Type 2

Entrepreneurship is hard but you do it because it will afford you opportunities no one else in the world will ever have.

You can’t be in it for the financial reward, because there is often no reward. The experience itself has to be part of the reward, otherwise the risk of failing and getting nothing in the end is actually so high no one would ever do it. Statistically, the default outcome for any new business is failure. 

If your sole focus is always how to get paid for your time, you’re not at all wrong. That is almost always the most lucrative & safest route. However, that mindset does put you on a different track altogether. One of dependency, because someone else has found a way of creating the value you then benefit from. 

As entrepreneur, you’re creating the value that others benefit from. It’s ultimately a position of power because other people then depend on you to hire them, fire them or offer them opportunity. Getting that power often comes with the great sacrifice of figuring out how to create the value in the first place.

The below quote is a great description of how these two mindsets yield very different results from an ex-Googler taken from
Amin Ariana’s answer on Quora to the question “What kind of jobs do software engineers who earn $500k per year do?” found here –  http://qr.ae/YxgBp

If you’re a worker in a village who supplies said village with water, you are valuable to its people. 
 
There are two types of workers:

Type 1 worker: Grabs an empty bucket or two, goes to the sweet water lake, fills them up, comes back and makes twenty people happy. He gets to drink some of that water along the way, and once he gets back, takes some of the water home.

Type 2 worker: Disregards how much of a “fair share” of water he’s getting. Instead of grabbing a bucket, grabs a shovel and a little cup, and disappears for a while. He’s digging a stream from the lake towards the village. Often he disappoints people for having returned from weeks of work with an empty cup. But the elders in the village for some reason believe in him and want to keep him (and throw him a bone so that he doesn’t starve for a little while). Some day, suddenly he shows up with a constantly flowing stream of water behind his back. He puts the Type 1 workers out of water delivery business. They’ll have to go find a different activity and “team” to work with. Type 2 worker, depending on how much control they retained on that stream, get to own a good chunk of it. Because the village wants to acquire and integrate that stream, they compensate the ownership of Type 2 worker in that stream with on par ownership in the village itself, typically land or such.

News media observes the Type 2 worker and his unwillingness to part with his accumulated wealth in return for his added value for the village (often vesting on a schedule, also known as golden handcuffs); and spins it such that it looks as if another village tried to woo that worker but was met with unexpected resistance.

The resulting media impression, in the mind of Type 1 workers, feels like pay inequity. This is because Type 1 workers expect equal rewards for equal time spent being loyal to the same village.

The overlooked detail is that not all sweat creates equal value. 

 
Type 2 worker was willing to break some rules, becoming an outcast and going hungry for an indeterminate period of time to create an automated stream of wealth for the village. Worker 1 expects to “get paid” this value by performing “skills” or “tasks”. The basis of this line of reasoning doesn’t yield the desired results. The key difference is risk taking with no guarantees.

Arguably almost all of the pioneers of the village itself (in this case Google) were Type 2 workers who held their thirst for years before establishing the stream of billions of dollars. 

So let me tell you another story:

In May 2009, a career Type 1 worker applied for a job at Twitter. He was turned down. In Aug 2009 he applied for a job at Facebook. He was turned down again. He decided to set out on an “adventure” and picked up Type 2 work, digging a stream of revenue from the lake of humanity’s communication needs to the village of incorporated chatterboxes manifested in the very two companies that had rejected his Type 1 services.

Along the way when he and another friend were digging the stream, their inspired group grew to 55 individuals, and the elders of other villages threw them a few bones, $250K at first, then $8MM and eventually $50MM by Sequoia Capital once the stream was going to obviously be successful.

Three hours before this very moment that I’m writing this, CNN announced that this Type 2 worker’s stream “is purchased by Facebook for $19 Billion”.

Facebook just purchased WhatsApp. And Brian Acton, after five years of “digging a revenue stream” for Facebook’s business, is now a capital owner in Facebook; a place where he originally applied for a job and got denied.

If you’re an entrepreneur, you’re aiming for Type 2. But many new entrepreneurs still have the Type 1 mindset, that alone can cause you to fail. If you’re Type 1, there’s nothing wrong with that either, you’re creating a different type of value for different reasons.

Always know where you choose to stand, as a Type 1 worker or as Type 2.