CHAPTER 4

Stories of Success and the Common Good

About the Profiles

What follows is a series of profiles of business leaders—owners, founders, CEOs, and entrepreneurs—who tell the story of the built-together reality. Some of the business leaders profiled herein are people who have worked with the authors for many years through the Responsible Wealth project and United for a Fair Economy. Others are new to us. But in each of their stories is a recognition that their success is not entirely their own. Certainly hard work and creativity played a big part in nearly all these success stories, but so did luck, timing, a wide array of public investments, and an economic framework built through governmental action.

When we interviewed them for this book, we looked beyond questions about their personal characteristics and upbringing typical of many success biographies. Though the questions of modern success biographies have changed with the times, they still focus heavily on character and upbringing as they did in the nineteenth century. As historian Irvin Wyllie noted of these earlier biographies, “many of their questions were routine, but many were prejudicial.”

Was your boyhood spent in the country, or in a city? Did you work as a boy? Did you use tobacco previous to the age of 16? Are you a church member? Is honesty necessary to business success? Should a country boy go to the big city if chances of success are fair in his own community? To what do you attribute your success? What maxims or watchwords have had a strong influence on your life and helped you to success? What books would you recommend to an ambitious boy?¹

A modern biographer may substitute illegal drugs for tobacco, but the questions otherwise would be much the same. These questions obviously steer a subject to respond from a framework of individual character. That tradition of focusing on the personal traits while ignoring the contributions of society is a pervasive problem with the success stories told in our culture.

But what if we asked questions that went beyond individual character such as:

What was the role of luck and timing in your success?

Were you born White? Male? Tall? How might that have shaped your prospects?

Were you educated in public schools and universities? Were your parents? What about your employees?

Did you or your parents get direct government subsidies for higher education, homeownership, or business development? Did you benefit from other government programs?

Did you inherit wealth or opportunities from your family?

How did you or your business benefit directly or indirectly from public investment and taxpayer dollars or preferential tax treatment?

What do you believe are your obligations to this society? What are your views toward taxation?

It was in this spirit that we approached the subjects of the profiles that follow. Most of the profiles are based on original interviews with the subjects in 2011, some of whom were also interviewed in 2003 or 2004 as part of an earlier report. We also included two profiles in this section that are drawn from public records.

We believe that these profiles, taken together, lay the foundation for a more nuanced narrative—the built-together reality—that recognizes successful businesspeople as more than islands floating in a void. Instead it views individuals as acting within an environment rich with public infrastructure built through generations of investment in the common good. The built-together reality credits good ideas and hard work but also points to the roles of timing, other individuals, society, and, importantly, government in supporting business success in this country. As such, the built-together reality leads to the public investment imperative—the idea that all of us, and especially the most successful and financially well off, need to contribute to the support of government to ensure that those public investments continue to be made.

Jerry Fiddler: Public Support for Education Helped Get Me Where I Am

Jerry Fiddler was co-founder, CEO, and chairman of Wind River Systems in Alameda, California. Now a mentor, an investor, and a professor of entrepreneurship, he helps entrepreneurs start new businesses.²

Unless you happen to be a computer programmer, you probably don’t spend much time thinking about how a global positioning system (GPS) or a digital camera works or where the Mars rovers get their intelligence. All those devices have something in common: they’re driven by software developed by a company you’ve probably never heard of—Wind River Systems. Based in Alameda, California, Wind River is a company born in part from government investment in research.

At the helm of Wind River for 26 years—first as founder and CEO and then as chairman—Jerry Fiddler knows that his success depended on many things, including public support of education, other people’s investment, US government support of the Lawrence Berkeley Laboratory, and a whole lot of happenstance. In fact, were it not for a few quirks of fate, he might be a jazz musician, a photographer, or a geologist today.

Wind River Systems was sold to Intel in 2009 for $884 million. Fidder’s share was more than $40 million. Now Fiddler “helps people start companies” as an investor in and consultant to startups in Silicon Valley, as an adjunct professor of entrepreneurship at the University of California at Berkeley, and as guest lecturer and mentor at Stanford University.

Education played an important role in Fiddler’s success. After attending public school in Chicago, he went on to attend the University of Illinois, a land-grant college, where he majored in music and photography.

I was the first person in my family to get a college degree. I went on and got a master’s in computer science. I got out and got a job working at Lawrence Berkeley Laboratory as a computer scientist. I was making what seemed to me, at the time, to be an infinite amount of money. But I wanted something different. I wanted to affect the world in a different way. And I decided to start my own little consulting business.

I called my dad, my parents, to tell them, and I was sure they were going to try to talk me out of it because here I was kind of living the dream—I had a stable job, responsible interesting work, prestigious—and I decided I was going to start my own business. I was 29 at the time. And my dad said, “Well it’s about damn time.” It was completely the opposite of what I expected to hear.

In addition to the importance of schooling, Fiddler acknowledges that his entrepreneurship has partially been the result of his upbringing. For him the two seem to go hand in hand: having the opportunity to attend school coupled with the support of family in his endeavors helped lead to his ability to set Wind River in motion. A product of European thinking brought up in America, Fiddler says,

Being in a family situation that supported me to develop, and in schools with teachers who also helped me to learn and develop … you just don’t do it on your own. You do it with the help of parents and friends and teachers and co-workers and service providers.

My parents were both born here, but all four of my grandparents came from various parts of eastern Europe. My dad had businesses: he had a fabric store, a lingerie shop, and that was just the way those folks thought about things; you don’t work for somebody else. The way you grow up and become a real adult or mensch is you start a business, you run a business.

And I think that’s still happening, there’s still that immigrant population that to a disproportionate degree really pushes entrepreneurship. And that population of course relies very heavily on what the public makes available to them, including public education. In turn those new businesses are a crucial driver of our economy.

Fiddler started Wind River Systems as a consulting company in 1978 with his business partner, Dave Wilner, saying, “I don’t think I could have done it without him.” As they moved from consulting job to job, they built pieces of software for their own repeated use; by 1987 Wind River had become a product-based company, focused on selling that reusable software. The company grew very quickly, more than doubling in size each year for six consecutive years and going public in 1993.

Wind River’s software is now found inside everything from digital cameras, to cars and spacecraft, to the routers and the hubs that control the Internet. From a few cutting-edge ideas, Fiddler built a company that provides a critical piece of our technological infrastructure. At its peak in 2000, Wind River had 2,200 employees and was valued at $4 billion.

One of the things people don’t talk about is how much we really rely on government institutions to maintain a fair playing field.

— JERRY FIDDLER

Fiddler attributes his success to a combination of factors. “It’s a wide variety of abilities and a willingness to take risks, coupled with a fair amount of luck.” His ideas about luck have been informed by his varied life experiences:

Something I learned as a musician is that being good is only one of many things you need to be successful. There are a million fabulous musicians out there who are never going to be successful because they don’t have the other skills or support they need. They don’t have the finance, the promotional backing, or the luck.

And business is the same. There are millions of people who have the qualities that make you successful in business but who weren’t lucky enough to be in the right place at the right time or to get the right help. So having the capabilities is necessary but nowhere near sufficient.

To Fiddler a big part of starting a successful business in the United States is the existence of a massive accounting, finance, and legal infrastructure to help companies get started and an education infrastructure to provide the needed skills.

You can have a great idea in most countries in the world, but you won’t be able to find the right advice, or the right accountants and lawyers, and you won’t be able to get it financed. So, part of it is just being in a place where the opportunity exists to start a business. The angel and venture capital community and all the support structure around it is massive and unique; it really doesn’t exist in the same way anywhere else in the world.

There’s no way I would be here if I hadn’t worked at a national lab. It was the best place in the world to learn how to do this. I probably wouldn’t have gotten that job if I hadn’t had a master’s degree, which I got from a public university. I wouldn’t have had that master’s or a bachelor’s degree if there weren’t financial aid and an assistantship in grad school. And had I not gone to a good public school, I probably wouldn’t have gotten into the university. So you just keep stepping back. Heck, if my mother hadn’t had the right prenatal care, I could have been 28 IQ points less intelligent! So where does it start?

Fiddler reflects on how his personal success has been affected by the right circumstances in his life, but he also points to the importance of well-functioning business and financial sectors. The economy functions with rules and regulations that ultimately benefit entrepreneurs and businesspeople. Fiddler believes that many are slow to recognize government’s important role:

One of the things people don’t talk about is how much we really rely on government institutions to maintain a fair playing field. Entrepreneurship is an equalizer, a way that people who aren’t wealthy can become more wealthy, can become more independent, and in the process can provide a huge amount of benefit to society as a whole. But we live in a society right now that is going in exactly the opposite direction. The disparity in wealth between the bottom and the top is growing dramatically, and the middle class is being squeezed out.

All of us, but especially entrepreneurs, rely on the government’s role of creating a level playing field, and people like the SEC and the FTC [Federal Trade Commission] and other regulating agencies are critical to entrepreneurship. Large business interests obviously put huge effort into lobbying, much of it into reducing regulation, but for small businesses, for startups, that regulation is important. The only way that you can have a healthy startup economy is if you have a level playing field that allows those companies to come into being and to compete, and that has to come back to some level of regulation; the government has to be regulating.

Noting the interdependent nature of our economic system, Fiddler continues, pointing out some of the things that most people take for granted:

And then there’s the rest of the infrastructure that we need—the roads and the railroads, transportation and information infrastructure that makes wealth creation possible in this country.

To take it up to a higher level, as a country we are absolutely the envy of the world in terms of the intellectual horsepower we put together—the creativity, the technology, the leadership. Why is that here? To me much of it is a product of the entrepreneurial system and of the immigrants who prized education, learning, and initiative. But most of all, it’s a product of the public education system.

Fiddler is quick to highlight the ways in which he did not create his success purely on his own. From a supportive family with entrepreneurial spirit, Fiddler had the opportunity to pursue higher education and then to begin his own business. As an entrepreneur he’s not afraid to say that he has benefited from governmental regulation. Fiddler is also not afraid to admit that he has been lucky: “It all builds. In this country there is more opportunity and mobility than anywhere else in the world. But it’s very rare that a lot of factors beyond the individual haven’t contributed, a lot of stars haven’t aligned properly to create someone’s success.”

Glynn Lloyd: Transportation and Food Safety Regulations Help My Business

Glynn Lloyd is the founder of City Fresh Foods, a Boston-based food service and delivery company.³

The importance of hard work and a reliable team of advisers is not lost on City Fresh Foods founder Glynn Lloyd. He has taken the lead role from the start but gives credit to his brother Sheldon as well as the people he has relied on over the years, from employees to consultants, for helping to make his business successful.

Lloyd, a leader in the Boston African-American business community, started the business in 1994 with the help of a $20,000 loan from the City of Boston’s Department of Neighborhood Development (DND) to help him build out his first kitchen on Dudley Street. This loan was the money that helped launch the business. By 1998 City Fresh Foods outgrew its Dudley Street kitchen, and the City of Boston helped the company relocate to a vacant foreclosed building that it was able to purchase in nearby Dorchester.

In 2009 City Fresh Foods took on a $400,000 investment in renovating its current 14,000-square-foot building in Boston’s Roxbury neighborhood, which now serves as its headquarters and production facility. Even with 15 years of success and nearly $5 million in sales, City Fresh Foods’ margins were so slim that it took investments from the DND and the state’s Economic Stabilization Trust as well as a $100,000 equipment lease to make the project work.

Lloyd has worked hard and taken some leaps of faith to make City Fresh Foods what it is today—a company that in 2011 had 80 employees and $7 million in sales—but he is quick to credit the many employees who make the place tick. He also recognizes the role that the public education system plays in making his business possible: “The folks here are mostly all educated through the public school system. The fact that they can read and write and use a computer and all that stuff is pretty important to us. You know, a certain level of education coming in is important.”

A product of the Sharon, Massachusetts, public schools, Lloyd got his start as an entrepreneur back in fourth grade, when he started cutting lawns in his Sharon neighborhood. He soon realized that he could pay other kids $4 or $5 per hour to do the lawn-mowing jobs that earned him $10. By high school he had a landscaping company with two trucks and a team of employees; he was hooked. “I had a knack for numbers and I loved people, so the combination of all those things worked for me.”

Lloyd sees himself as a motivator, capable of bringing out the best in others and of “creating order from chaos.” Where others saw a burned-out building, Lloyd pictured a thriving renovated warehouse with well-trained staff preparing tasty, nutritious, affordable meals and delivering them all around the Boston metro area; he motivated everyone around him to make his dream a reality.

City Fresh Foods operates in what Lloyd refers to as the “public market,” meaning the majority of its contracts are for public school meals and publicly subsidized meals for seniors. While those contracts account for much of the company’s income, it’s in the indirect government investments where it becomes evident how every small business—in fact, every business of any size—relies heavily on public structures.

Well, let’s talk about transportation. We’re a delivery company. We’re going 60 to 70 miles north, east, and south. So without roads, we have no business. We’re using backroads, side roads, and highways. Interesting enough, this was a tough year for us because we do a lot of the schools. Due to the heavy snow, we lost five days of school this year in terms of business, which is unheard of in the past few years. But there would have been a lot more if we didn’t have the infrastructure to clean the streets [and] put the salt down, which I know is very expensive, actually.

Lloyd also talks about the importance of public transportation for his employees to get to work. Though some walk or drive, he notes that many of his employees rely on Boston’s public transit system, including many employees who moved with the company from its Dudley Street location to its current Shirley Street location, about 3 miles away. From a business point of view, urban mass transit systems help expand the pool of employees that companies can draw from in looking for staff to fill their work needs. The state’s investment in the Massachusetts Bay Transportation Authority, including its trains, subways, and extensive bus routes, is a significant benefit to businesses of all sizes that is often taken for granted.

More than most companies, City Fresh Foods relies on natural gas to cook its products and electricity to power its operations; and like many businesses, the company is “completely computer-reliant, Internet reliant,” although Lloyd admits he rarely thinks about those things. Warren Buffett and Bill Gates Sr. talk about what would happen, or rather what wouldn’t happen, if you plunked an entrepreneur down in the middle of a developing country. Lloyd had a taste of that recently, when the Boston water supply was shut down for a number of days:

Water … clean water. We had the issue this year where there was a little concern around water contamination, and they shut it down. We had to pull our water from a different reservoir. And we had to literally boil all of our water here, and it took us back in time. I mean, you talk about taking for granted. I was saying, “What happens if you didn’t have water?” Well, we experienced it this past year. So, those are the basics. We treat it like the air that we breathe, but the reality is, without it, you’re out of business.

Providing health care to employees is one of the most difficult aspects of owning a small business. Massachusetts law now requires that all citizens be insured. City Fresh Foods already pays more than most employers in the food preparation business. It pays half of its employees’ health-care premiums for individuals and one-third for employees with families. “It gets expensive for employees to cover those health costs, the chunk that they have to support.” But Lloyd estimates that half of his employees are using the low-cost MassHealth plan.

It’s funny, because typically as an entrepreneur, you’re not asking for more regulation, but clearly it’s a benefit because people know their food is safe.

— GLYNN LLOYD (left, with his brother Sheldon)

Unemployment insurance as well is very helpful to City Fresh Foods and its employees. Lloyd continues, “On very few occasions, we have had to lay off people here, and during the summer … due to some of our contracts’ seasonality, we have laid employees off for the summer. And I know that’s a lifeline for the folks whom we’ve had to lay off, so there has been a direct benefit to folks.”

And in the food business, Lloyd is well aware that City Fresh Foods relies on food inspections and certifications, both coming in the door and going out: “With qualified vendors coming in, we need to know that they’re handling product correctly, so “USDA Inspected” is one of those things that we look for in terms of our supply side. That’s federal, and then you have your state and your local inspection services, which actually are a stamp of approval to our customers because they know that we’re abiding by basic healthy sanitation practices of how we’re handling our products here.”

These safety standards are not creations of an invisible hand. They are the result of a public outcry and governmental action following the muckraking journalism—including Upton Sinclair’s The Jungle—that exposed unsanitary and unhealthy practices. At the federal level, Congress passed both the Meat Inspection Act and the Food and Drug Act in 1906 to ensure that public health was not compromised.⁴ Both laws have since been expanded and updated as the industries have changed, ensuring the safety of our food supply for more than 100 years.

“It’s funny,” says Lloyd, “because typically as an entrepreneur you’re not asking for more regulation, but … clearly it’s a benefit because people know their food is safe. And, listen, if we have to do it, we want to make sure our competitors are doing it, and overall it’s trying to protect the health and the safety of our population, our kids.”

Food safety inspections, from the farm to the table, provide public confidence that is essential to any successful food service business.

Lloyd is hopeful that standards for what is served in schools will be changing for the better—away from fats, sugars, and empty calories and toward “real foods,” including leaner meats and unprocessed vegetables. He’s been pushing the city toward reallocating some of its 800 acres of vacant land toward urban agriculture. Both of these changes would help Lloyd and City Fresh Foods do their job even better.

Thelma Kidd: Taxes Are Just the Price of Doing Business

Thelma Kidd is the co-founder of Davis-Kidd Booksellers, which grew to four stores across Tennessee, employing more than 200 people before being sold to another independent bookseller in 1997.¹⁸

Thelma Kidd grew up in the West Texas town of Slaton, just outside Lubbock, a dry and dusty part of Texas where rainfall averages only 21 inches per year.¹⁹ Her first exposure to entrepreneurship came through her father. “My father was a building contractor,” she says. “He was definitely an entrepreneur, although I wouldn’t have known that word then. He started working for himself very early on, and his philosophy and belief about money—that there is not a paycheck that comes in regularly and that there wasn’t one particular company he worked for—prepared me for being a business owner. Working for myself, that’s really what fits for me—doing my own thing.”

Kidd got her formal education in the public school system of Slaton before going on to study briefly at a private college; she then finished her undergraduate degree at Texas Tech University in Lubbock, a public university. She received her graduate degree in social work from the University of Michigan, Ann Arbor, another public university, after which she worked for a few years as a therapist.

It was while working as a therapist in Ann Arbor that she saw a new kind of bookstore—the original Borders Books. Later she moved to Tennessee, where she joined with her college friend, Karen Davis, to explore the idea of starting such a bookstore in Nashville. Kidd’s love for bookstores, more than the idea of “starting a business,” motivated her. Specifically, she wanted to create a bookstore that honored free thought and differing opinions: “I liked the idea of having a magazine rack where two people could be standing side by side, and one could be reading the Buddhist Review and the other Christianity Today, and those people would both be welcome in the store. To me that is progress.”

Meanwhile, in Washington, DC, big changes were under way that would have a major impact on Kidd and Davis’s business plans. Julie Weeks of the National Women’s Business Council writes of the events that led up to President Jimmy Carter’s signing of Executive Order 12138:

Women have started, owned and inherited businesses in the United States since the founding of the country, yet official recognition and support for women’s enterprise development has been in existence only for the past 25 years …

The first federal government program to assist women’s business enterprises came as the direct result of lobbying from women business owners. Due to their efforts not only in lobbying the federal government but in urging the appointment of women in key agency positions, an interagency government task force was created, and a research study was conducted to review the status of women-owned firms in the US. The resulting report, “The Bottom Line: Unequal Enterprise in America,” documented some of the barriers that women faced in starting and growing their businesses. In response to the report, President Jimmy Carter issued an executive order in 1979 establishing an Office of Women’s Business Ownership within the US Small Business Administration.

Shortly thereafter, a pilot loan program was established, the office began working with federal procurement officials to get more women-owned businesses involved in selling goods and services to the government, and began reaching out to the women’s business community through speeches, conferences, and news releases.²⁰

It was in 1979, the same year the executive order was signed and a year before their business formally opened, that Kidd and Davis received one of these new Small Business Administration (SBA) loans for women entrepreneurs. They scraped together about $50,000 of their own, mostly borrowed from relatives, which was matched by a $175,000 SBA-guaranteed loan. Kidd notes, “It was a bank loan; but the SBA guaranteed if we defaulted that the bank would get 90 percent of their funding back from the SBA.” This guarantee helped Kidd and Davis overcome some of the major hurdles they faced as women starting a business.

I agree with something one of my mentors said: “I want to pay a lot of taxes, because that would mean I’m making a lot of money.” It is fair.

— THELMA KIDD (left, with her daughter and granddaughter)

“It was challenging being women going into business because there was a lot of resistance from Realtors,” says Kidd, “and we weren’t taken as seriously as I think we would have been had we been male. On the other hand, there was this funding available that was to encourage women to go into business, and that helped; that really was a great boost. I don’t know that we could have done it without that.”

Expanding on the challenges of being taken seriously as women entrepreneurs when approaching banks, Kidd adds, “We would have stunned looks or blank stares that would come back at us when we talked about what we were planning to do. The bankers and Realtors assumed that we were not serious about it, that we would get tired of it after six months and quit. I don’t think they assume that about a man who walks in.”

Thanks in part to the SBA-guaranteed loan, they overcame these challenges and opened their first store in the Green Hills neighborhood of Nashville in 1980. It was busy from the very beginning, which Kidd attributes to great timing and a bookstore model that was new to Nashville. Instead of the typical small bookstore with 2,500 titles, the new Davis-Kidd Booksellers had closer to 25,000 titles in their large, 3,500-square-foot store. Later they moved and expanded again to 9,000 square feet. The store eventually grew to 25,000 square feet and more than 100,000 titles.

They also tried other new strategies, such as staying open at night and seven days a week. This was pushing the boundaries far out for a Nashville bookstore in 1980, but it paid off. Within a few years, they opened up additional stores in Memphis (1985), Knoxville (1986), and Jackson (1995). When they finally sold the company to another independent bookseller in 1997, they had more than 200 employees and four stores, three of which included cafés.

Kidd acknowledges the importance of timing and luck, in addition to hard work, saying, “Things turn in your favor periodically, and it’s not just because you’re a good person or you worked hard, because things go against you sometimes, too, and it’s not because you are a bad person or you weren’t working hard. I do think that people who are successful need to be really dedicated and committed and have vision. But that alone is not enough. You need things going your way periodically.”

Kidd also talks about the importance of public investments and the stable regulatory environment in supporting her business. She acknowledges the role that public schools, libraries, and safe communities have played in her own life, but also talks of the benefits her stores received: “Obviously, when you have a retail store or any kind of public place, people are going to come in and use your space. I’m glad there were building inspectors and health inspectors for the café. It’s like a third-party check on what we were doing. That we had access to those people with the knowledge to keep our facilities safe was actually helpful, and it protected us.”

As Oliver Wendell Holmes once declared, “Taxes are the price we pay for civilization.” Kidd’s view on taxes is similar, noting that it’s just the price of doing business:

I don’t remember feeling resentful of having to pay taxes or having to pay for all the various licenses that you have to pay for. I mean, it is a hassle, it is money, but it’s business. It’s part of the price of doing business …

If your business doesn’t generate enough for you to be paying the various things you’re supposed to be paying, then your business model doesn’t work. You know, you need to do something different. You need to adjust something. That just feels like energy that is so wasted, to be mad at the government…

I agree with something one of my mentors said: “I want to pay a lot of taxes because that would mean I’m making a lot of money.” It is fair.

Warren Buffett: This Society Disproportionately Values What I Do Well

Warren Buffett founded Berkshire Hathaway and lives in Omaha, Nebraska.

Warren Buffett, the founder of Berkshire Hathaway and the second-wealthiest man in the United States, is hailed as one of the most successful stock market investors ever.²¹ Yet this does not prevent Buffett from acknowledging the role of the uniquely fertile soil of the American economic system in amassing his wealth. At a 1996 Berkshire Hathaway annual meeting, Buffett noted that the US system “provides me with enormous rewards for what I bring to this society.”²²

Although we referenced the following quote in the introduction, it is worth repeating here. In a television interview, Buffett stated: “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.”²³

Buffett feels he is not only fortunate to have been born in the United States but also lucky that he “came wired at birth with a talent for capital allocation.”²⁴ He bought his first stock when he was just 11 years old, from which he made a $5 profit. When his family moved to Washington, DC, from Omaha, Buffett had two paper routes, earning him $175 per month; he also had a business that made $200 per month from pinball machines and peanut vending machines.²⁵ After graduating from Woodrow Wilson High School, Buffett attended the University of Pennsylvania for two years before transferring to the University of Nebraska. He later earned his master’s at Columbia Business School.²⁶

Upon graduation Buffett worked as an investment salesman in Omaha for several years before taking a job at the Graham-Newman Corporation in New York. He returned to Omaha in 1957 and began Buffett Partnership Ltd. In 1962 his partnership bought shares in a textile-manufacturing firm called Berkshire Hathaway; he eventually took control in 1965 and used the company as a means to invest in others. Since then Berkshire Hathaway has acquired stock in such corporations as the Washington Post Company, ABC, Coca-Cola, and Gillette, and it even owns various companies, such as GEICO and FlightSafety.²⁷ His successful investing strategies, which follow a value investing philosophy, made Buffett a millionaire and eventually a billionaire. He is currently the chairman, CEO, and largest shareholder of Berkshire Hathaway.²⁸

I think that people at the high end—people like myself—should be paying a lot more in taxes. We have it better than we’ve ever had it.

— WARREN BUFFETT

But Buffett recognizes that while his particular skills have been and continue to be highly valued in the marketplace, the skills of other people are undervalued:

If you’re a marvelous teacher, this world won’t pay a lot for it. If you are a terrific nurse, this world will not pay a lot for it … I do think that when you’re treated enormously well by this market system, where in effect the market system showers the ability to buy goods and services on you because of some peculiar talent—maybe your adenoids are a certain way, so you can sing and everybody will pay you enormous sums to be on television or whatever—I think society has a big claim on that.²⁹

Consequently, Buffett’s attitude toward society shapes his perspective on taxation. He has said, “If you’re in the luckiest 1 percent of humanity, you owe it to the rest of humanity to think about the other 99 percent.”³⁰ Thus, Buffett is a staunch advocate for progressive taxation to “partially redress” existing inequality.³¹

He pointed out that in 2011 his taxable income of around $46 million was taxed at only 17.4 percent, a fraction of what others pay.³² He believes this is unfair. In a recent interview with ABC, he detailed his feelings: “If anything, taxes for the lower and middle class and maybe even the upper middle class should even probably be cut further. But I think that people at the high end—people like myself—should be paying a lot more in taxes. We have it better than we’ve ever had it.”³³

Buffett is also an advocate for the estate tax. In 2007 he testified before the Senate Finance Committee about its importance: “Dynastic wealth, the enemy of a meritocracy, is on the rise. Equality of opportunity has been on the decline. A progressive and meaningful estate tax is needed to curb the movement of a democracy toward plutocracy.”³⁴

In addition to supporting policy measures that address gross inequalities of our economic system, Buffett is a well-known philanthropist. In 2006 he announced that he would give away all of his Berkshire Hathaway stock to philanthropic foundations, with most of it going to the Bill and Melinda Gates Foundation. Then, in 2010, Buffett pledged to give away 99 percent of his wealth during his lifetime or at his death because, as he put it, “fate’s distribution of long straws is wildly capricious.”³⁵

Martin Rothenberg: My Success Was Paid For by Others

Martin Rothenberg was founder and CEO of Syracuse Language Systems, based in Syracuse, New York.³⁶

Martin Rothenberg forgets neither where he came from nor the help he received along the way. Now a successful entrepreneur in Upstate New York, Rothenberg is quick to credit the many public resources that were available to him.

Rothenberg’s story begins in Brooklyn. The son of immigrant parents—a housepainter and a sales clerk—he attended public schools there. Says Rothenberg: “I started my movement to technology by going to the Electricity and Radio section of the local public library when I was maybe 12 or 13 years old. I picked out all the books on that subject, and I found one that I thought I could understand without any help. I just read it from cover to cover.”

In a New York City technical high school, he took his first formal classes in technology. But money for college was not in the family budget: “If I went to college, I would have to pay for it myself. I could never take money from [my parents] for a college education—that wouldn’t be fair. That would come from the savings they had for their retirement.”

Following high school Rothenberg put his technical skills to use doing television repair, and he considered opening a shop of his own. But he was drafted into the army in 1953, and after Signal Corps training he spent 14 months in Korea. As the end of his tour of duty approached, Rothenberg recalls learning about what the GI Bill offered: “When I got home, they were offering me a full scholarship, including tuition and a stipend to live on. You’d have to be foolish to turn it down. By making it easy to attend college, the GI Bill encouraged people to make that step, to give up the immediate income for possible gains in their lifestyle and financial status later on. That’s what it did for me.”

After graduating from the University of Michigan in electrical engineering, Rothenberg took a job with Hughes Aircraft, then another in the space program at Bendix. His wife’s degree program took him back to the University of Michigan, where he learned about a full fellowship for a new three-year graduate program that combined computers and language. He notes that the fellowship program was under the National Defense Education Act, a direct result of the Russians’ launching the Sputnik satellite, as the country realized that there were not enough Americans educated in the area of technology. He was accepted into the program and had a necessary fourth year of graduate work funded by a loan, forgivable on the condition that he go into teaching.

The forgivable loan biased me somewhat toward going into education. I think that most people don’t realize the extent to which the technology programs at the universities are sponsored by the government. Besides the sponsorship of my education, I had research grants all the way through my teaching career, starting from the first year. There were a couple of grants from private foundations, but mainly they were government grants.

Besides paying for part of my own salary and lab equipment, the grants included tuition and stipends for assistants. So the young people who work for you in your laboratory are mostly paid for by the government. My university research provided the basis for Syracuse Language Systems. So that’s in large part where my wealth came from.

After graduate school, he went on to teach at Syracuse University for 25 years, from 1966 to 1991.

After the death of his wife in 1990, Rothenberg retired and started Syracuse Language Systems, which developed multimedia software for language learning. Of the company name, he says, “The reason I called it ‘Syracuse’ was because it was the Syracuse area that had all the skills necessary to make a high-tech software company. We had talented artists, programmers, marketing specialists, and linguists for the language software. And, of course, most of those people were educated in our public education system.”

He started the business slowly, with just a few people, including his son, starting out in a government-sponsored “incubator” that provided below-market rent and subsidized support services.

I had the ability, which was given to me by my graduate studies, to understand what’s right and wrong in speech patterns and, from my engineering experience, how to measure that and give corrective feedback to people. So I have those technical capabilities, which are not commonly found in one person. Usually, someone is either a linguist or an engineer, not both.

When I left the university in 1991, some people thought I, as an academic, could not do well in business.… They didn’t know my grandmother. My grandmother was an entrepreneur who was always in business even though she couldn’t read or write English, at least not too well.

By making it easy to attend college, the GI Bill encouraged people to make that step. That’s what it did for me.

— MARTIN ROTHENBERG

As a software developer, the company relied heavily on patent and copyright law to protect its products. Says Rothenberg:

Intellectual property protection is important. You can’t accumulate a lot of money or resources without someone stealing it from you, and a government has to protect you and stop that from happening. I have a number of patents. In my present company [Glottal Enterprises], for example, it would be easy for a larger company to reproduce what we are doing, except for the fact that I do have some patents protecting a lot of what I am doing now.

Syracuse Language Systems was the first company to make a consumer product using computer-based speech recognition, and I was awarded a patent in that area that protected our innovation. At a financially crucial time, we were able to get a sizeable legal settlement from one company that was copying our programs in Japan. On the other hand, one reason we couldn’t go into China was because they didn’t enforce copyright laws.

Not only was Rothenberg able to rely on the US government to protect his product but he also gives credit to the government for starting the Internet. “In the last years of our ownership of the company, we were heavily invested in using the Internet for language instruction.”

That’s not to say that the government couldn’t do more to support small businesses and level the playing field. Rothenberg reflects on some of the challenges faced by small businesses in America: “For example, one problem in hiring [at] a small company is health care. It is hard for us to pay for health care. Government health care, at least minimum health care, would make that better for us.”

In addition to his technical and linguistic skills, Rothenberg sees his strength as an entrepreneur as setting a clear vision for the company that everyone understands, motivating people, knowing his own limitations, and bringing in the right people to help him. But he’s quick to point out that he didn’t—in fact, he couldn’t—do it alone:

You can’t have a company doing especially high-tech work without a network of people that you can draw on—skills that you can draw on—for technical management [and] marketing skills. There is nothing that I could have done alone. My father was a house painter; all he needed was the paint and he would get paid for painting somebody’s house. But you can’t build a high-tech company by yourself in that way.

The first thing that you have to do is gather a team. There’s not much you can do as one person. You could start a small retail business, like my daughter has, but you’re not going to make a lot of wealth that way. Generally, you have a team. Unless you can find 76 hours in your workday, you just can’t do everything yourself.

When Rothenberg and his financial partners eventually sold Syracuse Language Systems in 1998, it was worth approximately $30 million. With a part of his portion of the proceeds, he established a small family charitable foundation dedicated to children, education, and the environment.

He does not forget the people who made his success possible. Together with most of the other stockholders, Rothenberg gave a parting bonus to the company’s long-term employees. He adds, “I consider grants from the charitable foundation to be in some measure from all the personnel of my former company, with my family acting as trustees.”

Kim Jordan: The Idea of a Self-Made Person Is a Stretch

Kim Jordan is a co-founder and the CEO of New Belgium Brewing, the nation’s third-largest craft brewer.⁵⁰

Established in 1991, New Belgium Brewing is the maker of the popular Fat Tire beer, among many others.⁵¹ Since its founding, the Fort Collins, Colorado–based company has grown rapidly. It is now the third-largest craft brewer in the nation,⁵² with more than 400 employees, including 250 in Colorado and another 150 across the nation. At the company’s helm is CEO and co-founder Kim Jordan.

Jordan makes clear her view of the self-made myth: “This whole notion of the self-made person is a stretch.… If you live in a farm community, which I have done, you see that neighbors are wildly dependent on one another: ‘I’ll come help you put up your hay; you’ll plow my road.’ It is certainly more of a myth than a reality, and that’s just the interpersonal part. You know, one neighbor to another.”

Expanding her example to the role of government, Jordan adds:

Then you have the whole, “Well, wait a minute. How about all of the subsidies for farming, or the county road system, or the fact that school buses drive long, long ways out of the way to pick kids up to be able to attend public school?” You know, it seems like the purpose of the government is to be able to fund things that we can’t fund … by ourselves because it’s just too expensive to do.

So [the myth] has a lot of romance to it, I guess. Although I’m not quite sure why we feel compelled to say that we don’t need to rely on one another.

Jordan speaks highly of the public investments, coordinated through the Downtown Development Authority (DDA) that have revitalized downtown Fort Collins, where New Belgium Brewing is based: “The quality of life in downtown Fort Collins is much improved because we have a Development Authority that’s able to use tax increment financing to make really cool projects downtown that are vastly improving the cultural vibe of the community.”

Small and large cities across the United States have such a development authority that works to “foster economic, cultural, and social growth”⁵³ in their downtown areas. In 2010 the Fort Collins DDA renovated two alleys, stringing up lights, planting flowers in pots, and utilizing quarried boulders as benches. The DDA has also helped fund the improvement of more than 70 facades in Fort Collins, simultaneously promoting “green building practices and projects,” which the 2010 DDA Annual Report says attract green businesses that are more likely to fund community projects.⁵⁴

Jordan reflects on the many public investments made possible through our tax system that have helped New Belgium succeed: “Beer is heavy, and it needs to be transported in vehicles. Certainly the public highway system, the federal system, has been hugely important to [New Belgium Brewing].… We are in an enterprise zone, and so the credits we receive for that, both in hiring and in investments, have been important. The tax credits for purchasing equipment have been really helpful to us, and we probably would not have been able to grow as we have without those because there were years when they were pretty significant.”

Beer is heavy, and it needs to be transported in vehicles. Certainly the public highway system … has been hugely important to New Belgium Brewing.

— KIM JORDAN

In the crucial early years of the operation, New Belgium received a $40,000 Small Business Administration loan. “We were probably three years into it [the business] … so at the time, that was pretty substantial.” The company also benefited from services provided by the local land-grand university, Colorado State University (CSU), and a grant from the Department of Energy to encourage innovation and new energy technologies.

We work a lot with CSU in pilot programs where they want a test facility for some project or another. So just the fact that we have a land-grant university in our town is helpful to us, all the way from microbiology through energy management.…

We are part of a test project, a grant through the Department of Energy.… Being a part of that project, on the one hand it compelled us—or rather forced us, I guess—to invest a few million dollars, but on the other hand we were able to get a couple of million dollars out of the program as well for both hardware and software for energy management and for renewable energy production. So that was a benefit.

Like almost all business owners, Jordan took great risks in her life. She and her then-husband took out a second mortgage on their home, along with credit card debt, to raise the seed money they needed to start the business. At one point she had to borrow $5,000 from family to make payroll, but in the end she emerged a very successful businesswoman.

Jordan acknowledges that she was also lucky on many levels. Both of her parents were college graduates who were politically active and engaged in the community. In addition to providing a stable home environment, her parents could afford to send her to a private Quaker school, where she learned some of the bedrock values she holds to this day and which have influenced the company as well. Says Jordan: “George Fox, who was one of the founders of the Quaker movement in the United States, has a quote, which is, ‘Let your life speak.’ And in terms of the way that we operate New Belgium, I think that’s been really influential for me because I think one of the things that you come to see as a successful entrepreneur is that you can use profits to do really interesting work.”

Jordan benefited in many ways from the public structures in our society. She completed her college degree at CSU, a land-grant college as noted above. While she worked her way through college, she received publicly guaranteed student loans and a few Pell Grants along the way. Jordan was also fortunate to have attended CSU at a time when the state was far more generous in its support of higher education.

During the years that Jordan attended CSU, higher education accounted for more than 20 percent of the state’s general fund budget. That dropped to just over 10 percent in the years leading up to the Great Recession in 2008. Since then it has dropped to only 6.4 percent of the state’s general fund budget, though funding from ARRA has helped offset some of the funding lost during the past two years.⁵⁵ Absent a new stimulus plan, however, that federal assistance will soon disappear.

Recognizing all the benefits and good fortune that both Jordan and New Belgium Brewing have received over the years, Jordan takes to heart a quote from Luke 12:48, “For everyone to whom much is given, of him shall much be required.” And giving back is a fundamental aspect of how New Belgium operates:

It’s about making sure that we pay a living wage, sharing profits with our co-workers, sharing equity through ESOP (Employee Stock Ownership Plan) ownership, giving people a bike, providing domestic partner benefits, having paternity and maternity leave, having a generous personal time-off plan—I could go on.… [This set of company policies] comes from the belief: (1) that to whom much is given, much is required, (2) that excessive consumption is really not the best mark of a life well-lived, (3) that the pooling of labor to build equity should inure at least at some level to the benefit of everyone, and (4) that the accounting for our impact on the commons is our responsibility to work toward.… I’d never want to sit here and say, “Oh yeah, we account for all of our impact”—because we don’t. But we understand it to be a process, and we are into continuous improvement, so in that area as well as many others we continue to invest money and intellectual energy and passion and focus.

We lift up a pint in celebration of Jordan’s uncompromising values and business success.

Anirvan Chatterjee: Leaving the Ladder Down behind Him

Anirvan Chatterjee is the founder and the CEO of BookFinder.com, which later became a subsidiary of Amazon.com.⁵⁶

Anirvan Chatterjee didn’t set out to found a successful online business as a young technologist in Silicon Valley in the 1990s, but it almost seemed inevitable:

I’d been running the site as a hobby project out of my dorm room, and it started growing, gaining users. Meanwhile it felt like everyone around me was trying to start their own dot-coms. I don’t have an entrepreneurial background in my family. But the entrepreneurial dream was totally a part of San Francisco Bay Area culture during those early dot-com years, with everyone reading their Wired magazines and talking about how the Internet would change the world. It was hard not to get caught up.

The result was BookFinder.com, a comparison search engine for new, used, rare, and out-of-print books that the then-19-year-old Chatterjee first built as a class project at UC Berkeley and which eventually became a subsidiary of Amazon.com.

A similar environmental boost came from his family: his father, who had emigrated from India to Canada and then moved to the Bay Area, was an engineer.

I started programming when I was 15. My dad worked tech jobs, and he was able to bring a computer home from his work on the weekends, until we bought our first computer. My parents had moved so that I could go to school in a well-funded public school district. Property prices were higher, but they made that sacrifice for my education. I started taking computer science classes at school as early as possible. We had a great computer science teacher, and she really sparked my interest in trying to think about how people use technology.

In fact, state-sponsored education played a multigenerational role in Chatterjee’s success. The Indian government trained his father (and thousands of others) in engineering, ultimately helping fuel technological advances in the United States and elsewhere. Once the Chatterjees came to America, California’s public schools nourished and focused Anirvan’s nascent interest in computers.

When Chatterjee was trying to decide whether to take his entrepreneurial leap from college to business, he sought and received the encouragement and the blessings of his mentors at UC Berkeley, the flagship university of California’s public higher-education system. “The support of my professors meant a lot to me,” he says. “Many of them had seen me start the project as an undergrad and continue working on it as a grad student, seeing the site grow, seeing it get national attention. It meant so much to get that kind of support from them, letting me use the site as an example project in my classes.”

Before the Internet, finding rare books was a hit-or-miss affair of hours spent searching the dusty stacks of mom-and-pop stores. The digital revolution allowed individual retailers to widely share their catalogs, but comparison-shopping was still difficult. That was the problem BookFinder.com was created to solve. “There were over 50 different sites where individual bookstores could upload their catalogs,” says Chatterjee. “What BookFinder.com offered was a one-stop search. As a user you would type in the name of the book you wanted, and we’d instantly search millions of books for sale and show you all the choices, so you could pick the cheapest copy or a signed first edition or whatever you wanted. You could then buy the book of your choice directly from the bookseller.”

Public investment in libraries served as a source of inspiration:

If it weren’t for libraries, I may not have been reading so heavily or have gotten into the bookselling business. Growing up, my parents would take me to the library every week, and I got so much joy in being able to check out any book I wanted. I’m a voracious reader. I read over a hundred books a year. The mix has changed over time. After I started working, I started buying more of those books, and now the mix is about 50-50. But libraries sustained me to the point where I started taking buying books seriously enough that I could start a business around it.

Chatterjee stayed with his company after it was bought out—first by used-book search giant Abebooks and then ultimately by Amazon.com—but he left in 2009, after almost 13 years at the helm, to spend the next year doing citizen journalism with his wife, focusing on global climate change issues.

Chatterjee attributes his success to factors beyond talent and hard work: “Being there at the right time, at the right place, with the right idea had a lot to do with it. I mean, I worked hard. I don’t want to discount the fact that I worked incredibly hard on my startup. But a lot of people work incredibly hard on their ideas, and people work hard all their lives and don’t necessarily have much to show for it financially at the end of their lives. So I count myself as incredibly lucky.”

Ironically for an American story, even Chatterjee’s brown skin helped him: in the world of Internet startups, his Indian-American ancestry gave him the reassuringly “right look” for a computer programmer in Silicon Valley. “My race and gender certainly didn’t hurt,” he says.

He also cites hard-to-measure yet still very real “public goods”—such as the enforceability of contracts—as part of the environment that allowed his business to thrive:

As a really young company, we’d end up juggling 50 to 100 contracts at any given time with companies in the book space. In many cases, we would contract with a company so that they would have their books listed on our site at no cost, and they would pay us something if and only if we helped them sell any books. But we couldn’t really know if we’d helped sell any books or not. Once our users left our website, we had no way of knowing if they completed the transaction. But we trusted those contracts. It meant a lot to be working in a stable business environment in a first-world country, where we felt like we could rely on partners to honor contracts.

Similarly, just as his company relied on the established legal framework and the centuries of contract law and practice to undergird its business relationships, as a programmer Chatterjee is well aware that he was able to draw from the commons to design and engineer his website. “We didn’t have to write 99 percent of the code for the BookFinder.com platform,” he says. “We built on top of an open source operating system, databases, programming language, and code libraries. Thousands of programmers had banded together to build great software and give it away at no cost. That meant we didn’t have to spend $50,000 buying a license from Oracle—we could download a free database and get started building a company, thanks to a generous sharing economy.”

It meant a lot to be working in a stable business environment in a first-world country, where we felt like we could rely on partners to honor contracts.

—ANIRVAN CHATTERJEE

Just as he acknowledges the role of good luck in his success, Chatterjee recognizes the bad luck that can trip up others. A supporter therefore of public services that give a necessary hand up, he bemoans the recent “massive disinvestment” in the California public education system that served him so well:

That [disinvestment in public education] starts at K–12 and goes all the way up to our two tiers of public universities and community colleges. And having started a business that came out of a university class project, it seems only fair that others have that same opportunity to access a space that could be an incubator for every Californian with a great idea. I didn’t think I’d start a business—I just happened upon it. I was at the right time and place but in an environment where I was inspired to go further. And I really hope that’s going to be as accessible as possible to a large, diverse audience.

He says that California’s public universities are addressing funding shortages by filling classrooms with more full-tuition, out-of-state students, leaving fewer slots for local students whose education is partially subsidized by the state: “Our taxpayer dollars should be supporting more in-state students getting this kind of public education. It’s not only for those who can pay more.… Yeah, I’ve gotten a lot and I want to make sure others have that as well.”

On a national scale too, Chatterjee thinks it’s simple logic that public services be paid for by those best able to bear the cost—people like him, who often have been the beneficiaries of those services:

I’ve been incredibly lucky, building and selling a small dot-com in my twenties. Especially in a recession like this, people like me are the first ones who should be tapped to make sure that the country’s able to pay for its basic human needs.… So, yeah, I am very much in favor of substantially increased progressive taxation, possibly a tax on wealth or a tax on financial transactions. There’s a huge class of Americans who can afford to be tapped a little bit more so we can pull everyone else up with us.

Chatterjee believes in leaving the ladder down behind him.

Peter Barnes: Wealth Comes out of the Commons

Peter Barnes co-founded Working Assets and is currently a writer and an entrepreneur in Point Reyes, California.⁶⁴

Peter Barnes co-founded Working Assets, a financial services and telephone company serving progressive investors and consumers. Like his parents, Barnes attended New York City public schools, and “the fact that my father, a penniless son of immigrants, could get a really good free education certainly benefited me.” After graduating from Harvard in 1962, Barnes worked as a journalist for 15 years and then decided to become a businessman. In 1982 he co-founded Working Assets as a socially responsible investment firm that later moved into credit cards and telephone service. He sold his stock in Working Assets to his partners and retired in 1995.

His experience as a business owner led him to co-found OnTheCommons.org, an organization dedicated to expanding popular understanding of the “commons,” which includes, in Barnes’s words, “the gifts of nature and society that we share and inherit together—and have an obligation to pass on to our heirs, undiminished and more or less equally.” This notion of the commons includes environmental assets such as the air, fisheries, water, and land. It also includes socially created assets such as our highways, legal system, the Internet, and accumulated scientific knowledge.⁶⁵

Barnes’s understanding of the role of the commons has shaped his perspective about wealth creation. The notion that stock values are in part socially rather than individually created will be new to most readers. It comes from his experience taking (or rather almost taking) Working Assets public:

What we, the private shareholders, learned was that our business was worth a whole lot more as a public company than as a private company. What added this extra value? It wasn’t that we’d make more sales or profit—these numbers would be the same either way. The extra value came purely from the fact that our stock would be liquid—we could sell it to any Tom, Dick, or Harriet, any day of the week. According to our investment banker, liquidity alone would add 30 percent to the value of our stock.⁶⁶

Though in the end they decided not to take the company public, for Barnes it was a pivotal lesson. “That added value comes not from the company itself but from society—from the stock market and the infrastructure of government, financial institutions, and media that supports it.” For many whose wealth has been created in the stock market, it is easy to forget that this entire system has been built over several generations and is regulated at taxpayer expense through institutions such as the Securities and Exchange Commission.

And the US stock market is not just local. It is a highly sophisticated global marketplace where you can sell your shares virtually anywhere at any time. This gives access to an infinitely larger market of potential buyers—the market for shares becomes the whole world. This greatly increases liquidity and value. As Barnes points out, “You are plugged into a global network; you get listed, and based on your filings with the Securities and Exchange Commission, people generally believe your numbers. You talk to a few analysts and, sight unseen, they pay you money. It’s a wonderful social creation that basically rewards private shareholders for adding their company to the grand casino that is the publicly traded stock market.”

For Barnes the stock market is just one of the ways in which a private enterprise benefits from society’s investment and infrastructure. The entire system of institutions that fosters trust in the marketplace is essential. When Barnes co-founded Working Assets as a money market fund, he created advertisements to attract investors: “The next thing we knew, people were sending us big checks in plain envelopes. These people had never seen me before, nor met anyone from our company. They didn’t know us from a hole in the wall. So they didn’t trust us. They trusted a system that took centuries to build. I wrote some ads, but no one would have responded to them without the whole infrastructure that gave people trust.”

Repeated examples show what happens when this trust in the marketplace is shaken. In the wake of the Enron and WorldCom scandals, millions of investors lost confidence in the accuracy of corporate accounting, and the stock market lost 28 percent of its value.⁶⁷ A study by the Brookings Institution estimated that the decline in investor confidence cost the economy approximately $35 billion.⁶⁸ “The corporate scandals caused people to stop trusting the numbers that companies were reporting,” said Barnes. “Imagine how much value is created by trust and the whole system that assures that trust?”

People were sending us big checks in plain envelopes.… They didn’t know us from a hole in the wall. So they didn’t trust us. They trusted a system that took centuries to build.

—PETER BARNES

Since leaving Working Assets, Barnes has focused his energies on writing about economics and the commons. He is the author of Who Owns the Sky?, a book proposing a solution for environmental degradation and economic inequality called the “sky trust.” Recognizing the air as a common asset that absorbs pollution, Barnes calls for using the proceeds from selling pollution rights to fund wealth-building accounts for everyone. He helped write “cap and dividend” legislation that would charge polluters and return the revenue to everyone on a one-person, one-share basis. Barnes believes this would curb global warming and ensure a strong middle class at the same time.

Barnes is an advocate of a healthy capitalism that recognizes the value of the commons. This value is huge and lies behind much of what we call “private” wealth. “Most wealth comes out of the commons,” he says, “and individuals add a little bit on top of that. But because of the way capitalism is set up, for adding that little bit, you get to grab an enormous share of what comes out of the commons.”

This description by Barnes reflects what we mean when we talk of the built-together reality of individual and business success. In our case, we’re speaking primarily of the public infrastructure, built through generations of public investments in the common good. Whatever the entrepreneur adds is built on top of that foundation.

For Barnes the challenge of capitalism in the twenty-first century is to recognize the value that is created by the commons and to protect it—give it standing and clout. There will still be those who generate substantial individual wealth, but it won’t be because they have pocketed the wealth of the commons.⁶⁹

Amy Domini: Regulation Makes My Industry Possible

Amy Domini is founder and president of the Domini Social Equity Fund, creator of the Domini 400 Social Index, and founder of the Domini Social Investment mutual fund.⁷⁰

Amy Domini questions a lot of things. She challenges the status quo on a regular basis; in fact, questioning the status quo forms the basis of her groundbreaking business. But ask her to point to the influences that made her an entrepreneur, an advocate, a pioneer, and a challenger, and she’ll tell you it was the public structures and the predictable social order of small-town 1950s childhood in suburban Connecticut that instilled in her a sense of safety, clarity, duty, and service. “Everybody went to Girl Scouts,” she says. “Everybody went to church and Sunday School. Everybody learned how to figure-skate; everybody learned how to swim.… If you didn’t want to go stir-crazy, you were always interacting with other people.… In my mother’s generation [it was] creating a bridge club or a PTA [Parent/Teacher Association].”

One of Domini’s lessons about the role of public investment came early. She was the daughter of a public school teacher and the owner of an eggplant processing plant. Domini recalls, as a teenager, her parents pressing their fellow taxpayers to approve a tax levy to build a new high school. The levy failed and the new school was not built, leaving the students to suffer in a dilapidated building. “It was one of the first times I made the connection between paying taxes and the quality of life.”

Her path to becoming a broker in a male-dominated industry was not without help but also not without hard work. With the help of her grandfather, she got a job as a clerk, making copies at a brokerage firm. Using the lessons from her childhood, she arrived five minutes early to work and meetings, did a little bit more than asked, and eventually got promoted through the secretarial ranks. In 1974 she recalls that the stock market was “in the tank”; and although most brokers at the time were men, she asked her boss if she could take the training and to her surprise soon became the firm’s first female broker. She later learned that four women had sued Merrill Lynch for gender discrimination and realized she was probably an indirect beneficiary of those women’s exercising their rights.

In those days, she says, stock ideas would often come “over a squawk box from some smart person in New York” and then be passed on to clients to see if they wanted to invest. Domini found that some of her clients were offended to be offered stock in weapons manufacturers or tobacco, activities that conflicted with their own values: “You are always supposed to know your customers, where they live, et cetera. I just added to it: ‘Is there something you don’t want me to talk about, or something you have deep commitments to, or something you don’t want to be an investor in?’ Virtually everyone said yes. I was amazed.”

This simple but powerful twist on the staid and conservative investment field became her niche and ultimately blossomed into the growing socially responsible investment field of today.

As a young stockbroker, Domini built her client base in part by teaching adult education classes in the evening. She drew up a course called “Ethical Investing,” which she offered alongside the “ABCs of Investing” class she was teaching. Soon after, she co-authored the groundbreaking 1984 book by the same title (after overcoming her disbelief that no such book already existed!). In subsequent years she would continue this groundbreaking work, as described by Domini Social Investments:

Amy realized that what social investors needed was a benchmark—something akin to traditional investment benchmarks like the Standard & Poor’s 500 or the Dow Jones Industrial Average—that could be used to determine whether there was a cost or a benefit, in dollars and cents, to invest this way. For example, would an investor who chose not to invest in tobacco companies or major polluters, preferring companies with better environmental and human rights records, perform better or worse than investors who did not consider these factors? She saw this uncertainty as the primary obstacle to the growth of socially responsible investing.

In 1989, she and her partners Peter Kinder and Steve Lydenberg began work on the Domini 400 Social Index, an index of 400 primarily large-cap US corporations, roughly comparable to the S&P 500, selected based on a wide range of social and environmental standards. When it was launched in 1990, it was the first index of its kind. A year later, they launched the Domini Social Equity Fund to provide investors with a fund that tracks the Index.⁷¹

Although it comes as no surprise to Domini, these socially responsible investments performed as well as or better than traditional investment portfolios.⁷²

Far from bristling at the regulation of her industry, Domini speaks with a seeming sense of pride at the extent to which the mutual fund industry is regulated by the Securities and Exchange Commission. The whole mutual fund industry and its investors benefit from this extensive regulation, even if many of us take it for granted:

The mutual fund industry is a regulated industry. People who complain about regulation don’t even know what regulation is; it’s consumer protection.

—AMY DOMINI

The industry I am in, the mutual fund industry, is a regulated industry. People who complain about regulation don’t even know what regulation is; it’s consumer protection. That’s its purpose. I must do reporting to my board and shareholders on a quarterly basis. My calendar is full of follow-through on mandatory reporting. Still, if you were to say to me, “Which of these regulations would you strip away?” I’d tell you that I am fine with them.

If I were an investor and had an inkling of an understanding of how regulated a mutual fund is compared with other financial management routes, I would be stunned. A financial planner is somewhat regulated; a hedge fund almost totally unregulated—nothing to keep them from being liars, cheaters, thieves, except perhaps laws against fraud or insider trading. The regulatory environment is great consumer protection. In this tough market, where consumers don’t feel protected, [regulation of mutual funds] should give them some comfort.

Domini’s companies, and the whole socially responsible investing field, also benefit indirectly from government-mandated disclosures and regulation of other industries.

I could not have started my business without federally mandated disclosures. For instance, if I am trying to evaluate a company, I look to the company’s own reporting. There is a lot of it. I particularly look at the Form 10K. Corporations must by SEC guidelines release quarterly information, reports, and the annual reports must be audited. The 10K [report required by all publicly traded companies] tells me a lot. But many other sources grow from mandatory reporting.

How many people died in the workplace last year? That is federally mandated disclosure, so that it is available to me in most cases. Are there any environmental liabilities? I look to the 10K, which must by law reveal this (though it is admittedly under-reported). Further, the Toxic Release Inventory [is a] federally mandated data source.

Who are the top officers by pay? In today’s cyber-age it takes about a nanosecond to find out if there are any women or people of color in that top five by pay, and their names are disclosed due to regulation. The board, ditto—federal mandate.

What product safety recalls have occurred? Regulations mean that the information is disclosed, but it is not easy to find. Thankfully, Public Justice, the group that lobbies on behalf of consumers, has a list on their website, which makes it easy. Does the company sell weapons? Weapons procurement is federally disclosed.

Not only do my investors know that the product I offer has robust federal oversight, but I know that the data I rely upon to create that product does as well.

Free-market theory assumes falsely that people have perfect information about the products they are buying, which is necessary for people to make rational choices between competing products. In the real world though, perfect information is almost never available to consumers. Most consumers have little idea about where the products they buy come from or how they were made. The same applies to investors.

The regulatory examples Domini lifts up help make up for that flaw in market theory by gathering valuable information, which Domini uses as the cornerstone of her business model. This is much the same concept used by the USDA in requiring companies to label food products with a list of ingredients and nutritional information. For markets to even come close to functioning as theorized, this kind of transparency is necessary, but it rarely comes without government involvement.

Nikhil Arora: It Takes a Village to Raise a Business

Nikhil Arora is the co-founder and the co-owner of Back to the Roots, an Oakland-based sustainable-products company.⁸⁰

Nikhil Arora was born in 1986, making him the youngest entrepreneur profiled in this book. He is the co-founder, along with Alejandro Velez, of Back to the Roots, a startup business in Oakland, California, that was “inspired by the idea of turning waste into wages and fresh, local food.”⁸¹ In 2010 they were one of Social Venture Network’s Innovation Award winners,⁸² and in 2011 Arora and Velez were named among CNN Money’s “10 Generation Next Entrepreneurs to Watch”⁸³—and for good reason. Only two years old, their hallmark product—kits to grow gourmet mushrooms entirely from used coffee grounds—is already being sold in nearly 500 stores nationwide, including 300 Whole Foods stores, 150 independents, and, most recently, in 30 Home Depot stores for test marketing in Northern California.

Arora is a first-generation Indian American who was born and raised in Southern California. His parents both graduated from college in India, and his father received a master’s degree at a university in Germany. Both landed professional, computer-related jobs after moving to the United States, providing Arora with a solid middle-class upbringing. Arora, like many business leaders featured in this book, attended public schools, both in Southern California and when he went on to study political science and business at UC Berkeley.

It was there, in his final semester at UC Berkeley, that he met his business partner, Alejandro Velez. They both heard their professor make a comment in a business ethics class about its being possible to grow gourmet mushrooms entirely from used coffee grounds. Independently, they both approached their professor, asking if he had any more information. The professor responded to each of them separately via e-mail: “I have no idea, but this other kid asked me that, too. You guys should link up.” They did.⁸⁴

Shortly after they met, they began experimenting and grew their first batch of oyster mushrooms. Eventually, the business plan began to take shape, with used coffee grounds supplied by Peet’s Coffee & Tea, good-quality gourmet mushrooms grown by the company, and customers to buy them, including Whole Foods. But with less than $2,000 of their own money to start with, an initial grant they received from UC Berkeley made a big difference. “I think we were fortunate enough at that point—a couple of weeks before graduation,” says Arora. “We got a small grant of $5,000 from our chancellor for social innovation. We looked at each other and said, ‘You know what? We have got to do this!’ And that’s really how we became full-time mushroom farmers.”⁸⁵

The grant from UC Berkeley’s Haas School of Business was not the last grant they would receive. In subsequent years they won other grants of between $10,000 and $50,000 as a result of contests to identify new ideas, as well as competitive awards targeting young and urban entrepreneurs. The funding for these grants was largely made possible through public-private partnerships, a recurring theme Arora brought up in our interview with him.

Shortly after the initial success in growing and selling gourmet mushrooms, Back to the Roots moved into producing mushroom-growing kits. Through the kits—boxes of preseeded coffee grounds that customers simply moisten to start growing—they dramatically expanded the reach of their business, which now includes a 10,000-square-foot warehouse in addition to their nationally distributed product.

We got a small grant of $5,000 from our chancellor for social innovation. We looked at each other and said, “You know what? We have got to do this!” And that’s really how we became full-time mushroom farmers.

—NIKHIL ARORA (right, with business partner Alejandro Velez)

Arora also speaks of the importance of the loans they were able to get in the critical first years of their business. In addition to a $25,000 loan from Whole Foods to promote local producers, they received a $50,000 loan through the Oakland Business Development Center (OBDC). The OBDC loan program uses public funds from the City of Oakland, the federal SBA microloan program, and others. The purpose of the OBDC loan program is captured on its website: “We finance businesses that help to achieve positive social, environmental, and financial impact in the communities we serve. Our mission-driven loans increase job opportunities in low-to-moderate-income areas, foster entrepreneurship among underserved groups, and bolster economic and community development through the transformation of blighted neighborhoods.”⁸⁶

Arora points to the JOBS NOW! program as an example of a public-private partnership that helped his new business grow while providing the long-term unemployed with a chance to get back into the workforce. The JOBS NOW! program, administered by the San Francisco Human Services Agency, initially received 80 percent of its funds through the American Recovery and Reinvestment Act, also known as the federal stimulus bill.⁸⁷

The jobs program paid the salaries, for an initial period of time, of new, prequalified employees who had been out of work for six months or longer and had children under 18 years of age. Federal funding for the program expired in 2010 and was not renewed, but the City of San Francisco found new funding for the program at the state and local levels. Under the renewed program, an employer can be reimbursed for the first $5,000 in salary for individuals hired through the jobs program.

Arora notes that Back to the Roots participated in both the initial federally funded program as well as the locally funded, scaled-back version of the program. More than 60 percent of the people they hired through the program became long-term employees. Speaking of the program’s benefits, Arora states, “We were able to get subsidized for that $5,000, which is nice because it pays for all that training period, which is the most inefficient part of bringing someone on. It really incentivized us to hire, to grow, and to take some chances because we had the people who could help us do it. I can’t tell you how instrumental that program was for us, more than any other grants we received. It was the most tangible form of support: helping pay the people you’re hiring.”

A brief glance at Arora’s story shows the ways in which public and private factors have contributed to his business success. In addition to his and Velez’s hard work and entrepreneurial spirit, Arora has benefited from a host of public institutions, including the public school system, UC Berkeley, public-private grants for innovation, the OBDC loan program, and the San Francisco JOBS NOW! program.

Reflecting on the success of Back to the Roots, Arora reiterates the value of the public-private partnerships, direct public supports, and all the other businesses—from Whole Foods to Peet’s Coffee & Tea—nonprofits, and individuals that have supported them on their journey: “You know that saying about how it takes a village to raise a child? Well, I think it takes a village to raise a business too.”

Ben Cohen: Holding the Business in Trust for the Community

Ben Cohen is a co-founder of Ben & Jerry’s ice cream company, based in Waterbury, Vermont.⁸⁸

Ben Cohen’s rapid-fire recitation of his résumé can only bring a smile and a sense of amazement. Perhaps it’s where he learned to value the work of the common man:

I went to public school in Merrick, on Long Island, and after that I went to Colgate University for a year and a half, dropped out, went to a few other places and dropped out of all of them, and, you know, had a bunch of jobs along the way. I was a newspaper boy. I worked at McDonald’s. I worked sorting mail, as a Pinkerton Guard, an assistant superintendent, a garbage man, a Yellow Pages deliveryman, and a night mopper at a Jamesway department store. I was a short-order cook, a taxicab driver in New York, and a clerk at a hospital. I was a pottery wheel deliverer, and I tried to make a living selling pottery, but nobody would buy my pottery. My first real job was at a residential school for emotionally disturbed kids in Upstate New York as a crafts teacher.

Cohen never expected to make it big in the world of ice cream. In fact, when he teamed up with his childhood buddy Jerry Greenfield (“We met in seventh-grade gym class, running around the track; we were the two slowest, fattest kids in the class”), ice cream was supposed to be just a stepping-stone to something more desirable: “We decided to try out being in business for ourselves and opened a homemade-ice-cream parlor. The idea was that it was just going to be a little one-storefront operation, and then we’d sell it in a couple years, and with the money we got, we’d buy a tractor-trailer and become cross-country truck drivers.”

They started the business on just $12,000: $2,000 borrowed from Cohen’s father, $2,000 of his own, $4,000 from Greenfield, and a $4,000 bank loan. Drawing on Greenfield’s biochemistry background and a college textbook simply called Ice Cream, they began cranking out “gobs of homemade ice cream,” searching for the right formula.

Neither Cohen nor Greenfield had much background in commerce. They consulted with the University of Vermont, and Cohen took a $5 correspondence course from Penn State University.

The way we got our business stuff was by mail from the Small Business Administration. The SBA published all these little pamphlets. They cost 25 cents apiece, and they were on all the different aspects of a small business. Whatever you needed to know, it was there, in one of these little pamphlets. And you know, there was no bullshit in ’em. They were excellent.

Jerry and I devoured the SBA pamphlets that the government puts out on how to start a business and how to conduct business. It just educated us about every phase of business, from selecting a location to marketing and advertising and bookkeeping and creating a business plan. So that was quite helpful to us.

And then, at a stage when Ben & Jerry’s needed money, we ended up getting an Urban Development Action Grant from the government.

Being in the food business brings its own set of concerns, and Cohen recognizes the importance of government’s role here as well: “The government does set food-safety regulations, and we found those to be helpful. It taught us how to make safe products, and it certainly was helpful in making sure all the suppliers and vendors had to make safe products that conformed to the government’s standards.”

Who created the wealth? It was really created by our customers and employees, people who worked with us.

—BEN COHEN

Reflecting on the role of government in supporting a business like theirs, he adds: “Every business needs the infrastructure that government provides in terms of roads and transportation. And I think [another role is] just refereeing a level playing field and setting down the rules by which businesses can go about their business.”

Cohen and Greenfield could be forgiven if they believed that their success was purely the result of their individual effort. The first years of the business were quite a struggle, and winters in Burlington, Vermont, were particularly bad for selling ice cream. So they began selling 2.5-gallon tubs to restaurants out of the back of Cohen’s car. They eventually hit upon packaging their product in the printed pint containers for which they are now famous and selling it to mom-and-pop stores. They went from 50 accounts to 200 accounts in a matter of months, and took off from there.

Soon the business was bursting at the seams, with not enough room to store raw ingredients or finished product, not to mention “lousy” working conditions. Rather than go the standard route and take in venture capital, they decided to get money from the community. They held the first-ever in-state Vermont IPO “against the advice of the lawyers, accountants, and business advisers”:

There came a time in the history of Ben & Jerry’s when we needed a cash infusion to grow the business. And the normal route for doing that would have been to take in an investment from a venture capitalist, but Jerry and I didn’t want to do that because instead of making a few already-wealthy people wealthier, we wanted to find a way for the community to become the owners of the business; we wanted to spread the wealth and share the wealth.

The idea was to find a way for our neighbors—essentially Vermonters, people who had supported us from the very beginning—to become the owners of Ben & Jerry’s. And the way we found to do that was to hold what became the first-ever in-state Vermont public stock offering, so we sold shares to Vermonters for a very low minimum buy. I think the minimum buy was $126 to get in on the ground floor of this IPO, which was usually an opportunity reserved for wealthier, sophisticated investors.

We advertised and sold these shares direct to everyday Vermonters, advertising them in the first section of the newspaper along with the clothing ads and the supermarket ads. And by the end of the offering, one out of every 100 Vermont families had become an owner of Ben & Jerry’s.

That money built the first plant in Waterbury. From that point on, Cohen believed he was “holding the business in trust for the community.” The uniqueness of Cohen and Greenfield’s relationship to their investors was reflected in their annual meetings, which had the flavor of celebrations and attracted thousands of shareholders. Says Cohen, “Most companies hold their meetings in out-of-the-way places at out-of-the-way times and try not to have anybody show up. We did everything we could to get as many people to come as possible.”

Employees too received different treatment at Ben & Jerry’s. Despite working 16-hour days, the two founders had modest salaries and did not receive dividends or profits while they were running the company. They also had a compressed salary ratio that started at 5-to-1, then moved to 7-to-1, meaning that the CEO could only be paid a maximum of seven times what the lowest-paid worker was making. “We had a profit-sharing system because we believed that the employees should share in the profits because they were creating the profits. And we had a foundation that was run by the employees. They decided where the money should be given.”

It’s not that Cohen takes none of the credit for the success of the enterprise, it’s just that he keeps it in perspective. When pressed to identify his personal skills and talents, he responds, “Drive, perseverance, focus, passionate dedication, self-sacrifice, somewhat of a talent for marketing, a passionate desire to integrate social concerns into our day-to-day business activities, and an intuitive sense of what kind of ice cream people would like to eat!”

But he recognizes the relative value of all types of work and doesn’t believe that the rewards of one should be astronomically different from those of another:

Yeah, we put our life into it. Yeah, I was working 16 hours a day; but the people who were working for me, they were working eight hours a day. Yeah, I was working twice as much. But the people working for me were working hard. When I put in a day of mental work, I’m not working any harder than somebody on my production floor who’s putting in eight hours a day of physical work in an environment that’s a helluva lot worse than my office.

Who created the wealth? It was really created by our customers and employees, people who worked with us. And when the company went public, we did grant a bunch of stock to the people who were working at the company at the time.

Ben & Jerry’s was sold in 1999 to the multinational Unilever for about $326 million.⁸⁹ Cohen was opposed to the sale and believes that the more recently enacted B Corporation law in Vermont might have allowed them to remain independent.⁹⁰ But some parts of the social mission were continued, and he was happy to see the company recently announce that it would source most of its nondairy ingredients through fair-trade methods, which will affect farmers all around the world. Cohen’s share of the proceeds was about $40 million. How does he view that money? “I always worked on the idea that 50 percent of the money that I get goes back to the community in the form of advocating for progressive social change—to change the system so that we don’t end up with as many people in poverty and needing remedial welfare-type bailouts. I believe very strongly, and I’ve got this quote up on my wall: ‘If we had justice, we wouldn’t need charity.’ So I use 50 percent of the money I get to try to achieve that.”

Gun Denhart: Healthy Communities Support Healthy Businesses

Gun Denhart founded the Hanna Andersson clothing company in Portland, Oregon.⁹¹

Gun Denhart grew up in a small university town in southern Sweden. She learned from watching her father, a businessman who eventually started his own company in the packaging business. At university, she planned on studying law but quickly discovered she was better at business: “It was kind of in my genes.”

After meeting her husband, Tom, a native of Portland, Oregon, the two settled in Greenwich, Connecticut, where they had their first child in 1980. Denhart recalls, “We dressed him in Swedish clothes, and people kept stopping me in the street to ask, ‘Where did you get those clothes?’” Neither Gun nor Tom had experience with clothing or mail-order businesses, but they moved to Portland in 1983 and launched Hanna Andersson as a tiny mail-order catalog offering high-quality children’s clothing.

“We didn’t know anything about children’s clothes or about mail order,” says Denhart. “But we were lucky because that was just when the Baby Boomers were having a lot of children. There were a lot of synthetics in children’s clothing, and we were different because we used all-natural fibers. People liked what we had because the quality was really great and we offered bright colors.”

She doesn’t think for a minute that Hanna Andersson’s success was all her own doing. “I certainly don’t think I did this by myself. For one, my husband and I started this together. The good thing about our relationship was that we had completely different skills. I had the business background, and he was the creative one—he really created the catalog and the brand. But so many people we worked with contributed to making Hanna what it is today.”

The list of factors that contributed to the success of Hanna Andersson is long. Denhart credits the complementary skills she and Tom brought to the enterprise; locating a vendor in Sweden that made fantastic cotton clothes; good timing as Baby Boomers were looking for high-quality clothing for their children; and plain old luck. And she gives a significant amount of credit to Hanna Andersson’s employees: “We hired some people in the beginning who were just crucial to Hanna’s success—you are so dependent on your employees. We always encouraged people to act like partners; you know, ‘Please don’t just do what we tell you to do. Give us ideas on how to do things better. Take the ball and run with it.’”

Denhart notes that one of the advantages of starting a business in the United States is the sheer size of the market, and the expansion of the Internet enabled Hanna Andersson to take advantage of that: “One thing that makes it so much easier in America than in my home country of Sweden is that the market is huge. You know, Hanna serves such a niche. You need a big market to support something like that. One language is a huge advantage. I mean, if you compare the EU with America, which is about the same-size market, it is certainly not as easy to get your products out [in the European Union].”

The Internet, a result of federally funded research (see “Reality Check: Building the Internet” earlier in this chapter), allowed Denhart to bring her niche product to scale in the large US market. As one marketing expert attests, “The Internet has opened up all sorts of niche marketing opportunities that either never existed before, or were too expensive to tap into.”⁹² Denhart recounts her story:

We computerized really early on.… When we first started, we didn’t have a computer, which was ’83; but two years later we [did], for word processing and managing catalog orders.… I also had an older son who pushed me to get on the Internet. But we were really one of the first catalog companies to do this.

It’s a big cost saver for a mail-order company because instead of having people on the phone, taking orders, we actually have the customers do the work for us when they enter the order via the Internet. I am a big fan of the Internet. The Hanna website quickly became the preferred way for customers to place their orders.

Denhart lists other public investments that have helped provide a stable environment for her business to operate:

For example, the electricity works, the sewer system works, the banking system has regulations so we can trust our banks. I actually wish we had more banking regulation.…

If we didn’t have a postal service that worked, our whole business model would have been impossible.… You know, there are countries where you can’t rely on the mail. I mail a letter to my brother in Spain and it comes back three times over! How can you conduct business in a country where the mail doesn’t work?

You need to pay taxes because you need to support the infrastructure in your society. You can’t have a healthy business in an unhealthy community.

—GUN DENHART

Denhart believes strongly in the importance of education, particularly early-childhood education, and argues that it should be a high priority of businesses. In 1999 she was a founding board member of the Oregon Business Association, which lobbies for progressive business issues like education and improved health care.

For the long-term success of the state [Oregon], you need to make the education of your kids a priority. I strongly believe that you need to pay taxes because you need to support the infrastructure in your society. You can’t have a healthy business in an unhealthy community.

Businesses really rely on an educated workforce and should be [willing to] spend money on public education. It’s kind of a no-brainer to me. And it’s [baffling] that we can have people arguing and saying, ‘I don’t have kids in public schools, so why should I care about public education?’ And it’s not only education: you need clean water; you need a safe society; you need protection from crime. It’s so obvious to me I just get mad that it’s an issue at all!

Finally, because Denhart believes strongly that her employees were a big part of the success of Hanna Andersson, when she and her husband sold the company in 2001 their appreciation for the role of their employees made the transition profoundly different from most sales. Although there was no contract requiring them to do so, the Denharts devised a formula for rewarding employees based on their salary and their length of service. “There was no way we were not going to give the employees a part of the proceeds. There was plenty of money to go around. And we didn’t do this alone—a lot of people contributed to the success of the company.”

With tears welling up and a lump in her throat, Denhart recalls meeting with each department about the sale of the company and thanking employees for their contributions. “There were so many tears all around,” she recalls. “For some, the checks allowed them to pay off their debts. The less money they made, the more grateful they seemed to be for the bonus,” she adds.

Abigail Disney: Government Creates a Fertile Ground for Business

Abigail Disney is a philanthropist, a filmmaker, and an heir to the Disney fortune.

Despite all of Abigail Disney’s hard work and personal accomplishments, she acknowledges the significance of being born into wealth: “It’s absolutely an accident of my birth. And that’s sort of the point—that there shouldn’t be dynasties built around the simple good luck of being born related to somebody very wealthy.”¹⁰² Nevertheless, luck is not the only factor she attributes to her success in her current philanthropic work: “I like to think I have been pretty effective in what I’ve done so far, but I haven’t done it on my own. In order to do the work that I do, I rely on a tax code that supports a vigorous nonprofit sector.”¹⁰³

Abigail Disney is the granddaughter of Roy Disney, Walt Disney’s brother and business partner, and an heir to the Disney fortune. She is a filmmaker and a philanthropist as well as the co-founder and the co-president of Daphne Foundation, a progressive social change foundation that makes grants to grassroots community-based organizations working with low-income communities in New York City.¹⁰⁴ Her documentary Pray the Devil Back to Hell won numerous awards, including Best Documentary at the Tribeca Film Festival.¹⁰⁵ The film chronicles the story of Christian and Muslim Liberian women who came together to pray for peace outside the Presidential Palace, a nonviolent protest credited with reinvigorating stalled peace talks.¹⁰⁶ Today she serves on the boards of the Roy Disney Family Foundation, the White House Project, the Global Fund for Women, and the Fund for the City of New York as well as the advisory boards of a broad range of organizations working in the areas of poverty, women’s issues, education, and the environment.

As she readily points out, the Disney family fortune has greatly benefited from policies, both historically and currently, that have allowed the business to flourish and expand, making it one of the most well-known corporations in the world. She highlights social infrastructures that many others take for granted as being pivotal in the success of the Disney business. From the early days of the Walt Disney Company, her grandfather and great-uncle relied on federal protections after losing the rights to their first creation, Oswald the Lucky Rabbit, to their original distributor. Disney explains: “[My grandfather] 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 Company benefited from a federal system of protections, laws and taxes that created fertile ground for building a business empire.”¹⁰⁷

Government support of a positive business climate goes far beyond just copyright protection. She expands:

My grandfather would be the first person to tell you that he managed to amass his fortune not in spite of but because of the American system. After all, without reliable and safe roads there would be no such things as Disneyland; without high-functioning legal systems and a well-regulated business environment, there would have been no copyright protection for Mickey Mouse, no intellectual property protection for Snow White. And frankly, without a Marshall Plan, there would have been no European markets into which to expand, a move that permanently changed the Disney Company from a reasonably successful film company in the United States into a massive multinational corporation.¹⁰⁸

Also worthy of note is the FCC, which regulates the airwaves that carried the Disneyland television series and The Mickey Mouse Club.

Disney clearly recognizes the importance of an efficiently operating government in the creation of individual wealth, and she translates her passion for that sentiment into advocating for progressive taxation and social responsibility. One of the issues about which Disney is most vocal is the need for a strong estate tax. “The estate tax is the cornerstone of a progressive system that leaves wealthy heirs with ample funds while providing the government with the resources it needs to build an environment for the common good. By preserving it, we not only restore billions in revenue to the national treasury—we also restore our most cherished collective ideals as a nation.”¹⁰⁹

Disney not only advocates that wealthy individuals ought to pay their fair share in taxes but also points out that her sector of business is made stronger by the support of taxpayer funds:

I certainly never asked anyone to hand me anything I didn’t earn, and I don’t intend to try to compound my already good fortune by enjoying security, health, and good social order without contributing to the cost of those things by paying my fair share of taxes.…

There is no question that the whole [nonprofit] sector is larger and stronger and more robust because of the many millions of other dollars that flow into it because of the estate and other taxes. The loss of those millions upon millions would have a terrible impact on a sector already under enormous strains from the increase in demand and decrease in revenue caused by the difficult economic times we’re in.¹¹⁰

Without high-functioning legal systems and a well-regulated business environment, there would have been no copyright protection for Mickey Mouse, no intellectual property protection for Snow White.

—ABIGAIL DISNEY

Disney is a refreshing example of a prominent inheritor and successful business leader who vocally expresses that she and her family did not do it alone. She powerfully articulates the role of government in the success of both the Walt Disney Company and her own nonprofit sector while simultaneously promoting the need for a strong tax code to support such institutions through her philanthropic and activist work.

Jim Sherblom: Regulation Makes It a Fair and Open Game

As the CFO, Jim Sherblom guided one of the world’s most successful biotech companies, Genzyme, through its crucial early years.¹¹¹

Jim Sherblom worked in the biopharmaceutical industry for two decades. In the early 1980s, he was chief financial officer of Genzyme, one of the largest public biotech firms in the United States, with more than 1,700 employees. That might seem like enough for one career, but between 1989 and 1993 Sherblom was president and CEO of another biotech startup company called Transgenic Sciences Inc. Then he founded his own venture capital firm, investing in life science companies. For Sherblom the idea that anyone made their money alone, and so has no obligations, is patently ridiculous: “The opportunities to create that wealth are all taking advantage of public goods—like roads, transportation, markets—and public investments. None of us can claim it was all personal initiative. A piece of our success was built upon this infrastructure that we all have this inherent moral obligation to keep intact.”

One of the examples of public benefits Sherblom lifts up is the tremendous liquidity and market stability provided by our system of financial regulation. In 1986 he oversaw the issue of Genzyme’s initial public offering. The IPO was accompanied by a dramatic increase in the company’s value, from $50 million at its last round of private financing to $500 million two years later as a public company. Says Sherblom, “When we were a private company at $50 million, investors had to be willing to keep their investment for several years. Only private equity investors and venture capitalists were willing to do that. Once you’re in the public marketplace, you have much bigger pools of capital. A buyer could sell it the next day if they changed their mind. So they’re willing to pay a substantial premium to reduce the risk of their investment in this way.”

What is this liquidity worth? “My guess is that it’s worth 30 to 50 percent of the value of these publicly traded companies,” suggests Sherblom.

It’s the fact that people feel comfortable and have liquidity—that they can trade in and out of them so easily.

More products have come out of the United States’ biotech industry than all of the rest of the world’s biotech industries combined, and I think it has something to do with the risk-taking culture of American business. These companies are going through $100 million before you even know if the drugs are going to work. So you have to be in a culture that is willing to pool lots of resources because they’re bets that are too big for any one group to take.

But, he adds, the risk-taking pays off because the federal government steps in at key points. Take the case of Ceredase, Genzyme’s initial blockbuster drug for the treatment of Gaucher’s disease:

The original research that we were all basing the targeting of a protein around was all public domain. Our initial work was funded by the NIH, to see if it was feasible to produce a functional protein. Finally, when you have gone through and gotten FDA [US Food and Drug Administration] approval, you know you have some clear claims that you can make, and you are protected for a period of time from other people coming out and making similar claims for products they haven’t done similar levels of testing on. We have one of the world’s biggest and most innovative pharmaceutical industries because of the FDA.

The same is true in the investment world. I wish that all our firms were regulated at an appropriate level by the SEC because oftentimes people who are not SEC-regulated are doing things inside a black box that, if not outright illegal, are clearly unethical. There is no way of competing against them if they don’t have to follow the law or even ethical behavior and can so grossly misrepresent what they are doing. For those of us who are investors who care about how our money is made, who want to make a good return but want to do it legally and ethically, having some independent regulator who can force a certain transparency on these black-box models is enormously helpful. It keeps the game as a fair and open game, and everybody can have confidence in the system.

Sherblom’s view of his own career echoes his take on Genzyme’s success. Hard work and smart risk taking paid off, but so did breaks at key moments—timing is everything:

There’s no objective reality that suggests that people who went to Harvard Business School with me and have had successful careers—that that’s purely an indication of their personal merit. You look at any objective data and say, “OK, some of it’s luck, some of it’s personal intelligence and capability, some of it’s perseverance and willingness to take chances, and some of it is that the industry emerges and for a time it’s able to create X number of people with really great opportunities.” You have to catch that particular wave with the right preparation for that wave.

My wife and I were both very good at what we set out to do and very lucky to have been born at the time we were born. My kids look at us and say, “From the early 1980s through the late 1990s, the economy expanded in such a way that if you were willing to work hard and you were educated, like Yale and Harvard, you had opportunities to see your net worth increase 10-fold!” That’s not true today.

Now, says Sherblom, the economy we face is very different from the one that rewarded him—and that makes the argument for giving back even more urgent.

This Great Recession of 2008 is different from 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.…

None of us can claim it was all personal initiative. A piece of our success was built upon this infrastructure that we all have this inherent moral obligation to keep intact.

—JIM SHERBLOM

It may not be sustainable and it may be more painful if the richest 5 percent take the vast majority of the gains from here forward, and so you are pushing everyone else down further.

Elaborating on the 2008 financial collapse itself, Sherblom expresses deep appreciation for the role of government in stabilizing markets before even more damage was done:

I never would have guessed how much the government could become an underwriter of last resort. When you see the power in capitalism of creative destruction, you often don’t talk about the downside of the destruction that is going on in people’s lives. It’s partly the government’s fault that things got so out of hand by removing all of the regulations during the Clinton and the Bush years, but it’s also clear to me that if they had pulled a Herbert Hoover and decided to just let it play itself out, which some of the advisers were suggesting, it would have taken us at least another generation to recover from the downturn.

The fact that almost all of the financial assets are close to if not already back at the values that they had before the downturn suggests that we rightly or wrongly had some pretty smart and courageous people at the helm as we went through that storm. And that’s something that companies cannot individually do. They cannot trust each other in the middle of the storm. They have to have some independent actor who is trying to help pull things together.…

If I were to say, “How do we come out of this better for having lived through the experience?” it has to be that we put back in place those kinds of protection that allow each competitor to know that the other competitors are playing fairly.

After many years in the business world, Sherblom turned in a new direction. In 2004 he received his master’s degree in divinity from Andover Newton Theological School and continued to work as a venture capitalist for a number of years, though he has now primarily wound down his venture capital work and focuses most of his time and energy on serving his Unitarian Universalist congregation.

I have been serving a [Unitarian Universalist] congregation in Brookline as their pastor, and there is a deep strain in American culture of communitarianism, believing that we ought to be looking out for each other, to love our neighbors as ourselves, and be the good Samaritan. Then there is this deep strand of individualism that everybody should do it on their own and the people who are falling out of the system must have done something wrong. I think you could get most Americans to affirm both of these views as being true, and yet they are deeply in conflict with each other.

We came into the twentieth century with a fairly dramatic fight between labor and capital. By the end of the twentieth century, it was clear that capital had won. Now the question is, OK, if capital is in the driver’s seat, as it clearly is, how do you end up finding a reasonable balance so that people aren’t taken advantage of on either side—so that those who are capital holders get a proportionate return from their capital while leaving enough incentive in the system so that everybody can have a living wage?

I don’t think it’s rocket science. It’s not impossible to find that balance. For most of American history, we have found some reasonable balances in that regard, including the mid–twentieth century, the 1940s, ’50s, ’60s. I just think we are out of whack right now. We can’t even have the conversation because people start hyperventilating when they hear that you would be taking anything away from the richest 5 percent. Somehow making sure that everyone has a living wage is un-American. It wasn’t historically, but it is certainly how the debate is now crafted.

In discussing how these values are reflected in his personal life and outlook, Sherblom adds:

My wife and I both grew up working-class, so we didn’t come with wealth from our parents. Our approach has always been to give back, to pay back a fair share for the infrastructure, and to know that everybody else is taken care of so that there is that safety net—that the people at the bottom really do have a living wage. If that ends up taking a third of our income, between various kinds or forms of taxes, that doesn’t seem an unreasonable share for us to give back for living in a society that was structured such that we could make higher multiples from our good, hard efforts than we could in most other societies, which couldn’t give us those kinds of opportunities and didn’t have the infrastructure in place to let us find those successes. Our lives and our success are uniquely American.