CHAPTER 3

The Built-Together Reality of Individual Success

Roots of the Built-Together Reality

Is there an alternative to the self-made myth? Is there a more balanced narrative that honors the role of the individual while revealing a more accurate picture of the other factors of individual success? Yes. In our interviews and conversations with business leaders, entrepreneurs, and other high-wealth individuals, a more complex and honest story takes shape, what we call the built-together reality.

The understanding of our interconnectedness is deeply rooted in our society. Early in human history, people began to organize communities for mutual protection and shared well-being. From early Colonial pacts to the US Constitution, Americans have similarly recognized that we are all in this together, that no man is an island, and that our mutual prosperity is deeply intertwined. It is this deep and rich heritage that we draw upon when we lay out the framework of the built-together reality.

In articulating the built-together reality, we seek to find a balance that acknowledges both the contributions of the individual and the contributions of society, including those made possible through governmental action.

Role of Individual Effort and Leadership

There is no question that individual initiative, risk-taking, and creativity matter. Some people accumulate great wealth because of their extra effort and sacrifice. They have worked and saved while others have played and consumed. And they have taken real risks, betting the farm or home on a dream. Others succeed through effective leadership, which can infuse an organization with higher morale and productivity. Such leadership is often thankless and lonely, and the stress involved must seem, on many days, more trouble than it is worth.

Individual imagination and intelligence can transform an organization or an entire society. An innovative new idea to fill some unmet need can be a blessing for the community as a whole. The cotton gin, the assembly line, and the computer chip were technological advances with broad economic and social impacts in which individual inventors played a decisive role. Or consider how a piece of art, a song, or an evocative performance can move our hearts. We would be impoverished without these gifts to the world. Individuals should be rewarded for their contributions with social recognition and material benefit.

But how do we untangle the various threads of individual temperament, social privilege, and luck in any of our lives? We know that there are some individuals who seem to stand out because of their energy, creativity, or spark. But what about the role of the economic environment, historical timing, and public investments?

Biographies and the literature of success focus on the individual skills and qualities of business leaders and wealthy people. These qualities include maturity, a passionate drive for excellence, interpersonal and organizational skills, the ability to take initiative, and a willingness to delay personal gratification.

When asked about the forces that have shaped their success, many individuals point to personal factors in their own social upbringing and environment that made a difference. These include parental values; a supportive family and spouse; skilled and able co-workers; key mentors, teachers, and coaches; and perhaps a particular educational institution. Seldom will people go beyond personal factors and qualities to include broader contributors such as luck, timing, privileged upbringing, or the public resources on which their success is hinged. It is this latter set of factors that we now examine in more detail.

Unequal Opportunities and Historical Timing

While there is no doubt that starting a business in the United States gives one significant advantages, opportunity is not the same for all regardless of how hard they work or how diligently they apply the lessons of the purveyors of America’s rags-to-riches narrative. If opportunity varies so dramatically, what does it mean for the self-made myth?

Historical Timing

We noted earlier the tremendous wave of opportunity that presented itself to those who were born in the 1830s and survived the Civil War. Andrew Carnegie, John D. Rockefeller, and many other nineteenth-century millionaires built their empires on the historic economic and industrial expansion of the time. Opportunity has continued to flow and ebb throughout our nation’s history. The cause of that ebb and flow is rarely random, however, and frequently is the result of public policy choices of that time in history.

In 1921 Lewis Terman of Stanford University began what Malcolm Gladwell calls “one of the most famous psychological studies in history.”¹ Using IQ tests, he sorted through 250,000 elementary and high school students to identify the top 1,470 “geniuses” with IQs of 140 and over. Then he began the lifelong task of tracking these geniuses over the course of their lives.² Though they all had comparable levels of “innate ability,” they faced very different prospects in life for a variety of reasons. On timing, the “failures” in Terman’s study were far more likely to be among those born between 1903 and 1911. It was they who had the unfortunate timing of entering the workforce during the worst of the Great Depression. What careers they did build were interrupted by the draft of World War II. The group born between 1912 and 1917, on the other hand, came of age after the worst of the Depression was over and entered World War II at a young enough age that the draft presented an opportunity more than a career interruption.³

Similarly, as the personal computer revolution took off in 1975, Bill Gates (b. 1955), Paul Allen (b. 1953), Steve Jobs (b. 1955), Bill Joy (b. 1954), Eric Schmidt (b. 1955), and other software giants were just coming of age, poised to build their computer empires. Had they been born a few years before, they would likely have ended up in the soon-to-be-outdated world of mainframes. If they had been born later, the historic window of opportunity would have already closed.⁴ They were born at just the right time.

The fact is, when you were born matters a lot more than many would like to admit. Jim Sherblom, former chief financial officer (CFO) of Genzyme, notes how different his life prospects were from those of young Americans just entering the workforce today: “This Great Recession of 2008 is different than any other financial catastrophe that happened during my working career. We are going to be a very different society with very different expectations about what is possible for a young ambitious person who wants to do well in their life.” Timing matters.

Random Luck

Billionaire oilman John Paul Getty once famously stated that his secret to success was to “Rise early, work hard, strike oil.”⁵ For those seeking to follow his advice, rising early and working hard are completely within their control. The good fortune of striking oil, though, points to the importance of luck in whether one person succeeds and another does not.

If luck is in fact a major factor in determining who is wealthy and who is not, then it casts into doubt the moral justification of the vast inequalities of income and wealth in our society. When the founder of Sears and Roebuck, Julius Rosenwald, attributed his success primarily to luck, he heard audible complaints. A trade journalist retorted, “If financial success was chiefly a matter of luck, there would be strong grounds for the surtaxes that governments so savagely levy on large incomes, for the voraciousness of unionized labor, and for the leveling process of Socialistic doctrine.”⁶ In other words, keep telling them it’s your character. If they think it’s luck, there may be social claims on your money. Of course, Getty also had the benefit of being White and male and of living in a nation that protects property rights. He was also born to a family in the petroleum business,⁷ giving him a substantial head start on his career.

Class and Cultural Capital

Turning to the Terman geniuses again, we see the importance of class in shaping one’s prospects in life. Terman divided 730 of the men, now adults, into three groups from the most successful to the least successful (top 20 percent, middle 60 percent, and bottom 20 percent). It became apparent that the family’s background, that is, class, was the most important factor in determining a man’s success. The top group overwhelmingly came from middle- and upper-class households where they had books, parents with college degrees, and ample resources to pursue their goals. The bottom group came from the other side of the tracks, lacking high-quality education, financial wherewithal, contacts, and role models. Again, these were all geniuses with the same “innate ability,” but their life paths were very different because of the economic class into which they were born.⁸

In addition to the cultural capital that comes with class are the financial boosts one gets from one’s parents. Gifts from parents to pay for higher education or a down payment on a home or to help start a business can transform a person’s options and change a life trajectory. According to New York University sociologist Dalton Conley, the single most important factor in determining a young adult’s net worth is the net worth of his or her parents.⁹

Among the very wealthy, inherited privilege is often a guaranteed catapult to continued wealth. Over one-third of the Forbes 400 in 1997, for instance, were born onto the list. Using baseball imagery, they essentially were born rounding third base and heading for home. And at least another quarter were born standing on the base path, meaning they were fortunate enough to inherit a small business, a piece of land with oil under it, or an investment of “parental equity” on flexible terms.¹⁰ Each of these individuals contributed something unique, but they had a significant boost that someone born in the batter’s box doesn’t have. In the words of Seagrams billionaire Edgar Bronfman, “To turn $100 into $110 is work. To turn $100 million into $110 million is inevitable.”¹¹

Societal Barriers of Race and Gender

It is hard to discuss race in America without discussing economic class. While there have been great strides in achieving legal rights for Blacks and other communities of color, little has changed in the economic order. Many decades after the great Civil Rights victories were achieved, Blacks still hold only 10 cents of net wealth to every dollar of White median family net wealth. Latinos do not fare much better at 12 cents to every White dollar of net wealth.¹² Unlike income, wealth is readily transferred from one generation to the next through inheritance and other intergenerational transfers, ensuring that the inequalities of yesterday are carried forward to each successive generation despite progress made on other fronts.

This lack of net wealth has been a significant barrier to the emergence of Black-owned businesses. Robert Fairlie of the University of California, Santa Cruz, documents the trend. “Blacks have made fair gains in the labor market, education, politics, and legal issues, but it seems to me like business ownership and performance are areas that have not seen the kind of progress that we’ve seen elsewhere.”¹³ Fairlie places the blame on the low level of personal wealth, which means limited access to startup capital for a new business. While Thomas Boston of the Georgia Institute of Technology takes a more optimistic view on the progress, he too acknowledges that lack of wealth is one of the main barriers to Black entrepreneurship.¹⁴

However you look at it, without wealth it is very difficult for anyone to break into the business world. This applies not just to Black would-be entrepreneurs but to Latinos, women, and others as well. So what does this mean for the rags-to-riches myth if it takes significant wealth to start a new business? What does it mean for the self-made myth if people of color, who don’t have the same wealth at the starting line as Whites do, are less able to turn their entrepreneurial visions into reality?

Beyond the question of business ownership, race and gender discrimination are still pervasive problems in our society. Even in the regular workforce, there are still well-documented gaps in pay and professional advancement.¹⁵ Our society goes even further by rewarding those whom it deems physically attractive or fitting the right image of success. A 2003 study concluded that tall people on average earn more money than short people, with each inch of height being equivalent to $789 a year in extra pay.¹⁶

Society’s Contributions to Individual Success

In thinking about the interplay of the individual and society in building a successful business, it’s helpful to think of a musician performing in a large arena. What we build together through generations of public investments in the common good—roads, education system, courts, a stable economic framework, publicly funded research, and much more—are like the stage, arena, and, most importantly, the PA system that amplifies the entrepreneur’s creation. Without that infrastructure the musician, no matter how creative and talented, would have only limited reach.

The truth is that we have a robust economy precisely because we have an infrastructure that supports it. We have order and stability, a predictable system of rules for ownership and investing, and mechanisms to resolve disputes. Investors and entrepreneurs have confidence that the rules today will be the same next year and the year after. And we have a skilled workforce thanks to our nation’s substantial investment in public education. That is the essence of the built-together reality.

Public Infrastructure

Entrepreneurs and business leaders in America rely on a wealth of public infrastructure—including roads, schools, parks, and more—paid for through our tax system. What’s more, these commonly held assets accumulate over time thanks to generations of such public investments. It is upon these commonly held assets that entrepreneurs are able to build their business enterprises.

The individuals featured in this book, and many others whom we have interviewed, speak to the role that our nation’s transportation infrastructure—including highways, airports, railroads, and seaports—plays in making their businesses possible (see “Reality Check: Highways and Transportation” in chapter 4). Most also speak to the importance of our public education system, which in many cases benefited them personally but which also provides their businesses with an educated workforce. This public infrastructure also extends to our communications networks, the Internet, and more.

In a 2004 report titled Rethinking Growth Strategies, economist Robert G. Lynch looked at a host of data and surveys on factors that drive economic growth and business location choices among states. He found that education of the local workforce and the transportation infrastructure, for example, were far more important than low taxes in determining business location. Lynch summarizes his findings: “There is evidence … that increases in taxes, when used to expand the quantity and quality of public services, can promote economic development and employment growth.”¹⁷ This finding is clearly reflected in the interviews we conducted with business leaders for this book.

Public Investment in Research and Innovation

As taxpayers we should be proud that the US government is the biggest venture capitalist in the world. The federal government spends more than a hundred billion dollars per year on research, mostly in grants to universities.¹⁸ And public support doesn’t stop once the technology has been developed. The US government also offers tax breaks to companies that invest in using technology. We should not underestimate the role of this research in creating the bedrock for wealth creation and the quality of life we enjoy.

Earlier in our nation’s history, our government invested in the creation of agricultural extension agencies to spread new technologies and increase production of America’s farmlands. In 1919, driven by national security concerns that Britain and Germany would dominate international radio, the Woodrow Wilson administration created the Radio Corporation of America (RCA) as a consortium to retain and develop crucial radio technology. “The firm that soon became America’s leading consumer-electronics company was launched by government, and with an injection of public capital.”¹⁹ In 1915 Congress created the Advisory Committee for Aeronautics to jump-start America’s aviation industry after it was clear that the United States was falling behind. One of its first projects was the creation of a giant wind tunnel to test different wing designs.²⁰

Beginning in the mid-1960s, publicly funded R&D under the Defense Advanced Research Projects Agency began the process of creating what we all know today as the Internet (see “Reality Check: Building the Internet” in chapter 4). At the same time, government’s tremendous buying power helped drive down the cost of microchips, making them affordable for consumers. The Breakthrough Institute writes, “Government procurement drove the price of microchips down by a factor of 50 in just a matter of years. Consider this: without these public investments in the semiconductor revolution, your iPod would cost $10,000 and be the size of a room!”²¹ More recently, after extensive federal dollars and research grants, scientists successfully mapped the human genome, making possible a whole new wave of medical breakthroughs.²²

All of these represent public actions that helped fuel innovation and our broader prosperity. Government investment in technology research helps businesses operate more efficiently. According to economist Lester Thurow, more than half of the productivity growth in the economy each year results from advances in technology.²³

Kung Fu and Piano Wires: The Rules of Our Economy

In describing free-market economic systems, economist Ha-Joon Chang recalls the kung fu movies he watched as a child and his later shock when he learned that many of the stunts were made possible because the actors were suspended with piano wires. Like the invisible piano wires of these kung fu movies, our economy is made possible by a host of unseen rules and protections.²⁴ The fact that we take them for granted enables us to live the illusion that the economy is simply a natural occurrence—a miraculous organic ecosystem that functions best when left alone. It is not. Our economic system is made possible only because of copyright protections, private-property laws, courts for resolving disputes, and the predictability made possible through regulatory agencies like the SEC, the Federal Communications Commission (FCC), and others.

Over several centuries our society has created a framework of property law that gives particularly strong protection to private property. This framework enables individuals to own and sell many different types of property, using mechanisms such as real estate titles and stock ownership structures. Much wealth is now based on intellectual property—ideas, portals, and patents. The benefits of this protection for intellectual and physical property rights cannot be overestimated.

In an op-ed that appeared in USA Today, Abigail Disney (profiled in this book) writes about the loss of Walt and Roy Disney’s first creation, Oswald the Lucky Rabbit, after the cartoon’s distributor wrestled the rights away from them. She adds, “This loss was a huge setback for both men, and my grandfather vowed never to let himself be taken advantage of again. He soon registered a copyright on a new character named Mickey Mouse. It was 1928, and it was neither the first nor the last time the Walt Disney Co. benefited from a federal system of protections, laws and taxes that created fertile ground for building a business empire.”²⁵

Additionally, governmental regulations, including those that govern and stabilize financial markets, add tremendous value by providing stability and predictability to the environment. For Amy Domini (also profiled in this book), who started a mutual fund, the safety, order, and predictability of the market were central to her success. Similarly, in our profile of Jim Sherblom, he talks about the tremendous value that was added to Genzyme by going public. He estimates that the liquidity and the security provided by a regulated and fluid stock market accounts for 30 to 50 percent of a public company’s value. We’ve also seen in 2008 what happens when those markets fail and the trust is broken. Sound financial regulation and transparency are essential to a functioning economy.

Public Investment in Individual Opportunity and a Strong Middle Class

Many economists have argued that when prosperity is broadly shared and the middle class is strong, as it was in the post-WWII era, economic growth is most robust.²⁶ Garrett Gruener, venture capitalist and founder of Ask.com, echoed this theme in a Los Angeles Times column:

When inequality gets too far out of balance, as it did over the course of the last decade, the wealthy end up saving too much while members of the middle class can’t afford to spend much unless they borrow excessively. Eventually, the economy stalls for lack of demand …

What American businesspeople know, and have known since Henry Ford insisted that his employees be able to afford to buy the cars they made, is that a thriving economy doesn’t just need investors; it needs people who can buy the goods and services businesses create. For the overall economy to do well, everyday Americans have to do well.²⁷

At various points in US history, we’ve chosen to invest in individual opportunity in many ways. For more than a century, we’ve had a national commitment to public education for all citizens. We’ve also made tuition assistance available for higher education. The GI Bill, for example, was among the most successful wealth-broadening initiatives in US history.

We have also invested in other programs designed to broaden wealth, such as mortgage assistance for first-time homebuyers and flexible financing for business startups. Post–World War II housing programs were very successful at increasing opportunity and membership of the middle class, but due to racial and gender discrimination these initiatives were not universally available.

In addition to benefiting personally from these investments, many of the business leaders we’ve spoken to have also noted the benefit these investments played in building a strong middle class that can buy the products they sell, as articulated by Garrett Gruener in the quote above as well as by Jean Gordon of Frostyaire, who is quoted in the introduction.

Charitable and Civic Institutions

With the help of our tax system, which encourages charitable giving, we as a society have built an enviable infrastructure of charitable and cultural institutions. These include universities, hospitals, research institutes, humanitarian organizations, museums, and other cultural institutions. A number of the individuals we profile describe how they have benefited from private charities providing educational scholarships and research grants.

Colleagues and Employees

For anyone engaged in a large endeavor to state “I did it alone” renders invisible all the contributions of co-workers and colleagues, not to mention those who went before them in any given field. Ideas, products, and books do not emerge in a vacuum. Other people’s creativity, labor, feedback, and suggestions are always involved. As President Franklin D. Roosevelt remarked, “Wealth in the modern world resulted from a combination of individual efforts. In spite of the great importance in our national life of the … ingenuity of unusual individuals, the people in the mass have inevitably helped to make large fortunes possible.”²⁸

Unfortunately, the contribution of the team, the helper, the editor, and the laborer are often undervalued in measuring wealth and achievement. Albert Einstein understood this: “A hundred times every day I tell myself that my inner and outer life are based on the labors of other men, living and dead, and that I must exert myself in order to give in the same measure as I have received and am still receiving.”²⁹

Like Einstein, many of the individuals profiled in this report talk about how they received tremendous support from colleagues. Ben Cohen, for example, believes that his employees were critical to Ben & Jerry’s’ profits and thus to his own success. His sentiments are echoed by Gun Denhart of Hanna Andersson clothing company; and Kim Jordan, CEO and co-founder of New Belgium Brewing, has much the same assessment.