The Kauffman Foundation recently proposed a way to do that with a set of ideas aptly called the Startup Act. Those ideas, which would cost the government virtually nothing, include:
• Letting in immigrant entrepreneurs who hire American workers.
• Reducing the cost of capital through capital gains tax relief for early stage investments.
• Reducing barriers to IPOs by allowing shareholders to opt out of Sarbanes-Oxley.
• Charging higher fees for patent applicants who want quick decisions to remove the backlog of applications at the Patent Office.
• Giving licensing freedom to academic entrepreneurs at universities to accelerate the commercialization of their ideas.
• Having the government provide data to permit rankings of startup friendliness of states and localities.
• Regular sunsets for regulations and a consistent policy of putting new ones in place only if their benefits exceed their costs.
There is no time to waste. The president must meet as soon as possible with congressional leaders to develop a menu of policy initiatives to reignite the startup job machine. Despite the deep divisions on taxes and spending, there is overwhelming support in this country for letting entrepreneurs work their magic without excessive government interference.
We realize America’s larger businesses have their own agendas and ideas for moving our country forward. But all of us know where the energy that drives our economy comes from—new companies with new ideas that build confidence and optimism. We will all profit when our elected leaders understand and act on this fundamental fact too.
Here is the latest installment in our Vintage Future series (see I, II, and III) in which we take a tongue-in-cheek look at predictions from the past to remind ourselves that today’s trend can be tomorrow’s punchline.
This time, crazy patents from LIFE: eyewear for chickens, animatronic rickshaws, moneyballs, dog power, and more. Think: someone went through the effort and expense to protect this IP.
What has been will be again,” reads the Book of Ecclesiastes. “What has been done will be done again; there is nothing new under the sun.” Nothing new under the sun. Powerful words. But with all due respect to the ancients, they clearly never spent any time pondering the peculiar, mysterious world of patents, and marveling at the wonders revealed therein.
We’ve opined on the nature of success and the role failure oftentimes plays along the way: failure is a part of business, a great teacher, it’s important to fail the right way… (see here, here, here, here, here, and here)
Well, OK. But on the other hand… via Feld Thoughts, an excerpt from a graduation speech delivered at the University of South Carolina College of Engineering and Computing:
What you learn from failure is limited at best – you learn what didn’t work. It tells nothing of what will. In contrast, what you learn from success is how to succeed. This is infinitely more valuable…
In fact, you now know one thing for certain. You know that with talent and determination and hard work, you can accomplish what few others can. You succeeded. In the future, taking on truly hard things – things that seem impossible – you will not be in uncharted waters. On the contrary, you will build more success.
That’s key. Success breeds success. It is not a question of whether you will achieve more success. The question is what it will look like.
Hard to argue with the notion that winning beats losing, but undefeated seasons are rare, undefeated careers (or lives) rarer still; so it’s good to know how to roll with the punches and come back stronger. While we’re on the topic, here are two recent items, each distilling the subject down to just three words:
Philips Electronics CEO Greg Sebasky offers an excellent summary of what he sees as three keys to success: Courage, Rigor, and Humility
Professional sports require dedication and performance under pressure. In this environment, personal traits and preferences that manifest themselves as strengths can become counter-productive. Self-belief can become unhelpful ego, which impacts the ability to learn from setbacks. A win-at-all-costs mentality can turn into a desire to bend the rules a little too far…
Business, like sports, is a rollercoaster. Success is high profile, failure higher still. Given this, any outlook which fails to recognize the potential threat of derailment and to prize the resilience necessary for coping with setbacks is an incomplete picture. We characterize future potential in terms of three dimensions — commitment, ability, and resilience. Those individuals in sport or business with the highest potential are replete in all three…
Just like Pacific University: Remember current performance is often a misleading barometer of future potential.
Just like Manchester United and Arsenal Soccer Clubs: Insist on understanding the people behind the data.
Just like the New York Giants: Encourage your talent to understand and actively manage their own personal sources of potential derailment.
A recent Wall Street Journalsummarized a new set of ideas (from The Kauffman Foundation) to assist job-creating companies: easier access to early-stage capital, lower taxes for long-term capital gains, regulatory reform, and more. There is a slight misconception embedded in the conventional wisdom about those “job-creating companies:” jobs are created mostly by new businesses, which start out small, as opposed to the more common short-hand of “small businesses.”
The end of every boom-bust cycle during my lifetime has included a fin de sièclescandal: insider trading punctuated the ’87 crash, accounting irregularities (think Enron and Worldcom) helped pop the tech bubble of the ’90s, and our most recent bust was characterized by lax governance at Fannie & Freddie and more than a few banks.
We all understand the business cycle, and we all understand human nature… but what about all those good governance measures that get implemented in the wake of each meltdown? Why do they inevitably fail to prevent the *next* crisis?
Presumably, those companies and regulatory bodies have boards comprised of accomplished and highly intelligent members, with personal wealth at stake… (I)t’s likely that they were following the current and best practices for strong and effective board oversight.
Simon C. Y. Wong, a partner at London-based investment firm Governance for Owners and adjunct professor of law at Northwestern University School of Law, hits many of the same notes in this past June’s McKinsey Quarterly:
Why is it that despite all the corporate-governance reforms undertaken over the past two decades, many boards failed the test of the financial crisis so badly? … (I)t’s a sure bet that most of these boards would argue—and demonstrate—that they had best-practice structures and processes in place.
The answer, I believe, after years of examining and advising scores of boards, is that such best practice isn’t good enough, even if your board is stacked with highly qualified members. Without the right human dynamics—a collaborative CEO and directors who think like owners and guard their authority—there will be little constructive challenge between independent directors and management, no matter how good a board’s processes are.
Here Mr. Wong later uses the formulation that serves as the title of this post:
[B]oards that operate to their potential are characterized by constant tensions, coupled with mutual esteem between management and outside directors. Rather than leading to endless bickering, this virtuous combination helps to facilitate healthy and constructive debate and improves decision making.
And here he makes an excellent point about ownership that is especially true in the venture capital industry:
Directors with an ownership mind-set—whether from the family or outside—have passion for the company, look long term, and take personal (as distinguished from legal) responsibility for the firm. They will spend time to understand things they don’t know and not pass the buck to others. They will stand their ground when it is called for. Ultimately, the success of the company over the long term matters to them at a deep, personal level.
In the venture world our long term reward depends heavily on whether or not the value of our portfolio company appreciates. Furthermore, there are far fewer investors (than in a publicly traded company) so owners are more “meaningfully engaged.” Owners of private companies get to pick both their investors and their board members. If entrepreneurs pick great partners (broadly defined) to fund their business and make sure both financial incentives and long term goals are aligned, they will have achieved “high performance” corporate governance that will contribute substantially to their eventual success.