The Entrepreneur vs. The Strategy Consultant

By Auren Hoffman

The Entrepreneur is very different from the typical McKinsey-esque strategy consultant. Both are extremely smart, driven, persistent, creative, and determined. But I have found that there are some major differences.

First, entrepreneurs tend to take more ownership
of their jobs. My definition of an entrepreneur is someone who steals office supplies from home and brings them to work.Second, most entrepreneurs I know tend to be B students in college. The entrepreneur never got straight A’s because either:

(a) She didn’t care a lot about her grades, or
(b) She was too busy doing other things to worry about her grades.

I say “she” in this example, because most entrepreneurs are women. Far more than 50% of new businesses started in the U.S. are started by women.

Entrepreneurs tend to be street-smarter than strategy consultants. Entrepreneurs are more practical, more focused on the bottom line, and more attuned to real-world contingencies.

A typical strategy consultant job interview might go something like this:

“I toss a coin. Heads you win $10,000. Tails you lose $6,000. Do you play this game? Why?”

And a typical strategy consultant answer would go something like this:

50% chance I win, 50% chance I lose. So my decision calculation goes something like:

Winnings: (0.5) * $10,000 = $5,000

Loses: (0.5) * $6,000 = $3,000


My net value of this game is $2,000

Therefore, even if I am very risk averse, I’ll still play this game, because I can afford to lose $6K when the payoff is so much higher.

A typical entrepreneur would look at this game totally differently and would ask a series of questions:

* How do I know the coin is fair? Maybe tails is much more likely to come up. Can I test the coin by flipping it 500 times to see if it is consistent? Do I really want to waste my time performing and recording 500 coin tosses?

* How do taxes affect my wins and losses? Is Uncle Sam going to take a huge chunk of my winnings but not recognize my losses? Can I only apply my losses to gambling gains? How are state and city taxes affected?

* Do I have to pay in cash if I lose and do I get cash if I win? If that is the case, are we going to show up at the location with all the money? Will I be secure? Can I pay by credit card to get frequent flyer miles?

* How can I be sure I will collect from you? Are we going to hold the money in a third-party escrow? How much will that cost?

As you see, the entrepreneur lives much more in the rough-and-tumble real world where spreadsheet models don’t always happen.

Let’s take another interview question as an example – this one straight from a major strategy consulting firm:

“You’re flying from London to New York and you are sitting in first class (because we only fly first class, of course). You happen to be sitting next to the CEO of the largest paper-clip company in Britain who is traveling to the U.S. to give a speech. He needs to know how many paper-clips are sold in the United States ever year. What is your answer?”

The typical strategy consultant would use the basic plug-and-chug algorithm that every other smart interviewee would answer:

“Well … there are 300 million people in the U.S. and they each buy on average one box of paper clips per year … and they each get six legal documents per year … but now less paper is being used than last year because of electronic mail and all of us consultants saving paper by writing everything landscape … so therefore there are 2.79 gazillion
paper clips sold each year …”

The entrepreneur responds much differently:

* What about those plastic triangle clips? Binder clips? Do they count?

* Mr. CEO — can I ask you how many paper clips are sold in Britain? Why would Americans use more paper clips per capita than Brits? UK has about 60 million people, the U.S. has about 300 million – that means we are about 5x bigger than you. So take the number of paper clips sold in Britain and multiply it by 5 and voila!!

* This guy is an idiot … He’s in the paper clip business and he doesn’t even know the number of paper clips sold in the U.S.! Is he just playing golf all day?? I hope he goes to the bathroom soon so I can call log-on to my E*TRADE account and short this guy’s stock. No time to waste …

via The Entrepreneur vs. The Strategy << Summation


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