Chapter 15

Entrepreneur Country and the E-Companies

WE’RE BACK SITTING IN that little cafe in Tel Aviv, conversing with master entrepreneur Yossi Vardi.

“This is a whole country in motion,” Vardi is telling us. We’ve seen it in action, so we know what he means. And we’ve seen the same principles at work in many other settings—in garages and labs in Silicon Valley, in collaborative incubators like Geekdom, in still-growing companies like Rackspace, and even among the high-powered, life-or-death teams shaped by the Navy SEALs. It’s the spirit of mission, innovation, and achievement that animates Israel—a tiny country that lives in a very rough neighborhood on the global map, one where falling behind and ceding your leadership to others is not an option.

This little nation has one big thing going for it: abundant entrepreneurial anxiety. Israel has mobilized itself into an entrepreneurial and innovation powerhouse as a sheer matter of survival.

But what about the original start-up nation? Are our choices here in the United States so different?

THE STAKES ARE THE SAME

Jim Clifton, chairman and CEO of Gallup, offers a pretty stark answer to that question in his 2011 book The Coming Jobs War. He points out that as the unmatched economic leader since World War II, our nation not only has military authority, it has the moral authority to lead the world away from the worst regimes and toward democratic rights, to promote a better world. But, he says, “if the United States allows China or any other country or region to out-enterprise it, out-job-create it, out-grow its GDP, everything changes.”

In other words, today’s competition to build the strongest economy and the best jobs may not be a violent conflict like those that have convulsed the planet in the past—but if we were to lose, its outcome would feel the same. This one’s for all the marbles. And right now, the trends aren’t good. Clifton reports that in 2011, the U.S. GDP was almost $15 trillion and China’s was $6 trillion. (Russia’s was $1.47 trillion, and India’s was $1.43 trillion). The median household income in the United States is about $51,000, compared to $10,000 in China. But China is coming on like a freight train. The difference is GDP growth. We’re growing at 2 percent; China is growing at 10 percent. Simple math tells us what to expect: 6 trillion compounding over 30 years at 10 percent blows away $15 trillion compounding at 2 percent over the same period. So unless something changes in that timeframe, China will become the world’s leading economy by a wide margin.1

The only reasonable course is to respond in proportion to the threat—to mobilize ourselves on a vast level all across our society, to go all in with our people and resources to remain winners in this grand arena.

We must do whatever it takes to maximize and mobilize our greatest legacy and our future hope: our entrepreneurs.

HOW WE CAN DO IT

A National Goal

This must become a full-blown national priority, as any true war effort would be. We need political and business leaders who can rally their constituents to a national entrepreneurial cause, and who want to make sure, as Tom Friedman of the New York Times has put it, that America remains the Cape Canaveral of start-ups in the globalization age. That means the subject isn’t just inserted as an applause line every year in a State of the Union speech; it’s declared as a national mission the way John F. Kennedy pointed to the moon and challenged the whole nation to go there.

The 10–10–10 Plan

Here’s a goal worthy of JFK’s call to land a man on the moon. We’ll be electrified when we see the president of the United States stand, point upward, and say:

“We hereby commit as a nation to doubling our number of entrepreneurs by the end of this decade—those citizens who choose entrepreneurship as a career and help create new businesses, the great American engine of leadership and prosperity since the dawn of the Republic. Those people who have the dream and then dare to follow it will be patriots and heroes of a new generation.”

No one agrees on the exact number of natural-born, normally occurring entrepreneurs in our workforce, but our best estimate is that it’s around 10 percent. The behavioral scientists we spoke to said it’d be reasonable to tap another 10 percent, the ones who have simply lacked the access, the exposure, or the environment of entrepreneurship but who have the capacity that just needs to be effectively switched on. Ten years is an aggressive but plausible timeframe if we’re committed enough; hence 10–10–10.

Since it’s generally accepted that over 80 percent of all new jobs are created by businesses between one and five years old—those started by our current crop of entrepreneurs—we can confidently say that tapping an additional 10 percent would create a very large number of new jobs and new opportunities in this country.

A New Cabinet Post

We need a Cabinet-level Department of Entrepreneurship that is funded, staffed, and given the same status as a Department of Homeland Security or a Department of Education. This is necessary if our leaders believe, as more and more Americans do, that this mission is vital to the country.

There is precedent for it around the world. Israel has an Office of the Chief Scientist, who oversees the public-private partnership that has been crucial to the nation’s start-up miracle. The office monitors the vital circuit between academia, research, and industry; it’s also involved in incubator programs and in nurturing innovation that may be too undeveloped for private investment. The Office of the Chief Scientist doesn’t favor any particular business category; it lets merit and the market decide where the support goes. It doesn’t keep an investment stake or influence any company’s decision-making. It exists solely to advance the nation’s entrepreneurial prospects and economic health.

This is not the only example of smart, public-private entrepreneurial partnership at the highest levels of government. It shouldn’t be framed as socialism or unwarranted government intrusion any more than what happened during both World Wars, when our government took a huge role in converting industries to wartime production. What we’re talking about is teamwork between the private and public sectors, aimed at achieving the great national mission of our time.

And the fact is that our most aggressive competitors are fully engaged in business-building government partnerships. If you need an example, start with China.

THE ENTREPRENEURIAL GROUNDSWELL IS HAPPENING

The great news is that we are awakening. Entrepreneurial awareness is blooming in new initiatives and institutions all over the country. Accelerated mentoring and seed-financing organizations like Y Combinator and TechStars are holding three-month sessions in major cities from San Jose to San Antonio to Boston that have helped launch hundreds of start-ups. Weekend entrepreneur boot camps, like 3 Day Startup for university students, are catching fire. Collaborative workspaces that let entrepreneurs move out of Starbucks and into a community working environment are popping up everywhere. In 2011, Rackspace’s founders and friends got together and started Geekdom, a collaborative workspace in San Antonio. Geekdom is expanding so fast, it just moved into a new 45,000-square-foot space. It also hosts events and practical business classes, and houses an annual session of TechStars.

Entrepreneurship education is also moving into some of our charter schools, which should be seen as the tip of a very encouraging iceberg. It’s never too early to expose kids to the entrepreneurial mind-set. We must help a new generation reframe their idea of work and think of themselves not just as job seekers, but as job creators.

TEACHING TO THE ESSENCE

Perhaps most important, we need to bring the techniques of emotional mechanics and Accelerated Proficiency from the isolated corners where they exist now—typically in specialized areas like military and sports training—into the mainstream curriculums where they don’t yet exist. If MBA programs are going to teach entrepreneurship, they can no longer deny the need to expose their students to the essence that powers it. The educational establishment must accept that it’s as critical a responsibility to teach students how to succeed in the face of fear, risk, and failure as it is for them to take tests and write term papers. It’s as important to teach kids to lower the barriers that stop them as it is to teach the science, math, and other skills they need to know once they’ve unstuck themselves and put themselves in motion.

We’re not merely proposing an additional course in high school. We’re proposing a philosophical sea change in today’s school systems, in which teachers have to get three permissions from the principal’s office and have a medical aide standing by just to take the kids outside for a class on a nice June day.

Bringing emotional mechanics into the mainstream goes beyond the scope of this book, but it’s not a pipe dream. The theory and practice behind it is well understood and has been taught quickly and efficiently in high-risk occupations for decades. Remember what whole societies can do and have done when faced with issues of survival in wartime. Educating our youth in emotional mechanics and reaping the benefits is only a matter of priority.

THE E-COMPANIES

Historian Will Durant once said that “before great civilizations are conquered from without, they are destroyed from within.” It’s the same for great companies. But any business that wants to compete in the new era by leaving none of its creativity, energy, enthusiasm, or commitment on the table can become the biggest engine of entrepreneurial mobilization there is, starting now. It’s in their employees’, customers’, and shareholders’ best interests to do so.

We know this because Rackspace has been building an entrepreneurial engine since 1998—a work forever in progress, up to about 5,000 people now and adding about 100 new people a month. Zappos.com, the legendary online shoe retailer (acquired by Amazon in 2009) and Google are also said to operate this way—large companies that have kept the entrepreneurial spirit alive.

We call such businesses E-Companies.

“E” of course stands for Entrepreneur, the element that is kept vibrant in such a company’s DNA from its 1st day to its 10,000th day. These companies knowingly and proudly run on emotional mechanics because they understand entrepreneurial thinking and celebrate it at every level, from the CEO and founders who are the keepers of the vision, to the teammates “down on the floor” who are encouraged to see themselves as entrepreneurs working on the mission, not just employees working for the man. Everybody in an E-Company believes in an articulable set of values that drive progress and decision making in the same direction.

Given what we’ve seen on our journey to write this book—and looking back on what the founders did at Rackspace based on their intuitive knowledge of these principles—we now know that the E-Company spirit carries human power of such limitless creativity and magnitude that any company that taps it will leave traditional companies in the dust. In the global tsunami of hyper-competition that’s racing our way, only the E-Companies that harness this power will be able to compete.

One common trait of all E-Companies is the Belief Culture. That means they all:

• are built on a shared mission;
• manage to members’ strengths;
• live on values that supersede any personal agenda;
• love customers;
• care about their team members; and
• trust implicitly that initiatives taken to advance these values—by innovating, stretching service, risking for the right reasons, and sometimes failing in order to learn—will never be punished by leaders because everyone is fighting for the same cause.

This is the culture what kicks and breathes inside the E-Company.

FEAR CULTURES

Fear Cultures, on the other hand, are the old-fashioned, top-down, command-based kind of culture that dominated Western economies up until the digital age. In fear cultures, imperial C-level executives live on a palace floor, as far as possible from the noise and grit and low wages of the factory below. They manage by rooting out weaknesses, exposing and punishing mistakes, finding fault, cutting material and costs, and squeezing more and more efficient margins which usually squeezing quality and value as well. Fear Cultures compel humans to live in a protective rather than productive state at work. Employees in a fear-dominated organization know that risks and innovative thinking are too dangerous because failure is often punishable by (job) death.

Fear Cultures are designed to perpetuate a valuable status quo and demand conformity to traditional systems and standards. It’s an approach to business that worked better s in an age of no or slow change—when companies could get established, dominate a category, and rest on laurels that the founding entrepreneurs provided for decades. Fear-based companies offered a reasonable quid pro quo that made workers’ acceptance of politics and conformity reasonably worthwhile, because in return they used to provide some loyalty: the expectation of lifetime employment and a decent pension.

Not anymore.

Today these places are rife with managers and employees who stay because they’re terrified of losing a job, not because they are getting the sense of mission and belonging that all human beings need from work. At the core, employees in command-and-control environments like these know deep down they are not trusted. In turn, they are cordial with but wary of their coworkers and managers.

But most important, employees in fear cultures can’t mentally or physically serve customers with the kind of two-handed, all-in, cheerful commitment that the world increasingly demands. It’s impossible to do this when you only have one free hand—because you need the other to protect yourself.

A work environment like this is seldom a happy place. And fear cultures by definition cannot be entrepreneurial. They are destined to be disrupted.

BELIEF CULTURES: HOW THEY HAPPEN

Remember Fish Camp in the chapter on true teams? The Aggies of Texas A&M live in a giant Belief Culture perpetuated for decades across hundreds of thousands of alumni. It starts with a firm superset of values that cover right and wrong, then it’s codified in traditions, symbols, and language. It celebrates itself constantly, and always gives team members the benefit of the doubt. Action talks and bullshit walks in Belief Cultures. No one is held to a higher standard than leadership, which is why genuine middle management buy-in to the mission is the most critical challenge in an E-Company, especially as it scales. The Israeli Defense Force leaders consider this their biggest challenge as well. They also tell us that they can solve it only one way: by having midlevel officers serve the values, the big picture and the little picture, as much as top commanders.

Management sends signals through the ranks with every move they make, either upholding or betraying the code of values. Apple, for example, has long touted itself as a place where customers come first and employees matter. But certain recent actions may be challenging their Belief Culture, causing deep concern in customers, employees, and the press about whether Apple’s corporate culture after Steve Jobs is remaining true to its entrepreneurial values.

One example was the summary destruction of billions of dollars’ worth of customer-accessory attachments in a single stroke—with zero warning—by making all the old power cords obsolete in the new iPhones. Another was the attempt to forcibly eliminate Google Maps from the iOS platform and replace it with Apple’s program, which didn’t work. Management decisions like this not only would never be interpreted as putting customers first, but they also humiliate employees, who have to rationalize them to aggravated users and who as users are mad themselves.

We’ve also heard that corporate authorities took away a cherished symbol of trust and respect from the Apple Geniuses and other store team members when they stopped furnishing associates with the Customer Service Code. This is what had enabled any floor employee to escalate service levels and cancel charges without supervisors’ permission, as long as their best judgment told them it was the right thing to do. Many former employees said they were heartbroken when this happened; it was a spirit-crushing move that told team members their leaders had slashed its investment in employee trust in order to increase profit at the world’s highest market-cap company.

The belief tree is shaken when leadership does these kinds of things. It doesn’t take too many hits for it to fall down.

MANAGING TO STRENGTHS

People measure what matters. Nothing has galvanized Rackspace’s commitment to manage to people’s strengths more than the company’s decision to learn about and measure them, using the StrengthsFinder™ program, originally developed by Marcus Buckingham and Donald Clifton in their book, Now Discover Your Strengths. Since then, it’s become a tradition for every team member at Rackspace to take the Strengths Test. Most display their five key strengths proudly for all to see, either emblazoned on their ID cards or somewhere on their desks.

Managing to strengths may be one of the simplest, most sensible philosophies ever developed to unleash human potential. It merely says that every person has natural strengths and weaknesses. When people work in a job that expresses their strengths, they are more energetic, creative, interested, passionate, and productive—effortlessly and happily so. However, the opposite is true when they are forced into jobs that run counter to their strengths. Thus, understanding and celebrating people’s strengths, and doing whatever’s possible to assign people to teams and tasks that support those strengths, makes talent flow with the grain, not against it.

At Rackspace, managing to strengths isn’t just a nice idea—it’s a real value that gets serious investment. By making every team member read the little book and take the short test to see which of the 36 named core strengths apply to them, Rackspace creates a shared language for regular discussions of the subject at any level in the company—a baseline that symbolizes the depth of the company’s commitment to its people and to helping them maximize their individual talents for everybody’s benefit. That’s another characteristic strength of the E-Company.

NEW ENTREPRENEURS AND ENTERPRISES SPAWNED

Channeling human potential into entrepreneurial power is one of the greatest societal contributions E-Companies make. In fact, we think it’s the patriotic duty of corporate citizens to get behind this war effort. Companies are by nature collaborative workplaces with lots of technical resources that bring together talented individuals. It’s therefore natural in E-Companies for excited, empowered team members to bubble up with new ideas. Companies that sponsor entrepreneurial community development programs like Geekdom in San Antonio, and that encourage their own developers and makers to engage and mentor young entrepreneurs, more readily stimulate new product and business ideas, thereby helping the economy to grow and making the nation a better place for all of its citizens.

Some ideas will fit the mission of the parent company, while other will be spun off into new patents or business areas. But some need to leave the nest entirely because their destiny is to fly in a different direction.

When this happens, an E-Company doesn’t see it as treason and call security to escort the offending entrepreneurs out the door. An E-Company is a birth mother. It is proud of the unique contribution it can make by spawning new offspring for our shared entrepreneurial future.

When entrepreneurs inside Rackspace develop an entrepreneurial idea of their own that is too powerful for them to deny, the company doesn’t ask them to deny it. If their only choice is to follow this dream, then they go with the respect and blessing of their former colleagues. It’s part of the DNA of Rackspace as an E-Company.

We know that people are hungry, even desperate to work in Belief Cultures that allow them to feel entrepreneurial. Once they’ve tasted it, they never want to go back. They literally love what work does in their lives; their loyalty to the company and what it stands for is fierce. They’ll fight to protect it.

Several good books and articles on this topic have aimed to quantify how much more productive a company can be if it celebrates its customers, people, and values, as compared to the old-fashioned model. Author Stephen Denning, who calls the new style of management “Radical Management” and who has been studying the subject for years, claims that companies who operate this way are not just more profitable but hugely so, and that most of the legacy companies touted in Jim Collins’s book, Good to Great, will go down the tubes if they don’t change their ways. “It’s not because the customers are more contented or because the people doing the work are happier or because it extends the life expectancy of a firm, generates jobs and fuels the growth of the economy,” Denning says. “It does all those things, but the real driver of its inevitability is that it makes more money.”2

There’s no doubt that big, entrenched Fear Cultures with thousands of employees are hard to change. And we’re not expecting the giant traditional corporations of the world to suddenly convert to E-Companies overnight; they’ve got a lot of baggage. The greatest hope is for the new entrepreneurial companies, the ones who embrace a different style of capitalism from day one. Call it Human Capitalism.

Every new enterprise is born as an E-Company, and it can stay that way so long as its people believe that what matters is to be a valued member of a winning team on an inspiring mission. At the rate these new companies are replacing the old guard, it won’t take that long.

WELCOME TO THE ARENA

We want to leave you with the best quotation of them all. It could be titled “The Song of the Entrepreneur,” but indeed it is a quotation from Theodore Roosevelt, repeated in a speech by President John F. Kennedy several decades later:

The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who knows the great enthusiasms, the great devotions, and spends himself in a worthy cause; who at best, if he wins, knows the thrills of high achievement, and, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who know neither victory nor defeat.

We hope this point in The UnStoppables marks a beginning for you, rather than an end. We hope that if there were to be only one takeaway for you after spending your time with us, it would be this one:

You can’t decide to be a visionary, or a genius, or to be particularly artistic, highly talented, or especially beautiful. You can’t decide to have been born with money or a comfortable childhood or to have been sent to the best schools.

But you can decide this: To Dream, to Dare, and to Do. To stand with your fear and turn the struggle into your best advantage. To learn the essence, then get in motion.

There is one supreme thing in this life you get to decide.

You decide to become . . .

UnStoppable.

1 Jim Clifton, The Coming Jobs War (New York: Gallup Press, 2011).

2 Stephen Denning, The Leader’s Guide to Radical Management: Reinventing the Workplace for the 21st Century (San Francisco: Jossey-Bass, 2010).