Category: Entrepreneurship

Charter School Founder Stood Up to “Education Bureaucrats”

The NYT ran an inspiring obituary for Joseph H. Reich last Tuesday. Reich and his wife were pioneers in the Charter School initiative. The obituary quotes them as saying that they were able to afford to send their own children to private school, but poor parents who want better for their children than what is on offer by the government public schools could not afford a similar option. They were quoted as saying “We recoil against this injustice.” They created one of the first charter schools and also donated $10 million for general support of charter schools. The obituary says that they stood up against “vigorous pushback from education bureaucrats.”

For the full obituary see:

Trip Gabriel. “Joseph H. Reich, 89, Pioneer of New York City’s Charter Schools, Dies.” The New York Times (Tuesday, October 15, 2024): A21.

In Walt Disney’s Disneyland Youth Could “Savor the Challenge and Promise of the Future”

(p. 12) President Dwight D. Eisenhower once praised Walt Disney for his “genius as a creator of folklore.” When Disney died in 1966, the line made it into his obituary, evidence of its accuracy. Folklore, defined broadly, is an oral tradition that stretches across generations. It tells people who they are, how they got here and how they should live in the future. The company Disney created appointed itself keeper of these traditions for Americans, spinning up fresh tales and (more often) deftly repackaging old ones to appeal to a new century.

It started with Mickey Mouse, but as his company turns 100, Disney’s legacy — advanced in hundreds of films and shorts and shows, mass-produced tie-in merchandise, marvelous technical advancements, gargantuan theme parks around the world — was the production of a modern shared language, a set of reference points instantly recognizable to almost everyone, and an encouragement to dream out loud about a utopian future. Walt Disney was a man who gazed backward and forward: speaking at the opening of Disneyland in 1955, he proclaimed: “Here age relives fond memories of the past, and here youth may savor the challenge and promise of the future.”  . . .

Disney told stories of folk heroes (Davy Crockett, Paul Bunyan), princes and princesses, and even, occasionally, a mouse, all while leading the pack on ever-shifting technologies. (He was, among other things, the first major movie producer to make a TV show.) A sense of optimism ruled Disney’s ethos, built on homemade mythologies. The lessons of his stories were simple, uplifting and distinctly American: believe in yourself, believe in your dreams, don’t let anyone make you feel bad for being you, be your own hero and, most of all, don’t be afraid to wish upon a star. Fairy tales and legends are often disquieting, but once cast in a Disney light they became soft and sweet, their darker and less comforting lessons re-engineered to fit the Disney ideal. It was a distinctly postwar vision of the world.

And we ate it up, and we exported it, and we wanted to be part of it, too.

For the full commentary see:

Alissa Wilkinson. “The Wonderful World of Disney?” The New York Times, Arts&Leisure Section (Sunday, December 17, 2023): 12 & 14.

(Note: ellipsis added.)

(Note: the online version of the commentary was updated Dec. 18, 2023, and has the title “Disney Is a Language. Do We Still Speak It?”)

Trust Ventures Engages in “Trench Warfare” Against Regulations Binding the Firms It Finances

(p. A15) Another “Ghostbusters” movie is in theaters, but what we need are regulation busters. I spoke with Salen Churi and Brooke Fallon from Trust Ventures, a $500 million Texas-based venture-capital firm. It’s almost as if they are wearing plasma proton packs.

. . .

Trust Ventures came together, Mr. Churi said, because no one thinks “ ‘I hate innovation,’ except perhaps for incumbents. We have crises in the most human of industries—energy, healthcare, housing. Everyone thought I was nuts. They’re like, ‘Why would you invest in companies with regulatory problems?’ ” Good question.

Most venture capitalists invest and help startups with new strategies and hiring a team. Mr. Churi describes what he does as “trench warfare,” fighting with regulators and incumbents deal by deal.

. . .

Mr. Churi explains that “when you get a great new technology that’s fundamentally different, regulators just want to shove you in the old box, right? Our challenge is to say, ‘Well, actually, this needs a new box.’ Otherwise, it’s going to sit on the shelf.”

Eye exams are a great example of an old box. The American Optometric Association is powerful, and many states banned online vision tests. “Regulators don’t care about all those single mothers who have to pay three times as much or that people in Central Illinois have to drive three hours,” Mr. Churi says.

The pandemic loosened telehealth rules, providing an opening to test your eyes with your own smartphone. As lockdowns ended, Trust Ventures worked with the startup Visibly in several states to legalize online eye exams permanently. They got help from their investors network—some of their limited partners “are great American families,” Mr. Churi says. Visibly’s Food and Drug Administration-approved online eye tests, now in 36 states, cost as little as $35 instead of three times as much at LensCrafters or box-store-located optometrists.

For the full commentary see:

Andy Kessler. “Inside View; America’s New Regulation Busters.” The Wall Street Journal (Monday, April 15, 2024): A15.

(Note: ellipses added.)

(Note: the online version of the commentary has the date April 14, 2024, and has the same title as the print version.)

People Thinking about the Rules They Have to Obey, Are Not Thinking about the Problems They Have to Solve

(p. A18) . . . I looked into the growing bureaucratization of American life. It’s not only that growing bureaucracies cost a lot of money; they also enervate American society. They redistribute power from workers to rule makers, and in so doing sap initiative, discretion, creativity and drive.

Once you start poking around, the statistics are staggering. Over a third of all health care costs go to administration. As the health care expert David Himmelstein put it in 2020, “The average American is paying more than $2,000 a year for useless bureaucracy.” All of us who have been entangled in the medical system know why administrators are there: to wrangle over coverage for the treatments doctors think patients need.

. . .

In every organization I’ve interacted with, the administrators genuinely want to serve the mission of the organization, but the nature of their jobs is to enforce compliance with this or that rule.

Their power is similar to what Annie Lowrey of The Atlantic has called the “time tax.” If you’ve ever fought a health care, corporate or university bureaucracy, you quickly realize you don’t have the time for it, so you give up. I don’t know about you, but my health insurer sometimes denies my family coverage for things that seem like obvious necessities, but I let it go unless it’s a major expense. I calculate that my time is more valuable.

As Philip K. Howard has been arguing for years, good organizations give people discretion to do what is right. But the trend in public and private sector organizations has been to write rules that rob people of the power of discretion. These are two different mentalities. As Howard writes, “Studies of cognitive overload suggest that the real problem is that people who are thinking about rules actually have diminished capacity to think about solving problems.”

. . .

. . ., Mark Edmundson teaches literature at the University of Virginia. The annual self-evaluations he had to submit used to be one page. Now he has to fill out about 15 electronic pages of bureaucratese that include demonstrating how his work advances D.E.I., to make sure his every waking moment conforms to the reigning ideology.

In a recent essay in Liberties Journal, he illustrates how administrators control campus life . . .

. . .

Organizations are trying to protect themselves from lawsuits, but the whole administrative apparatus comes with an implied view of human nature. People are weak, fragile, vulnerable and kind of stupid. They need administrators to run their lives. They have to be trained never to take initiative, lest they wander off into activities that are deemed by the authorities to be out of bounds.

The result is the soft despotism that Tocqueville warned us about centuries ago, a power that “is absolute, minute, regular, provident and mild.” In his Liberties essay, Edmundson writes that this kind of power is now centerless. Presidents and executives don’t run companies, universities or nations. Power is now held by everyone who issues work surveys and annual reports, the people who create H.R. trainings and collect data. He concludes: “They are using the terms of liberation to bring more and more free people closer to mental serfdom. Some day they will awaken in a cage of their own devising, so harshly confining that even they, drunk on their own virtue, will have to notice how their lives are the lives of snails tucked in their shells.”

Trumpian populism is about many things, but one of them is this: working-class people rebelling against administrators. It is about people who want to lead lives of freedom, creativity and vitality, who find themselves working at jobs, sending their kids to schools and visiting hospitals, where they confront “an immense and tutelary power” (Tocqueville’s words) that is out to diminish them.

For the full commentary see:

David Brooks. “Death by a Thousand Paper Cuts.” The New York Times (Friday, January 18, 2024): A18.

(Note: ellipses added.)

(Note: the online version of the commentary has the date January 19, 2024, and has the title “Lessons of the Trump Assassination Attempt.”)

The article by Lowrey mentioned above is:

Lowrey, Annie. “The Time Tax; Why Is So Much American Bureaucracy Left to Average Citizens?” The Atlantic, July 27, 2021. Available at: https://www.theatlantic.com/politics/archive/2021/07/how-government-learned-waste-your-time-tax/619568/

The academic paper co-authored by Himmelstein that underlies the Reuters article cited by Brooks above is:

Himmelstein, David, Terry Campbell, and Steffie Woolhandler. “Health Care Administrative Costs in the United States and Canada, 2017.” Annals of Internal Medicine (2020) doi:10.7326/M19-2818.

The article by Howard mentioned above is:

Howard, Philip K. “Bureaucracy Vs. Democracy.” The American Interest (Jan. 31, 2019) Available at: https://www.nytimes.com/2024/01/18/opinion/american-life-bureaucracy.html?searchResultPosition=1.

The article by Edmundson mentioned above is:

Edmundson, Mark. “Good People: The New Discipline.” Liberties Journal 3, no. 4 (2023) Available at: https://libertiesjournal.com/articles/good-people-the-new-discipline/.

The two Tocqueville quotes are from Book 4, Chapter 6 of:

Tocqueville, Alexis de. Democracy in America. Chicago: University of Chicago Press, 2000 (1st ed. 1835).

Dual-Class Stock Allows Firm Founders to Retain Control

(p. B10) . . . Britain is changing the rules to attract more would-be corporate dictators. Its financial regulator this month [July 2024] is ditching shareholder protections in an effort to attract IPOs back to the venerable London Stock Exchange.

The hope is that owners of companies will like London more if they can maintain control, while management will like London more if they don’t forever have to ask pesky shareholders for permission for things.

. . .

Investors in the U.S. have been all too happy to buy companies where the founders have kept control, or act as if they did. Benign dictators are in fashion.

. . .

The history of corporate success fits this model perfectly. Founders who manage to create, expand and list a company are usually pretty good. It isn’t surprising that shareholders like to give successful founders a free rein, avoiding all the usual corporate-governance restraints designed to prevent flights of fancy by a runaway CEO.

Founders also have skin in the game, in the form of a large part of their fortunes tied up in the stock, unlike the hired help who fill the C-suite at most big companies. Their flights of fancy might not always work out—Alphabet’s “moonshot” ventures have mostly lost money—but are part of the point of investing with a founder promising growth.

. . .

In companies that give extra votes to the founder, it becomes hard or impossible to change the board, let alone kick out the CEO.

. . .

London’s outright ban on dual-class stock has been tested by market forces and failed because companies simply listed elsewhere, usually on the Nasdaq. Britain will now have a corporate-governance regime that puts more onus on shareholders to protect themselves.

For the full commentary see:

James Mackintosh. “Streetwise; There Is a Time for Corporate Despots.” The Wall Street Journal (Saturday, July 20, 2024): B10.

(Note: ellipses, and bracketed month, added.)

(Note: the online version of the commentary was updated July 19, 2024, and has the title “Streetwise; There Is a Time for Corporate Despots—but It Isn’t Forever.”)

Sometimes Indigenous People Know More Than Credentialed Scientists

(p. D4) As a group of European botanists prepared to travel across Borneo by motorboat and four-wheel-drive vehicles, they heard about a species of palm with an extremely rare quirk.

It flowers underground.

The palm, Pinanga subterranea, is one of 74 plants that scientists from the Royal Botanic Gardens, Kew, in London named as new to science last year, thrilling some in the botany world. The botanists who went plant-hunting in Southeast Asia six years ago were not expecting to find it.

But the plant is not hard to find: It grows abundantly on Borneo, the third-largest island in the world, which includes parts of Indonesia and Malaysia.

. . .

. . ., the “discovery” of Pinanga subterranea is an example of conventional science catching up with Indigenous knowledge.

“We have described this as new to science,” said William J. Baker, the most senior scientist on the trip. “But the preexisting knowledge about this palm is layered, and was already there before we even got anywhere near it.”

Over the past 30 years, non-Indigenous scientists have turned more to Indigenous knowledge to expand or test their research, with varying degrees of sensitivity.

. . .

There have been a number of collaborative studies that credit Indigenous communities with having generations of wisdom on topics that include shellfish productivity, grizzly bear management and raptor behavior. In some cases the communities lead or participate in the research.

For the full story see:

Mike Ives and Hasya Nindita. “‘New to Science’ Plant Wasn’t Such a Secret.” The New York Times (Tuesday, January 30, 2024): D4.

(Note: ellipses added.)

(Note: the online version of the story has the date Jan. 20, 2024, and has the title “A Plant That Flowers Underground Is New to Science, but Not to Borneo.”)

Policy Reform, Such as Smaller Research Teams, Needed for Faster Big Breakthroughs

(p. D3) Miracle vaccines. Videophones in our pockets. Reusable rockets. Our technological bounty and its related blur of scientific progress seem undeniable and unsurpassed. Yet analysts now report that the overall pace of real breakthroughs has fallen dramatically over the past almost three-quarters of a century.

This month in the journal Nature, the report’s researchers told how their study of millions of scientific papers and patents shows that investigators and inventors have made relatively few breakthroughs and innovations compared with the world’s growing mountain of science and technology research. The three analysts found a steady drop from 1945 through 2010 in disruptive finds as a share of the booming venture, suggesting that scientists today are more likely to push ahead incrementally than to make intellectual leaps.

“We should be in a golden age of new discoveries and innovations,” said Michael Park, an author of the paper and a doctoral candidate in entrepreneurship and strategic management at the University of Minnesota.

. . .

The new method looks at citations more deeply to separate everyday work from true breakthroughs more effectively. It tallies citations not only to the analyzed piece of research but to the previous studies it cites. It turns out that the previous work is cited far more often if the finding is routine rather than groundbreaking. The analytic method turns that difference into a new lens on the scientific enterprise.

The measure is called the CD index after its scale, which goes from consolidating to disrupting the body of existing knowledge.

Dr. Funk, who helped to devise the CD index, said the new study was so computationally intense that the team at times used supercomputers to crunch the millions of data sets. “It took a month or so,” he said. “This kind of thing wasn’t possible a decade ago. It’s just now coming within reach.”

The novel technique has aided other investigators, such as Dr. Wang. In 2019, he and his colleagues reported that small teams are more innovative than large ones. The finding was timely because science teams over the decades have shifted in makeup to ever-larger groups of collaborators.

In an interview, James A. Evans, a University of Chicago sociologist who was a co-author of that paper with Dr. Wang, called the new method elegant. “It came up with something important,” he said. Its application to science as a whole, he added, suggests not only a drop in the return on investment but a growing need for policy reform.

“We have extremely ordered science,” Dr. Evans said. “We bet with confidence on where we invest our money. But we’re not betting on fundamentally new things that have the potential to be disruptive. This paper suggests we need a little less order and a bit more chaos.”

For the full story see:

William J. Broad. “What Happened to All of Science’s Big Breakthroughs?” The New York Times (Tuesday, January 24, 2023 [sic]): D3.

(Note: ellipses added.)

(Note: the online version of the story has the date Jan. 17, 2023 [sic], and has the same title as the print version.)

For Nature paper mostly discussed in the passages quoted above is:

Park, Michael, Erin Leahey, and Russell J. Funk. “Papers and Patents Are Becoming Less Disruptive over Time.” Nature 613, no. 7942 (Jan. 2023): 138-44.

The paper on team size, and co-authored by Wang, is:

Wu, Lingfei, Dashun Wang, and James A. Evans. “Large Teams Develop and Small Teams Disrupt Science and Technology.” Nature 566, no. 7744 (Feb. 2019): 378-82.

What Inspired Steve Jobs and Who Steve Jobs Inspired

(p. A13) Katie Cotton, who as Apple’s longtime communications chief guarded the media’s access to Steve Jobs, the company’s visionary co-founder, and helped organize the introduction of many of his products, died on April 6 [2023] in Redwood City, Calif.

. . .

Ms. Cotton . . . chose which reporters could speak to Mr. Jobs (even though he would occasionally speak, on his own, to journalists he knew well). In 1997, she invited a Newsweek reporter, Katie Hafner, to watch, along with Mr. Jobs, the first commercial in Apple’s new “Think Different” advertising campaign.

A tribute to “the crazy ones, the misfits, the rebels and the troublemakers,” a narrator intoned as the commercial opened with a still picture of Mr. Jobs holding an apple in his left hand; it continued with clips of people who changed the world, among them Albert Einstein, Pablo Picasso, John Lennon, the Rev. Dr. Martin Luther King Jr., Thomas Edison and Muhammad Ali.

“I looked over and Steve was crying,” Ms. Hafner, who wrote about Apple for Newsweek and later for The Times, said in a phone interview. “I looked at Katie, and I couldn’t tell if she was moved or feeling triumphant — I don’t know — but I was filled with admiration for her, because she knew how to play this and to give me access.”

. . .

After Mr. Jobs died, the advertising agency TBWA/Media Arts Lab screened a proposed commercial for Ms. Cotton and two other Apple executives.

“It’s sad when a founder dies,” the commercial began, as recounted by the journalist Tripp Mickle (who now covers the tech industry for The Times) in “After Steve: How Apple Became a Trillion-Dollar Company and Lost Its Soul” (2022). “You wonder if you can make it without him. Should you put your brave face on for the world, or just be honest?”

When it finished, Ms. Cotton was weeping.

“We can’t run this,” she said. They never did.

For the full obituary see:

Richard Sandomir. “Katie Cotton, 57, Media Vice President at Apple Who Had Jobs’s Back.” The New York Times, First Section (Sunday, May 7, 2023 [sic]): 30.

(Note: ellipses, and bracketed year, added.)

(Note: the online version of the obituary has the date May 4, 2023 [sic], and has the title “Katie Cotton, Who Helped Raise Apple’s Profile, Dies at 57.” The online version says that the print version is on p. 28. In my national print version, the obituary is on p. 30.)

The book by Mickle mentioned above is:

Mickle, Tripp. After Steve: How Apple Became a Trillion-Dollar Company and Lost Its Soul. New York: William Morrow, 2022.

Otherwise Innovative Retailers Exit Healthcare Due to “the Layers of Government”

(p. B3) Walmart, the world’s largest retailer, said Tuesday [April 30, 2024] that it was shutting down its health care centers, a network that only last year it said it planned to expand.

The retailer said in a blog post that its 51 health centers across five states would close.

. . .

Offering health care is more difficult than selling consumer goods like laundry detergent and car parts, said David Silverman, a retail analyst at Fitch Ratings, noting the layers of government and insurance providers involved.

“The attempts to enter these spaces and some of the failures of doing so really underscore the challenges and complexities of operating in the U.S. health care space,” Mr. Silverman said.

. . .

In 2021, Amazon, Berkshire Hathaway and JPMorgan Chase ended their high-profile joint health care venture, which sought to explore new ways to deliver health care to their employees. In March, Walgreens said it had closed 140 of its VillageMD clinics and planned to close 20 more.

For the full story see:

Jordyn Holman. “Walmart Is Shutting Down Health Centers in 5 States.” The New York Times (Wednesday, May 1, 2024): B3.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the story has the date April 30, 2024, and has the title “Walmart Is Shutting Health Centers After Plan to Expand.”)

Growth-Impeding Red Tape Especially Hurts Small and Midsize Firms

(p. B1) When Markus Wingens created the position of “energy manager” for the metal heat-treatment company he runs in southwestern Germany, his idea was to increase energy efficiency and attract customers interested in sustainability.

But the job has become as much a task of filling out paperwork and studying seemingly ever-changing laws as it is ensuring that the firm, Technotherm Heat Treatment Group, is meeting energy requirements.

Last year, four new laws and 14 amendments to existing ones governing energy use took effect, each bringing fresh demands for data to be reported and forms to be submitted — in many cases to prove the same standards that the company has already been certified as reaching since 2012, Mr. Wingens said.

“We have the Renewable Energy Act, we have the Energy Efficiency Act, we have the Energy Financing Act, and each comes with an administrative burden,” he said. “It’s madness.”

Freedom from red tape has been a rallying cry for farmers from Poland to Portugal at recent protests against European Union laws and policies. Indeed, the burden of bureaucracy is a general complaint of corporate executives across the globe.

But nowhere is the issue more pressing than in Germany, Europe’s largest economy, which is facing anemic growth of no more than 0.2 percent this year. In a report last month, the International Monetary Fund called “too much red tape” one of the major impediments to reviving the German economy.

For example, it takes 120 days to obtain a business license in Germany — more than double the average in other Western economies. Germany also lags behind the rest of the European Union in the digitization of government services, still requiring written forms for certain tax refunds and building permits.

. . .

(p. B2) German companies spend 64 million hours every year filling out forms to feed the country’s 375 official databases, according to industry estimates. When the Stuttgart chamber of commerce asked its 175,000 members to name their biggest challenges, red tape topped the list.

. . .

The red tape drain on time and resources is felt especially by small and midsize firms — those with fewer than 500 employees and annual revenue below €50 million (about $54 million) — that are the backbone of the German economy.

These businesses often lack in-house legal departments dedicated to filing audits, recording statistics and deciphering which information is wanted by which authorities — the European, federal, state and local governments.

. . .

“In Germany, we have regulations about handing over business cards at business meetings and whether it’s still allowed,” [Andreas Kiontke, a lawyer who works with the Stuttgart chamber of commerce] said.

For the full story see:

Melissa Eddy. “German Business Is Tangled in Red Tape.” The New York Times (Tuesday, April 15, 2024): B1-B2.

(Note: ellipses added. The bracketed information on Andreas Kiontke is from a couple of paragraphs earlier.)

(Note: the online version of the story has the date April 9, 2024, and has the same title as the print version.)

A Founding Manager (aka Project Entrepreneur) Has the Motivation, Knowledge, and Power to Keep His Firm Innovative

In my Openness book, I discuss “project entrepreneurs” who overlap considerably with what is called “founder mode” in the commentary quoted below.

(p. B4) People like Elon Musk and Steve Jobs at times seemed to have a je ne sais quoi that allowed them to act and behave as leaders of their companies in ways that would have tripped up mere mortals.

This past week, Silicon Valley put a name to it: “Founder Mode.”

It’s a term coined by Paul Graham, co-founder of Y Combinator, an influential startup incubator in the San Francisco Bay Area. He wrote an essay this month gaining a lot of attention in tech circles that pits his “Founder Mode” against what he calls “Manager Mode.”

Graham tries to put his finger on the special relationship entrepreneurs have with their companies that he argues outsiders just lack.

. . .

In a podcast late last year, Chesky, who co-founded Airbnb originally as AirBed and Breakfast, talked about the three traits he said better equip a company’s founder over an outside manager.

“They’re the biological parent—you can love something but when you’re the biological parent of something, like, it came from you, it is you, there’s a deep passion and love,” Chesky said. “The second thing a founder has is they have the permission…like I can’t tell another child what to do but if they were my child I probably could.”

This empowers a founder to make dramatic changes, such as rebranding.

And finally, according to Chesky, a founder knows how the company was built in the first place. “You know how to rebuild it, you know the freezing temperature of a company, you know at what temperature it melts,” he said.

. . .

Before publishing his essay, Graham ran it by a few tech titans, including Musk. After it was published, Musk weighed in on X with his own endorsement: “Worth reading.”

For the full commentary see:

Tim Higgins. “Micromanaging Is Cool Again in Tech.” The Wall Street Journal (Monday, Sept. 9, 2024): B4.

(Note: ellipses between paragraphs added; ellipsis within paragraph in original.)

(Note: the online version of the commentary has the date September 7, 2024, and has the title “With ‘Founder Mode,’ Silicon Valley Makes Micromanaging Cool.” The French phrase is italicized in the print version.)

My book, mentioned above, is:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.