It’s the economy, stupid!
IGNITION 2018 - Day 1 Recap
4th Dec 2018
It’s the economy, stupid!
While you expect a conference on media, technology and transformation put on by Business Insider to be about business, I was surprised how much of day one was focused on the economy and the need to bridge the gaps that threaten the health of it. There has been a seismic shift in the thinking of tech entrepreneurs away from technology for the profit of shareholders and more toward the use of technology to benefit the broader economy and country as a whole. The general consensus of this shift in thinking is that turbulence is ahead and we need to take action in order to avoid crashing and burning.
Henry Blodget started off the day by reminding the crowd that our economy is an ecosystem, not simply a reflection of the Dow Jones. In an ecosystem, he pointed out, we need to remember that one company’s “wages” are another company’s revenue. While unemployment is at a 50+ year low, we still lack good paying jobs, as 90% of the people in our country still live paycheck to paycheck. “Shareholder Capitalism” is partly to blame for this.
While Shareholder Capitalism’s focus on creating value for shareholders has many benefits, distribution of wealth and fairness to the employees who create that wealth is not one of them. The pressures from Wall Street to continue to deliver more and more value to shareholders is the reason why companies like Walmart rain in profits of $36 billion a year, while simultaneously paying their employees a meager $11/hour. Many companies would respond to this by saying they have to keep wages low in order to deliver the results Wall St. is looking for so the stock will go up. However, this doesn’t seem to have been a problem for Amazon who famously returns roughly 1% in profit annually. The lesson here: big companies can afford to pay better wages, they just choose not to from fear of punishment from Wall St.
As the attention turned to Wall Street, former Citi CEO and Ellevest founder Sallie Krawcheck discussed her thoughts on how the Street is doing with diversity in the #MeToo era. Her assessment: they get a “D” and still show no sign of being open to change. Interestingly, she noted that the problem with diversity in financial services isn’t a pipeline problem — even her class was ⅓ women — it’s a promotion problem. Women and people of color coming into the business are simply not being promoted to leadership positions. There are of course lots of problem with this, but one of the biggest, as Krawcheck pointed out, is the culture. In companies where everyone in a leadership role is the same, groupthink runs rampant – a major culture issue. Industries that lack diversity and have no one challenging conventional thinking eventually fall prey to their lack of foresight and implode – which is pretty disastrous when that industry is the engine that fuels the economy.
Other business makers getting a D: the VC community. At least in Steve Case’s book. Last year, 75% of venture seed money went to startups in California, New York or Massachusetts – and 90% of that money went to men. This perpetuates the divide in America. To level the playing field, Steve has started a “Rise of the Rest” VC seed fund focused on funding startups in the heartland. The goal is to create healthy economies across the whole of the US. Keep in mind that for every startup job created, there are 4-5 other jobs created. Finally, he noted that state and city governments need to do more as well. In his estimation, if the 234 cities that pitched, and didn’t win, the Amazon HQ2 contract would have put half the amount of money and effort into their own startup community, they could create the next Amazon.
So what’s the answer? Where do opportunities lie? Drew Houston, founder of Dropbox’s answer truly resonated: everywhere. In his opinion, when you see lots of similar competitors in a marketplace, it may be an indication that no one is doing it that well or just haven’t found the secret sauce. Contrary to the Blue Ocean theory, sometimes it’s better to hop into those nascent red oceans and compete with the sharks.
I’ll close with one of the most profound thoughts of the day that also serves as a metaphor for business and life from Danica Patrick. She talked about how her final two races, one Indy, one NASCAR, ended: she crashed. In both. For an extremely competitive person wanting to go out on top, this was hard and gave her pause on her decision to retire. Ultimately, she did decide to stay the course and retire and, in the process, had to reconcile and begin to understand the difference between quitting and letting go. A “quitting” mindset would keep nagging at her and occupy mental space. Letting go of racing allowed her to make room for all of the new things she wanted to do. Like write a book, start a clothing line and a winery.
This stuck with me. As businesses, we need to do a better job of letting go. Letting go of our attachment to “doing things the way they’ve always been done.” Letting go of our focus on profits over employees. And letting go of the bias that keeps us all in our respective bubbles. It’s time we free up some mental space. Space that will allow us to re-invent our business models, envisioned by a diverse group of employees, that drives true economic benefit.