Zhang Weiying: Entrepreneurs have dreams, and making money is not the only goal

Professor Zhang Weiying once said that he has studied entrepreneurs for 35 years, and only in recent years has he truly understood what entrepreneurship is. He also said that the best way to understand entrepreneurship is to understand what entrepreneurship is not.

His new book, "What Entrepreneurship Is Not," was written in October 2019, with six sections and more than 20,000 words, and was serialized in Management Horizons, No. 20-22, co-sponsored by Fudan University and the International Society for Management Studies.

With the authorization of Professor Zhang, we will continue to reprint the content of this article and share it with you, and today we reprint the third section of the article.

Cyrus West Field (1819-1892) was a prominent 19th-century American entrepreneur and financier who was best known for laying the first submarine cable across the Atlantic.

Field was the son of a missionary who made a fortune running the paper industry and was well-to-do at an age when he was prosperous. At the age of 34, due to physical reasons, he sold his business, leisurely lived at home, and lived a secluded life. But for someone like him, long-term idleness is a bit of a void. By chance, he met Frederick Newton Gisborne, an Engineer from Canada. Gisborne was laying a submarine cable from New York to Newfoundland, the easternmost part of the Americas, so that information about the arrival of ships could be obtained days in advance, but halfway through the project, the funds ran out, so he had to come to New York to find the support of financiers.

Field knew nothing about electricity and had never seen any cables. But he was still attracted to Gisborner's project and decided to devote himself to the cause. But his idea was much bigger than Gisborne's. He asked Gisborner: Why only to Newfoundland and not to Ireland, connecting the Americas with Europe?

It's a crazy idea. Although the submarine cables between Britain and France had been successfully laid in November 1851, within a few years, the United Kingdom had established telegraphic links with its surroundings of Ireland, Denmark and Sweden, Corsica and the European continent, but these submarine cables were not more than tens of kilometers long, which was not the same as the submarine cables across the Atlantic, and the difference between the two was like the difference between a small bungalow and a skyscraper.

The waters from Newfoundland to Ireland stretch for more than two thousand nautical miles. How deep is the bottom of the Atlantic Ocean? How much pressure is there in the seawater? Can the cable withstand such pressure? Does the magnetic field deep in the ocean cause the current to dissipate? None of these questions were clear at the time. Although "Guta Glue" has been invented for several years, there was no insulation material that was absolutely reliable at that time, and there was no accurate measuring instrument. Even if these technical problems are solved, cables made of copper and iron weigh more than 9,000 tons, where can we get giant ships that can carry cables? At that time, the largest vessel had a deadweight of only 5,000 tons. Where did you get such a high-power generator, and it would take two or three weeks to continuously deliver the current across the ship?

So when Field proposed his idea, scholars objected, arguing that "it is absolutely impossible." Even Morse, the inventor of the telegraph, found the plan an incredible adventure. Western Union, the largest U.S. telegraph company at the time, was dismissive of Field's plans. They planned to lay cables from Alaska to Siberia via the Bering Strait, and then connect the Americas and Europe via telegraph lines on land poles. After all, the narrowest point of the Bering Strait is only 53 nautical miles, and the technology to lay such a short submarine cable is mature and there is a wealth of experience to learn from.

But Field was fascinated by his own ideas and was not intimidated by the difficulties. He devoted all his energy and possessions to founding the Atlantic Telegraph Company. He used his persistence and three-inch tongue to persuade some rich people in the United States and Britain to join, and his shareholder list included the famous British novelist William Thackeray (author of Vanity Fair) and Anne Byron, the widow of the famous poet Byron. These people invest in him only out of moral zeal, with no purpose in making money at all. Field established contact with all the experts and sought their technical support. Over the course of several years, he crossed the Atlantic Ocean 31 times between the two continents. He persuaded the U.S. and British governments to each lease him a battleship for carrying cables weighing more than 9,000 tons. It was the largest vessel available at the time.

When everything was ready, on August 5, 1857, Field himself took command, and the battleship USS Niagara, with half of its cables and hundreds of sailors, set out from the harbor of Valencia, Ireland, to lay the Atlantic submarine cable. The battleship Agamemnon carried the other half of the cable to the center of the Atlantic Ocean, ready to lay the next half. Before departure, thousands of people flocked to the port to witness this historic moment. The British government sent a representative to deliver a congratulatory message. A pastor came to pray for it.

For the first few days, everything went well, and by the sixth day, 335 nautical miles had been laid, and the telegram signal was still clear. But on the sixth night, as Field was getting ready to fall asleep, the familiar sound of the rattling winch suddenly stopped. The cable broke from the gondola. It is impossible to find the broken end.

The first laying failed!

After nearly a year of waiting and preparation, Field is ready for a second laying. In June 1858, two warships were planned to sail from both sides of the Atlantic to the middle of the Atlantic, and then lay in two different directions at the same time. However, soon after the ship Agamemnon departed, it was hit by a huge storm, and although it reached the intended location as planned, the cables carried had been severely damaged, and after barely laying 200 nautical miles, it was not allowed to return home in ashes.

The second laying also failed.

The two failures have consumed half of the capital, but nothing has come of it, which is really frustrating. The shareholders stopped, and the chairman advocated selling the remaining cables to minimize the losses; the vice chairman chimed in, and offered his resignation in writing, expressing that he did not want to have anything to do with this absurd matter.

But Field's firm convictions did not waver. He explained that after such a test, it was proved that the performance of the cable itself was very good, and the cable on the ship was enough for a new experiment, and we had nothing to lose. His strong will overcame the hesitation of his shareholders. At his insistence, the third laying was initiated.

On July 28, 1858, the two paved ships met at a predetermined location in the middle of the Atlantic Ocean and then set out in two different directions at the same time. By August 5, the Westward Niagara reported that it had now reached Trinity Bay in Newfoundland after 1,030 nautical miles and had seen the coast of the Americas, while the Agamemnon, which was moving eastward, had seen the Irish coast after more than a thousand nautical miles.

It worked! On August 16, Queen Victoria and U.S. President Buchanan exchanged messages congratulating each other. For the first time in human history, a message can be instantaneously flown across the Atlantic, connecting the new world and the old world! A global sensation! Everyone was excited! On August 17, newspapers in New York and London hailed the victory with oversized headlines. On August 31, a grand celebration was held in the city of New York, and Field became a big hero, sitting on the first carriage of the parade, immersed in the praise of "Columbus II". The president of the United States also attended the celebration, but could only sit in a third carriage.

But before the march set off, Field had gotten the news: the cables were suddenly not working. After September 1, there are no more telegrams coming! It turned out that the reason for the failure was that Wildman Whitehouse, the chief engineer hired by Field, was actually an amateur engineer, a surgeon who increased the voltage when the current signal was weak, and as a result, the cable burned out.

Within a few days, the bad news was blowing. Suddenly, there was a one-hundred-and-eighty-degree turn in public opinion, and Field became a sinner, and people said that he was a big liar, "deceiving a city, a country, and deceiving the whole world." There are rumors that the telegram across the Atlantic has never been sent, what a telegram from the Queen of England! It was completely fabricated by Field himself. Others say he knew the telegram was malfunctioning, but concealed the facts for his own selfish interests and used this time to get rid of his stock at a high price.

Cyrus Westfield, who yesterday was considered a national hero, now has to hide from his former friends and admirers like a criminal.

But Field is not a man who is easily overwhelmed by failure. After six years of silence on his heavy cross, he regained his strength and once again devoted himself to his dreams.

The United States was in the midst of a civil war, and it was impossible to raise money and no one cared. Field came to England, raised £600,000 in Manchester, London and Liverpool, obtained the original operating rights, bought the largest ship of the time, the great eastern, within two days, and made the necessary preparations for the voyage.

The Great Orient was built by the brilliant British engineer Isanbad Brunel, cost £250,000, launched in 1858, and was originally planned for a direct flight between London and Sydney, but because of insufficient supply, it only sailed between London and New York three times, bankrupted three entrepreneurs, and was idle for sale at this time, so field picked up a big bargain, costing only 25,000 pounds, one-tenth of the construction cost. The Great Eastern draft is 22,000 tons and can load all the cables.

On July 23, 1865, the Great Eastern departed the River Thames with a load of more than nine thousand tons of new cable.

Unexpectedly, the first test failed again. Two days before the paving reached its destination, the cable broke and lost £600,000.

Field wanted to regroup, but financing was difficult and banks were no longer willing to lend. Fortunately, Sir John Pender, a Scottish textile entrepreneur, was optimistic about the cause, mortgaged all his family fortune to the bank, loaned him 250,000 pounds, and invested in Field's business, so that the manufacturer was willing to make cables.

On July 13, 1866, the Great Eastern sailed for the second time, and it was a success! The telegram signal from the other side of the Atlantic was clear. On July 29, 1866, Queen Victoria and President Johnson exchanged official telegram messages. Even more coincidentally, a few days later, the old cable that had been missing was also found. In this way, the two cables finally connected the Old World and the New World into one world! On the first day of cable operations, he earned £1,000. Field also washed away his reputation as a "liar" and became a big hero again! [i]

Investor John Pendle also made a fortune and subsequently founded 32 submarine telegraph companies. The 32 companies later merged to form the eastern telegraph company, laying most of the submarine telegraph cables connecting Europe, Asia, and Africa, later renamed Imperial and International Communications, and renamed Cable & Wireless in 1934.

What I want to illustrate with this story is that entrepreneurs don't make decisions with profit as their only goal; entrepreneurs have dreams of going beyond profits. Profit is not so much the purpose pursued by the entrepreneur, but rather the indicator of the entrepreneur's success and the social constraint on the entrepreneur's behavior.

Maximizing profits as the goal of the enterprise is the standard assumption of mainstream economics. In the view of mainstream economics, any deviation from profit maximization is an unwanted phenomenon caused by the moral hazard of the agent, which will lead to a loss of efficiency and should be curbed. In many cases, such assumptions are valuable to our understanding of corporate behavior and market operations. But such assumptions also mislead our understanding of the real world. In the real world, at least for outstanding entrepreneurs, making money is not their only goal, much less their end goal, even if they are the sole owners of the business.

Schumpeter believed that what entrepreneurs really seek is not profit, but a successful career. In particular, entrepreneurs are driven by three non-monetary motives: (1) building their own private kingdoms; (2) conquering opponents and proving themselves superior to others; and (3) enjoying creativity. [ii]

In this world, there are always some people who are ambitious, want to do big things, and want to get ahead. In traditional societies, ambitious and out-of-the-box people can only become monarchs by conquering other people's territories, plundering other people's property, enslaving other people's lives, building their own kingdoms, and finally becoming monarchs. They use the logic of robbers. In a market economy, where the rights of individuals are protected by law, such a bandit logic is unlikely to work. The best way for ambitious people to get ahead is to become entrepreneurs, build their own business empires, and outperform competitors by providing valuable products and services to customers.

An entrepreneur like Jack Ma, Alibaba is the private kingdom he has created. See hundreds of millions of customers using the services provided by their own companies, hundreds of thousands of employees, before and after traveling, foreign visits have presidents, prime ministers to meet, large and small gatherings are the center, from time to time in a variety of media exposure, no one knows, no one knows, there will indeed be a feeling of being a king.

Wang Shi's choice is also a typical one. When he first became a Vanke, he realized that under the Chinese system, making big money and doing big things cannot be combined, and he paid more attention to doing big things rather than making big money, so he gave up the huge shares he deserved and chose to be a "professional manager". But what he really wants to do is not to be a "professional manager", but to build a business empire and be a leader in the real estate industry. Vanke is the carrier for him to realize his dreams, and Vanke's success is his own success. He wants to prove to people: I can, you can't!

The enjoyment of creativity is also an important reason why many people choose to be entrepreneurs. Entrepreneurs doing things under uncertainty are always fraught with challenges that are a reward in themselves for people who like creative work. Every time you overcome a difficulty, it's like winning a victory!

Cyrus Westfield laid submarine cables, which can hardly be said to be driven by profits. He wants to do an earth-shattering cause, wants to be "Columbus number two", wants to change the world with his own actions, this is his purpose. In the process of laying submarine cables, he was always passionate and fun, so he could lose many battles until he succeeded. If he didn't enjoy the process, he couldn't have persevered to the end.

Because entrepreneurs pursue not only profits, but also career success and the realization of dreams, many decisions of entrepreneurs cannot be proved by "expected profit maximization". According to the standard economic model, if a project invests 10 million, the probability of success is 10%, then the entrepreneur will only invest when the profit after success reaches more than 100 million. But in the real world, entrepreneurs are thinking about not only monetary rewards, but also non-monetary rewards. Entrepreneurs often do "loss-making" things, if that's earth-shattering enough. As Schumpeter put it: "Even the apparently disproportionate success of individuals has a role to play, because the likelihood of achieving these achievements exerts a greater incentive than the one that can be demonstrated by rational calculations and multiplied by the product of the amount of profits." For entrepreneurs who don't realize it, it also seems like an attractive reward." [iii]

A controlled study showed that professional managers care more about monetary rewards than entrepreneurs. They choose to be professional managers instead of starting their own businesses because they believe that professional managers are paid more. [iv]

There are also a large number of empirical studies that show that the median income of entrepreneurs in the United States is lower than the median income of employees. It is only because a very small number of entrepreneurs receive extremely high incomes that the statistical average of the entrepreneurial group rises above the median income. [v]

I don't deny the importance of profit in entrepreneurial decision-making. In fact, on the contrary, I believe that it is profit, which is an institutional indicator, that guarantees the compatibility of the entrepreneur's personal goals with the interests of society. On the one hand, in the market economy, profit is a sign of entrepreneurial success, and if entrepreneurs do not make money, it is difficult to prove their success, let alone build their own kingdom. Therefore, even if they are not driven by profits, entrepreneurs must use making money as a means to achieve their goals in life. A question that ordinary people often ask is: He has already made a lot of money, enough to spend several lifetimes, why should he make money? To this, the simple answer is: Yan Que An Zhi Hong Hu Zhi Zhi! For ordinary people, making money is to support their families, but for entrepreneurs, making money is a means to achieve career success.

On the other hand, for society, if the income of the enterprise cannot be greater than the cost, in most cases it means that the entrepreneur has wasted valuable social resources, has not created added value for the society, and should be eliminated. Profit, therefore, is like the whipping of the entrepreneur by the whole society, driving away his constant efforts; profit is also like a cage, which constrains the behavior of the entrepreneur within a reasonable range.

Traditional societies have no shortage of ambitious people like entrepreneurs in a market economy. But on average, they do far more bad things than good things, and some even cause great disasters to society. The reason for this is that they are not bound by profits, and even if they make mistakes, they can continue to obtain resources through violence and go further and further down the wrong path. In contrast, in a market economy, entrepreneurs are not likely to make mistakes consistently because they are constrained by profits. (Source: Principles of Economics)