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Ayn Rand Never Built a Company. The Morality of Entrepreneurship

The ingredients of innovation economies

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By Victor Hwang

There’s a serious disconnect today in America between political discourse and economic reality. I find it disturbing. If you follow the headlines, the nation is embroiled in a civilizational battle between liberals who seek to impose political correctness and build an authoritarian state, on one hand, versus conservatives who seek to perpetuate inequality and minority repression, on the other. It has become a battle of caricatures.

More importantly, it does not reflect what is actually happening on the ground. You know, reality. It’s that place where real people are building real things. Based on my experience in Silicon Valley, I’d like to propose a different way to think about the intersection of economics and politics in America.

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I’m fortunate to get an uncommon perspective in my professional life, because I work at both the micro and the macro levels. On the micro level, I’m an entrepreneur who starts and invests in new companies, including one that makes the world’s most powerful filter to remove harmful germs from drinking water. On the macro level, I work with cities, companies, and countries to design economies that accelerate the pace of innovation and value creation. Because I straddle two worlds, I tend to see hidden nuance, where others might see simplicity.

American politics has surely become an oversimplified battlefield. Each side portrays the other in comical terms. Here is how conservatives, like Ross Douthat in a recent NYT column, often see the battle lines:

Left (Bad) Right (Good)

Top-down < > Bottom-up

Elite-imposed < > Self-reliance

Collective morality < > Individuals define morality

Forced generosity < > Voluntary altruism

In contrast, here is how liberals, like Elizabeth Warren, might see the battle lines:

Left (Good) Right (Bad)

Bottom-up < > Top-down

Individual activism < > Elite complacency

Fairness as moral goal < > Elites define morality

Voluntary generosity < > Legalized selfishness

For another example, let’s take the ideas of writer Ayn Rand. Rand argued that rational selfishness is a virtue. She felt that morality that is not rational diminishes life and happiness. Rand has experienced a popular boomlet in recent years. Many politicians and business leaders have embraced her ideas. Liberals, for their part, have readily accepted her as a foil. Again, a simple binary choice.

But Rand’s ideas don’t fit the reality I work in. They bifurcate the world too cleanly. Here’s a different, more nuanced way to describe the world.

Like all graphs, this is an oversimplification of reality, but it highlights some critical distinctions. (For political geeks, I’ve taken the “liberty” of adding the political philosophers that might be associated with these quadrants, namely Locke, Hobbes, Rousseau, and Rand.)

On the horizontal axis, we see the division between morality and rationality. Morality is about pursuing “the way the world should be.” Rationality is about dealing with “the way the world is.” You can hear echoes of America’s liberal-conservative divide here.  On the vertical axis, we see the division between top-down and bottom-up views of the world. Bottom-up is about individuals and their interactions with one another. Top-down is about managing institutions, whether companies, cities, or entire countries.

So what’s the point, you might be asking? If our goal is to maximize economic wealth, it’s increasingly clear that two of these quadrants matter more than the other two. Scientific research shows that innovative economies thrive in the bottom-left and the top-right. Entrepreneurship happens in the bottom-left, where individuals organize dynamically into teams to solve problems. Highly entrepreneurial environments are what we call “Rainforest” ecosystems. But ideas become scalable products on the top-right: in environments with high predictability and low operational costs. We call those systems “Plantations.” I’ve written about this in prior columns (for example, see links here, here, and here).

victor_hwang

New ideas, startups, and solutions are birthed on the bottom-left. Ideas that replicate and become sustainable must scale to the top-right. The crossover is hard. It’s not a leap; it’s a chasm. And it’s not just a political chasm between left and right. It’s the business chasm between innovation and production. Silicon Valley doesn’t call the process of launching new products “crossing the chasm” for nothing.

The political philosopher Edmund Burke saw the same thing. Society is a difficult balance between moral motivation and practical constraints.

A man full of warm, speculative benevolence may wish his society otherwise constituted than he finds it, but a good patriot and a true politician always considers how he shall make the most of the existing materials of his country. A disposition to preserve and an ability to improve, taken together, would be my standard of a statesman.

Sounds like the description of a successful entrepreneur to me. So where does that leave Ayn Rand, in the bottom right corner? The truth is that Ayn Rand never built a company. Therefore, she didn’t fully appreciate the essential moral quality of entrepreneurship. Innovation is more than the sum of a series of rational transactions. Without hopeful people who desire to improve the world, however foolish they may be, entrepreneurship will wither. Don’t just take my word for it. Ask Steve Jobs and Mark Zuckerberg.

Rand’s ideas are a useful thinking tool, but she was a product of her time. A refugee from Communism, she despised the imposition of morality by the state. My mother escaped from Communism too, so I am sympathetic to Rand’s point of view.

But the real world is not a simple binary. America’s political discourse is problematic, because it ignores the real economic value creation that happens everyday, whether in the Valley or anywhere else. The hopes and dreams and passions of innovators are not frivolous—they are core to the economic system. How they confront and conquer the challenge of bringing new ideas to life is what matters. Helping to build ecosystems that accelerate the entrepreneurial journey was a core reason for me to start the Global Innovation Summit, which attracts over 50 countries seeking the same thing.

So the economy’s life cycle is more nuanced than Ayn Rand realized. Innovators are deeply moral animals, since by definition they envision the future as it should be. In fact, the world would die without such dreamers. People with a vision of how the world can be better are actually the ones who do make the world better.

3 December 2015


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  • Using Ayn Rand is a straw man argument. She can’t defend herself and the reader is stuck with your interpretation of what she allegedly believed. I like your article. It is a good attempt at getting the alleged opposites in focus.

    There is a fatal flaw in what you describe as “the essential moral quality of entrepreneurship.” That is not analysis; it is dogma. It is really self-flattery about the world that you think you inhabit as a capitalist with a conscience, an entrepreneur of good and practical progress. I know this because I used to drink the same cool-aid. Everyone wants to wake up every morning and believe that they are making the world a better place. Terrorists, rebels, philanthropists, nuns, etc., they all believe the same thing, and see those who battle with one another as lost. Rather than escaping the duality, you have firmly planted yourself in the middle of it.

    In my book, there is a section on Big History and the anatomy of contradictions which attempts a fuller explanation of the dynamics at play. We are all part of the dynamics. However, the rest of the book is about the failures of capitalism and entrepreneurship; why the math never works out. It is the entrepreneurs that have created the practical mess. They control the material and human resources of society. If things are a mess, they deserve the blame, not some solitary philosophers.

    If you are thinking at this level, it wouldn’t take much to get to the next level. The book is a free download at my website. behappyandfree.com The key is in understanding how you are part of the problem, even if the businesses you are involved with increases the quality of life (every business does). The battle of ideas is a battle against a system of ideas, and the pedestal of entrepreneurship is actually a huge problem because the math driving the system gets ignored.

  • Corey Rusko

    Maximizing economic growth is not the primary value of Ayn Rand’s philosophy, but the growth we’ve seen from capitalism is a welcome consequence.

  • Mike Starkey

    Ayn was an entrepreneur starting a company based on objectivism; a unique perspective. Many men and women who create companies are not capitalists but in fact fascists; working with the state for their own gain at the expense of their fellow man. Gates and Mr. Face book and Soros and Buffett and Musk are big examples of collectivists/statists gaming the system; corrupted capitalism. Capitalism by strict definition is dependent on voluntary cooperation between private parties who own the means of production and distribution. The ever increasing central government makes it easier for companies to collude with the state to maintain their power rather than compete in the market.

  • c1776

    I find your understanding of Ayn Rand to be very superficial. Her conception of reason is unique—as you probably know, she called it “man’s basic means of survival.” But why did she say that?

    She identified that man, unlike animals, needs to creatively discover values in order to survive and flourish. He has to think about what he needs and figure out how to go from where he is and what he has, to that state he has determined to be an improvement.

    To put it another way: in her conception, entrepreneurialism is how humans flourish.

    I think Hoffman and Casnocha in “The Start-up of You,” make a good point:

    “You were born an entrepreneur. This doesn’t necessarily mean you were born to start companies. It means that our ancestors in the caves had to feed themselves; they had to invent rules of living…”

    Ayn Rand invented rules of living on the most abstract and universal level: philosophy and morality.

  • “Henry Cameron: Why did you’d decide to become an architect?
    Howard Roark: I didn’t know it then. But it’s because I’ve never believed in God.
    Henry Cameron: Come on, talk sense.
    Howard Roark: Because I love this earth. That’s all I love. I don’t like the shape of things on this earth. I want to change them.”

  • Eric V. 2

    You might want to think about replacing “Communism” with “Socialism”. I think it is pretty disingenuous to have “macro-morality” represented by an example that typically takes the form of dictatorship, and “macro-rationality” represented by an example of capitalism that exists within a democracy.
    It is possible to have top-down planning designed to make the world a better place within a democracy. This is something called “social-democracy”, and is distinctly different from communism (a bit of an understatement, just ask Bernie Sanders).
    Ruling out the top left of your chart with such a mis-representative caricature does help your narrative, but comparing communism and it’s negative connotations (and I am sure you are well aware that most people reading this article will think of Castro and Stalin before thinking of Marx and Trotsky) to neo-liberal economics is more polarizing that what Ross Douthat would say.

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  • Duncan Cairncross

    Rand was an idiot
    She not only didn’t “build a company”
    She like most so called intellectuals never actually built any thing at all!
    If she had actually got her hands dirty and done some constructive work during her lifetime she would have realized just how much she depended on a multitude of other people

  • sudhir

    Bashing Ayn Rand is unfair because she is not alive and can’t reply. Forgetting this is surely unethical practice, whatever your provocation or temptation. Some of us UNDERSTAND her and RESPECT her ideas on MERIT, and also feel good about it. We are the real ENTERPRISING individuals and like ATLAS carry you guys on our shoulders. Period. No more confusion whether she created any business or not—look at her Fan-club among celebrities today and simple Google Search will show what am I stating in the open.

  • San_Francisco_PM

    “….the nation is embroiled in a civilizational
    battle between liberals who seek to impose political correctness and
    build an authoritarian state, on one hand, versus conservatives who seek
    to perpetuate inequality and minority repression, on the other.” – you lost me on this first paragraph. Only a left wing hack would frame conservatives as wanting to perpetuate inequality and minority repression. COMPLETE B.S. ! GOP primaries had candidates who were Hispanic, African American, and female. DNC had only two candidates: two old white people. If you want to be taken seriously, stop these lies and maybe people will actually read your article.