June 2018

It’s a popular misconception that entrepreneurs cannot be effective leaders of larger organizations. That leads many organizations to turn away from the very type of leadership their organizations need.

I live an entrepreneurial life, and it never fails to amaze me how many people misunderstand entrepreneurs. The media are largely responsible. They overplay the theme of individual success and ignore collective effort when they talk about entrepreneurship.

This imbalanced coverage creates the impression that successful entrepreneurs are not good at leading teams or being good team players; it paints them as highly individualistic and as outsiders, someone interested only in running the show until the venture capitalists take over or the business is sold.

This viewpoint prevents many entrepreneurs from finding interesting and exciting challenges in larger organizations and deprives these organizations of the type of leadership needed to grow. Last week I ran across some research work done by Timothy Butler, senior fellow and director of career development programs at Harvard, and it really crystalized my thinking.

Butler’s first observation is that entrepreneurs are not actually risk takers; rather, they are risk mitigators. They do not take risks blind to the outcome, but instead look with a clear head for ways to manage risk. They are able to do this because they are highly comfortable with ambiguity and uncertainty, which is a fundamental entrepreneurial trait. This makes them very suitable for leading teams developing strategies and  calmly managing them through the stresses of change.

He also notes that most entrepreneurs are not wild-eyed creative people who daydream and come up with big ideas. His research found that while this is sometimes true, most entrepreneurs’ creativity is oriented toward the practical. This means that their insights can be communicated and made actionable by others, because they can be explained and broken up into steps.

Lastly, Butler’s research shows that entrepreneurial people are effective sales people. In this area, the stereotypes and reality overlap. That doesn’t surprise me at all. Entrepreneurial people are generally most happy when they are engaged in solving a hard problem, and happy people tend to attract others to their activities. This makes entrepreneurial people naturally adept in selling their vision and ideas to others. Their enthusiasm and clarity of purpose make them highly effective leaders in a larger organization.

It strikes me that many of the organizations that I see facing big challenges could use CEOs with the skills Butler identified: risk management, practical creativity and contagious joy.

So how do we help these organizations see our region’s entrepreneurs as a reservoir of these talents?

The first step is to look less at the context in which they exercised their entrepreneurial character and instead focus on their behavior and emotional intelligence. Because entrepreneurial people are problem solvers by nature, you can learn a great deal about them by how they meet challenges. Many entrepreneurial people work very well with teams and are inspirational leaders. If they have built teams to grow their own businesses, they can certainly lead a larger organization’s people as effectively.

The second step requires some self-awareness on the organization’s part. As Butler points out, an organization must be honest about its need for change and capacity to execute. An entrepreneurial leader will want to move fast and get things done. Meanwhile, the organization must also be clear about whether the challenges it faces are going to be hard for the entrepreneurial leader to meet. Entrepreneurial people want to do hard things and make a difference — this is something Butler’s research shows, and also something I have seen time and again.

I know many entrepreneurs who could be great leaders for larger organizations. Yet very few have ever been asked.

Read more

I have long believed that our region has a specific model of technology entrepreneurship that is different from models elsewhere. Last week, another member of our community provided his perspective on what that model is, and why our region is an innovation hotbed with boundless entrepreneurial potential.

Evan Burfield is best known in our region as a founder of 1776 and Union. I spoke with him last week about his new book, “Regulatory Hacking, a Playbook for Startups,” and asked him why he wrote it.

Burfield explained that while managing 1776 and Union, he has often been confronted with startups here and elsewhere that were applying what Burfield described as the “Silicon Valley playbook.” He was referring to a company creation viewpoint that encourages companies to ignore prevailing political and government restraints and to avoid working with the government as a customer or partner.

He just didn’t understand how this approach made any sense for growing technology businesses. Silicon Valley mythology dictates that issues of regulation and government should be ignored when startup entrepreneurs create their business ideas. The realities of technology business growth are far more constrained by government regulation and politics than many like to admit. Regulating technology is the natural result of its growing complexity and of the risks facing citizens as a result of that increase in complexity. Arguing that regulation shouldn’t apply to technology is mistaken, he concluded, because “regulation is how government addresses risks.”

Perhaps there is a distinction to be made between regulating markets – say antitrust or internet access – and regulating the application of technology that could cause physical or social harm. Market regulation might be seen as more partisan or more likely to vary in application as political power shifts.  However, from Burfield’s perspective, regulation of technology was likely to exist and affect startup growth whoever was in power, because as technology continues to become more complex, its ability to cause harm also increases.

His conclusion, therefore, is that at a minimum, budding entrepreneurs must be ready to understand and work within the regulatory environment. But Burfield believes that they should also be creative and identify opportunities where regulations are likely to change, or where the entrepreneur can lead a change, so as to position their businesses to accelerate their growth. He calls the process of looking at regulation in this way “regulatory hacking.”

Burfield is quick to add that regulatory hacking is not ignoring or dismissing rules and regulatory expectations. This is a key point: Regulatory hacking is not finding ways to push externalities onto others by ignoring regulation. It is finding ways to constructively work within regulations to do something that serves a social purpose.

As Burfield looks that the realities of technology and regulation, he sees a distinct opportunity for our region’s innovators to lead the nation in creating businesses that will balance regulation, political considerations and economic opportunity. Technologies such as artificial intelligence, sensors, blockchain and others will change our economy for the better only if political concerns and regulation are properly addressed. “The exciting new technologies that are starting to come to market are going to be much more consequential and risker,” is Burfield’s prediction.

Regulatory hacking very much describes a phenomenon that was revealed in my prior work with The 2030 Group and the Greater Washington Partnership. Our region grows our largest and most successful businesses when the business takes advantage of the interplay between regulation and entrepreneurship. MCI, AOL, Capital One and many others have grown by taking advantage of proximity to our nation’s capital and growing within regulatory constraints and pushing the boundaries in constructive ways. Burfield’s work therefore reinforces what makes our region unique as a business community and makes it relevant for technology startup entrepreneurs.

Although our region has this unique opportunity, we should not be complacent. Burfield points out that many entrepreneurs and governments around the world are actively embracing regulatory hacking. They are thinking ahead, anticipating how to grow technology businesses that will properly balance risks with economic opportunities. Burfield is dismayed that the current national political environment is not looking forward but instead is transfixed by “economic arguments that feel ripped from the 1950s or even the 1920s.”

My conversation with Burfield about his new book reminded me why our region is such an engrossing business community to work in. The interplay of politics, regulations and technology that will shape the economic destiny of billions of people occurs in our midst every day.

Read more

Last week I was in Italy, where I was repeatedly reminded that a society’s direction is shaped by the choices made by its wealthiest citizens. This holds true whether the society is organized as a republic or an empire.

The Renaissance is often said to have started in Florence in the late 14th century. For one hundred years, Florence was the center of unprecedented upheaval in artistic techniques, architecture, philosophy, and political thought. Perspective was introduced into painting. The largest dome built since antiquity rose above the terracotta roofs of residents. Sculpture became truly representative of the human form. All this was possible because the merchants and bankers of Florence accumulated enormous wealth over a relatively short period of time. They chose to spend their money on artists and architects to advertise Florence’s power to its enemies and deter attack, to encourage the population’s loyalty to its city, and in many cases, to fulfill their religious duties. They spent their money in ways that benefited the city, as well as themselves.

The Roman Republic and the first few hundred years of empire also allowed for the creation of great wealth, largely because of wars of conquest. During the Republican period, great public spaces were created for trade, for courts, and for worship. These were paid for by the government and by private individuals. The early Empire saw public spending on baths, aqueducts, granaries, roads, entertainments, and shrines. These expenses were undertaken both by the emperors and by local wealthy persons, who sought their fellow citizens’ respect (and sometimes their votes) and a good afterlife.

But there is no immutable law that the wealthy will spend their money on civic activities. In the 16th century as Florence’s political system changed from a republic to a hereditary monarchy, wealth concentrated into the hands of the ruling family was funneled more and more into public displays of consumption to remind subjects of their hereditary right to power. Chapels, artwork and buildings were funded to convey the dominance of the Medici family, and its hereditary right to rule. The same Medici family that a hundred years earlier when Florence was a republic were the leading funders of publicly focused projects.

Looking at our community today I wonder how different we truly are. Wealth funds university endowments to pursue intellectual discovery, provides risk capital to develop new businesses and charitable organizations that address social challenges. The wealthy build things that are important to them and focus their money on the things that they care about. Some put their money into causes that they believe in. Others spend on consumption. Some don’t want to pay taxes to support public benefits, while others are happy to do so because they believe it is their responsibility.

We are at a very interesting point in our society’s future. Undoubtedly you are hard pressed to find a consensus opinion of how the wealthy should spend their money. That does not mean, of course, that people don’t have an opinion.

For my part I think that if we are to live up to the American ideal of the freedom of choice, we must acknowledge that this means that those with wealth should be free to spend it as they wish. There is no immutable law that says how the wealthy must act – nor should there be. But, it is fair to remind all who have the wealth to shape our society’s future, that their power to choose on what to spend also carries a somber responsibility.

Much of what affects us today – many of the things we associate with modernity – were built from the projects and the public works that the wealth of Florence and Italy funded. The choices that their wealthy made affected the development of their societies and ours as well in lasting and significant ways.

Last week was a reminder to me that for those of us in our region with the wherewithal to apply wealth to address a social challenge are providing the clearest clues of what our society will value, and how it will grow.

As it is the case for all of us today, and for those that are to follow in years to come, we must all acknowledge that societies are shaped by how the wealthy spend their money. While there may not be a consensus on what they should spend their money on, I hope that our wealthy understand that it not just today’s world they are shaping: They are also influencing subsequent generations.  They have the power to choose, and the responsibility to choose wisely.

I wonder what those who follow will think of their decisions. And, I hope that our wealthiest citizens will care what they think.

Read more

A study on the role of non-U.S. citizens in our region’s work force was released last week by the Center for Regional Analysis at George Mason University. At a time when a lot of emotion surrounds the treatment of immigrants, I valued the opportunity to learn about the economic implications of removing these people from our work force.

Terry Clower, director of the CRA, explained why his colleagues had prepared this report. Because immigration has become such an emotionally charged issue, they wanted people concerned about the region’s economic future to have objective data to fully appreciate the role that foreign born, noncitizens play in its economy. As Clower put it, by gathering this data, we can all “frame important questions about the potential economic consequences” of national immigration policies and attitudes on our region’s growth potential.

The report shows us that our region has a lot at stake in the immigration debate.

Noncitizens are a significant portion of our region’s work force: close to 500,000 people and 15 percent of total workers. Many of these people have been our neighbors for a long time. Four out of five of them arrived in the U.S. prior to 2010. These are people who undoubtedly now have roots here with children in schools, and almost certainly pay taxes. They are also disproportionately important to several key local industries. Approximately half of the workers filling construction, cleaning, and maintenance occupations in our region are foreign-born non-citizens.

I asked Clower what surprised him the most about the data. He highlighted two findings. The first was how reliant our region’s construction industry is on the noncitizen labor force. Since construction is a particularly important industry in our region this was an important finding. His second was the breadth of work activities in our region that rely on noncitizen workers. This is a group that is far more knitted into our economy than many imagine.

Mark While, a co-author of the report, highlighted two additional data points that he thought were important. This first was that a quarter of our region’s noncitizen workforce is from El Salvador. This means that Trump administration’s plan to change the status of noncitizen Salvadorans is likely to have a direct effect on our economic growth trajectory.

He also noted that noncitizens comprise 10 percent of our region’s computer and math skilled workers. Not only are they a significant percentage of our high-tech work force, but also they, as a group, achieved comparatively higher levels of educational achievement than did citizens. At a time when the region already has a shortfall of technical talent, the non-citizen workers are even more indispensable. According to White, “There isn’t much slack in the workforce, so the region can’t afford to lose that 10 percent, let alone 5 percent or 2 percent.“

Knowing how important these industries are to the region’s economy, I asked Clower what would happen if noncitizens left the local work force, either because changes in enforcement of immigration laws forced them out, or never joined it, because a perception that immigrants were not welcome meant they never came here at all. He pointed to the historically low U.S. unemployment rate and the tightness of our job market, suggesting that if jobs currently being performed by noncitizens were not being filled, there would be some wage increases to encourage new employment, but that there just weren’t enough available workers to fill the openings that would be created. This meant that “while some would see higher wages, the total number of jobs would likely drop and the net economic effect could be very negative.” Our region’s economy would shrink while costs of doing business would increase.

Overall, the CRA report demonstrates to me how important it is to have an objective basis for making political and economic decisions. How we treat our noncitizens will have an economic effect on us all. This is not a partisan statement, but a statement of fact.

In discussions about immigration, like those about taxes, tariffs or energy, emotional arguments based on what we are sure is true may make some of us feel good in the moment. But these are all issues that benefit from a close study of shared facts because what we are sure is true often isn’t. We need to put aside emotion and deal in facts when figuring out what’s right for the region.

I want to live in a region that is growing and providing opportunities for all that live here. Adopting policies that cause key workers to leave or dissuade them from coming at all may be great politics. But it’s terrible economics and bad business.

Read more