This is the first post in a series that will analyze Jay-Z as both an entrepreneur and a brand. The series will examine (and quote) “Empire State of Mind,” a book by Forbes writer Zack O’Malley Greenburg, as a source for information regarding the history behind Jay-Z’s business.
The book’s goal is to explore “the details of how [Jay-Z] honed his entrepreneurial philosophy not at a fancy business school but on the streets of Brooklyn, New York.” Given the lesson “Empire State of Mind” seeks to impart, I think that our entrepreneurship center blog is the appropriate place to discuss the book and extract discussions about entrepreneurship from the book’s narrative.
Greenburg’s text seeks to catalogue Jay-Z’s business journey; this series will analyze Jay-Z’s entrepreneurial psyche. I hope to develop this series into a case study for student entrepreneurs to read and apply towards their entrepreneurial journey.
Granted, Jay-Z is not the most successful entrepreneur of our generation; however, I feel that his story is one of the more compelling. No one can deny the impact hip-hop has had on my (the millennial) generation. Thus, if hip hop is a part of my generation’s life-blood, then Jay-Z is definitely one of my generation’s most influential icons.
I am extremely interested in hearing your thoughts; feel free to email me, tweet me or comment on the series as you see fit. Remember: I am simply beginning the marketplace of discussion, but I want you, the reader, to guide the discussion.
Volume 1: Opportunity
Growing up in the Marcy Projects of Brooklyn, New York, Shawn “Jay-Z” Carter had two options: go to school or hustle.
College was an idealized goal; but Jay-Z recognized that it was too far away to solve his immediate problems. He was literally hungry, so he looked for an opportunity that would address that hunger.
Allured by the fast-money of street-life, Jay-Z opted to sell drugs. DeHaven Irby, a friend of Shawn Carter, introduced him to the drug game and the amount of lucrative potential innate to the illegal trade. It then became apparent to Jay-Z the amount of opportunity he would sacrifice by doing anything but selling drugs.
Before Jay-Z became a successful music mogul, he learned an important lesson about opportunity cost. Even though Jay’s mom would have preferred him to go to school, get a degree and become a lawyer or a doctor, Jay-Z realized that there was fast money to be made. The money was quick and risky, but given Jay-Z’s situation the fast money was the most appealing.
I am not condoning illegal activity, but I think Jay-Z deftly executed a decision calculus that accounted for both his aspirations and the demands of his environment.
Even though going to school and eventually starting a career was safer, it did not give Jay-Z the pay out he wanted or needed. As a young entrepreneur (especially student entrepreneurs) we are often faced with various scenarios where we have to make decisions with opportunity costs in mind.
For the more established entrepreneur, these decisions are often situated between two business ideas. An entrepreneur can either opt to pursue idea A and reap idea A’s reward or she can pursue idea B and reap idea B’s reward. The decision can be tough because often times the rewards for idea A and idea B are mutually exclusive. The entrepreneur, therefore, must evaluate the costs for pursuing one opportunity in the stead of the other and then decide if the potential payout of pursuing said opportunity is worth the cost.
Jay-Z had a similar decision to make when he had to decide between selling drugs and making music. Jay-Z had made a small name for himself as a lyricist and “free-styler” in his neighborhood. His reputation for gritty, fast and clever lyrics preceded him. DJ and Atlanta Records A&R Clark Kent tried on multiple occasions to sign Jay-Z to the label and pull him from the world of narcotics into the music industry.
“Jay-Z remained hesitant to devote time to music that could be spent making more money hustling,” Greenburg writes in his book. “Jay-Z’s reluctance to splurge on music was understandable, as there are a lot of people who pay when recording a hip-hop song.”
Jay-Z did in fact dabble in music from time to time. Yet, after completing a music tour with rappers Jaz-O and Big Daddy Kane, Jay-Z realized the amount of money he was losing by pursuing music. Thus, he got back into the drug game.
“Specifically, Jay-Z went back into business with DeHaven,” Greenburg writes. “From a supply and demand standpoint, the decision made a lot of sense. In the 1980’s New York was the main East Coast entry point for cocaine imports from South America.”
Even though Jay and DeHaven were selling drugs, they still employed ideas about supply & demand into their business structure. Rather than simply selling in New York, the pair recognized the opportunity to sell in other markets.
“With ties in New York and Trenton, Jay-Z and DeHaven did what any shrewd businessmen would do with a growing enterprise: they expanded into undeveloped markets in Maryland and Virginia, where the competition was lighter and the clientele less sophisticated.”
By recognizing a higher demand in Maryland and Virginia, the pair hopped on the opportunity to expand into a new market and raise the prices on their product.
Even though Jay-Z and DeHaven were committing a serious crime, the two demonstrated a bit of business savvy that all entrepreneurs should mimic. Jay-Z’s mind for opportunity kept him making decisions regarding what was best for his cash flow.
However, eventually the “Devils” associated with the drug trade caught up with Jay-Z. According to the Greensburg text, Jay-Z’s first album, Reasonable Doubt, was supposed to be his only album. However, a nudge from death caused Jay-Z to permanently change his attitude about the opportunity costs associated with selling drugs and making music.
“‘He saw death,’ DeHaven explains. ‘He saw the bad side of the game. He almost had his life taken. And that’s what did it. He messed with the wrong people.'”
Jay-Z realized that the risks – jail time and maybe even death – were no longer worth the fast-money reward of selling drugs. The businessman, therefore, had to move in a new direction towards a new “hustle.”
“For the burgeoning businessman, the decision to stop dealing sometime around 1995 could also be explained as a simple recalibration of risks and benefits,” Greenburg writes. “‘When he saw the money that he could make in the music business,’ Toure muses ‘and be legal with it, and not have to worry about the police, and getting shot by other drug dealers, and all the other predators who’d been coming at him, it made a lot of sense.'”
The business mogul innate in Jay-Z observed the risks of his trade and realized it was time for a change. However, as he did when he hustled illegally, Jay-Z prepared to move into a new opportunity with a mindset bent on profiting as much as possible….
As a young entrepreneur, you should train your mind to recognize and act on opportunity. As you move towards your venture, you should also be aware of the opportunity cost associated with that venture. What else could you be doing with your time? What are you losing by pursuing your opportunity? Is the lose worth the potential benefit associated with your venture? What can you do to ensure that your venture is worth the potential losses you may suffer?
These types of questions frame the thought-process of a successful entrepreneur. As you pursue your venture, think about what opportunity you are exploiting and the costs of that opportunity.
Phillip Wiggins: Twitter @_PhillipWiggins