From Chris Rabb’s Invisible Capital on business plan competitions.
As a former director of a nationally recognized urban business incubator, I know firsthand the opportunities they have to help their clients develop invisible capital as well as the challenges that incubators face. When I was the vice president of entrepreneurial programs at a nonprofit-based business assistance organization born out of an independent study conceived by Wharton MBA students, I was asked on occasion to be a judge for a business plan competition, a feature of the program mandated by its well-intentioned philanthropic funder.
The participants were all under twenty-five years old. Some were high school dropouts, while others had earned their GEDs. Some were attending or had received an associate’s degree fro the Community College of Philadelphia, and a few were students at the University of Pennsylvania or Drexel University.
Invariable, the winners of these business plan competitions were students from the more selective schools. Were they more entrepreneurially oriented than their counterparts? No. Were they harder working? No. Were they more business savvy? No. Were their ideas or business models more compelling than those of their less educated peers? Rarely. So why did students from elite schools always win these competitions? Two words: invisible capital.
The Penn and Drexel students were more adept at using technology. They could write better. They were better trained in conducting research. They were more confident speaking in front of audiences. Their projects were often connected to experiences they had working in other professional or educational environments, and their plans incorporated how they would secure funding, talent, or customers based on their various social networks. They had more human, cultural, and social capital, not to mention economic capital. It wasn’t even close.
The problem with these competitions, I soon realized, was they did not rate the viability of the business model but the ability of the contestant to advocate for her venture in clear, substantive, and compelling ways. While this is important, it was not supposed to be the purpose of the competition, which was to reward the person with the best business plan, one that (at least in theory) would be related to the most viable business model. However, the contests always turned into a virtual beauty contest, where beauty was defined by eloquence, clarity of thought, poise, presentation, and the use of language often associated with conventional intelligence (aka cultural capital). Eliza Doolittle [of “Pygmalion”, which Rabb references throughout this chapter] mimicked the patrician ladies, and in so doing, she was accepted as their peer regardless of her intellect, values, or skills. To them, Eliza’s most important tacit skill was her ability to assimilate.
The winners of these business competitions walked away with a nominal prize, big smiles, and their egos stroked. The losers left with serious mixed lessons. First, many undoubtedly thought that their business concepts and models were inferior to those of the winners, without any indication why that was the case (when in fact it rarely was). Second, they did not know how influential their lack of invisible capital was in diminishing their chances of excelling, largely because they didn’t even know that the were being judged (albeit unconsciously) on the amount of invisible capital they brought to the competition.