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Managing people

Five leading entrepreneurs’ worst stuff-ups

By Oliver Milman
Monday, 06 August 2012

features-Richard-Branson-behind-bars-thumbHaving a big name involved in your start-up is likely to draw investor and media attention to your business, but it’s unlikely to sustain it in the long term.

 

That is the painful lesson being learned by US tech venture Airtime, which is reportedly struggling for users despite the backing of Napster founder Sean Parker.

 

Parker is a serial start-up investor, having backed fbFund, ooma, Causes, Plaxo, Yammer, Asana, Element Payment Services and Spotify, so it’s not surprising that every one of his businesses aren’t immediate hits.

 

However, struggling start-ups might take a sneaking piece of comfort from the fact that Parker isn’t the only heavy-hitting entrepreneur to make a very public slip-up.

 

Indeed, almost every leading entrepreneur can point to an error he or she made, some with nearly catastrophic consequences.

 

With this in mind, we’ve picked out mistakes made by five well-known business founders and what start-ups can learn from them.

 

For each mistake, click on the tabs below:

 

1. Sir Richard Branson

 

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One entrepreneur who appears to turn everything he touches into gold is Sir Richard Branson, who has managed to turn a small record label into a sprawling, global group of household name businesses.

 

But in 1971, he made what he now calls “the biggest mistake of my life.” A 19-year-old Branson was running his record mail-order business when he found out that records brought into the UK intended for export were not subject to purchase tax.

 

“I bought the records I needed, pretended they were for export, and then sold them to British customers,” Branson blogged for the Virgin Group in 2008.

 

“I was caught red-handed by HM Customs & Excise and put in a cell overnight. Naturally I agreed to pay back everything and the fines imposed and avoided a criminal record.”

 

“It nearly killed off my entrepreneurial dreams; thankfully it didn't. But it did teach me a hard lesson about never doing anything illegal or unethical again.”

 

Oh dear Richard.

 

How did he sort it out?

 

By turning it into sage advice that could be monetised in various speeches and books. But Branson says there is also a lesson here for other businesses when it comes to taking your medicine.

 

“One thing is certain in business – you and everyone around you will make mistakes,” he says.

 

“When you are pushing the boundaries, this is inevitable – and it's important to realise this. Even when things are running well, there is always the prospect of a new reality round the corner.”

 

“Suddenly, all the good decisions you made last week are doing you untold damage. What on earth did you do wrong?”

 

“Failure usually occurs when leaders avoid the reality of business. You have to trust the people around you to learn from their mistakes. Blame and recriminations are pointless.”

 

2. Warren Buffett

 

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You could never accuse Warren Buffett of avoiding accountability. When it comes to a transparent admission of failure, the ‘Sage of Omaha’ is as forthright as they come.

 

It may surprise you to learn that the multi-billionaire founder of investment firm Berkshire Hathaway has made mistakes. But a peruse through his annual letter to shareholders unearths a few mea culpas.

 

He incorrectly predicted an upturn in the US housing market last year, spent $2 billion on bonds in an energy business that are now worth under $900 million and didn’t spot a fall in oil and gas prices when he bought at the top of the market.

 

"During 2008 I did some dumb things in investments,” he admits. “I made at least one major mistake of commission and several lesser ones that also hurt."

 

His worst mistake? Buying Berkshire Hathaway itself. Buffett ran the business in its original incarnation – as a textiles producer – for 20 years before moving into other areas.

 

"The dumbest thing I could have done was to pursue 'opportunities' to improve and expand the existing textile operation — so for years that's exactly what I did," he admitted last year.

 

"And then, in a final burst of brilliance, I went out and bought another textile company. Aaaaaaargh! Eventually I came to my senses, heading first into insurance and then into other industries."

 

How did he sort it out?

 

By realising that honesty is the best policy and that, for all of the focus on a business’ leader, the team around him or her is just as crucial.

 

As he once said: “It is better to hang out with people better than you. Pick out associates whose behaviour is better than yours and you will drift in that direction.”

 

3. Rupert Murdoch

 

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The past year has been one of uncharacteristic admissions of oversight by the all-powerful News Corporation boss Rupert Murdoch.

 

Not only has the phone hacking scandal eaten away at the UK arm of his media empire, Murdoch has also had to eat some humble pie over the purchase and subsequent sale of MySpace.

 

Lamenting that after the 2005 purchase of MySpace for $580 million, “We could have sold it for $6 billion a month later”, Murdoch admits things didn’t go quite as well as he planned.

 

"I made a huge mistake," he said about the acquisition at a shareholder conference last year. “We then proceeded to mismanage it in every possible way.”

 

News Corp sold MySpace for $35 million, just 6% of its purchase price, to Specific Media in June 2011.

 

How did he sort it out?

 

Since being unleashed onto Twitter, Murdoch has continued his MySpace confessional, tweeting in January: “Many questions and jokes about My Space. Simple answer – we screwed up in every way possible, learned lots of valuable expensive lessons.”

 

Murdoch clearly understands the need to admit to previous mistakes and to wash your hands of underperforming parts of your business as soon as you can.

 

Since the MySpace sale, News Corp has embarked upon a division of its entertainment and publishing divisions and has continued to push ahead with putting its online content behind pay walls.

 

The lesson for start-ups is clear – stick to your knitting. If you do make a venture into a new area, make sure you get the right people in to run it, or at least advise you, or it could prove a costly mistake.

 

4. Mark Zuckerberg

 

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Facebook has had to precariously balance its business model between the desire for cashed-up advertisers to gain access to users’ habits and the privacy concerns of said users.

 

Last year, the vehemence of user protests over seemingly eroding privacy on Facebook forced CEO and founder Mark Zuckerberg to confess that things hadn’t been ideally handled.

 

“Overall, I think we have a good history of providing transparency and control over who can see your information,” he said in a blog post. “That said, I'm the first to admit that we've made a bunch of mistakes.”

 

“I also understand that many people are just naturally sceptical of what it means for hundreds of millions of people to share so much personal information online, especially using any one service.”

 

“Even if our record on privacy were perfect, I think many people would still rightfully question how their information was protected. It's important for people to think about this, and not one day goes by when I don't think about what it means for us to be the stewards of this community and their trust.”

 

While the growing discontent over privacy wasn’t seriously threatening Facebook’s huge global reach, Zuckerberg was clearly spooked enough to tackle the issue head-on.

 

How did he sort it out?

 

By taking practical steps and telling everyone about them. Facebook overhauled the tools it offers to supposedly give users more control over their accounts. Zuckerberg also hired two high-profile privacy tsars to his executive team.

 

Less than a year on, users aren’t quite so up in arms over privacy on Facebook. The headlines moved onto the business’ botched IPO, but that’s another story entirely.

 

5. Stephen Fry

 

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He may be seen as a modern-day polymath, but entrepreneurship doesn’t appear to be foremost among Stephen Fry’s skills.

 

Back in June, it was revealed that his first start-up, Pushnote, had shut up shop after less than a year.

 

A notice on the homepage read: “It was a difficult decision, not least because we loved the great content shared on Pushnote, and we’re sorry we can no longer support the site."

 

“As an innovative social platform, Pushnote was always a bit of an experiment. It was a lot of fun and we made a lot of friends, but our passions have led us elsewhere."

 

“The people behind Pushnote have been dreaming up new ideas for some time, and those ideas have come to eclipse Pushnote, so it’s time to move on.”

 

The online tool, which allowed users to comment on various different sites without having to log in multiple times, was named a “turkey” by reviewers.

 

How did he sort it out?

 

By being Stephen Fry. Which involves making lots of TV shows, making witty quips and going on speaking tours.

 

After a minor media flurry after the demise of Pushnote, the episode was quickly forgotten, with Fry moving back to what he does best.

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