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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
Will America's entrepreneurial spirit continue to define its destiny? What can the rest of the world learn from America's experience?
In Launchpad Republic: America's Entrepreneurial Edge and Why it Matters to All of Us, Howard Wolk and John Landry provide an insightful and thought-provoking history of entrepreneurship in the United States, with a focus on the political, legal, and cultural forces that have sustained "creative destruction" and propelled the country forward for more than 200 years. In telling this story, the book highlights the critical features that have set America apart from other countries and identifies the key attributes necessary for it to maintain leadership for years to come.
Entrepreneurship is a rebellious act, and America's democratic system is unique in enabling new companies to challenge established ones. As a result, the country enjoys not just more robust start-up activity, but also a dynamism that forces big companies to improve—or face the consequences. It protects both property rights and the right to compete in ways not enjoyed elsewhere, encouraging investment and innovation. Aside from assessing how American entrepreneurial capitalism unfolded, the authors address current challenges such as the rise of the "Big Tech", concerns about inequality, inclusivity and sustainability, and the evolution toward stakeholder capitalism. They compare the American approach to both Continental Europe's consensus-oriented framework and China's authoritarian model.
Launchpad Republic offers readers:
- Insights into how America's political, legal and cultural history helped make the country the most dynamic economy in the world since inception
- A framework for understanding how the country's balanced and limited government, decentralized financial and corporate system, and responsiveness to consumers all served to enable innovation and improved standard of living while avoiding many of the pitfalls of cronyism and protectionism
- Fascinating comparisons between the United States and other countries, both historical and contemporary, that provide important context to many of today's critical issues
A book that covers important topics in an easy to read style, Launchpad Republic belongs in the library of every policy wonk, capitalist, entrepreneur, founder, business leader, amateur historian, and technologist with an interest in how America's relentless entrepreneurial spirit has influenced—and will influence—its destiny.
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Table of Contents
Cover
Title Page
Copyright
Dedication
Preface
Summary of the Book
Endnotes
Acknowledgments
About the Authors
1 Bigger, Better, Faster, Cheaper
Birthing Unicorns
Slaying Dragons
Challenging and Limiting Authority
A Political Economy of Competing Interests
Key Features of the American Entrepreneurial Economy
Tolerating Collateral Damage
Endnotes
2 Gorillas and Guerillas
Understanding Incumbents
Erecting Barriers to Entry
Start‐ups and Market Entry
Upstarts, Incumbents, and Innovation in an Entrepreneurial Economy
Corporate Strategy 2.0: Ecosystems, Platforms, and Networks
Endnotes
3 European and Colonial Foundations
Old World Meets New Opportunities
The Entrepreneurial Breakthrough
An Economic Theory for Entrepreneurs
Colonial Openness
Development Without Entrenched Incumbents
Franklin and the Self‐Made Man
Resisting Imperial Incumbency
Entrepreneurial Rebels
Endnotes
4 Upstart Nation
The Compromise Constitution
Origins of American Political Economy
The Entrepreneurial Constitution
The Perils of Central Administration
The Rise of Ordinary Entrepreneurs
Endnotes
5 Building the Entrepreneurial Republic
The Competing Visions of Hamilton and Jefferson
The Race to Get Ahead
Balancing Property and Competition
Vanderbilt as the Relentless Mogul
Jackson and the Decentralization of Finance
When the Right to Compete Trumped Property Rights
America's Dynamic Economic Elites
The North‐South Divide
Conclusion
Endnotes
6 The Evolution from Small Business to Big
Upstarts in the New National Market
Local Incumbents Left in the Dust
New Rights for Big Business
Carnegie as an Entrepreneur of Scale
Combining Incumbents
The Progressive Response
America's Tradition of Corporate Autonomy
Endnotes
7 The Age and Aging of Incumbents
The Push for Bigness
Big Science and Corporate Conglomerates
Resisting the Lure of Central Planning
An Entrepreneur for the Age of Bigness
The Great Dismantling
The Cultural Shift
America's Unique Corporate Dynamism
Endnotes
8 The Entrepreneurial Revolution
The Revenge of the 1960s
Bringing Down the Barricades
The New Consumer Market
Financial Engineering and Financing Engineers
Reinventing and Disrupting Government
Silicon Valley Inspirations
Steve Jobs as Hippie‐Billionaire
The Irony of Big Tech
Endnotes
9 The Inflection Point?
Social Concerns
Challenging Big Tech and Revisiting Antitrust
Assessing European Capitalism and Regulation
Understanding China and Authoritarian Capitalism
The Only Thing to Fear
Endnotes
10 Maintaining the Entrepreneurial Advantage
The Continuing Balance
The Foundations for Continued Success
The Entrepreneurial Future
Endnotes
Index
End User License Agreement
List of Illustrations
Chapter 1
Figure 1.1 Venture capital as a percentage of gross domestic product by coun...
Chapter 6
Figure 6.1 Regional ownership distribution by investor category.
Figure 6.2 Category of the largest investors at the company level.
Chapter 7
Figure 7.1 Average company lifespan on the S&P Index.
Chapter 9
Figure 9.1 Share of venture capitalists by race, ethnic, and gender identity...
Guide
Cover Page
Additional Praise for Launchpad Republic: America's Entrepreneurial Edge and Why It Matters
Title Page
Copyright
Dedication
Preface
Acknowledgments
About the Authors
Table of Contents
Begin Reading
Index
Wiley End User License Agreement
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Additional Praise for Launchpad Republic: America's Entrepreneurial Edge and Why It Matters
“For all their vision and drive, entrepreneurs are but seedlings who require fertile soil to flourish. Melding a smart and sprightly historical survey of American politics with a successful practitioner's keen eye for competitive dynamics, Wolk and Landry offer a compelling argument about how formal and informal rules of the game have long sustained the world's most entrepreneurial society. Anyone interested in better understanding U.S. entrepreneurial success – and how to hold on to it – should read this engaging book.”
—David B. Sicilia,Henry Kaufman Chair of Financial History, University of Maryland
“Amidst the deafening noise of polarized politics, economic uncertainty, and rising social challenges, Launchpad Republic offers a signal of optimism and hope. Wolk and Landry remind us that limited government, protection of property rights, and a rebellious spirit are critical drivers of America's dynamism. A must‐read for policymakers and citizens alike!”
—Vikram Mansharamani,Lecturer, Harvard University, author of Think for Yourself: Restoring Common Sense in an Age of Experts and Artificial Intelligence
“The timing of this book is perfect. We need a reminder, or more appropriately, a reeducation of how the ideas, events, culture, and institutions came together to create unprecedented progress and prosperity. The scholarly recount of history that led to this amazing outcome highlights the important role of America's unique brand of entrepreneurship. This book is an important defense of entrepreneurship and ideas and institutions that have well proved their value.”
—Ray Stata,Founder, Analog Devices, technology industry pioneer
“In this important book, Wolk and Landry deftly explain how the United States can address its current social issues and preserve its moral authority and global leadership role. The solution is not ‘big government’ but, on the contrary, leveraging America's entrepreneurial edge: the talent and the energy that have been the source of a remarkable revolution.”
—Marco Magnani,Economist, LUISS University, author of Making the Global Economy Work for Everyone
“Wolk, a successful entrepreneur himself, and Landry, an experienced business historian, trace the free‐enterprise arc ingrained in America's culture that produces innovation and innovators time and again. In a thorough and well documented way, they demonstrate how upstarts change norms and adaptability prevails in the past and present and therefore likely will in the future.”
—David Cowen,President & CEO, Museum of American Finance, co‐author of Alexander Hamilton on Finance, Credit and Debt
“Launchpad Republic is the definitive review of America's journey to become the world's entrepreneurial engine. Wolk and Landry expertly uncover the combination of political, economic, and social tensions that bind our colonial origins, our industrial past, and our digital present. This well‐researched and thoughtful retrospective of American economic history should be required reading for anyone interested in maintaining our nation's entrepreneurial edge.”
—Sunil Dhaliwal,Founder and General Partner, Amplify Partners, Silicon Valley
“Launchpad Republic provides a rich historical and contextual understanding on entrepreneurship in America. With practical case studies illustrating the birth and journey of startups across eras, the book provides a useful reference for educators and learners globally. The book is also a must‐have for policy makers working on initiatives to spark or scale local entrepreneurship.”
—Jonathan Chang,Former Executive Director, Lien Centre for Social Innovation at Singapore Management University, Former Executive Director, Entrepreneurship Centre and the Overseas Colleges at National University of Singapore
“The U.S. was founded on a culture of starting stuff, and we must get back to our entrepreneurial roots. Launchpad Republic is a compelling read and a beautiful historical lens to explore entrepreneurship throughout our country's lively economic experiment and to help us imagine a more inclusive and equitable economic future with entrepreneurship at its core. Let's start more stuff.”
—Saul Kaplan,Founder & Chief Catalyst, Business Innovation Factory
“What explains America's economic edge, especially American innovation leadership? In their powerful new book, Launchpad Republic, Wolk and Landry argue that the relationship between American democracy and the American economy is critical to the success of the United States. Using an array of cases and data, they show that enabling startups systematically allows for industry disruptions to advance innovation and economic growth. This is a great new book, and I highly recommend it!”
—Michael C. Horowitz,Professor of Political Science, University of Pennsylvania
LAUNCHPAD REPUBLIC
AMERICA'S ENTREPRENEURIAL EDGE AND WHY IT MATTERS
Howard WolkJohn Landry
Copyright © 2022 by Howard Wolk and John Landry. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging‐in‐Publication Data is Available:
9781119900054 (Hardcover)
9781119900078 (epdf)
9781119900061 (epub)
Cover Design: Wiley
Cover Image: © George Inness, The Lackawanna Valley, c. 1856,
National Gallery of Art, Gift of Mrs. Huttleston Rogers
For Candice, Addison and Berkeley, and Deanna and Sidney
– HW
For Carolyn Landry, and in memory of Walter Landry Sr.
– JL
Preface
Entrepreneurship is often a form of rebellion.
Many people think of entrepreneurs as builders, which is certainly true. It takes a Herculean effort to launch a company, and most successful entrepreneurs have a relentless drive to create, sustain, and develop their enterprises. They work continually on growth and planning for the future. They invest extraordinary amounts of time and resources, and they take on great risks.
But underneath this effort, entrepreneurship is frequently an act of dissent, an attack on the status quo, and sometimes even a political manifesto. The attack may be subtle, through an unserved niche in the market or a product idea that incumbents are neglecting, rather than going head‐to‐head with those companies. But the entrepreneur is still challenging the established order.
These two sides to entrepreneurship – the encouragement to build, the empowerment to destroy – show up throughout American history. The colonies began as commercial enterprises, with London‐based investors serving as venture capitalists. Yet many of the early colonists were dissenters, not just religious but also cultural. The U.S. Constitution put in place checks and balances to mediate this ongoing tension through the institutions of government. The result was a persistent tension between a desire for stability and investment on the one hand, and an implicit culture of disruption on the other. From the colonial period through the current day, this balancing act between rewarding builders and enabling challengers, often the same people, has been at the heart of the American entrepreneurial economy. It has been our internal combustion engine of progress.
These dual aspects are easy to see on college campuses today. Many of the most successful start‐ups have emerged out of universities, particularly those receiving government grants to support research and promote innovation. These institutions provide stability and access to resources critical to building a company and are often openhanded in allowing students and professors to commercialize their work. But many of these campuses also have a strong undercurrent of anti‐authoritarianism, such as MIT with its strong hacker culture, and Stanford with its legacy of freewheeling culture from the 1960s.
This tension, and how it developed over time, is the topic of this book. We show how the American political economy evolved to manage the dynamic between upstarts and incumbents and to balance the various competing forces at play. Just as it is difficult to maintain democratic government over long periods of time, it is hard to sustain an economy that favors both disruptive competition and stable property rights. But the United States has pulled it off, and the ensuing creative destruction has yielded astounding gains in living standards and material prosperity. While daring entrepreneurs and the country's entrepreneurial spirit deserve most of the credit, the political, legal, and institutional systems are not far behind.
Too often we see American history in extremes, either as a deeply flawed, exploitative project, or as a consensus‐based march of progress to ever‐increasing liberty, participation, and growth. But the genius of America's political economy has been its ability work through competing interests without falling into chaos. We had deep‐seated conflict from the beginning, but just enough consensus to keep from disintegrating altogether (except in the 1860s), and the political system worked to channel those conflicts in a way that balanced property rights and openness. People think wise administrators and leaders can achieve the perfect system, but in practice that often leads to cronyism or stagnation, as many countries have found. In both the political and economic spheres, the adversarial process worked well, as long as it stayed in bounds. America's entrepreneurial economy is often messy and inconsistent, but it retains enough openness and stability to motivate daring entrepreneurs to risk their fortunes.
Entrepreneurship is a core American value, and its virtue is one of the limited number of things that almost all Americans agree upon. For conservatives, entrepreneurship reflects important values such as hard work, individual effort, and reward for success. For progressives, the inherently rebellious nature of entrepreneurship represents a check against power and vested interests. While people might differ on who, precisely, is an entrepreneur and what characteristics should be most prized, the debates – which go back as far as Hamilton and Jefferson – take place within a broad consensus of support.
Multiple perspectives have informed our work on this project. The first is practical experience. One of the authors (Howard Wolk) spent three decades as an entrepreneur, corporate executive, and investor in start‐up enterprises. He helped to start and build several technology‐enabled ventures, and he has made numerous early‐stage investments directly in start‐ups and through leading venture capital firms globally. This includes experience as an early investor and board member in what is now the largest auto rental company in China.
More pointedly, along with his father and brother and talented teams over many years, he helped build one of the largest privately held firms in Massachusetts, a classic story of a small business that grew into an industry leader and worked hard to maintain its position. The company began in 1972 as Cross Country Motor Club, selling individual memberships, but it pioneered private‐label versions of roadside service for automobile companies and insurance carriers in the 1980s and ’90s. As the company grew, it took on incumbent players AAA and GE (which had a motor club for many years), ultimately succeeding by customizing its services in ways that the larger firms would not or could not. Later, once the organization's flagship company (renamed Agero) became the industry leader, it had to fend off challenges from a new generation of upstarts. It acquired a firm in San Francisco and embarked on aggressive digital transformation in order to stay ahead. While no successful incumbent likes competition, many at the company would grudgingly admit that the challenge has kept the company sharper and at the forefront.
The second perspective comes from the academic world, including economic history, law, and public policy. John Landry earned a PhD in American economic history at Brown University and has worked in the business publishing world for close to three decades, including years as an editor at the Harvard Business Review. There he came to appreciate the messiness and vitality of how companies and economies actually work. Howard Wolk has degrees in history, economics, law, and public policy, and also served in the Clinton Administration as a lawyer and a member of the National Performance Review, a project that sought to “reinvent government” and make it work more effectively; the latter helped inform his perspective on both the possibilities and inherent limitations of political institutions.
Both of us have witnessed the recent explosion of interest in entrepreneurship, even as the understanding of it in the broader context is still new.1 Business schools offer more classes on the topic each year, and economic policymakers aim to create “the next Silicon Valley.” Governments around the world track their progress in fostering innovation and industrial clusters. Still, those governments and policymakers and other interested parties often have little appreciation of the forces that enable a sustained entrepreneurial economy, particularly the legal, political, and institutional factors. At a time of general rethinking of capitalism and the role of government in regulating business, we have written this book to describe how these factors have operated through American history and how they can be maintained, leveraged, and improved going forward.2
Summary of the Book
Chapter 1 lays out the basic argument: that the United States developed a dynamic entrepreneurial economy because it balanced the right to compete with property rights. It contrasts the American propensity to allow creative destruction with other countries that take a conservative approach and are much more likely to protect existing corporate, market, and social arrangements.
Chapter 2 delves into entrepreneurial competition and the differences between start‐ups seeking to enter markets and incumbents erecting barriers to that entry. Each side has strengths and weaknesses, and a vibrant economy allows both to prosper. Indeed, most successful firms progress from start‐up to incumbent.
Chapter 3 is the first of six tracing the entrepreneurial balancing act from its roots in early modern Europe to the present. Unlike their traditionalist neighbors, such as Catholic Spain, the Netherlands and England challenged imperial restrictions and respected merchants and others outside the traditional gentry. They favored personal discipline, risk‐taking, and the mobilization and capital for productive purposes, and distinguished the enterprises of individuals from those of the crown. They carried their commercial bent, egalitarianism, and tolerance to the European colonies of North America, which lacked the highly marketable natural resources of the Caribbean and Spanish colonies and thus had to develop sophisticated policies to encourage development. The colonies’ desperate need for settlers created an unprecedented egalitarianism and pragmatism that overwhelmed efforts to reproduce Old World hierarchies.
Chapter 4 describes the process of gaining independence from Britain and establishing a federal constitution. The founders decentralized power but established a strong central foundation to protect essential economic rights. Many of the tensions that proved important to the entrepreneurial economy – tensions that other countries would find intolerable – were accepted in the final document. The result was a revolution in political and economic participation, unleashing a wave of ambition. It remains the core of the American entrepreneurial political economy.
Chapter 5 explores the building of the entrepreneurial nation in the early United States. The ongoing debate between Hamiltonians and Jeffersonians illustrates the emerging balancing act as the country's economy gained strength and achieved a degree of national integration. While policymakers pivoted from neo‐mercantilist principles to laissez‐faire, the courts favored entrepreneurial competition over the narrow view of property rights behind government monopolies and traditional activities.
Chapter 6 starts with the end of the Civil War, which opened the frontier to a new wave of entrepreneurship while ushering in legal and institutional mechanisms such as substantive due process, national infrastructure development, and the broader and larger stock market. The new scale of markets, connected through railroads and telegraphs, promoted massive private organizations that put new pressures on the balancing act. While these new entrepreneurial efforts brought efficiency and productivity, they eventually became too powerful and the dislocation too great. In the early 20th century, the Progressive movement emerged and argued for federal policies to check this power and curb abuses, including antitrust interventions. A rough consensus emerged on the eve of World War I: big business was to be tolerated but watched carefully.
Chapter 7 describes the results with the rise and then (relative) decline of large corporations over most of the 20th century. The pressures of the Great Depression, World War II, and the Cold War led governments to give extraordinary support to these enterprises, and for decades the results were satisfactory to most people. Giant incumbents did much to develop and promote powerful new technologies and business practices. But increasingly they settled into stagnant oligopolies that hindered economic growth. External factors such as the Vietnam War, the oil shock, and foreign competition, as well as new technologies, eventually forced governments to withdraw much of their regulatory oversight and protection.
Chapter 8 describes the revival of the upstarts from the 1980s to the present. In response to economic malaise, the federal government deregulated much of the economy. A heady wave of start‐ups, raised in the anti‐establishment fervor of the 1960s and ’70s and empowered by optimism after the fall of the Berlin Wall, grabbed the opportunities. Financial innovation, especially junk bonds and venture capital, provided crucial new resources, while the personal computer, internet, and other open systems made it easier for upstarts to build products and attract customers. “Blue‐chip” incumbents such as AT&T and IBM lost much of their market value and dominance, but the government (except during the financial crisis of 2008) declined to protect them. Government itself faced disruption from “social entrepreneurs” in education and other areas. By the 2010s, one‐time start‐ups had become “Big Tech” and were pioneering advances around the world.
Chapter 9 tackles the current popular sense that something has fundamentally changed in the balancing act between upstarts and incumbents. There's widespread fear that the latter now have the decisive upper hand due to “winner‐take‐all” network effects, lax antitrust enforcement, and the rising power of corporate lobbying and electioneering. Worker displacement, lower wage growth, and the prospect of continued automation, outsourcing, and artificial intelligence raise concerns about reduced opportunity for individuals, while encouraging some to look at Europe for answers. Finally, the rise of China and more authoritarian capitalist states stokes concerns about America's global competitiveness over the next century.
A deeper look, however, shows the balancing act is still resilient overall. While some aspects of the current situation are concerning, in particular the dramatic rise in economic inequality and continued lack of inclusion in important areas, the United States has endured greater pressures on the balancing act in the past, and still thrived. Some adjustments to policy may be in order, but any fundamental changes that throw the pendulum far in either direction will likely cause more trouble than benefit.
Chapter 10 concludes with principles and high‐level recommendations to bear in mind as we try to improve the current system while maintaining the attributes that have made us successful. If we build on these principles and successes, as an effective complement to government, we may even be able to expand our entrepreneurialism to solve deep‐seated problems such as climate change and inequality. The power of individuals as citizens, consumers, and shareholders should not be underestimated.
By understanding the balancing act between upstarts and incumbents in all its complexity, including the cultural, political, legal, and institutional mechanisms that enable it, citizens and policymakers can better appreciate what it takes to keep it going and, indeed, improve it. The system does not require superior wisdom to work; only an open structure that allows competing interests and the voice of the consumer to be heard, as well as an understanding of the fundamental issues. But insights into the dynamic can help us avoid any fundamental changes to the system that could jeopardize entrepreneurship, innovation, growth, and opportunity, while allowing us to leverage its great energy and creativity for an even better future.
Endnotes
1
Some of this explosion of interest is going into giving some long overdue attention to the role of people of color, and women of all ethnicities, in the development of America's entrepreneurial economy. We hope in a future edition of this book to say more about their part in this story.
2
Several histories of American capitalism have appeared in the past decade, but none offers an in‐depth assessment of the country's extraordinarily vital entrepreneurship and its link to the country's democracy. Most of them have provided interesting narrative but less analysis. Michael Lind's
Land of Promise: An Economic History of the United States
(New York: Harper, 2012) argued that Alexander Hamilton's nationalist vision of development economics drove the country's progress, despite recurring bouts of Jeffersonian “producerism” that mostly entrenched local elites and prejudices. We suggest that both leaders’ visions helped build the entrepreneurial balancing act. Jonathan Levy's
Ages of American Capitalism: A History of the United States
(New York: Random House, 2021) largely took entrepreneurship for granted and instead emphasized where political leaders fell short in stabilizing and broadening prosperity. By contrast,
Capitalism in America
(New York: Penguin, 2018), by Alan Greenspan and Adrian Wooldridge, celebrated entrepreneurship and creative destruction, but explained the bounty with a more libertarian approach than we offer. Bhu Srinivasan's
Americana
(New York: Penguin, 2017) surveyed entrepreneurs over the 400 years of American development and suggested that Americans’ commercial drive was so innately powerful that it overwhelmed political, moral, and social structures. Willie Robertson's
American Entrepreneur: How 400 Years of Risk‐Takers, Innovators, and Business Visionaries Built the U.S.A
. (New York: William Morrow, 2018) praised innovators and small businesses with less attention to political economy.
Acknowledgments
Several people helped and supported this work. Davis Dyer at the Winthrop Group played an instrumental role in guiding the authors throughout, while Fred Dalzell of that firm assisted greatly with research. Much of the book germinated at Harvard Kennedy School's Mossavar‐Rahmani Center for Business and Government, where Howard Wolk served as a senior fellow from 2012 to 2014. He led a study group on entrepreneurship entitled “Bigger, Better, Faster, Cheaper.” Thanks go to Richard Cavanagh, John Haigh, Richard Zeckhauser, Scott Leland, and Jennifer Nash, all of whom provided tremendous support during and after that period, as well as numerous colleagues and students who provided feedback and support during the project's early days.
John Landry thanks his professors from the Department of History at Brown University, especially his dissertation advisor, Naomi Lamoreaux.
Many other people were extremely generous with their time in reading portions of the manuscript, often early on when the text was quite rough. We would like to thank Bill Aulet, Alex Berger, Jeffrey Blecher, Robert Brennan, Jeffrey Bussgang, Jonathan Chang, David Cowen, Justin Fox, Jeffrey Gordon, Michael Greeley, Michael Horowitz, Thomas Jones, Jeffrey Kushner, Vikram Mansharamani, Jeffrey Rayport, Mitch Roberts, Stephen Rosen, Devjani Roy, Gabe Scheffler, John Sinclair, Austin Slaymaker, Alex Slawsby, Gabe Smallman, Michael Vorenberg, and Jeffrey Wolk for their heavy lifting and thoughtful critiques.
We also thank the team at Wiley, including Bill Falloon, Purvi Patel, Samantha Wu, Priyadharshini Arumugam, Ranjith Kumar Thanigasalam, Samantha Enders, and Amy Handy, as well as Silvana Bouhlal and Peggy Wright for assistance with many early drafts.
Howard would like to make a special acknowledgment to his father, Sidney, an entrepreneur and company builder whose spirit of optimism and respect for people is a continual source of inspiration and admiration, and to the many, many associates at all levels within the Cross Country organization over the years who have worked together to make it a shared success.
Finally, we thank our families, especially our wives, Candice Wolk and Rochelle Rosen. A project of this sort takes enormous amounts of time and can become an emotional and intellectual distraction. We could not have completed it without their support and enthusiasm at each stage.
About the Authors
Howard Wolk is an experienced entrepreneur, company builder, and investor. He is co‐president of The Cross Country Group, a privately held business group, and a former senior fellow at the Harvard Kennedy School's Mossavar‐Rahmani Center for Business and Government. He received a BA from the University of Pennsylvania and a BS from the Wharton School. He also holds a law degree from Columbia and a master's degree in public policy from Harvard. He lives in the Boston area with his wife and two children.
John Landry is an independent business historian and writer. He has written or co‐authored histories of several companies, including Mylan Inc. and the New England Electric System. He earned a BA from the University of Chicago and a PhD in history from Brown University. Formerly an editor at the Harvard Business Review, he lives in Providence with his wife along with two sons away at college.
1Bigger, Better, Faster, Cheaper
The streets of San Francisco may be tough, but they were not tough enough to deter Travis Kalanick, the pugnacious co‐founder and early CEO of Uber. In fact, the street part was a lot easier than the politics. When the ridesharing website UberCab appeared in 2010, it was an immediate hit. But after its official launch a year later, the company was forced to change its name to Uber after taxicab drivers, who had spent thousands of dollars for their government‐issued medallions and had to comply with municipal regulations, complained about the competition.
That was just the first of many battles. As Uber expanded into multiple cities in the United States and morphed from a “black car” limousine ridesharing service into one that set up ride‐hailing with independent operators, the fights continued, with the aggressive company continuing to skirt the edges of established regulation. Local municipalities and their taxicab interests pushed back, but Uber generally prevailed, as consumers enjoyed the easy‐to‐use service. When state legislatures got involved, as California's did in 2019 by requiring platforms to treat “gig economy” workers like employees, Uber took to the streets politically, leading and winning a ballot initiative that created a ridesharing exemption the following year. In other cases where resistance was strong, the company argued that it was simply a technology platform, not a service, and thus exempt from other regulations and restrictions. And it was not afraid to take aim at crosstown rival Lyft at any time.
In fact, Kalanick and the company almost seemed to relish the battles with regulators, adopting an approach that was purportedly called “Travis's Law”: Our product is so superior to the status quo that if we give people the opportunity to see it or try it, in any place in the world where government has to be at least somewhat responsive to the people, they will demand it and defend its right to exist.1
Kalanick himself was controversial, and he was forced to step down in 2017 after a series of revelations of inappropriate behavior at the company under his leadership. Nevertheless, with a combination of quick consumer adoption of its innovative app and substantial sums of venture capital, Uber rocketed to success in the United States and expanded globally.
Outside the United States, by contrast, the company's entrepreneurial disruption met determined opposition. In London, where taxicab drivers must adhere to strict licensing and conduct codes, the company discontinued its car operations in 2017 and did not resume operations until four years later when a British Supreme Court decision allowed it back in. Meanwhile, local European companies tried to build up operations in their home countries or other locations where Uber was not yet strong. Hailo made early progress in London by partnering with taxi operators but ultimately merged with a German company to form what today is FREE NOW. BlaBlaCar in France had some early success but stayed focused on the ridesharing and struggled. The Estonian company Bolt, founded in 2013, expanded to 300 cities and 45 countries, but it was late to the game. These companies gained traction, but continued regulatory challenges in many of their markets and limited capital kept them from expanding aggressively. At the end of 2021, FREE NOW had a market valuation at around $1 billion, BlaBlaCar at roughly $2 billion, and Bolt at $5 billion. Uber, in contrast, was worth $85 billion, while its rival Lyft reached $15 billion.
China was another story. In 2012 Didi Dache emerged, backed by powerhouse Tencent Holdings, and quickly achieved market leadership. Kuaidi Dache, with lead investor Alibaba, soon followed. In 2015, the two firms merged, creating the dominant player – rebranded Didi Chuxing – with over 80% market share in what would soon be the world's largest ride‐hailing market. For all their relentlessness, Kalanick and Uber did not stand a chance against the government favorite, and it sold its UberChina division to Didi in 2016 in exchange for roughly an 18% interest in Didi.2
While Uber ceded the Chinese market to the domestic player, it is unclear who will win the global game. In June 2021, Didi went public on the New York Stock Exchange with an initial market value of $70 billion, and appeared to be poised to overtake Uber. But a few weeks later the Chinese government ordered the company to shut down certain of its services out of concerns about data privacy, and the company's app was removed from the major app stores. The restrictions were part of a broader crackdown on technology firms under the country's anti‐monopoly laws, an effort by Premier Xi Jinping to assert control over the emerging private‐sector giants. By Spring 2022, Didi's market value had dropped to $10 billion – less than half the IPO valuation – and the company announced plans to delist from the NYSE and move to the Hong Kong stock exchange.
Birthing Unicorns
Entrepreneurship goes back to ancient times, but the velocity and scale of start‐up activity worldwide has expanded substantially in the past decade. This trend is in large measure due to the success of Silicon Valley technology firms, the ease of idea‐sharing around the world, and the low‐cost access to technology and markets facilitated by the smartphone and the internet. Alongside these success stories, enabling their efforts, venture capital and other sources of funding have grown to unprecedented levels in virtually every major country. The result is a frenzy of start‐up activity across the globe.
Yet the story of Uber and its peers highlights some critical differences in entrepreneurship worldwide. These differences often reflect not just challenges or opportunities related to specific companies or markets, but also systemic differences across countries. These variations indicate deeper and longer‐standing cultural, economic, or political factors, often described by academics who study “varieties of capitalism.” While most of these analyses look at broad factors in the economy, many of the differences are most pronounced when it comes to entrepreneurship and the fate of start‐ups across various regions.3
Despite the buzz of entrepreneurial activity around the world, America still stands out. This leadership includes the country's historic and current ability not just to create new companies at high rates but to empower the most successful of them to grow. As the case of taxis illustrates, the dynamics of competition, access to the market, the ability to raise capital, the power of competitors and other constituencies to resist, and broad political and institutional forces all affect the ultimate success of a venture. When one looks at the results, it is clear that America excels not just in enabling start‐ups but in supporting them to achieve scale. And as one looks at the dynamics at work underneath, the reasons become clear.
The year 2021 was remarkable in terms of start‐up activity, with an astounding $330 billion invested globally – almost double the amount the previous year. And while many countries reached record levels, the United States still represented the dominant share, with nearly half of all the investment going to companies.4
While the creation of large companies is not the only barometer of successful entrepreneurship, the United States continued to lead the world in “unicorns” – privately held ventures that reach the billion‐dollar valuation level – at 400. Most other nations lag by a wide margin: India counts 38, the United Kingdom 31, Germany 18, Israel 18, France 17, Canada 14, Brazil 13, and South Korea 10.5 Moreover, as of the end of 2021, the U.S. has given rise to 8 of the 11 companies worldwide with market valuations above $1 trillion.
Certainly, some of this is changing, as countries and investors are awakening to opportunities to build exciting businesses in markets around the globe. But it is not clear how these companies will fare over time and whether the enterprises that emerge in this frenzy will unleash a continual cycle of innovation and entrepreneurship in their countries that will endure beyond those firms, or simply devolve into stagnant industry incumbents once they reach the top.
It is particularly interesting to consider these statistics in light of China's rise. At 158 unicorns, China is the only nation that comes close to the United States and may soon overtake it – albeit with four times the population. However, recent issues such as the crackdown on the large technology firms, the temporary detention of Ant Group founder Jack Ma, the restrictions on civil liberties in Hong Kong, and the Evergrande financial crisis all raise questions about the long‐term future off China's entrepreneurial economy and whether authoritarian capitalism and entrepreneurship can coexist over time.
While the long‐term success of entrepreneurship in other parts of the world remains an open question, American leadership in this area is clear and has been an important pillar of its development since inception. How do we understand America's remarkable support and encouragement of entrepreneurship?
Historians and other experts have laid out several contributing factors. The country's open frontiers, with virgin land and other natural resources, invited growth and created a culture of expansion.6 Moreover, from the very beginning, the country desperately needed people to work the land and later to help build out its infrastructure. As a result, the nation developed a culture the that offered people opportunities and welcomed a steady flow of talented immigrants, restless enough to leave their own countries and willing to take on new opportunities.7 Substantial public investment in infrastructure, research institutions, and fundamental science likewise have been essential to developing many new industries.8
Yet these factors alone do not suffice to explain the wave after wave of entrepreneurial activity in the history of American capitalism. After all, the United States is not the only large, immigrant‐frontier country with a public‐minded and growth‐oriented government. But it stands out for the intensity, breadth, and duration of its entrepreneurial verve. Something else is needed to explain how the country has been able to empower people to chase after bold dreams, risking financial resources and tackling a myriad of other challenges, rather than apply their talents toward contented lives in comfortable settings.
That something else may best be described, ironically, as safety. Or at least safety in taking risks and investing the time, talent, and energy in pursuit of dreams. In most other countries, entrepreneurs often face major challenges, impediments, and barriers to entry when it comes to starting businesses. They must overcome stiff or capricious licensing requirements, burdensome regulation, and a weak transportation and financial infrastructure (including access to capital). And should these entrepreneurs falter, they have to deal with devastating liability or even social disgrace.
More significantly, America's cultural, legal, and political systems give entrepreneurs the room to succeed and grow, even if that means pushing up against strong, established foes. In many countries, new enterprises, especially innovative or disruptive ones, often face powerful forces of resistance or co‐optation, whether at the national or local level. In some countries, this includes the possibility that government authorities might prevent or deter the new competitive enterprise or even expropriate successful ones. In other countries, especially in more developed ones, the resistance is subtle. Since innovative firms often upset the apple cart, a range of actors including large established firms, small businesses, workers, suppliers, and even customers may object, and these forces of resistance create deterrents through the political and institutional system.9 Aspiring innovators often have little recourse.10
An important corollary to America's pro‐start‐up culture is its inherent opposition to cronyism and monopoly. As discussed later, America has a strong tradition against protectionism at both the local and national levels. While companies no doubt can be effective in garnering and using political influence, citizen‐consumer interests have largely prevailed over time, giving innovators and competitors access to the marketplace at any level while also creating a larger market overall. The result has been greater innovation, productivity, and efficiency, as well as a sustained and continuous cycle of new enterprise.
Would‐be crony capitalists are not the only ones vulnerable to new companies and emerging innovations; here, as elsewhere, other constituents and interest groups, including workers and small business, often resist entrepreneurs. While these groups are sometimes quite powerful and effective in using the political process to deter change, they are usually unable to stop new companies or innovations from finding their way into the market, especially if consumers are directly impacted. Among all the many potential forces of resistance, the relative paucity of protection for incumbents is perhaps the most noteworthy difference between America's dynamic entrepreneurial economy and nearly all other competitive economies.
Slaying Dragons
It may seem ironic that even as America spawns more unicorns than other countries, it also is more lenient in allowing large and successful firms to fail. But this underside – the “destruction” component in Joseph Schumpeter's famous formulation – is actually an essential part of the equation. Not only does the hypercompetitive market economy of the United States allow upstarts to challenge incumbents and sometimes win, but the intensity of the competition, and the relatively few ways for incumbents to seek protection, forces those large companies to “stay on their toes.”11 Part of what drives unicorns is the recognition that they may themselves be vulnerable.
It is not a coincidence that while the United States saw more unicorns emerge in the last several years, it also witnessed significant failures of some of its largest and most powerful companies. Even General Electric, a mainstay on the Dow Jones Industrial Average for a century, fell from the index in 2018, preceded by such giants as AT&T, Sears, and General Motors. A study of publicly traded firms on the Standard and Poor's 500 index found that the average “corporate lifespan” is at an all‐time low and continues to decline.12 Amidst the growth of powerful new companies, America's “churn rate” among large firms is higher than elsewhere.
As will be discussed later in the book, there are many reasons why large and powerful incumbents decline. New disruptive technologies might change the underlying economics of a product or market, and established firms have difficulty identifying or adopting to the change. In other cases, corporate bureaucracy, incentive systems, or plain bad luck exact a toll. But the key feature of the American business environment is that, in general, we do not prop up faltering companies and we allow even the largest and most powerful firms to fail.
The difference between the United States and most of the world is striking in this regard. In much of the developing world, inefficient or corrupt governments, along with conservative cultural norms and unclear property rights, stifle entrepreneurship, whether the small business variety or innovative start‐ups.13 In some countries, authoritarian regimes offer stability, but with greater risk of confiscation or favoritism – especially for companies with big ambitions. Successful firms often become aligned with the state. Even in fast‐growing “entrepreneurial nations,” the state often promotes “national champions,” frequently at the expense of true dynamism. China and India have witnessed an explosion of start‐ups and the emergence of large, powerful companies, but most of the success stories are tied to the political power base. It remains unclear whether newer entities in these countries will be able to challenge incumbents or, just as important, whether these rising firms will stagnate due to the lack of serious challengers as they obtain and protect a leading market position.14
Even the most liberal, Westernized countries have failed to support the level of dynamism seen in America. Germany and Japan are thriving, but they tend to encourage static consortiums of firms and supporting business networks, often as part of concerted national policies. Their leading companies have typically existed for decades and are aligned with the government, major banks, and employee unions. Supplier networks are vibrant and competitive (the German Mittelstand firms and members of Japanese keiretsu come to mind), but without the winner‐take‐all dynamism that encourages risk‐taking in the United States. France has wrestled with liberalizing, but many incumbents remain entrenched and small business incumbents are politically powerful. The United Kingdom's economy is also largely static and facing challenges to its leadership role in capital markets due to Brexit. To be sure, many European cities have recently seen a high level of entrepreneurial activity – Berlin, Stockholm, London, and Paris have particularly active start‐up scenes – but none have yet demonstrated the U.S.'s relentless cycle of start‐ups challenging incumbents over decades.
The closest comparison to the United States in this regard is Israel, a small country with an impressive level of innovation from many venture‐backed firms. As noted in a top‐selling book on the topic, this “start‐up nation's” dynamic and assertive culture has been perhaps its most powerful asset. But Israel's export‐intensive high‐tech economy means it avoids confronting dominant incumbents as new firms develop. As a result, while it is intensely competitive, it doesn't face the opposition of established domestic rivals typical in most large developed countries. Israel is the exception that proves the rule.15 (See Figure 1.1, Venture Capital as a % of GDP by Country.)
Challenging and Limiting Authority
Underlying the balancing act between upstarts and incumbents is the seldom appreciated tension between two central principles in American political economy: the right to property and the right to compete. While often at odds, these principles emerged together centuries ago out of a general mistrust of powerful authority, especially monarchy. Both principles check the possibility of government overreach, which is how they became embedded in the U.S. constitution at the nation's founding.
The American adoption of these principles emerged from long‐running traditions dating back to the feudal system, most notably in England. Early property rights were recognized in 1215 in the Magna Carta, which protected the interests of the nobility from monarchical invasion. This concept of secured interest and limited royal prerogative carried over later to firming up property rights related to the issuance of royal grants and charters during the age of exploration.16 Wealthy gentry worried that central authorities would confiscate personal property, while venturers sought certainty before investing time and resources to risky endeavors. Over time, these protections expanded to other enablers of commercial activity such as contracts, insurance, and financial instruments, as well as patents for inventions.17
Compared with classic property rights, the right to compete is a nebulous concept, but it too has deep roots. The modern sense of economic competition as a positive social force emerged in the early modern period of European history, long after widespread recognition of property rights. The right to compete took shape initially from the questioning of scientific and religious authority during the Scientific Revolution and the Enlightenment, and soon broadened into commerce.18 The development of guilds also led to early issues regarding the ability or right to conduct trade. The controversy over the enclosure movement in the 16th century, pitting landowners fencing in their lands against peasants who traditionally had grazed livestock there, is one example where property interests were both asserted and challenged. These developments culminated in the early 1600s backlash against Queen Elizabeth I, whose reliance on patents limited opportunity and fostered resentment among aspiring gentlemen and commoners. Building on this resentment, both John Locke and Adam Smith proclaimed the right to pursue a trade as an inherent, natural right.
Figure 1.1 Venture capital as a percentage of gross domestic product by country.
Source: OECD Capital Series, “Entrepreneurship at a Glance, 2016.”
The assertion of property rights (specifically the limit on royal confiscation) and the right to compete (especially against overreaching royal grants) gained momentum with England's Glorious Revolution of 1688. Besides limiting the power of the monarch to confiscate property, the revolution brought a Bill of Rights. Among the changes was a radical restructuring of the British East India Company, the dominant commercial enterprise of its day, to end its domestic (though not international) monopoly rights.19
Both property rights and the nascent right to compete carried over to America, and the scope of these two rights and principles have continued to evolve. Classic property rights such as those related to the ownership of land have expanded into questions such as the ability of a company to determine retail prices, a software company to bundle products, a smartphone or automobile manufacturer to determine who can make repairs, or a technology company to parlay data into new services. The right to compete has been asserted in areas such as market access and “fair” competition, in some cases arguing the exact flipside of classic property rights. How the right to compete evolved and developed, not just as a complement to property rights but as a challenge to it, and how the American political and legal systems have responded to this tension, is essential to understanding how the American economy actually generates progress.
The interplay of these rights altered not just the political and economic landscape but also the social order, where “new money” often pitted itself against “old money.” At times, entrepreneurs threatened the wealth or standing of individuals with far‐reaching influence. Schumpeter noted how creative destruction upsets the social pecking order, with entrepreneurs continually taking on dominant interests and knocking them off their proud perches.20 Today, wealthy individuals can manage this risk by diversifying their activities, so the dynamic is not quite the same zero‐sum game it may have been in the past. And often entrepreneurs supersede rather than disrupt, raising the bar and keeping incumbents fresh and vigilant rather than dismantling them. The striving and success of entrepreneurs can thus have far‐reaching effects well beyond just the economic sphere, including politics.
A Political Economy of Competing Interests
In the 1950s, political scientist Louis Hartz noted that the United States features a long‐standing tradition of limited government involvement in the lives of its citizens. Hartz and others identified the key attributes of this tradition as a strong orientation toward individualism, the absence of an embedded aristocratic class, and an egalitarian approach toward social and political life. Personal liberty and rational self‐interest constitute the essence of the American culture.21
This liberal tradition plays out in economic life as well, and the political and economic system embodied by the Constitution largely allowed “private ordering” in the area of economic affairs. It also allowed – some might say even encouraged – a competition of interests. Both the entrepreneurial economy and the political system involve balancing acts. In politics, the country aims to avoid both the extremes of popular democracy, which infringes on the rights of minority groups of all kinds, and the extremes of rule by elites, which suppresses the interests of the populace. Economically, we likewise avoid favoritism toward upstarts, which would undercut the property and other rights of established firms, and favoritism toward incumbents, which would hinder upstarts from mounting challenges. It achieves this balance not through benevolent rulers or even an explicit consensus but through an adversarial and competitive process. As in the realm of politics, the economic system allows competing interests to be heard, with the ultimate goal of stimulating growth and productivity gains. The result is more dynamism, innovation, and social mobility.
