Howard Wolk is an entrepreneur and Co-President of the Cross Country Group (CCG). He was Associate Council for the transition team during the Clinton Administration, as well as part of Vice President Gore’s Task Force on Reinventing Government. John Landry is a historian and senior consultant with Winthrop Group. Previously, he spent 13 years as an editor at Harvard Business Review.
Below, Howard and John share 5 key insights from their new book, Launchpad Republic: America’s Entrepreneurial Edge and Why It Matters. Listen to the audio version—read by Howard and John themselves—in the Next Big Idea App.
Most of us have grown up with stories of the great entrepreneurs, from Cornelius Vanderbilt and Andrew Carnegie to Henry Ford and Steve Jobs. But when we think about how our economy works overall, we tend to focus on what the big established companies are doing. Consider how much sway we give to the Dow Jones Industrials, as though twenty large companies (across many industries) really matter much in a $25 trillion economy.
Everyone is in favor of entrepreneurship; we just don’t rely on it for economic progress in our mature 21st-century economy. But actually, upstart businesses have driven much of our progress throughout the course of history. They carry out much of the major innovation in the economy, which established companies ignore because they’re focused on continuing to operate at scale. However rich entrepreneurs become, society gets most of the value they create. Entrepreneurs create value for themselves, for our economy, and they even make big companies better.
Most histories of the U.S. economy downplay entrepreneurs. They take these risk-takers for granted and criticize them for limited government support, or for unequal benefits to society. But the entrepreneurial tradition in the U.S. is quite different from that of most other countries. Only in the U.S. have we allowed upstarts to dethrone incumbents on a regular basis. Other countries have tended to protect existing businesses, often under the guise of saving workers and communities from dislocation. Americans have tolerated much more risk and creative destruction in order to encourage startups.
We open the book with the story of Uber and its founder Travis Kalanick. Uber dared to attack taxicab incumbents with an attractive new transportation app. Kalanick famously declared that Uber was going to break laws pretty much everywhere it operated, but that the app was going to create so much value for customers that most U.S. cities and states would change those laws to allow Uber to operate—and he was right. By contrast, in Europe and elsewhere, most governments preferred to protect incumbents and forced Uber out. It really shows the difference in political economy between the U.S. supporting entrepreneurs and the rest of the world remaining suspicious of entrepreneurship.
We tend to look back on the framing of our federal union as the congenial result of brilliant, far-seeking, public-spirited men coming to a unanimous set of compromises. But those founders were just as polarized as we are now, which was a good thing because our Constitution made it hard for the government to give privileges to anybody. It was messy.
The Broadway musical Hamilton shows some of this tension, but the actual differences went much deeper—to the benefit of future entrepreneurs. Alexander Hamilton favored companies with national subsidies and monopoly privileges in order to compete against British giants, while Thomas Jefferson favored local monopolies to ensure that every community could be led by gentlemen of leisure with education and public interest. Members of these opposing stances hated and fought against each other so much that we ended up discouraging monopolies both nationally and locally. From the outside, it was a terrible mess, but it resulted in a country and economy with extraordinary dynamism that essentially institutionalized competing interests. In doing so, we ended up with an economy that welcomes entrepreneurial energy.
Entrepreneurship has done a lot to magnify inequality. The wealthiest people tend to be great innovators, such as Elon Musk and Jeff Bezos, with rewards far out of proportion to anyone’s merits. But that’s part of the engine of capitalism—in order to get people to save money and invest in risky ventures, we have to give them the potential of high returns. At the same time, entrepreneurs can undermine the worrisome inequality that comes from government privileges. There are three kinds of inequality: inequality of wealth, income, and that which comes from special privileges, often instituted by the government.
If we didn’t have entrepreneurship, we’d look for progress from big companies, supported by big government. That would eventually lead to cronyism, with certain companies given favors (subsidies or protections) that would make them socially elevated over the rest of us. With entrepreneurs and citizens continually pushing against government support, we prevent government-driven inequality that poisons society.
That applies to monopoly as well. Some companies get so big and powerful that we might need the government to clip their wings, but entrepreneurs are a much better way to overcome monopolies than government intervention. The Atlantic & Pacific Tea Company (A&P) grocery chain innovated and became a dominant grocery chain in the early 20th century, putting thousands of small grocers out of business in towns across the country. Those grocers and their suppliers appealed to state and federal government officials for help, but they got only small limits on A&P’s behavior. What really took down A&P was the next wave of grocery innovation: the supermarket. It was the innovators who gained the customers and put A&P pretty much out of business. That’s how the engine of entrepreneurship can unseat monopolies and all kinds of privileged positions.
Entrepreneurs have damaged the environment in many ways over the centuries. Aggressive steelmakers, like Carnegie, polluted the air, land, and water in Pennsylvania. But we can employ that same engine of creativity and risk-taking that made these companies to minimize and protect against climate change. Governments can help with infrastructure which forces companies to pay for pollution, but climate change is such a massive problem that we need fundamental innovations. It isn’t enough to come up with a good idea in a university lab. We need entrepreneurs to invest in that idea, test it in the market, and scale it up.
Look at the history of electric cars. The federal government tried to get the big car companies to invest in this technology for decades, but EPA requirements on gas mileage wasn’t enough. There was incremental progress until an entrepreneur (Elon Musk) and his startup (Tesla) finally made electric cars attractive to consumers. He had a more radical approach to push for electric vehicles, and was bolstered by government subsidies to make their purchase a little more affordable.
Seismic platform changes can be brought into the marketplace through this paradigm. It makes it easier for new innovators to come into the market, and it pressures big companies to change. The big companies just wouldn’t do it unless they were forced by competitors. Leveraging entrepreneurs to commercialize innovation and bring changes into the market can be a critical catalyst to solving our most pressing problems in the area of climate change.
To listen to the audio version read by co-authors John Landry and Howard Wolk, download the Next Big Idea App today:
“There are certain things that all parents should know—like how to change a diaper, for example, or how to function on three hours of sleep.”
5 Key Insights from author Alec Nevala-Lee
“When it comes to books, we at the Next Big Idea Club are anything but snobs.”
About Author
