During the late 1800’s, American author Horatio Alger wrote 129 novels, most of which recount the deeds of impoverished young people who overcome their modest means to establish independent lives as self-sufficient, middle class citizens.
Years after Alger created this new genre, it was derisively (and incorrectly) termed “rags to riches.” A common critique is that Mr. Alger’s heroes succeeded by conveying a simplistic formula comprised of honesty, cheerfulness, virtue, thrift, and hard work.
Dismissing Mr. Alger’s works as juvenile rags to riches novels misses the author’s primary point and the reason why the books had such a tremendous impact on several generations of American entrepreneurs.
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Five Dollars And Two Hours
If you were given $5 and two hours to “make as much money as possible”, what would you do? This is question Tina Seelig, Executive Director for the Stanford Technology Ventures Program, asks her entrepreneurial classes.
The students are given several days to devise their plans. However, once they open the envelopes which contain their seed capital, they then have two hours to execute their plans.
The majority of students fret over the fact that they only have $5 of capital and limited time to launch their money making ideas. However, the teams that consistently make the most money ignore the fact that they are given $5. They move forward with the ideas they brainstormed before they knew how much capital they were given. In many cases, they devise ideas which require no cash.
Just like the heroes in Horatio Alger’s novels, the teams that make the most money realized that the world is not comprised of limitations. As described in Small Ideas, Big Benefits, an entrepreneur’s world abounds in opportunities and successful entrepreneurs learn to recognize them while ignoring externalities that might otherwise restrict their achievements.
To learn about Ms. Seelig’s students’ winning ideas, I highly recommend you watch the following six minute video.
Santa Barbara Foundation
A number of years ago, I was honored to join the Santa Barbara Foundation’s Katherine Harvey Fellows. The organization was created to teach (relatively) young professionals the “art of philanthropy.” The group of approximately a dozen people was drawn equally from the non-profit world and the business community.
We were given $10,000 to distribute to three or four worthy organizations of our choosing. Not surprisingly, the enterprising Katherine Harvey Fellows quickly identified a long list of promising charities. Unfortunately, our limited funds were insufficient to make a significant impact if we spread it over several charities. To address this reality, some of the non-profit professionals suggested that we allocate all the money to a single charity to ensure that our grant would make a sufficient impact.
Conversely, a contingent of the business folks proposed that we raise more money in order to make meaningful grants to multiple organizations. We took this path and eventually raised over $50,000. The additional capital allowed us to make substantial grants to three organizations and still leave a cash endowment to the following class of Fellows. This “self-sufficient” approach has been adopted by all subsequent Katherine Harvey classes, resulting in a sizeable, ongoing financial legacy.
Novel Of Point Of View
Contrary to the disparaging opinion of modern-day literary critics, the protagonists of Mr. Alger’s novels seldom achieved great wealth or power. Rather than attaining riches, they generally became modestly successful contributors to their communities. Rather than “rags to riches”, a more appropriate label for Alger’s genre is “rags to self-sufficiency.”
What the critics fail to realize is that Mr. Alger’s protagonists see the world as fraught with opportunities, rather than limitations. It is not their “cheerfulness” that causes these fictional characters to excel. It is their utter disregard for the amount of money in their pockets and their unrelenting focus on identifying prospects missed by others. As discussed in The Fringe, point of view is worth at least 30-IQ points. Mr. Alger’s heroes significantly increased their entrepreneurial IQ’s by maintaining the proper perspective.
Tackle Ms. Seelig’s challenge with the mindset of Hortio Alger’s heroes and “make as much money as you can.”
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John Greathouse has held a number of senior executive positions with successful startups during the past fifteen years, spearheading transactions which generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.
John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara’s Faculty where he teaches several entrepreneurial courses.
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