The New Builders. Seth Levine
that our systems have become skewed too much in favor of large businesses. And in the places we've tended to support smaller enterprises, we've been overly focused on that tiny portion of new companies that have both the goal and the potential to become large businesses. In doing so, we've destroyed the level playing field that fits the entrepreneurial mythology of the American Dream and created one that stacks the odds against grassroots entrepreneurs.
There is another cost to our love affair with big. Over the past decades, we've narrowed our focus as to where innovation happens, and in doing so, we miss seeing where creativity occurs. Especially if it's on a smaller scale.
Innovation Comes from Surprising Places
In our economy many, if not most, innovative breakthroughs are born in small businesses. A few big businesses have defied the odds to remain innovative over time, but almost by definition, big companies work on incremental innovations – an effort to build upon the value of what they already own and often to protect the economic value of past innovations.15 The importance of small businesses in the process of innovation is one of the reasons that American government and media have showered so much time and attention on Silicon Valley and the technology industry. For a while, the Valley appeared to have a lock on the process of innovation, spawning thousands of small businesses – renamed startups in the high‐tech world. With a purpose‐made system of finance (venture capital, private equity, and the like), Silicon Valley has specialized in killing the startups that don't have fast‐growth potential and nurturing the ones that do into big companies – sometimes very, very big companies.
But like our dynamic economy, our much‐vaunted engine of innovation is showing signs of slowing down. Today, there are fewer entrepreneurs picking up the baton. We have a much less efficient system for funding ideas and companies because most of our systems of finance remain focused on a particular kind of new business founder: White males starting software or internet businesses. The barriers to women and people of color, as well as those from the lower rungs of our socioeconomic ladder, in particular, remain high, whether they are starting a technology company with the goal of scaling quickly or a business with different, yet equally important, goals. Additionally, class (perhaps better defined as caste) and age are also limiters of entrepreneurship and entrepreneurial vitality in the United States. In the long game of becoming an innovator/entrepreneur, almost the only people who succeed are those who are either born into privilege, or those who are so good at what they do, and so passionate about it that they are able to overcome the systemic barriers stacked against them.
Can You Tell an Innovator When You See One?
Fred Sachs is an inveterate entrepreneur. He bought his first company, a Main Street enterprise in Alexandria, Virginia, called Smoot Lumber, in his late thirties, and started a second one, a commercial door and hardware company, in time to ride Washington, DC's building boom in the 1980s. He sold them both, the first in 1996 and the second in 2008. He then started his third and invested in his fourth venture. In the first, a farm he owns in rural Virginia, he's experimenting with new strains of organic wheat. The second is a Canadian‐based startup that is working on developing medical diagnostic devices.
He learns something every time around, he told us. At 76, he's every bit a New Builder – and one of his key qualities, which perhaps surprisingly seems to sharpen with age, is the ability to innovate. When Fred interviewed with the consulting firm McKinsey back in 1972, they asked whether he was more innovative or creative. Over the years, he's learned that being an entrepreneur requires both. “Sometimes you have to create a solution to a particular problem; and in other situations you have to innovate in order to get around a particular hurdle. And if you're not going to deal with the problem, you're going to be left behind. You have to continue to change.”
Many successful entrepreneurs are older, in their forties, fifties, and beyond – a fact that has been obscured by our obsession with technology entrepreneurship, where founders often skew younger (certainly our myth of the startup founder does). Paul Graham, an investor in entrepreneurs and a co‐founder of the famous Silicon Valley accelerator Y Combinator, once quipped that “the cutoff in investors' heads is 32… After 32, they start to be a little skeptical.”16
This certainly maps to how the media portrays startup founders, but a closer look tells a different story. The average age of entrepreneurs when they start their companies is 42, researchers at MIT and the US Census Bureau found. And, perhaps bucking the conventional wisdom of Silicon Valley, the average age of a technology founder is nearly the same: 40.17
Interestingly, the time we spent with New Builders suggests that entrepreneurs might actually get more innovative as they get older. Early successes free older entrepreneurs to play with ideas, and they often have extensive networks built up over time that they can leverage in new ventures. Innovation and entrepreneurship for many older entrepreneurs seem to become something of a habit.
After Fred Sachs sold his first two companies, he planned to spend time on his small farm in Eastern Virginia. But an entrepreneur's mind is hard to disengage, and before long he was producing organic flour from Virginia‐grown grains. First it was a hobby, but quickly his entrepreneurial juices began to flow. By 2018, Grapewood Farm was producing tons of flour, which it sold to regional bakers for upwards of $7.00 a pound, depending on the variety.iii
“I think we could probably do twice as much business as we're doing now, because it's unique and people are interested in eating healthy foods and buying local,” he said. Meanwhile, he's also working on and investing in his medical diagnostic device business.iv
Innovation and Invention; Entrepreneurship and Science
Innovation has a fuzzy definition, and it's often confused with invention (also not always crisply defined). For our purposes, we think of innovation as a broad term. Many, if not all, entrepreneurs and especially New Builders, are engaged in our innovation economy. Breakthrough innovations, like the silicon chip that laid the foundation for Silicon Valley, often take a long time and large amounts of money – from the first germ of an idea in a scientist's lab to market. But once they're realized and in the market, they create huge amounts of economic energy, spawning follow‐on breakthroughs and incremental innovations. The spirits of science and entrepreneurship are often entwined, especially in pursuit of these breakthrough innovations. Thomas Edison is a classic example. The phonograph, the motion picture camera, and the light bulb grew out his ability to turn invention into a business process. He found likeminded funders – including Henry Ford (an innovator in manufacturing processes) and Harvey Firestone (the rubber and automobile tire magnate). In the mid‐twentieth century, Otis Boykin,18 who was Black, invented electronic control devices for guided missiles, IBM computers, and pacemakers. It's a sign of how much harder Black innovators had to work that he ended up in a lawsuit with his employer, Chicago Telephone Supply Corporation, claiming the company was trying to steal his early research for the pacemaker. He lost the lawsuit but left CTS Labs to work on his inventions through his own research and consulting company.
While it's easy to pick through history for stories of the genesis of inventions and innovations that we often take for granted in everyday life, it's much harder to imagine innovations that didn't happen. We described a version of this phenomenon in Chapter 1 when we talked about ghost companies – those businesses that never got off the ground and whose impact on our society will never be known. That these companies are invisible (they quite literally don't exist) is one of