Rob Adams has likely listened to as many new business ideas as anyone on the  planet, and one of his first tips for entrepreneurs is to never tell a potential investor you’ve got an original idea.

“Wake up,” he says, “Good ideas are not scarce, they are a dime a dozen.” If you don’t believe so, Adams suggests an online search of key words describing your idea. “You’ll find ten companies doing it, or thinking of doing it. You can drive yourself nuts searching for a unique idea, but that is not the point.”

The point, as he describes in his book A Good Hard Kick in the Ass, is execution intelligence, the ability to compose a team that can operationally execute a business plan with sustainability, flexibility and resilience, to dominate rather than define a market space.

Why Investors Hate the Nondisclosure

“Every time I’m asked to sign a nondisclosure agreement I see a huge red flag pop out that says Warning!” Adams asserts. “It screams out, ‘I’m stuck on my idea,’ it means you’ve spent too much energy obsessing about the idea and probably haven’t thought enough about the team, which is what the investor is really interested in. It implies you haven’t given much thought to your customers, or to the market.”

Getting to market first with a new idea doesn’t mean anything in Adams’ experience. “Netscape’s browser was out long before Microsoft Explorer,” he recalls. “Creating a new category does not necessarily spell success, but I can think of plenty of businesses that entered an existing category and proceeded to stomp all those roaches to pieces.”

Execution Intelligence is Where Rubber Meets the Road

Adams knows many people don’t think of the team as an integral part of a new business concept–but the ability of a particular group of people, in a particular place and time, to make a company thrive is a must have for a winning business. His tips for entrepreneurs include six critical success factors every new business team should strive to achieve:

1. Domain knowledge. Are you experienced in the market space where you will compete? Sometimes startup teams want to explore initiatives outside their prior experience, but Adams cautions against leaving your industry knowledge behind, including intimate insight into your customer base.
2. Fast-growth scar tissue. Without it, you can’t deal with the ups and downs of rapid growth. Just working at a startup doesn’t necessarily give you the necessary experience, claims Adams. He asks, were you driving the changes, or riding the waves? If you don’t have this experience, add someone on your team who does.
3. Experience in hyper-competitive markets. At some point, a large, well-financed competitor will loom up overnight and bellow loudly. Can you deal with that? Entrepreneurial success requires a team to face a competitor who wants to kill you, and be energized by the challenge.
4. Risk management skills. Massive shifts in strategy or product lines are inevitable. Are you nimble? Can you cope? Adams believes startup teams must stay connected with prospects and customers every day in order to anticipate market forces and stay aware of what customers really need and are willing to purchase.
5. A comprehensive experience profile. Taken together, your team members must have the marketing, technical, sales, and executive expertise it takes to grow and run a company. In addition to the core management team, Adams recommends signing on key advisors with relevant and needed expertise.
6. Leadership know-how. Your corps of employees will expand faster than you can imagine. Can you recruit, retain, and effectively manage these people? This includes devoting sufficient attention to matters such as employee culture, values, and how to reward employees when they reach key milestones.

Its doubtful your startup team will possess all six of these attributes, but you must be aware of weaknesses and quickly move to strengthen your core. Not only will it increase your likelihood of wooing financial backers, but the very survival of your startup is at stake.

“Successful businesses don’t depend on unique ideas,” he affirms. “Instead, they rely on a team’s ability to execute–to build, market, and sell a product that’s better, faster, or cheaper, and to do so to near superhuman perfection.”

Yes, your idea may be genius, but at the top of Rob Adam’s tips for entrepreneurs is a simple yet jarring truth. “Get back to the fundamentals, or you’re roadkill.”

Rob Adams is an active investor, author, consultant and faculty member at McCombs School of Business, where he teaches in the MBA program and is the Director of the Venture Labs Investment Competitions. This week he is welcoming student entrepreneur teams from around the world to compete in the Global Texas Venture Labs Competition held every May on the campus of The University of Texas at Austin.

Other Entrepreneurship Reading:

• Futurist Predicts Reciprocity Will Be Biggest Innovation Opportunity in History
• Venture Labs Competition Proves Entrepreneurship Isn’t “Moot” on Campus
• What Questions Will an Investor Ask You?
• Online Entrepreneur Advocates for “One Day Business Plan”
• Angel Investing and All That Money Stuff

What is the true cost of your company’s product? Behind the simple economic analysis of materials, labor, marketing and distribution lurks the more complicated question of your brand’s social and environmental impact. Does your brand kill polar bears, and if so how does that fact impact your reputation?

Stephanie Jue, a business, government and society lecturer at McCombs School of Business, says cost economics is just the starting point for determining the societal impact of your product.

“Consider a $1.25 bottle of water,” she says. “What the consumer wants is the water inside, but it has to be in the bottle. We assume the price includes all of the costs of the water and creating the bottle, but consumers don’t pay the full cost of eliminating the plastic and eventually discarding the plastic when it can no longer be recycled.”

If consumers remain oblivious to the added cost there is likely no impact on brand reputation (convenient, portable water is good!), but in today’s information rich world, consumers tend to wise up. Social advocates make sure of it.

Witness the gradual demonization of bottled water as an example of what can happen when true costs are not just revealed, but turned into a cause célèbre.

Is the brand impact a factor of cuteness?

Cute enough for you to care?

How much consumers care about social and environmental impact, speaking from a pure brand perspective, may depend on the “cuteness” of the declared victim.

Jue notes that society is very worried about saving polar bears, for example, which seem to have minimal direct impact on the average person. Endangered honeybees, on the other hand, responsible for pollinating one third of the food crops in the U.S., receive much less concern.

“Valuing things in nature is very difficult and controversial, but as consumers we tend to apply more value to things we find familiar or cute,” she says. Unfortunately for society, cuteness does not necessarily correspond with value.

Wolves, not generally considered cute, were eliminated from Yellowstone Park in the 1920s, beginning a chain of events that resulted in deforestation, loss of natural lakes, and the disappearance of songbirds. Wolves were reintroduced to the park in the mid-1990s and the negative effects were reversed.

It may be that foreign technology workers are not cute enough to matter to American consumers. Despite the controversies regarding workers rights at Foxconn, including suicides, worker riots and charges of child labor violations, sales of the Apple iPad and iPhone remain undiminished. The Apple brand, despite some recent softening, appears relatively untouched by concerns regarding its manufacturing partner.

Managing your brand with eyes wide open

Stephanie C. Jue

Jue doesn’t suggest an exact measure for the social and environmental impact of brands, but she sees a new generation of consumers more aware and alert to the true costs of the products they choose.

“Young consumers comprise the best informed generation about environmental issues,” she says. “Social and environmental impact is now mainstream, and marketers cannot assume that true costs will not be seen or considered in the purchasing decision, particularly when the purported victims are familiar and appealing.”

Other Articles You Might Find Useful:

• Cause No Unnecessary Harm – On Social Responsibility From Patagonia to Walmart
• Ethical Behavior Unwrapped by New Video Series
• Breaking Gridlock and Solving Problems – Lessons from Global Warming

Originally published in Texas Enterprise.

Let’s consider a popular consumer brand choice you’ve likely thought about. Is the iPhone or the Android better for you? At the time this was written there were more than 97 million results on Google for that question, with lots of data points to consider. Which platform has the most advanced multitasking capacity? Which has better applications? You likely have a list of logical reasons in your head why one or the other is the best choice.

You may be disappointed to know two researchers at The University of Texas at Austin suspect those rational reasons may have little to do with your decision.

The fundamental question is whether consumers make their choices based on logical comparisons of performance, or are they emotional creatures who gravitate to products that appeal to their senses, feelings or moods?

Marketing professor Raj Raghunathan and Ph.D. student Szu-Chi Huang of the McCombs School of Business point to their research study that shows comparative features are important, but mostly as justification after a buyer makes a consumer brand choice based on emotional response.

The Case of the Attractive Chicken and the Unattractive Chicken

In one phase of their study, Raghunathan and Huang showed participants two photos. One was a nice looking, plump chicken. The other was a chicken that looked thin and sickly. Participants were told that the plump chicken was a natural chicken, and the thin chicken was genetically engineered.

The researchers informed half of the participants that natural chickens were healthy but less tasty, and genetically engineered chickens were tasty, but less healthy. The other half were told the opposite.

Overwhelmingly, sets of participants expressed a preference for the nice plump chicken, but their justifications were different. The first group claimed it was because they valued health above taste, and the second group said it was because taste was more important. Neither group seemed to justify their choice based on how they felt about the chicken’s looks. They felt compelled to justify their emotional choices with non-emotional reasons, to the point that the two groups found completely opposite ways to justify the same decision.

Post-hoc Rationalization in Marketing, Politics, Religion and Life

Researchers also tested the same hypothesis using political candidates. Participants were asked to rate the effectiveness of certain work styles displayed by two politicians. Not surprisingly, Republicans tended to value the work style used by the Republican politician, and Democrats valued the work style used by the Democrat. Like the chicken example, different groups were told opposite work styles for each candidate, but each group made their decision based on their pre-conceived political preference, and then justified their decision by whatever trait they had been told “their politician” used.

“This is called post-hoc rationalization,” said Ragunathan, “and it is found in every aspect of our life, whenever we make decisions. We are ruled by our emotions first, and then we build justifications for our response. You can see this happening in hiring decisions, dating, you name it.”

Logic and Reason are Valued, Emotion is Mistrusted

Professor Raj Raghunathan of McCombs School of Business

“In our society it is generally not considered justifiable to make a decision purely on an emotional response,” he said. “We want to be considered scientific and rational, so we come up with reasons after the fact to justify our choice.

“This process seems to be happening somewhat unconsciously, people are not really aware they’re coming up with these justifications. What is even more interesting is that people who claim that emotions are not that important, who consider themselves to be really rational, are actually more prone to fall into this trap.”

Ragunathan and Huang believe this is because once someone has denied the possibility of making a decision based on emotion, there is no other option but to come up with justifications. “You paint yourself into a corner,” he claims. “You want to portray yourself as this rational decision maker, but in reality, you’re the one who’s most likely to show post-hoc rationalization.”

Brand Image First, Rationalization Later

What does this mean for marketers? Ragunathan suggests it confirms the importance of brand image advertising and marketing activities, particularly in the early stages of an introductory campaign. “The earlier you make the emotional connection the better, because once consumers have decided they like a particular option, the more difficult it is for them to backpedal. Their thinking falls in line with the emotions,” he said.

Which brings us back to the question of the iPhone or the Android. Which is the best consumer brand choice for you? Hey, if it feels good, justify it.

The Art of Complimenting and Criticizing by Raj Raghunathan

Making Eco-Friendly More Acceptable to Consumers? with Raj Raghunathan

Other Branding Resources:

• The Pony Sheet – How to Develop a Brand and Ride It
• Adding F-A-B to Your Brand – Translating Features to Advantages to Benefits
• What is a Brand?
• What Happens to Your Brand After a Merger?
• Three Ways to Inoculate Your Brand Against Disaster
• Example of How a Branding Brainstorm Works

Environment and energy policy expert Dr. David G. Victor has been on the front lines of global environmental diplomacy for more than twenty years, so your ears perk up when he says, “The effect of all environmental treaties is nearly zero, and it’s time we seriously asked the question, ‘Is climate too hard to solve?’”

If you’ve been involved in breaking gridlock and solving problems you’ll almost certainly empathize with Victor’s frustration. Problems may seem unsolvable, particularly when motivations, authority and resources are not aligned, as in international emissions negotiations.

In the face of such constraints, how can you break the gridlock?

Reframe the Approach, And Your Definition of Success

Victor finds no surprise in the lack of progress made on global emissions. “Progress on climate requires governments to do things governments have a hard time doing,” he acknowledges. “There are high upfront costs with uncertain long-term results; and as industrial growth and emissions evolve across the globe, the natural leaders on climate issues change.”

He suggests a four-point approach for breaking gridlock that can work in any complex organization.

1. Learn to Work in Small Groups. U.N. negotiations are necessarily complex and many countries simply don’t want them to succeed. (Does that sound similar to your organization’s decision structure?) Victor encourages diplomats to continue high level global talks, while also embracing smaller efforts focused on countries where easy and early wins can be made. Striving first for smaller successes allows concepts to be tested, models to be refined, and support to be gathered as the new approach gains momentum.
2. Embrace Fragmentation. In the world of global diplomacy, a webbed hierarchy of agreements, initiatives, protocols and actions is honored as the means for moving forward in a unified, cohesive manner. Large organizations thrive on a fabric of interweaved policies, procedures, and layers of decision structure–all of which can be deadly for innovation or action. Victor argues that fragmentation is acceptable, particularly in the face of gridlock and in areas where forward progress of any kind is preferable to doing nothing. 
3. Build Credibility With Quick Wins. Lowering CO2 emissions is a key component of climate policy, but because of high upfront costs and large economic risks, Victor considers it an issue designed to fail. He encourages policy negotiators to instead focus on reducing soot, an issue where progress can be achieved more quickly and with lower cost. “Making progress on soot will demonstrate that when countries work together the efforts are credible,” he says. “Credibility is the beginning, middle and end of all international negotiations.”
4. Rewire the Assumptions. International trade rules currently make it harder for countries to address the underlying costs of emissions. When U.S. companies offshore production to China, the costs of emissions stay in China while consumers enjoy the benefits of low prices here in the States. Victor believes that until the environmental cost of emissions is properly accounted for, the motivations for change will be misaligned and climate progress will continue to stall. Properly framing the risks, rewards, barriers and opportunities is essential in any decision negotiation, and a smart negotiator will not allow others to define the assumptions upon which a decision is to be based.

Sacrifice for Thee But Not for Me?

Rewiring assumptions is easier to suggest than to accomplish, especially with global economies and national pride in the mix. Gaylen Paulson, head of the Texas Executive Education program, and an expert on complex negotiations, says self-serving bias naturally enters into discussions involving parties with competing interests.

“It’s true that 99% of people agree their neighbor should take the bus to work,” he says. “We all agree other individuals or nations need to make changes, but fail to recognize our own ‘objective’ point of view is clouded by self interest.”

While one party or the other may steamroll the process to their own advantage, Paulson says recognizing the other’s view of the issue is essential to achieving an agreement that will actually be implemented.

Victor agrees national interests have made quantifiable progress on climate control nearly impossible. ”Diplomats have been producing faux treaties designed to show compliance,” he complains. “The desire to have a simple strategy to achieve bold goals hasn’t worked for the last 25 years.”

As he continues his advocacy for quick environmental wins in small, focused areas across the globe, Victor sees a glimmer of hope for tangible progress, “even though it will be slow and messy.”

Such a process, as daunting as it sounds, may be exactly what your organization needs for breaking gridlock and solving problems in pursuit of innovation, profits and market share.

Dr. David G. Victor was a keynote speaker at the UT Energy Forum created by students at The University of Texas at Austin.

Robert Prentice, Chair, Business, Government and Society Department, McCombs School of Business

“We are all Lance Armstrong…sort of.”

Robert Prentice began his lively remarks with a suggestion to visit the Ethics Unwrapped Website, that features a new free video series on business ethics and corporate social responsibility.

“The good news is, you’re not as unethical as you could be!” he says with a smile. “Everyone of us has the opportunity to mug little old ladies and steal candy from a baby, congratulations on not doing that. But, the bad news is, you’re not as ethical as you think you are.”

“We all lie a little bit when it suits us. We are all Lance Armstrong…sort of,” he says. “So the word of the day is humility. When you read about the latest scandal of the day, everyone thinks it couldn’t happen to them, but it could.”

Prentice points out that most people, even him, want to think of themselves as good people. Most people frequently act unethically, usually in minor ways. “When we can fudge a little bit to help ourselves out we frequently do it. Not that we know we are doing it.”

He says our brain is part of the problem in business ethics or other aspects of our moral lives, influencing our decisions based on factors such as:

• Our self interest
• Emotional reaction
• Role morality
• In-group/out-group

“Most of us feel like we have rock solid character that leads us to act morally,” he says. “I want to believe that, too, but there continues to be research that points to the contrary.”

Prentice quickly reviews several research studies that point to peoples tendency to bend the rules when faced with:

• Authority Figures–we are raised to be obedient to parents, bosses, police, etc.
• Conformity Bias–everyone else is doing it, or thinking it, so it must be right.
• Time Pressure–ethical considerations have less influence when we are rushed.
• Self-control Depletion–some conditions such as job dissatisfaction deplete our self-control, leading to more cheating.
• Emotions–whether happy, sad, angry or frightened, our emotions flavor our decisions.
• Transparency–if we feel others can see our actions we tend to act more ethically.
• Role Morality–the role we are asked to play (such as being a manager or an employee) can impact our ethical decisions, positively or negatively.

“In the end, nobody can monitor you as well as you can monitor you,” he says. “If you want to be a good person, realize that there are a lot of forces working against you. You have to be aware of these factors, you have monitor the situation, and you have to police yourself.”

I highly recommend Prentice’s wide-ranging blog on business ethics and corporate social responsibility. The Ethics Unwrapped Blog.

Rex Tillerson, Chairman and Chief Executive Officer, Exxon Mobil Corporation

“If we are not careful this will become known as the Land of a Thousand Nos.”

Speech Preview Notes:

Innovation creates new opportunity. This has never been more evident than in today’s energy industry, where technological breakthroughs have led to a revolution in domestic unconventional resource development, which in turn has created thousands of new jobs, millions in government revenue and billions in economic growth. Thanks to innovation, an energy transformation is now underway in North America, the dimensions of which are still unfolding. We are breaking new ground in the safe and responsible production of oil sands, shale gas, tight oil and ultra deep water.

To sustain such innovation at the breakneck pace the world needs, the International Energy Agency estimates industry will need to invest $25 trillion by 2030. As you know, successful investment requires long-term vision and discipline as well as a secure and stable environment. For such long-term investment strategies to work, business and government must each know and fulfill their duties. The duty of government is to facilitate the safe and responsible development of energy within the context of a level playing field.

This new era of abundance has made it possible for the United States to meet our nation’s needs for energy and become something we have not been in decades – a major energy exporter. We must work together to build energy policies that strengthen markets, encourage free trade, promote the rule of law and provide a sound and stable policy environment to support the investments that enable continued innovation and improvement. If we can deepen our emerging energy consensus, we will develop the diversity of sources and security of supplies that a growing and more prosperous world needs.

Tillerson’s Remarks on Technology Innovation and Investment:

Rex Tillerson began with a remark sure to please the audience of UT school of business alums. “It’s always a pleasure to get back to the Forty Acres,” he says. “Most of the places I go aren’t this pleasant.”

He quickly turned to the core of his remarks, that in the midst of a challenging economy there has been a rebirth in the energy industry and in technology innovation in the energy sector, and we are in a race to meet the rising need for energy around the world, including developing nations.

“In households in the developing world, when the sun sets, reading and learning stop,” he says. “If we don’t plan for the future, we cannot spread prosperity across the world.”

“We look at the next decades, and we project 2 billion more people by 2040, to total of 9 billion. Energy demand in developing nations will rise by 60%. There will be billions of people who expect the qualities of life we have in the United States.”

Oil and Gas to Dominate Renewable Energy Technologies

Tillerson sees oil and gas as the energy source that will continue to shoulder most of the energy load in future decades. “Alternative energy will grow, but wind will only account for 7 percent of global supply, solar will only account for 2 percent of global supply,” he asserts. “Oil will remain the world’s number one fuel, but natural gas will surpass coal to become the number two energy source.”

He predicts that the energy transformation in the U.S. will continue to unfold as estimates of available oil and gas supplies continue to climb with increases in technological solutions for obtaining it.

“Estimates of available oil has doubled since 1975, despite our continued use of it,” he claims. “I used to debate peak oil production theorists that predicted massive shortages by 2020. Anyone who tries to predict the future has never been very good at predicting the impact of new technologies.”

Government/Private Cooperation to Create New Jobs

“Oil and gas could support another 1.2 million jobs in the years ahead,” he asserts. “We have natural gas resources to meet nearly two centuries of demand, and it has reinvigorated steel manufacturing in the U.S., petrochemicals, and large equipment manufacturing.”

At the same time, he says energy related carbon emissions, most of which come from electric power production have dropped, close to what they were in 1995.

He calls for cooperation between business and government to increase technology innovation and energy production. “Energy projects are the ultimate long-term investment, the payouts are long and the depletion cycle is long, requiring reinvestment along the way. Business and government must each know their roles and fulfill their respective duties.

He calls for business leaders to do what is right for society and for business, with a culture of accountability, safety and efficiency. On the government side, he hopes for regulation governed by sound science while accounting for risk and rewards.

“The regulatory process has stifled growth,” he says. “If we are not careful this will become known as the Land of a Thousand Nos.”

Energy Regulators Should Feel Confident to Allow Growth

He believes the government should feel confident to allow responsible development given the breakthroughs in technology that allow more efficient and safe exploration.

“It’s about open competition and sound regulation,” he says. “We know how to do this, we used to do it very well. We need leaders in corporations, in government and academia to grapple with the issues of energy policy.”

Tillerson tells attendees that leadership with integrity is a high calling. “Because of the contributions of institutions such as McCombs I am optimistic about our energy future.”

For further university discussion on the energy industry and technology innovation, visit Texas Enterprise Energy Insights.

Michael Hasler, Lecturer and Program Director, Master of Science in Business Analytics, McCombs School of Business

“If you can’t take data and tell a story with it, it is just overhead.”

Michael Hasler is on a mission to convince the world that the age of big data is the new oil boom.

“Just as oil transformed the economic landscape, data is driving that today,” he says. “The velocity of data is incredible, and there are opportunities, problems, and gaps in our skill base. Just as oil is useless unless it is refined, the same is true of data. You do not make decisions with data, you make decisions from information, which is refined from data.”

Hasler says that humans now do nearly 200 terabytes of activity on the Internet per second. “It’s not just the size, it is the churn, the velocity,” he explains.

New Tools to Uncover and Analyze Big Data

“We now have sensors, RFID tags, Facebook postings, all of these activities create data and it is virtually free to store this data, with a tremendous uptick in the computing capability,” he says. With this increase in data and computing capacity, there needs to be upgrades in the analysis tools. “I’m sorry Microsoft but you can’t analyze a terabyte of data on Excel spreadsheets,” he tells attendees with a smile.

“We also need the ability to visualize the data, with 3D spatial representation, surface graphs, and other ways to visualize the information. My goal is to turn students into storytellers,” he explains. “If you can’t take data and tell a story with it, it is just overhead.”

Big Data Poses Privacy Concerns

Hasler points out there is a $600 million potential annual consumer surplus from using personal location data globally, such as mailing coupons to customers based on past purchases. In a recent controversy Target was sending coupons for pregnancy and child care items to a man’s daughter and he wondered, “Why is Target sending my daughter these things?”

“Target has since changed how they deal with these things,” Hasler says, “but this guy’s problem was basically that Target knew his daughter was pregnant before he did.” Such issues fall squarely in the realm of social corporate responsibility and business ethics.

He reminds the attendees that analytics begin with opportunities, not information. “The age of big data does not guarantee better decisions, we need to understand which of the data is the right data,” he says.

When does data become overwhelming instead of insightful? Andrew Dillon, dean of the School of Information at The University of Texas at Austin, gives tips on dealing with information overload, including understanding the limits of our attention and memory. (Video)

Laura Kilcrease, Entrepreneur in Residence, Herb Kelleher Center for Entrepreneurship, McCombs School of Business

“Every angel brings value to the table.”

Laura Kilcrease reminds attendees that most of the new jobs created in the past five years in America were created by small businesses with less than five employees, much of it funded by the angel network.

“About $20 billion a year is invested by angel investors,” she says. “There were over 55,000 deals in 2008, mostly early stage investing, with some of it by so-called Super Angels who are comfortable investing larger amounts in startups.”

Typical levels of startup business funding are:

• Sweat equity
• Friends, Fools and Families
• The Angel Network
• Seed Funds
• Venture Capitalists

“Texas is clearly on the map,” she explains, But even though Texas, California, Washington, Massachusetts and Pennsylvania are among top states attracting angel investment, the dominant player is the San Francisco Bay Area and Silicon Valley, which captures about 38 percent of total angel investment.

Kilcrease Describes the Angel Investor

“Many of these are wealthy individuals who have retired and feel that they still have something to contribute,” she explains. “In some cases they were helped by someone early in their career and they want to pass the favor along to others.”

She says that even though angel investors may not have business experience (many have inherited their wealth) they often have incredible networks. “Every angel brings value to the table,” she tells attendees.

“A great angel helps an entrepreneur see around the corner, gain a sober second opinion, network with people who can help build the business by being an ambassador, while gaining credibility in a field.”

There are 4.2 million millionaires in the U.S., and about 12,000 investors currently provide angel business funding in the U.S. Kilcrease sees potential in these numbers.

“There is a big bandwidth of opportunity as more potential investors learn about angel network opportunities.”

Psychology of the Angel Business Investor

Angels will generally invest in any type of company, but there are some commonalities in how they typically invest, including having a preference for investments close to home or within their region. Kilcrease sees this changing as angel network syndicates begin forming across regions of the country.

Angel investing isn’t for everyone.

“This is very risky, and investments typically don’t return within the first three years,” she warns. “If they do pay off it is usually about 6-to-7 years after the investment.”

The Angel Network is Not for Every Entrepreneur

“Of every hundred business plans that enter the process 1-to-4 will make it through to funding,” she says. “It comes down to two major issues, belief in the quality of the management team, and the size of the opportunity.”

Kilcrease says angels are generally looking for $30 million in revenue in five years, although she sees some variation in this. She emphasizes that the entrepreneur needs to fully understand the terms of the angel rounds, talk to advisors and consult with experienced entrepreneurs.

“Stay flexible on the terms, especially valuation, and understand the common practices of the angel network in your region and business vertical,” she says.

Laura Kilcrease is the Entrepreneur-in-Residence for 2012-2013 at McCombs School of Business. She sponsors the Entrepreneur-in-Residence Speaker Series, with past speakers available for viewing online.

Lewis Spellman, Professor, Finance Department, McCombs School of Business and author of The Spellman Report

“What Lew is talking about may not be pleasant, but we need to take it seriously.”

Lewis Spellman has been jokingly called Dr. Doom by his teaching colleagues, but they acknowledge that his voice of warning on topics such as the national deficit and the rate of inflation is vital to the future of the U.S. and global economic survival. Colleague John Doggett told attendees of the McCombs Alumni Business Conference that “What Lewis is talking about may not be pleasant, but we need to take it seriously.”

Spellman warns that the U.S. has seen a 35x increase in money supply in recent years, which he predicts will lead to currency wars as the U.S. forces an increase in money supply in countries around the world.

“The numbers are staggering,” he says. “The current deficit plus already accumulated debt is a very small proportion of what is coming down the pike.  The fiscal gap of the present value of 75 future years of accumulating deficits amounts to $225 trillion on an income base of $15 trillion.”

He warns this deficit cannot be funded and he expresses frustration that there is no headway in confronting the problem, while conditions worsen.

“The country’s high levels of debt slow income, and so the deficit gap becomes even larger,” he says. “Even if we would sell the debt we couldn’t afford the interest payments.” In this environment Spellman sees only “monetary trickery” in the nation’s capital, as leaders search for costless financing options. He specifically addresses four such options:

1. Federal Reserve monitization of Treasury debt. The Fed purchases Treasury debt through increased printing of currency. “The central bank should operate independently,” says Spellman, “but we saw what recently happened in Japan when the central bank chairman resigned because be couldn’t operate independently. This is what happens in this situation, you either go along or you resign.”

2. The Trillion dollar coin. “This is also trickery in a sense,” Spellman says. “They are always looking for legal ways to handle the debt without addressing the underlying problems. There is a ceiling on printing currency, but no ceiling on issuing coins, so its just a legal move to accomplish the same thing. At the end of the day the result is the same as selling the debt to the Fed. It could be an ounce of dirt, it just happens to be a coin because they are authorized to issue coins with no limit mentioned.”

3. Treasury Currency: The United States Note.  “During the Civil War the Treasury printed money in order to pay the soldiers, and these where United States Notes, not from the Federal Reserve,” explains Spellman. “This is really just about whatever option goes smoother and raises the least flap with the press.”

4. Silver Certificates. “The Treasury issues the debt and the Federal Reserve two blocks away buys it, and it is all electronic, just claims on dollars,” says Spellman. “The debt disappears, and it is held by some government agency, but the only fixed asset is the extent to which the government is buying some physical assets and equipment.”

Spellman just shakes his head at such options. “I wish I had a printing press to cover my debt, we all wish we had one. So basically, the interest and debt mystically goes away if you live in the White House, and on the face of it things appear to be fine.”

This does not mean the kind of financial woes that brought down the Greek economy. “The exploding interest expense of the Greeks will not happen as long as the debt is held by the U.S. central bank and interest is rebated. The problem the Greeks had is that they don’t control the Euro printing press, and the U.S. government does.”

Even so, Spellman foresees significant financial problems ahead for the U.S. and the rest of the world, focused in large part on investors’ search for stable investments in the future.

“On the face of it, the U.S. takes care of its problem by printing money,” he asserts, “but the long term issues don’t go away. Currently the Fed leverage ratio is 50:1. If any commercial bank was at that level they would be out of business. You don’t think investors around the world don’t know that?”

As a result he sees investors looking at foreign markets if they can’t find what they need in the U.S. market. “The financial market liquidity will look for a new home,” he says, “but there are limits to how much foreign capital any market can absorb without a boom-bust cycle.”

Foreign central banks sell their currency to keep their currency competitive (cheap) in order to export, which leads to a currency war; a fight for the cheapest currency. “Now Japan has entered the currency wars just this past month,” says Spellman. “The energy producers are also intervening, Israel and lots of developed countries. So our money mushroom spreads elsewhere, the trade deficit slows our economy down, and it is hard to argue this is good for us.”

Spellman believes the short-term benefit of financing government spending without more taxes is like a sugar high. “There is a global money supply multiplier that is very large as a result of the ramped up response to U.S. monetary expansion,” he says, “and the long-term impact is astronomical.”

Why Is The Rate of Inflation Not Yet Soaring in the U.S.?

“We have such a depressed economy that the inflation hasn’t hit us yet,” he explains. “It will hit other countries first, and then we will import their inflation through higher prices. With this level of money supply globally it will catch up with us, I estimate 2 to 4 years from now.”

“But politicians see this as a victory, because the social security checks keep coming. On the surface it seems all fine and dandy, but the currency intervention will have investment effects. Where does capital investment go? If you have mutual inflation everywhere we have an incredible wildcard situation or opportunity. Investors will look for a currency that is not inflating, and I think it could be the U.K., Canada, China or Texas [he says with a smile] if it were to secede.”

U.S. Needs to Spur Entrepreneurship and Production

“Sustaining growth and fiscal commitments is better served by doing everything possible to incentivize entrepreneurship, winning the global production war with efficiency,” he asserts. But he has a warning to those who think they will be able to take their investments beyond the shores of the U.S.

“Ultimately U.S. citizens will flee paper currency in general and gravitate to another non-inflating country and commodity money. Washington understands this and they are already putting constraints on capital outflow from the country,” he says.

Spellman points to increasing restrictions and taxes being placed on citizens who seek to escape a potentially explosive rate of inflation and other economic woes in the U.S. “Your avenues for managing your own risk are becoming limited,” he warns.

In 2000, I was running a small brand consulting firm when I landed a choice piece of business in Houston. The client was a promising startup in the new sector of online energy trading, Altra Energy. At the time there was an 800-pound gorilla in the market, Enron Online, and we all knew that beating them at their own game would be challenging. This TV commercial at the time perfectly expressed Enron’s presumed dominance in the energy trading world.

Unbeknownst to this lowly Don Quixote, as Altra and I polished our spears for battle, a self-inflicted disease was already killing the beast from within. On August 22, 2001, Enron Vice President Sherron Watkins delivered a letter to chief executive Ken Lay sharing her concerns that the company might be an “elaborate hoax.” The ugly train wreck that followed has become a case study on unethical business conduct, and Enron became an exclamation point for the call to do a better job teaching ethics and corporate social responsibility in our schools.

Ethics Unwrapped: Beyond Business Ethics

Fast forward a dozen years and McCombs School of Business has just launched Ethics Unwrapped, a charmingly effective free video teaching tool designed to stimulate thought and discussion about ethics and corporate social responsibility in university and high school classrooms. Director Cara Biasucci says she hopes the series will make teaching ethics more attractive to professors.

“I hope that it creates a new generation of leaders that act more ethically,” she says. “If we can start building the consciousness and awareness in students at 18, 19 and 20 years old, then in 10 years we may have leaders that have a greater grounding in ethical action and a stronger commitment to act ethically.”

As the series itself affirms, achieving that end depends on whether students can move through their careers while avoiding the effects of Moral Equilibrium, Self-Serving Bias and numerous other ethical trapdoors, many of which are entertainingly addressed in a series of short Concepts Unwrapped videos.

Hint: you don’t have to be a student to enjoy or benefit from Ethics Unwrapped. 

The Ethical Role of Communicators and Consultants

It is tempting to fall into a “role” within the organization and believe that the burden of ethical behavior falls on someone else in the decision structure. “I’m just the communicator, the marketer or the brand consultant, that’s above my pay grade,” might be the rationalization. That’s called Role Morality, and yes, there is a Concepts Unwrapped video about that, too.

This common rationalization is what causes lowly administrative employees to criminalize themselves (by shredding documents or deleting emails, for example) in support of a coverup of unethical behavior that might have occurred far above them in the corporate structure. “I am just doing my job” is a surprisingly powerful sentiment, and it could easily be adopted by a communicator or consultant who believes he or she is there to serve a grand purpose, even if it gets shady around the edges.

Jack Abramoff, the disgraced D.C. lobbyist (and subject of the powerful video In It to Win), today looks back on his nefarious behavior and says, “I thought I was a good guy, working for worthy people.” That mindset justified any number of slippery acts, all while thinking he was fighting the good fight.

Don’t think it could happen to you? Well, you don’t know Jack. He went to jail and ruined his career to learn the importance of ethics and corporate social responsibility. For you, perhaps it will only take watching a video.

Conflict of Interest Disclosure: I played a minor role as a contributor to the Ethics Unwrapped video series, and I want you to like it, share it and use it in your own career and organization. Besides, its really cool.