Steve Mariotti is a prominent advocate of entrepreneurship. He’s taught nearly 40 years, first in some of the worst classrooms in the country and then all around the world by invitation, and seen these skills transform students’ lives.
“I have 170 letters from students that I taught, who five years later, 10 years later, 30 years later would write me these beautiful letters,” Mariotti said. “I have each one framed and almost each one memorized. And each one’s worth a billion dollars to me in joy.”
First, students are intrigued that Mariotti is telling them how to make money. But almost immediately they recognize there is more value than just money, because the moment they understand what the entrepreneur mindset is, their world has already changed. They are, as Mariotti quotes from the poem “Invictus” in one book, now the captains of their souls, the masters of their fate. By celebrating the students’ individualism, Mariotti helps them see their circumstances and, more importantly, themselves in a new light. “Empowerment” has become little more than a buzzword these days, but that is exactly what the students feel, in a real and actionable way.
He authored several textbooks on entrepreneurship after being unable to find any to teach from, and last year he came out with a memoir, “Goodbye Homeboy: How My Students Drove Me Crazy and Inspired a Movement,” and has been exploring stories of entrepreneurs around the world, and through times of war and genocide, through documentary filmmaking. He was nominated for a Pulitzer Prize for his work chronicling lives of entrepreneurs, and for a Nobel Peace Prize for his work in teaching entrepreneurship.
But it’s those decades of classroom teaching that mean the most to him.
“I actually felt like I was helping people, and there’s no joy like that ... the joy of feeling that you helped somebody. And a lot of times, it would just be a tiny thing,” he said.
An Early Entrepreneur
Every entrepreneur has a great failure story. Sometimes it’s a dramatic business failure, but often it is a personal and formative story.Mariotti had an early interest in entrepreneurship and started a handful of businesses before college because the opportunity was right in front of him. Mariotti grew up in Flint, Michigan; it was a middle-class, booming auto town, but union rates made it hard to find a job, so as a teenager he had to be creative. Sometimes it was as simple as selling flyaway golf balls back to golfers on the field.
“I always loved money, to be honest with you,” he said. But then the business worked, and it was like a switch turned on. “There is such a freedom, knowing that there is a way to make a livelihood. ... I think psychologically it really liberated me.”
Mariotti is convinced everyone goes through seasons in their lives where, for a time, maybe as short as a month, they are very good at some specific thing. For Mariotti, there was a period where he says he was just gifted at economics.
During those self-employed days, his grandfather would send him books, often on economic theory, and he read for hours. This led to a paper that won him a scholarship to study with economist F. A. Hayek, which then led to a coveted job at Ford’s headquarters, where as a young economist he was on the fast track. But this was short-lived, as less than two years later, he wrote a memo suggesting Ford (which was apolitical) should not be selling to South Africa’s apartheid government, which used the company’s technology to track down a dissident. Ford ultimately made a similar call, but Mariotti came under such scrutiny at the corporation at the time that he couldn’t stay.
Looking for a fresh start, he moved to New York City and took charge of his life as an entrepreneur would. He started his own import-export company that took him around the world, connecting with interesting artisans who wanted to bring their wares to New York. He enjoyed the freedom of being his own boss, setting his own hours, following his interests, and turning a profit.
Then he got mugged.
From Bad Teacher to Life Changer
In broad daylight, knife-wielding teenagers he remembers as probably seventh- or eighth-graders jumped Mariotti and threatened to toss him over the railing and into the river. He couldn’t fight them off, and it was doubly humiliating because it all happened in front of his girlfriend. The event haunted him; it caused sleepless nights, days filled with anxiety, and his business suffered for it.Mariotti later learned he had PTSD. He also realized after the event how insane these teenagers’ behavior was—all this just for the $10 bill he had on him. His therapist said he should face his fears, and teach these troubled kids, so that’s what Mariotti did. He became a special education teacher and was immediately put in some of the city’s worst schools.
It was chaos.
“It was torture,” Mariotti said. As a special education teacher, he worked with students labeled with behavior problems, and he was “a C, C-plus at best, kind of teacher.” He‘d lose control of the classroom, be terrorized by the students, and things would descend into disruptive madness. Mariotti felt trapped—something he’d soon realize the students felt about their own circumstances.
“I’m 25 and stuck in a job that I thought was making me worse rather than better, becoming more frightened,” Mariotti said. He couldn’t quit because he felt he owed it to the giants that had got him there in the first place: his grandfather was Ayn Rand’s lawyer and had introduced the two, and the famous writer had then bullied the famous psychologist Albert Ellis, a hero of Mariotti’s, into taking an appointment with Mariotti in the first place.
Things got so unbearable one day that Mariotti walked out in the middle of class. He stood in the hallway with his head down, praying for a way out, until he caught sight of his wristwatch and had an idea. He stormed back into class with the watch held high, and asked the class how much they would pay for the watch.
Now they were interested. Suddenly the class was having an interesting discussion about the watch’s value, and Mariotti with his knowledge of production was able to teach them about business, wholesale versus retail, negotiation, money, and by extension basic math.
That was the day Mariotti stopped being scared, and the event is seared into his mind. After that, he started teaching students about entrepreneurship, and he saw firsthand how the mindset liberated them, just as it did for him. These were low-income inner-city schools, where many of the students had been trapped in generational poverty and had broken families.
“They had, through no fault of their own, very painful lives,” Mariotti said.
“How do you get people that are left out of ownership, entrepreneurship, the capitalist system, and all the great things that in my opinion come from that: freedom of speech and religion, empowerment, self-actualization—how do you get people that are never exposed to that exposed?” he asked.
He began developing a vocabulary to teach them “the entrepreneurial mind frame, which basically means chronically looking for opportunities to improve your life. It doesn’t have to be money. It can be time, it can be any way to make your life, or your family’s life, or your community better.”
And the students were enthralled, not actually because of money, but because suddenly, they realized they had time.
An Individual’s Self Worth
There are these two pages from Hayek, Mariotti said, that have forever been stuck in his mind.“To give you a radical example, one kid in the class ... couldn’t get a business idea,” he said. Mariotti asked him to think about what goes on each hour of the day in the place he lived. The student happened to live in the projects, and kept odd hours, and he took the assignment quite seriously, logging what went on in the area every hour of the day.
“It took him a week, I‘ll never forget it,” he said. “He really just analyzed what went on in that half-block, and he realized that there was no way to get food or drink after about 8 o’clock, because even the bodegas would close down when it got dark. So in the winter, you'd have to go a mile, mile and a half. He built a $36,000 business that year, on that insight.”
“It is a powerful frame of reference, to realize that [you have unique knowledge],” Mariotti said. “It changes self-esteem—even among kids who had no sales, but they were the main owner, the owner of an idea, the sole proprietor of something nobody else has. That redefines ... changes how they look at themselves, and it is liberating ... Once you’ve had it, once you’ve touched it, you never really go back.”
“A lot has been written on why certain societies or communities are wealthier than others, and pretty much the consensus is time,” Mariotti said. A famous example of this is the “Marshmallow Test,” where young children who are capable of exercising restraint for greater delayed gratification went on to, over a decade later, be more successful than the children who couldn’t wait.
“It is critical, it enables you to save, it enables you to plan. And the future really is your savings, not just materially, your money, but your savings in your thoughts, your knowledge, your skills,” he said. You are no longer looking at life through a 10-minute cycle (“short time preference”), but looking five years down the road, 10 years down the road, and you are able to have vision.
After Mariotti realized this was a topic that not just engaged but liberated his students, a principal gave him the opportunity to teach an entrepreneurship class. He was given a list of 25 students who'd left school, and he succeeded in getting 24 of them to come back to his class, where they learned math and English by way of entrepreneurship lessons and were able to graduate with a special education degree.
“I always taught positioning, which is your comparative advantage,” Mariotti said. You never want to be directly competing with what someone else is doing, because then you have a commodity.
“Then I would teach what’s the strategy, the strategy really is what are the primary things that are important in terms of time and money. How do I get from here to there over five years, ten years?” he said. “And then tactics, which are how you compete in the short term, or what you have to do to get the strategy done.”
Then comes the key question: how to get students to put it into action? For some kids, it is an internal message, Mariotti said. He gets them to write down all the things they would be doing if they weren’t in his class, and sometimes there is an undiscovered passion. He remembers one student in his accounting class who was just a whiz at accounting and had beautiful penmanship, and Mariotti told him so. The student stopped coming to school just weeks before the end of the year, but Mariotti remembers seeing him at graduation, holding his report card and in tears.
Mariotti asked why he was crying, and the kid hugged him. “And this is not a kid that would ever hug somebody,” he said with a laugh. “He showed me his report card and it was all failures except in accounting, where he got A-plus. Fast-forward 20 years, and he becomes a partner at top accounting firms and starts his own small accounting firm in the Bronx. ... I think of it almost every day.”
For others, the key to action is what Mariotti calls an “external message,” looking outside of themselves to analyze others’ problems and needs, and tapping into some unique knowledge they can capitalize on, like the student from the projects with his food business.
“They’re both powerful methods, and I really teach both. And out of that discussion, it’s really self-awareness. It’s not like I give them a list of hundreds of businesses. It’s almost spiritual; they have to find it,” he said.
The Freedom of Ownership
Mariotti developed an educational program so successful that it’s been used all over the world—including in a number of socialist and communist countries, presenting a really interesting dilemma when people realize the communist culture is directly at odds with his free-market ideas.“Bizarrely, in 1988, I went to Russia,” Mariotti said.
One of the biggest reasons businesses fail is because people don’t understand the economics of one unit, Mariotti said, so this is something he really makes clear from the get-go. Business owners need to know the true cost of just one unit of whatever their product is, including not just the cost of production, but the shipping and packaging, otherwise they will never price it quite right. But pricing is tricky business under different economic theories of value.
“None of the kids [in that Russian class] could do a mark-up, because say if a scarf costs $5, as a rule you double it, sell at $10. As you learn the business, you can change the price,” he said. “Well in Russia, as in all communist countries, it’s against the law to make a profit. So there I was with four KGB agents, all of whom became friends, at a state-of-the-art facility ... but all the business plans would be, it costs $10; I’m going to sell it for $10.”
Entrepreneurship by definition is about making a profit, but in Russia, this was illegal. In fact, it had a different name: “black marketeering.” The year before Mariotti went there to teach, 1,000 people had been executed for black marketeering.
Communism uses the labor theory value, which means that the value of a product is determined by the amount of labor required to produce it. It butts heads with the subjective theory of value, which essentially means that value “is in the eye of the beholder,” Mariotti said, adding that by extension, this means “I can’t tell you how to think about your money.”
“Many government struggles are over this debate,” Mariotti said.
“The irony is, labor theory came out of a book widely seen as the start of entrepreneurship,” Mariotti added. Adam Smith’s “The Wealth of Nations” did in fact inspire Karl Marx.
In his work, to illustrate his point, Smith asks why diamonds have more value than water.
“His answer was originally correct, it was about scarcity and supply and demand. But if you’re in a desert, what’s more valuable? Water or the diamond?” Mariotti said. “Tragically, when the book went to the printers, in 1776, he changed his mind last minute and he changed the paragraph to [say the diamond is more valuable] because more labor went into getting the diamond. And that—if I had to change one thing in history, literally, I would change that he changed that. Out of that paragraph came this whole line of thought that there is a scientifically determined price for every product. That means another person can tell you what you have to pay for something.”
If value can be objectively determined, someone is doing the determining, which is shorthand for central planning.
Without subjective value, there’s no profit, and the ideas of ownership and private property tied up in that fall by the wayside as well.
Mariotti was keenly aware that he was teaching something that didn’t translate unilaterally across all cultures; it doesn’t work in places where the culture is hostile to ownership, or ownership for certain groups or individuals. This is present in America as well, as poverty traps people in the sense that once they own above a certain threshold, they can lose existing benefits. It puts people in poverty in that “short time preference” mindset, because people by nature tend to want to protect themselves from losses rather than risk what they have for a potentially greater reward.
“The outside perception and their own perception of themselves is ‘Oh, I’m not supposed to do that. Someone else is supposed to be the owner,’” Mariotti said.
“But those in their 60s, 70s, and older, they don’t just have unique knowledge, they have more of it. ”The wisdom that people get over the years ... and those groups are never encouraged to think about starting a business!”
