INTRODUCTION

Public Policy and the Success Narrative

Our nation has a deep and proud history of coming together in the face of adversity and challenge. When the Soviets launched Sputnik 1—the first manmade satellite to orbit the earth—on October 4, 1957, a challenge had been made. Americans rallied in response, retooling our economy in dramatic ways. Public dollars were put into research and development for new aerospace technologies. Education programs across the nation were ramped up with a new focus on science and math. The space race was on. Many astronauts put their lives on the line, and some lives were lost. But on July 20, 1969, the Apollo lander successfully touched down, and the first humans set foot on the moon.

This story represents one of many such moments in our history when Americans came together and solved a problem. In the days following World War II, Americans mobilized to help returning veterans rejoin the economy. Massive public investments in individual opportunity resulted in the GI Bill that enabled those veterans to attend college and buy a home, helping sow the seeds of an unprecedented period of economic prosperity and the rapid expansion of the middle class.

Today we find ourselves facing the lingering effects of the Great Recession. Unemployment is still near double-digit levels. Homes are still being foreclosed upon in record numbers. Banks are still not lending. Despite the enormous challenges we face, our nation seems unable or unwilling to come together and solve the serious problems before us. Instead we are caught in an intractable battle between two opposing views for solving the economic crisis we are in, each arguing that their policy solution is more fair, morally justified, and, in the end, more effective.

We believe that a large part of why we have such differing views in the realm of economic policy is because we have such divergent views on where individual success and wealth come from. In this book we explore a deeply held belief in our society—the myth of the “self-made man,” or what we are calling the self-made myth—and we offer an alternative that we believe is more honest and complete: the built-together reality. These conflicting paradigms are summarized in the table on the following pages (see “At a Glance: The Myth versus the Reality”). It is our hope that by coming to a deeper understanding of the origins of individual wealth and success, we can begin to achieve greater agreement on solutions to the economic crisis we are in and point the way toward a new era of broadly shared prosperity.

The Self-Made Myth

The self-made myth is the assertion that individual and business success is the result of the personal characteristics of exceptional individuals, such as hard work, creativity, and sacrifice, with little or no outside assistance. Those who subscribe to this myth do so only by ignoring the contributions of society, the supports made possible through governmental action, any head start a person may have received, and just plain old luck. If this were purely a matter of ego and self-delusion, it would not warrant such a book, but the perpetuation of the self-made myth has profound and destructive impacts on our views of government and the public policy debates of our times.

While its influence has ebbed and flowed over time, the myth of the self-made man has deep roots in our society, dating back to America’s earliest history. In a frontier nation with abundant resources, it was argued, any man (women and people of color were largely excluded in those early years) could, through industry and sound character, achieve financial success. Horatio Alger’s novels told and retold stories of the poor country boy who made good, while waves of writers touted the accomplishments of nineteenth-century industrialists and entrepreneurs who seemingly rose from rags to riches as testament to this “truth.” There were early skeptics who raised legitimate questions, but the story stuck and remains deeply embedded in our national character.

In the mid–twentieth century, writer Ayn Rand brought the self-made man story to new extremes with a book that is nearly required reading for conservative activists today. In Rand’s 1957 novel Atlas Shrugged, great men are responsible not only for their own success and wealth but for the success and the wealth of the entire world around them. Like the Greek Titan Atlas, they hold the world up on their shoulders. In this fictional world depicted by Rand, the great minds and the self-made titans of industry create virtually all wealth and prosperity in our society. Government only gets in the way.

The tension between society’s contributions and those of the individual are evident in our dialogues today. In a nationally televised interview, one of the authors of this book cited a USA Today op-ed by Abigail Disney, where she spoke of the role that public investments—including roads, courts, and schools—played in making her family’s fortune possible. The other guest on the show nearly exploded, “It wasn’t government! It was one man! … an entrepreneur named Walt Disney!”¹ This statement overlooks not only society’s contributions but also the contributions of Walt’s brother and business partner, Roy Disney, grandfather of Abigail. The tendency of our culture to attribute financial success solely to the actions of a single individual is a reflection of the self-made myth in the United States.

Throughout this book we often use individual and business success interchangeably because what we are talking about is that unique intersection of the individual and the business in which that individual is operating—the entrepreneur, owner, or chief executive officer (CEO)—that is, the “great man” held up by society as the primary driver behind that business’s success. It’s hard to think of Wal-Mart’s rise to market dominance without talking about its founder and long-time CEO, Sam Walton, or to talk about the success of Microsoft without any mention of Bill Gates. The same goes for Steve Jobs and Apple, Lee Iacocca and Chrysler, Phil Knight and Nike, Jack Welch and General Electric, and Mark Zuckerberg and Facebook.

Over the past three or four decades, we’ve seen a resurgence of the self-made myth, which has been used to fuel an anti-government narrative. It has been used as a political tool to dismantle the social contract that once bound us together as citizens of one nation whose prosperity was interconnected. As far back as Barry Goldwater’s The Conscience of a Conservative in 1960, we’ve heard the term “punishing success” applied to progressive tax policies,² an assertion that the success of those at the top was entirely their own doing, with no outside help. But that was only the beginning of a much longer assault on government.

We heard lots of talk about “job creators” and “punishing success” during the debate over the Bush tax cuts in 2001 and 2003. We heard it again in late 2009 during the standoff that led to the Obama-GOP tax deal that extended the Bush tax cuts for another two years. And we’re hearing it once again as the 2012 presidential race heats up. At a campaign event in Charleston, South Carolina, Texas Governor Rick Perry declared, “As Americans we realize that there is no taxpayer money that wasn’t first earned by the sweat and toil of one of our citizens.” In this view government and society had no role in the creation of that wealth. It is entirely the result of the “sweat and toil” of individuals acting alone. Perry went on to say that progressive taxation “punishes success.”³

Mitt Romney echoed this sentiment when he stated, “There was a time in this country where we didn’t celebrate attacking people based on their success. We didn’t go after people because they were successful.”⁴ Again, the assertion here is that it was their success and their success alone. Regardless of who emerges as the front-runner in 2012 or who wins the general election, the influence of the self-made myth in our political dialogues will likely continue for years to come.

Of course those who hold the Ayn Rand view take this elevation of the individual to the next level, by not only attributing the success of the business to that one individual at the top but attributing the success of the entire economy to those self-made individuals. Our public debates today are full of phrases like “job creators,” a reference to these mythical heroes whose hard work, creativity, and sacrifice drive our national economy. All public policy must bend to satisfy their perceived needs and wishes. By this view our society would be well served to avoid taking any action that might upset the “job creators.”

Implications of the Self-Made Myth and the Anti-government Narrative It Supports

In writing this book, we do not discount the fact that a person, through hard work, creativity, and short-term sacrifice, can better his or her position in life. In most cases one can. To assert that success is entirely the result of such individual character traits, with little or no help from others or society, however, has a corrupting impact on our policy debates. How we view the creation of wealth and individual success has a profound influence on our choices of policies to embrace. It shapes our views on taxes, regulations, public investments in schools and vital infrastructure, the legitimacy of extravagant CEO pay, and more.

If one truly believes that wealth derives entirely from the efforts of self-made men, who work harder and take more risks than the rest of us, then extreme inequalities of income and wealth are morally justified as the rewards for that differing work effort. Government should do nothing to intervene. If the successful individuals at the top of our economy are solely responsible for their own fortunes, then they owe nothing back to society, and any effort to tax concentrated wealth and income is akin to “punishing success.” The fact that we face the highest levels of inequality the nation has seen since 1928⁵ is irrelevant, or perhaps even something to be celebrated, for those who accept this frame.

Furthermore, elevating these individuals to the status of heroic “job creators” encourages us as a nation to cut their taxes even further, despite the adverse impacts that may have on funding available for vital public services. Of course, if wealth is derived entirely from these self-made individuals, then there is little or no role for government. Government should be kept as small as possible by this frame. There is a consistent anti-government narrative here, driven in large part by the idea that wealth is entirely the creation of exceptional individuals, with no help from the government.

Finally, by viewing wealth creation and financial success as entirely the result of internal characteristics, those who lack financial security, even if gainfully employed and hardworking, are responsible for their own financial misfortune. Social safety nets are viewed as promoting laziness and sloth. Organizing efforts to secure fair wages are viewed as “thuggery” or as group muggings of the captains of industry and finance who created the wealth.

The Built-Together Reality

We believe the time has come to re-examine how businesses succeed and individual wealth is created. In doing so we develop a more complete picture, one that includes the important role of hard work but also takes into account the role of others and the many roles of government in laying the foundation for business success. We call this more rounded and honest understanding the built-together reality of individual and business success. In short, the built-together reality asserts that individual and business success is built through hard work but also taxpayer-supported schools, roads, and courts; the contributions of others; and chance factors like luck, historical timing, and various head starts in life.

In reclaiming the narrative of wealth creation, we could have filled the pages of this book with facts and figures drawn from the works of great economists, but facts alone stand little chance when pitted against a story that is so deeply embedded in our national character. From Horatio Alger to Ayn Rand, writers have told stories of individual and business success, complete with heroes and villains. In doing so they have sold a message to the broad public, a public that would likely never read the writings of conservative economists like Milton Friedman. Stories, unlike facts and data points, define our culture. They establish values and deeply held beliefs that facts alone cannot refute.

As a result, this book draws primarily from the first-person real-life stories of entrepreneurs, business leaders, and other high-wealth individuals, using their own words. Through their stories, and a few facts we included for good measure, we seek to establish a more balanced understanding of the true sources of individual wealth and business success. Their stories paint a much different picture than the self-made myth. In addition to the importance of hard work, creativity, and short-term sacrifice to their business success, they talk of the contributions of co-founders, colleagues, and employees; the role public investments play in wealth building; the role of government rules and regulations that provide a stable framework for business to operate and thrive; and additional factors such as inheritance, privilege, and luck. This is the essence of the built-together reality.

One of the entrepreneurs featured in this book is Jerry Fiddler, founder of the tech company Wind River Systems, which employed more than 1,600 workers when it was sold to Intel in 2009 for $884 million.⁶ The company makes embedded software for an array of electronic devices, from car ignitions to digital cameras and even NASA’s Mars Rover. Fiddler, who now serves as principal of Zygote Ventures, understands the role that public investments played both in his own success and in that of his business.

Wind River wouldn’t have existed without government-funded research that I did at Lawrence Berkeley Laboratories. I wouldn’t have gotten that job at the lab if I hadn’t had a master’s degree. I wouldn’t have had a master’s or a bachelor’s degree if there weren’t a public university that provided me with financial aid. And if I hadn’t gone to a good high school, also public, I probably wouldn’t have gotten into the university.

So, do I, as a successful business owner in the US, owe some of that back to society at some point? Absolutely, yes.…

Like any successful business owner, I worked very hard, and I was also lucky. A lot of other people also worked hard and contributed sweat and ideas to build Wind River. And my employees and I benefited from a whole system of public and private benefits—laws and enforcement, financial incentives, education, research, infrastructure, national defense—the list goes on, and all of these things are supported by tax dollars.⁷

Jean Gordon, a small-business owner in Little Rock, Arkansas, tells a similar story. Her family business, Frostyaire of Arkansas, employs 45 people who freeze and store food, primarily chicken, for food processors and wholesale and retail food businesses, with cold storage food freezers in Batesville and Maumelle, Arkansas. She spoke at a press conference organized by United for a Fair Economy and Responsible Wealth in 2010, declaring, “My family members agree with me.… Frostyaire’s success depends on government investments like good public schools that give us well-educated employees, and good highways so our customers can ship food.”

Gordon goes on to talk not just about the public investments that have benefited her family business but also the role a strong middle class, supported through public policies, has played in keeping her business profitable. “At Frostyaire, our decisions about hiring employees, purchasing equipment, and expanding the business are not based on tax policy but on the number of customers and the amount of product they have to store with us.… The best way to help small businesses like ours is to put more money in the hands of the middle class who will spend the money as customers of our businesses …”⁸

Gordon’s testimonial echoes the writings of economist and former Secretary of Labor Robert Reich. Reich argues that is it no accident that our nation’s most vibrant period of economic growth took place when our middle class was strongest.⁹ It is this middle class, and the public policies that support and strengthen it, that allows businesses like Gordon’s to prosper and grow.

In story after story throughout this book, the entrepreneurs we have profiled point to factors beyond themselves that helped their businesses succeed. There is no doubt that an entrepreneurial spirit is important, but it is not enough by itself. The public structures that we as a society built together, through governmental action—including roads, courts, schools, parks, and more—are like the soil rich in nutrients in which the seeds of prosperity and entrepreneurship take root. If the soil is neglected and becomes rocky and barren, the seeds stand little chance of germinating or of reaching their full potential if they do survive. Warren Buffett, founder of Berkshire Hathaway, made this very point in a television interview: “I personally think that society is responsible for a very significant percentage of what I’ve earned. If you stick me down in the middle of Bangladesh or Peru or someplace, you’ll find out how much this talent is going to produce in the wrong kind of soil. I will be struggling 30 years later. I work in a market system that happens to reward what I do very well—disproportionately well.”¹⁰

We couldn’t agree more. We applaud the leadership of Warren Buffett, and the many other business leaders profiled in this book, in helping us move toward a more honest assessment of individual wealth and success and, in doing so, providing greater clarity about the major policy choices facing us today.

Implications of the Built-Together Reality and the Public Investment Imperative It Supports

By acknowledging the various factors contributing to wealth creation, the built-together reality lays the foundation for a more honest debate about the issues of our time. The built-together reality acknowledges the way public investments in our shared prosperity lift us all, including entrepreneurs and business leaders. By this view government plays an important role in building a foundation upon which individual and business success is possible, by investing in schools, transportation, and more; by sowing the seeds of innovation; and by ensuring stable rules of the road. With the built-together reality and the public investment imperative that flows from it in clear view, our views on a host of issues and policy choices shift in dramatic ways.

If random luck, historical timing, inheritance, and race play a significant role in individual and business success, then the moral justification for extreme inequality evaporates. At the same time, if public investments in transportation infrastructure, schools and universities, research and innovation, as well as courts and a stable business environment are significant contributors to the success of those at the top, then progressive taxes are no longer about “punishing success” but rather about giving back to support the nation and the states that helped make their wealth possible.

If investments in the common good are an important part of the financial success of business leaders and entrepreneurs, then anti-government attempts to make government as small as possible are in fact shortsighted and damaging. Instead we would be well served to make needed investments in a wide array of public structures, from the next generation of transportation and energy systems to an education system that sows the seeds of prosperity for generations to come. Instead of cutting taxes on “job creators,” the built-together reality suggests we should invest in America and revitalize Main Street, the underpinnings of any successful business.

If, as the built-together reality suggests, the success of those at the top is in part the result of others, including their employees, then organizing efforts to secure fair wages are morally justified. Similarly, if the misfortune of those struggling to make ends is the result not of laziness or sloth but of a plant’s closing or health issues beyond their control (i.e., bad luck), then today’s assault on the social safety nets is unnecessarily punitive. In fact, there is evidence that social safety nets actually increase people’s ability to overcome systemic barriers and rise to success in business and in the community.

Digging Deeper

It is in this spirit of shifting the public debate in transformational ways that we open this book with an examination of the self-made myth, its roots and modern forms, and its implications. From there we seek to reclaim a more honest narrative of individual and business success—that of the built-together reality—and to shift the way we think about the big public policy questions of our day.

It is in this spirit of shifting the public debate in transformational ways that we open this book with an examination of the self-made myth, its roots and modern forms, and its implications. From there we seek to reclaim a more honest narrative of individual and business success—that of the built-together reality—and to shift the way we think about the big public policy questions of our day.