Entrepreneurs are incentivized on the upside and have fear of downside. If you
are
successful, you receive direct compensation. If you fail,
the time and money
you have invested will be lost and it could be a major setback to your life and/or
career. Both the fear and potential reward are highly motivating.
Some people tell me they would find it hard to self-start as an entrepreneur. I
find the opposite to be true because of the incentive structure.
I actually think incentives are the biggest reasons why startups can beat big
companies. Furthermore, I think having the right incentive
structures in place is
essential for just about any system or economy to function properly.
If you are a salaried employee without stock in the company and without
bonuses
for performance, you would have less reason or motivation to “go the
extra mile” because you wouldn’t be compensated for the value you create.
Conversely, you would feel less of a need to create value because your
livelihood doesn’t depend on your ability to create
value - your salary is fixed
and typically guaranteed even before you start creating value.
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