The New Builders. Seth Levine
id="ulink_4bec1213-7874-571f-ada4-71dd36468850">Much of America's innovation comes from companies at the smaller end of the spectrum. That many of these businesses are failing to come into existence is alarming from an economic perspective, but perhaps even more so as seen through the lens of our innovation pipeline. For example, early in the pandemic, researchers in bioscience and health spoke to us of innovations that they hadn't been able to develop, not because the science wasn't promising, but because they lacked support for projects. These included fast‐growing tissue samples for vaccine testing and better ways to build trust for testing and vaccination programs with minority populations. That America is producing fewer new businesses suggests that large swaths of innovation are simply not occurring. Whether it's due to lack of resources, lack of investment in education, training, or a changing relationship with failure that is dampening our entrepreneurial spirit, the fact is by producing fewer new companies our economy is missing out.
The government plays a significant role in funding innovation of the breakthrough kind, especially because breakthrough innovations often don't have the obvious near‐term market applications that private‐sector investors or corporations like to see. But we have been systematically and methodically underfunding research through government channels over the past decades. In his book Jump‐Starting America, MIT professor Jonathan Gruber found that although total US spending on research and development remains at 2.5 percent of gross domestic product (GDP), the share coming from the private sector has increased to 70 percent, up from less than half in the early 1950s through the 1970s.19 Federal funding for R&D as a share of GDP is now below where it was in 1957, according to the Information Technology and Innovation Foundation (ITIF). Measured by government funding for university research as a share of GDP, the United States ranks 28th of 39 nations. Twelve of those nations invest more than twice as much as America does on a proportionate basis.20
In other words, the private sector, with its focus on fast profits and familiar patterns – and in the corporate sphere, on maintaining power – now dominates America's innovation spending. Today, even promising entrepreneurs with ideas that lack immediate commercial applications are often abandoned in favor of those with more near‐term promise. And evidence is emerging that big companies may be buying smaller ones in order to control (and perhaps time) their innovations.21
The Easy Story of the Big Movers
Historically, Americans see themselves as champions of the underdog. There has been a special place in American history for those individuals who, through sheer determination and grit, forged ideas that changed industries and ultimately laid the foundation for new parts of the American economy. We've honored the Main Street entrepreneurs who spent their energy in the interests of building healthy communities, and in so doing, helped keep our economy dynamic. But in recent years, we've seemingly lost that part of our story. We've forgotten to value it. Even worse, we often seem to be actively devaluing it in favor of big business.
A few years before Steve Murray, whose story starts this chapter, died, he helped put on a fashion show at a local nursing home. The elderly ladies put on glamorous floor‐length gowns, all silk and taffeta, with peplums and the long silhouettes of the World War II era. A woman named Vanda waltzed down the aisle of folding chairs in a fawn‐colored number with sequined shoulders that looked like it ought to be brushing the floor of a New York City nightclub to Tommy Dorsey music. And there, in the back of the room, was Steve, leaning on a clothing rack. He'd lent the dresses to the ladies, and from the smile on his face, it was clear that he was loving every minute of it. He really did have a rare eye for beauty – a gift he lent to his community.
After the story about Steve Murray's role in Lancaster's revitalization was published, the economic development director for the state of Pennsylvania wrote his boss, then Pennsylvania Treasurer Joe Torsella. “Maybe we've been doing economic development all wrong,” he said.22
But strangely, Steve is being written out of the Lancaster narrative in other places. New York Times columnist Thomas Friedman wrote a story about Lancaster's revitalization that celebrated the role of big business people – the very Hourglass Foundation Murray had battled – as the changemakers.
“They realized that the only way they could replace Armstrong (World Industries) and reenergize the downtown was not with another dominant company, but by throwing partisan politics out the window and forming a complex adaptive coalition in which business leaders, educators, philanthropists, social innovators, and the local government would work together to unleash entrepreneurship and forge whatever compromises were necessary to fix the city,” Friedman wrote.23
The famous anthropologist Margaret Mead acknowledged our propensity to believe that big institutions create change and the reality that they don't when she said, “Never doubt that a small group of thoughtful, committed citizens can change the world; indeed it's the only thing that ever has.”24
In truth, Lancaster's transformation needed both Murray's cussedness and the support and deep pockets of the powers‐that‐be. But it's the role of the influential changemaker that's getting lost in today's telling of the story. Not all entrepreneurs are in the mold of Steve Murray or Fred Sachs. Many simply want to run their businesses and create a good life for themselves and their families.
But we can't lose sight of the importance of these key New Builders who take it upon themselves to lift their entire communities. One of the most important things we uncovered in researching and talking with New Builders around the country is the power of an individual visionary in a supportive community. It's easy to ignore individual small businesses because, by their nature, they are small. But together, they comprise a powerful group.
Perhaps this is what is most surprising to learn: just how impactful New Builders are in their communities. In a world where business success is too often defined by size and profit margins, these New Builders are pushing back and redefining – perhaps realigning – the metrics we use to judge success.
Notes
1 i A 2014 Brookings Institute study by Ian Hathaway and Robert E. Litan described business dynamism as “the process by which firms continually are born, fail, expand, and contract, as some jobs are created, others are destroyed, and others still are turned over.” Importantly they note that “[r]esearch has firmly established that this dynamic process is vital to productivity and sustained economic growth. Entrepreneurs play a critical role in this process, and in net job creation.” See endnote 4 for further information.
2 ii A fairly large portion of those who report owning stocks do so through retirement accounts, and most of these holdings are relatively modest, in the range of $25,000 to $30,000.
3 iii Our interview was conducted outside at Sachs's home in downtown Alexandria, during the early months of the pandemic. Sachs and his wife split their time between Alexandria and the farm, and their sons are also involved in the business. Elizabeth and Fred sat outside a historic brick home, built by Albert Smoot, the grandson of the founder of the Smoot Lumber Company, in the 1930s. Seth joined them on Zoom.
4 iv Sachs runs his businesses using a set of what he calls “Management Musts.” These are: (1) spend time identifying, and going after unique market segments rather than embarking on broad assaults on entire industries;