The New Realities - #3: Ultrapreneurism.

My father’s generation created wealth through their corporate citizenship; join one and remain there for many years while vesting in a retirement plan and/or buying large cap stocks and holding on to them for just as many years.  This was a very viable path to economic security.  In 1979, upon graduation from college, I took a step in that direction by joining the marketing department of Pacific Northwest Bell, an AT&T regional operating company.  But, to the unspoken vexation of my father, I left seven months later to strike out on my own in the media business.  At my father’s memorial service in 1995, one of his friends who eulogized him said that my father never really understood what I did, but acknowledged that I seemed to like it so “so be it.”  I was then thirty-eight years old and within two years would be ‘retired’ (financially self-sustaining) myself.  I had become what was known as an ‘entrepreneur’ – creating wealth outside of, and often in spite of, the corporate world. 

            As social economist George Gilder celebrated entrepreneurs in The Spirit of Enterprise (the bible of Reagan-era entrepreneurs), he described them as those who “know that genius is sweat and toil and sacrifice and that natural resources gain value only by the ingenuity and labor of man.” He argued entrepreneurs “create the wealth over which the politicians posture and struggle … they sustain the world.”[1] Gilder’s is an over-romanticized celebration, but he aptly captured the spirit and sentiments of my generation of wealth builders.  But we too are fast becoming obsolete, replaced by ultrapreneurs who are even less systemically connected and are quickly adapting to new market conditions marked by interdependence, complexity, and volatility; and who are producing new inverted strategies of wealth creation.

            It is worth understanding the conditions that give rise to this new breed I call ultrapreneurs.  Globalism has many effects, driven principally by the liberalism of trade and geometric acceleration of enabling technologies.  As Nassim Nicholas Taleb successfully argues in The Black Swan the world today is best described as a “recursive environment” where an “increasing number of feedback loops … cause … snowballs and arbitrary and unpredictable planet-wide winner-take-all effects.”[2]  As complexity compounds, the improbable occurs with greater frequency, which brings to question a number of things, especially investment strategies.  In effect, the curve of distribution – the bell curve – flattens causing calculations of risk/reward to consider that the probability of outlier events (high positive and high negative returns) to be relatively more likely than they have been in the past.[3]  And, if complexity accelerates even faster – without contemporaneous codification of rules and consequences – the curve could become inverted.  Translation: playing within a standard deviation of the mean is no longer justified based on an assessment of relative risk and reward.  Add to this the emerging reality that systemic market risk increases in a complex financial system that has yet to develop command and control mechanisms, and that now also includes systemic fraud risk, the question becomes not whether one should be in or out of the market, but how one operates away from the market.  Furthermore, those who continue to chant the mantra of the “long run” are fools (or they simply don’t know how to interpret the short run).  In a complex interdependent market staring at either the mean or the horizon actually exposes one to more, not less, risk.  The better perspective is to view the landscape from a reasonable altitude, looking down, as events unfold, not out at the horizon.

            There are a number of people who argue that the end is near – that social collapse is imminent (even secularists).[4]  However, I would argue that Gregg Easterbrook is closer to the mark in Sonic Boom: Globalization at Mach Speed. Easterbrook claims that “job instability, economic insecurity, a sense of turmoil, the unfocused fear that even when things seem good a hammer is about to fall … are part of a larger trend, and no rising tide will wash them away.”  But he also points out that globalization has positive aspects: “ease of communication, more freedom of speech, markets closely attuned to consumer demand, [and] rising education levels in the developing world.”[5]  Adapting to this world requires a high degree of intellectual flexibility – an embrace of ideological agnosticism that produces a transcendent state of mind allowing creative reinvention.  This is the mental mindset of the ultrapreneur.  He or she is the ultimate free agent who has the same work ethic as an entrepreneur, but who remains as disconnected as possible from systemic risk and who prefers anonymity to fame.  They are hyper-independent, stealth, and highly adaptive.  They do not recognize traditional boundaries or conventions and find leverage in intelligence, not natural resources – and never debt.  They prefer networks to formal enterprise and may even operate through multiple identities.  They are a product of the natural evolution of social order in a complex interdependent world.  Ultrapreneurs will be the winners in an increasingly risk-laden world.

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[1] George Gilder, The Spirit of Enterprise (New York: Simon & Schuster, 1984), 18-19.

[2] Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable (New York: Random House, 2007), xxii.

[3] Hedge funds are the early interpreters of this strategy.  What killed many hedge funds was not investment strategy, it was leverage.

[4] See Joseph Tainter’s 1988 The Collapse of Complex Societies, or Niall Ferguson’s more recent “Complexity and Collapse” in the March/April 2010 Foreign Affairs.

[5] Gregg Easterbrook, Sonic Boom; Globalization at Mach Speed (New York: Random House, 2009), xii-xiii.