Whiz Kids Feel Backlash From Peers’ Downfall : Up-and-Comers Fear the Young and Driven Are Getting Bum Rap
First there was the anonymous letter, an envelope containing a newspaper article chronicling the flameout of ZZZZ Best carpet cleaning magnate Barry Minkow.
Then, earlier this month, came the Joe Hunt jokes, the snappish little comparisons to the Billionaire Boys Club leader whose malevolent genius became the grist for a television docudrama.
The jibes and insinuations have grown tiresome for Andrew Gombiner, a boyish-looking Beverly Hills High School and UCLA graduate who used the earnings from a student tutoring service to become a successful real estate syndicator before he turned 25.
“I laughed at first,” said Gombiner, who directs a baby-faced staff dressed in crisp white shirts and sharp silk ties in his Beverly Hills office. “It’s taken some time for me to begin to realize this might have negative ramifications.”
Like other youthful Southland entrepreneurs, Gombiner worries that the young, wealthy and driven are getting a bad name.
Feeling Pressure
For a decade, as entrepreneurship was celebrated as a primary weapon in America’s economic revival, young business upstarts could bask in the reflected glory of such whiz kids as Steve Jobs, who founded Apple Computer at 21, and Bill Gates, just 19 when he started Microsoft.
But now that entrepreneurship and young wealth are acquiring new associations with corruption and crime--now that Minkow and Hunt are competing for headlines with the likes of Jobs and Gates--Gombiner and others in the newest wave of budding capitalists say the veneration accorded young business owners through most of the profit-minded 1980s may be beginning to fade.
“It’s hard enough to get going when you’re young that you don’t need any more bad publicity associated with you,” said Neil Balter, the 27-year-old president of Canoga Park-based California Closet Co., a nationally franchised closet renovation firm with $35 million in annual sales. “I do think there’s going to be somewhat of a backlash for young start-ups.”
Dave Park, a 22-year-old senior in the entrepreneur program at USC’s School of Business Administration, feels the pressure, too. “People see a successful entrepreneur and they wonder what he did wrong,” said Park, who lives in Cerritos. “They associate an entrepreneur with a person who has no ethics, who’ll do anything to make a buck.”
Record Enrollments
Some experts insist that public enthusiasm for the whiz kids remains high--despite Minkow’s legal entanglements, despite the Billionaire Boys Club’s murderous exploits and despite the painful comeuppance of the rich young brokers and investment bankers blamed by some for adding to the turmoil on Wall Street.
“I haven’t noticed anybody being down on youth,” said Verne C. Harnish, who founded the Wichita, Kan.-based Assn. of Collegiate Entrepreneurs in 1983, as the post-Vietnam generation’s zeal for business careers went into overdrive, and two years later established the Young Entrepreneurs Organization as a kind of alumni group.
Though he acknowledged that ZZZZ Best’s problems, in particular, provoked serious discussions between young business owners and their financial backers, Harnish insists that the entrepreneurial tide remains strong. College-level entrepreneurship programs are recording record enrollments, and participation in Harnish’s groups continues to swell.
“The interest just seems to be growing every day in youth and entrepreneurship,” Harnish said.
Richard H. Buskirk, director of the USC program, says young businessmen, at worst, are the object of their elders’ jealousy. “The older generation is always going to find some reason to put the younger generation in its place,” he said.
Yet Buskirk’s motto--”Credibility is like virginity: You only lose it once”--may apply to the whiz kids as a group. With Jobs, Gates and others of the first wave of young tycoons now in their 30s and increasingly part of the business establishment, the new entrepreneurs--however unfairly--may all be bruised when one in their ranks falls.
Balter, who started his closet business at 18, has fallen under the pall cast by the demise of Minkow, who has filed for bankruptcy and is the subject of investigations for alleged fraud, money laundering and links to organized crime.
Put Off Sale
Minkow, 21, and Balter both did business with the same San Fernando Valley bank. And when ZZZZ Best faltered, the bankers put Balter’s company under sharp new scrutiny. “All of a sudden, from the clear blue sky, they started asking for information they never asked for before,” Balter said.
Soon after, Balter--eyeing ZZZZ Best’s disastrous public stock offering--decided to put off a sale of stock in California Closet Co.
“My broker said that for my company, with my age and the circumstances involved, we should just sit on it for a year and wait for the dust to settle because so many people had a bad taste in their mouths,” Balter said.
Balter had stumbled across Minkow’s path before. Both are graduates of Cleveland High School in Reseda. Both were ranked among the nation’s top 100 entrepreneurs under age 30 by Young Entrepreneurs Organization. They once quarreled in front of a national television audience on the Oprah Winfrey Show as Minkow, six years Balter’s junior, boasted that his company was five times as large.
“Barry was my nemesis,” Balter said. “I couldn’t get away from him.”
Now Balter is concerned that other young entrepreneurs won’t be able to get away from the ill effects of Minkow’s implosion.
“What Barry did was hurt a whole bunch of people without knowing it,” Balter said. “It’s unfortunate for the people who are coming up that they are going to be associated with him just because of their age.”
Before he went into seclusion, Minkow apologized in a television interview for any harm he may have done his peers.
Life Term
“Barry has publicly expressed his absolute chagrin and regret that any other young entrepreneurs could be prejudiced by any reflection either directly or indirectly ascribed to his conduct,” said Arthur H. Barens, the Los Angeles attorney who represents both Minkow and Hunt.
Yet the concerns about guilt by association may be exaggerated, some business observers say.
“People long ago quit making those kind of gross jumps in logic--that if one person did it, everybody out there is bad,” Harnish said. Besides, he insisted, much of the notoriety has had nothing to do with entrepreneurship.
The Billionaire Boys Club--led by Hunt, 28, currently serving a life term for the murder of Beverly Hills con man Ron Levin--consisted of young men who were born to money, not ones who earned it, Harnish noted. Wall Street’s whiz kids, with their MBAs and limousines, are equally the antithesis of the entrepreneur who builds his business from the ground up, he said.
The bankers and venture capitalists on whom many young business operators depend say, meanwhile, that youth has not become a disqualifying factor when they consider whether to lend to or invest in a business person’s dream.
“I would like to think we’re focusing on the crucial issues of what makes companies successful,” said Fred Haney, manager of the Newport Beach office of 3i Ventures, a venture capital firm. “If an energetic young guy brought a good business proposition to us, he’d still be looked at the same way.”
More Energy
Fledgling entrepreneurs see advantages in their youth as well. Diane Waxman, a 23-year-old senior in the USC program, brims with confidence over a venture she has launched with three classmates to sell beach cover-ups equipped with a waterproof zippered pouch for storing easily lost cash and keys.
“I think our youth is actually an asset,” said Waxman, president and chief executive of Sun Spot Beachwear. “We have more energy and less responsibilities. If I need to go to England because they need a thousand T-shirts, I can do it.”
And some young tycoons say the whiz kid backlash has not hit their businesses at all.
Todd Bernstein, the youthful president of Corporate Telecomm, a telephone sales and installation company in Van Nuys, just received an increase in his line of credit at Mitsui Manufacturers Bank without encountering any suspicion based on other entrepreneurs’ problems.
Bernstein did have some doubts about his 28-year-old loan officer, however.
“I thought he was sort of young to be handling our account,” said Bernstein, 26.
