What I Wish I Knew When I Was 20

A Crash Course on Making Your Place in the World

For Josh,
Happy 20th Birthday

What would you do to earn money if all you had was five dollars and two hours? This is the assignment I gave students in one of my classes at Stanford University. Each of fourteen teams received an envelope with five dollars of “seed funding” and was told they could spend as much time as they wanted planning. However, once they cracked open the envelope, they had two hours to generate as much money as possible. I gave them from Wednesday afternoon until Sunday evening to complete the assignment. Then, on Sunday evening, each team had to send me one slide describing what they had done, and on Monday afternoon each team had three minutes to present their project to the class. They were encouraged to be entrepreneurial by identifying opportunities, challenging assumptions, leveraging the limited resources they had, and by being creative.

What would you do if you were given this challenge? When I ask this question to most groups, someone usually shouts out, “Go to Las Vegas,” or “Buy a lottery ticket.” This gets a big laugh. These folks would take a significant risk in return for a small chance at earning a big reward. The next most common suggestion is to set up a car wash or lemonade stand, using the five dollars to purchase the starting materials. This is a fine option for those interested in earning a few extra dollars of spending money in two hours. But most of my students eventually found a way to move far beyond the standard responses. They took seriously the challenge to question traditional assumptions—exposing a wealth of possibilities—in order to create as much value as possible.

How did they do this? Here’s a clue: the teams that made the most money didn’t use the five dollars at all. They realized that focusing on the money actually framed the problem way too tightly. They understood that five dollars is essentially nothing and decided to reinterpret the problem more broadly: What can we do to make money if we start with absolutely nothing? They ramped up their observation skills, tapped into their talents, and unlocked their creativity to identify problems in their midst—problems they experienced or noticed others experiencing—problems they might have seen before but had never thought to solve. These problems were nagging but not necessarily at the forefront of anyone’s mind. By unearthing these problems and then working to solve them, the winning teams brought in over $600, and the average return on the five dollar investment was 4,000 percent! If you take into account that many of the teams didn’t use the funds at all, then their financial returns were infinite.

So what did they do? All of the teams were remarkably inventive. One group identified a problem common in a lot of college towns—the frustratingly long lines at popular restaurants on Saturday night. The team decided to help those people who didn’t want to wait in line. They paired off and booked reservations at several restaurants. As the times for their reservations approached, they sold each reservation for up to twenty dollars to customers who were happy to avoid a long wait.

As the evening wore on, they made several interesting observations. First, they realized that the female students were better at selling the reservations than the male students, probably because customers were more comfortable being approached by the young women. They adjusted their plan so that the male students ran around town making reservations at different restaurants while the female students sold those places in line. They also learned that the entire operation worked best at restaurants that use vibrating pagers to alert customers when their table is ready. Physically swapping pagers made customers feel as though they were receiving something tangible for their money. They were more comfortable handing over their money and pager in exchange for the new pager. This had an additional bonus—teams could then sell the newly acquired pager as the later reservation time grew nearer.

Another team took an even simpler approach. They set up a stand in front of the student union where they offered to measure bicycle tire pressure for free. If the tires needed filling, they added air for one dollar. At first they thought they were taking advantage of their fellow students, who could easily go to a nearby gas station to have their tires filled. But after their first few customers, the students realized that the bicyclists were incredibly grateful. Even though the cyclists could get their tires filled for free nearby, and the task was easy for the students to perform, they soon realized that they were providing a convenient and valuable service. In fact, halfway through the two-hour period, the team stopped asking for a specific payment and requested donations instead. Their income soared. They made much more when their customers were reciprocating for a free service than when asked to pay a fixed price. For this team, as well as for the team making restaurant reservations, experimenting along the way paid off. The iterative process, where small changes are made in response to customer feedback, allowed them to optimize their strategy on the fly.

Each of these projects brought in a few hundred dollars, and their fellow classmates were duly impressed. However, the team that generated the greatest profit looked at the resources at their disposal through completely different lenses, and made $650. These students determined that the most valuable asset they had was neither the five dollars nor the two hours. Instead, their insight was that their most precious resource was their three-minute presentation time on Monday. They decided to sell it to a company that wanted to recruit the students in the class. The team created a three-minute “commercial” for that company and showed it to the students during the time they would have presented what they had done the prior week. This was brilliant. They recognized that they had a fabulously valuable asset—that others didn’t even notice—just waiting to be mined.

Each of the other eleven teams found clever ways to earn money, including running a photo booth at the annual Viennese Ball, selling maps that highlighted local restaurants during Parents’ Weekend, and designing and selling a custom T-shirt to the students in the class. One team actually lost money when the students purchased umbrellas to sell in San Francisco on a rainy day, only to have the weather clear up shortly after they launched their effort. And, yes, one team ran a car wash and another started a lemonade stand, but their returns were much lower than average.

I count the “Five-Dollar Challenge” as a success in teaching students about having an entrepreneurial mind-set. But it left me feeling a bit uncomfortable. I didn’t want to communicate that value is always measured in terms of financial rewards. So, I added a twist the next time I assigned the project. Instead of five dollars, I gave each team an envelope containing ten paper clips. Teams were told they had four hours over the next few days to generate as much “value” as possible using the paper clips, where value could be measured in any way they wanted. The inspiration for this was the story of Kyle MacDonald, who started with one red paper clip and traded up until he had a house.
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He set up a blog to document his progress and to solicit trades. It took a year, but step-by-step he reached his goal. He traded the red paper clip for a fish-shaped pen. He then traded the pen for a doorknob and the doorknob for a Coleman stove, and so on. The value of the items increased slowly but surely over the year until he had his dream house. Considering what Kyle did with one paper clip, I felt quite generous giving the students ten paper clips. The assignment began on a Thursday morning and presentations were scheduled for the following Tuesday.

By the time Saturday rolled around, however, I was anxious. Perhaps I’d gone too far this time. I worried the assignment would be a bust and was ready to chalk it up to experience. These concerns couldn’t have been further from the mark. The seven student teams each chose to measure “value” in different ways. One decided that paper clips were the new currency and went about collecting as many as possible. Another team learned that the current world record for the longest paper clip chain was over twenty-two miles and set out to break that record. They rallied their friends and roommates, pitched local stores and businesses on their plan, and showed up in class with a mountain of paper clips linked together. Apparently the students in their dorm were so moved by the challenge that they committed themselves to breaking the world record even after the assignment was over. (I’m pretty sure they didn’t break the record, but it’s a good measure of the energy the team was able to generate.)

The most entertaining and provocative team came to class with a short video, with the song “Bad Boys” blaring in the background, that showed them using the paper clips to pick locks and break into dorm rooms to steal tens of thousands of dollars worth of sunglasses, cell phones, and computers. Just before I fainted, they announced that they were joking and showed another video documenting what they really had done. They traded the paper clips for some poster board and set up a stand at a nearby shopping center with a sign that read, “Stanford Students For Sale: Buy One, Get Two Free.” They were amazed by the offers they received. They started out carrying heavy bags for shoppers, moved on to taking out the recycling from a clothing store, and eventually did an ad hoc brainstorming session for a woman who needed help solving a business problem. She paid them with three computer monitors she didn’t need.

Over the years, I’ve continued to give groups similar assignments, changing the starting material from paper clips to Post-it
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notes, or rubber bands, or water bottles. Each time the students surprise me, and themselves, by what they accomplish with limited time and resources. For example, using one small package of Post-it notes, students created a collaborative music project, a campaign to educate people about heart disease, and a public service commercial—called
Unplug-It
—about saving energy. This exercise ultimately evolved into what has become known as the “Innovation Tournament,” with hundreds of teams from all over the world participating.
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In each case, participants use the competition as a means to look at the world around them with fresh eyes, identifying opportunities in their own backyard. They challenge traditional assumptions, and in doing so generate enormous value from practically nothing. The entire adventure with Post-it notes was captured on film and became the foundation for a professional documentary called
Imagine It
.
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The exercises described above highlight several counterintuitive points. First, opportunities are abundant. At any place and time you can look around and identify problems that need solving. Some are mundane, such as scoring a table at a popular restaurant or pumping up bike tires. Many, as we well know, are much larger, relating to major world issues. As Vinod Khosla, a co-founder of Sun Microsystems and a successful venture capitalist, says so clearly, “The bigger the problem, the bigger the opportunity. Nobody will pay you to solve a non-problem.”
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Second, regardless of the size of the problem, there are usually creative ways to use the resources already at your disposal to solve them. This is actually the definition many of my colleagues use for entrepreneurship: an entrepreneur is someone who is always on the lookout for problems that can be turned into opportunities and finds creative ways to leverage limited resources to reach their goals. Most people approach problems as though they can’t be solved and, therefore, don’t see the creative solutions sitting right in front of them.

Third, we so often frame problems too tightly. When given a simple challenge, such as earning money in two hours, most people quickly jump to standard responses. They don’t step back and look at the problem more broadly. Taking off the blinders opens up a world of possibilities. Students who participated in these projects took this lesson to heart. Many reflected afterward that they would never have an excuse for being broke, since there is always a nearby problem begging to be solved.

These assignments grew out of a course I teach on entrepreneurship and innovation at Stanford University. The overarching goal is to demonstrate that all problems can be viewed as opportunities for creative solutions. I focus first on individual creativity, then move on to creativity in teams, and finally dive into creativity and innovation in large organizations. I give my students small challenges and slowly make them more difficult. As the course progresses, the students grow increasingly comfortable seeing problems through the lens of possibility and are eventually willing to take on just about anything that comes their way.

I’ve been at Stanford for ten years as the executive director of the Stanford Technology Ventures Program (STVP),
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which is located in the School of Engineering. Our mission is to teach scientists and engineers about entrepreneurship and to provide them with the tools they need to be entrepreneurial in whatever role they play. We believe, along with a growing number of universities around the world, that it isn’t good enough for students to come out of school with a purely technical education. To be successful, they need to understand how to be entrepreneurial leaders in all working environments and in all parts of their lives.

STVP focuses on teaching, scholarly research, and outreach to students, faculty, and entrepreneurs around the world. We strive to create “T-shaped people,” those with a depth of knowledge in at least one discipline and a breadth of knowledge about innovation and entrepreneurship that allows them to work effectively with professionals in other disciplines to bring their ideas to life.
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No matter what their role, having an entrepreneurial mind-set is key to solving problems, from small challenges that face each of us every day to looming world crises that require the attention and efforts of the entire planet. In fact, entrepreneurship cultivates a range of important life skills, from leadership and team building to negotiation, innovation, and decision making.

I’m also on the faculty of the Hasso Plattner Institute of Design at Stanford, affectionately called the “d.school.”
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This cross-disciplinary program draws upon educators from across the entire university, including the Schools of Engineering, Medicine, Business, and Education. The institute was envisioned and launched by Stanford mechanical engineering professor David Kelley, who is also the founder of the design firm IDEO, known for creating wildly inventive products and experiences. All d.school courses are taught by at least two professors from different disciplines, and cover an endless array of topics, from design for extreme affordability to creating infectious action to design for agile aging. As part of the d.school teaching team, I’ve experienced the thrill of radical collaboration, extreme brainstorming, and rapid prototyping as we give our students and ourselves big, messy problems with more than one right answer.