Why Elon Musk Is Like Alfred Escher - Knowledge@Wharton: Scientists who study natural disasters categorize floods by their probability of happening over a given timespan. A 100-year flood, for example, is a flood that has a 1% probability of occurring in any given year. I use a similar system for entrepreneurs. Musk and Escher are 100-year entrepreneurs. More specifically, they are what I call Value Chain Entrepreneurs. Four attributes distinguish Value Chain Entrepreneurs from other types.
First, their “problem statement” addresses a dizzyingly complex issue that seems unsolvable to others but that they deem must be solved. Not solving the problem will have severe and unpredictable consequences.
Second, no single company, project or category can solve the problem. Rather, the solution requires the introduction of a new or significantly changed value chain — a new series of activities (usually performed by firms) that add value to society.
Third, the Value Chain Entrepreneur often operates multiple companies in parallel to construct that value chain. Of course, this produces voids and vacuums that the entrepreneur cannot address alone.
Fourth, the Value Chain Entrepreneur always threatens powerful incumbents. Thus, he or she must influence policy to achieve acceptance and regulatory support for the new value chain. So they become active in politics out of necessity to change the social contract that sustains the incumbent value chain.
Value chain creation and therefore disruption looks chaotic because it creates a wild-west environment of sorts. The 19th century oil craze, for example, created a semi-lawless industry depicted brilliantly in the movie “There Will Be Blood.” The chaos resulted in one man, John D. Rockefeller (1839-1937), controlling 90% of the U.S. oil market at one point.
First, their “problem statement” addresses a dizzyingly complex issue that seems unsolvable to others but that they deem must be solved. Not solving the problem will have severe and unpredictable consequences.
Second, no single company, project or category can solve the problem. Rather, the solution requires the introduction of a new or significantly changed value chain — a new series of activities (usually performed by firms) that add value to society.
Third, the Value Chain Entrepreneur often operates multiple companies in parallel to construct that value chain. Of course, this produces voids and vacuums that the entrepreneur cannot address alone.
Fourth, the Value Chain Entrepreneur always threatens powerful incumbents. Thus, he or she must influence policy to achieve acceptance and regulatory support for the new value chain. So they become active in politics out of necessity to change the social contract that sustains the incumbent value chain.
Value chain creation and therefore disruption looks chaotic because it creates a wild-west environment of sorts. The 19th century oil craze, for example, created a semi-lawless industry depicted brilliantly in the movie “There Will Be Blood.” The chaos resulted in one man, John D. Rockefeller (1839-1937), controlling 90% of the U.S. oil market at one point.