stick to one industry, even if it has failed first, than to start all over again in a different role.
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Such an assertion goes against the popular entrepreneurial myth of risk-taking and stubborn attempts to succeed, regardless of industry.

“Every time you change the nature of an activity, you lose a valuable experience of failure, including an understanding of the reasons for failure and the industry itself.”

Eggers, and his co-author Lin Song from Central Beijing University of Finance and Economics, studied two groups of entrepreneurs in Beijing and venture capitalists in the United States. As a result, they found that entrepreneurs who failed and remained in the same business, at least, improve the results in the next iterations, unlike many of those who have changed the nature of their activities.

One of the reasons for this is that entrepreneurs who fail are inclined to blame external circumstances, whether they are competitors, changes in market conditions, high prices and expectations, and not internal factors such as abusive management or disagreements in a team.

When your business goes well, there is a tendency to overestimate self-esteem, and when everything is bad, someone else is always to blame.

Initially, the study was intended to identify differences in the entrepreneurial cultures of the United States and China. One such difference is the desire of American entrepreneurs to work in a team, and, conversely, a great inclination of their Chinese counterparts to solo performances. As a result, the former can get more experience in business as a whole, at the expense of the team, and the latter always rely on the experience of just one person. At the exit, the researchers found a strange feature, entrepreneurs remaining in the same industry turned out to be in a better situation.

Entrepreneurs like Musk and Branson seem to have the power of King Midas to turn any objects into gold. Whatever business they do, they tend to succeed, which is related only to their exceptional leadership skills and brilliant ideas.

In the study, the authors consider two data sets: an extensive survey of entrepreneurs in China and venture capital investments in the United States.

Additional key data includes the fact that almost 46% of all serial Chinese entrepreneurs in the sample surveyed changed the nature of their activities before the start of a subsequent enterprise. In the US, this value is even greater, and reaches 54%.

Some items of research are difficult to prove. For example, only 27% of Chinese entrepreneurs who founded the previous company still remained in the same sphere.

In any case, a change of occupation, regardless of the success of the previous one, adversely affects the subsequent enterprise. The results showed that from 23 to 31 percent of enterprises showed a lower growth in Chinese data and by 18 percent according to the United States.

Researchers conclude that entrepreneurs should think twice before changing their scope of activity, and also warn potential investors about caution in investing in serial entrepreneurs who are switching from one industry to another, because previous failures could well be related to managerial deficiencies or failed strategic planning.