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Bob  0:14 
Welcome to creative distillation where we distill entrepreneurship research into actionable insights. My name is Jeff York, research director at the Deming Center for Entrepreneurship at the ºù«ÍÞÊÓƵ Leeds School of Business, joined as always with my co host, Brad Warner,

Brad Werner  0:30 
I'm the teaching director at the Deming Center at Leeds School of Business. And I'm really happy to be here with you today, Jeff, this is great. We're outside.

Bob  0:38 
This is cool. We are on Brad's back porch. So if you hear dogs barking for attention, or lawnmowers going or birds flying by, it is a lovely day here in ºù«ÍÞÊÓƵ, Colorado. And, you know, we're getting closer to being back to doing what we originally started doing this is like we would actually go into breweries and distilleries and drag people along with us and sit there for a really long time and enjoy the ambiance and talk to entrepreneurs. So we still have a remote guest today. We're really excited to welcome Robert Everhart. Bob, as he goes by. Bob is the director for research on entrepreneurship and society at the Graduate School of Business at Stanford University. Thanks for joining us today, Bob. Hey, thanks. This is great. And we have lovely weather here in Palo Alto. And of course, I'm inside, but we are outside. What's right to me, tell me about like, I never knew anyone would the title of director of research on entrepreneurship and society. That's pretty interesting. What's that all about? Well, thank you. It's a title that took some effort to get done. But what it is, is where you have a project funded over a million dollars to investigate, and it's fine, we're funded by venture capital, believe it or not, yeah, to investigate how entrepreneurship is changing society. And the way we tend to talk about it. And let's use your dog example. There their mile radius is like God know, what the dog is doing is illustrating what we talked about. Because when we first started investing in entrepreneurship, and entrepreneurship was like a puppy. You know, we were trying to figure out how to feed it, what foods are good for, and how often they needed to be walked. All those kinds of things. We tried to figure out how to get this puppy to grow into a nice dog. Yeah. Entrepreneurship itself, or the retail, appreciate the dog is entrepreneurship, and we make that dog grow and how to make that dog prosper has been successful, you should see his new family besides welfare, but nowadays, right that dogs run to be a big thing. And it's like wolf wolf. And it comes in and it cracks mud on my clean couch. And it does wrong things in the bedroom. Yeah, see, exactly. And now we got to deal with it. And that's precisely what we're doing at this project. We're no longer describing how to grow this puppy entrepreneurship. We're trying to figure out how that it's a big dog, how do we deal and understand what its effects on us? And that's exactly what we're doing. Cool. So the effects of entrepreneurship on society? I think that's an interesting lens, because like, you know, we do a lot of stuff about societies affects entrepreneurship, at least I've written a bunch of papers on that. If your colleagues have written about those kinds of topics, you guys are kind of turning that around and saying what is entrepreneurships effect on society? Right? You see that in like faculty meetings? You've been in one where they I'm sure you have I have, where they say, Hey, we need to be more entrepreneurial around here. Yeah. And you know, they're not saying you should all go out and start companies. What they're saying is that your budgets just been cut, and you're more likely to be fired. And the whole point is they're taking this word entrepreneurship, and using it to take a good patina. And make you say, Okay, I need to be self reliant. Yeah. This was like when states cut funding to universities, which never happened here in Colorado. Thanks. Yeah. Supported by the state that, you know, you should be more entrepreneurial as a university, but don't raise tuition because entrepreneurs never raised their prices for anything would never never Yes, right.

Brad Werner  4:25 
2020 consultants from Kinsey that are, you know, 16 years old.

Bob  4:29 
That's right. Yeah. who have never been entrepreneurs themselves, by the way. Sure. And so that's part of what we're trying to understand better. There are lots of things going on, for example, there are mythologies about entrepreneurship that are not really understandable until you think carefully. For example, you'll hear this a lot that it's okay to fail and that every successful entrepreneurs have a lot of failures behind them. First of all, it's just not true. Okay. The research itself just shows that the thing that predicts a success past success, nothing that progress and failure is a past failure. But what this does is it allows us to communicate a message that people should be comfortable with a string of failures. We're saying that if you look at your past life and see a string of failures, now you can be comfortable that you're on the path. That's what's going on, you know, and that is, that's a change in the way we do stuff.

Brad Werner  5:27 
That's how I look at it. So I look at it as micro failures, right? If you have a string of business failures, that's one thing. But when we're talking about exploring markets and talking to customers in those types of tests, yeah, that's a different type of failure.

Bob  5:41 
Exactly. If you have a micro failure, like you have a product or a river, that's fine. I mean, that tries to find it doesn't work. And you cheat. Yeah. There's tons more before you before you remortgage your house. Yeah, exactly. Or before what I mean by fail, right. Right. But it's it's more than just communicating stuff. And it's the same thing when we tell Uber drivers, that they're entrepreneurs. Yeah, right. Congratulations. You're an entrepreneur now. Yeah, yeah, exactly. Guys on Shark Tank, right. And that allows us to

Brad Werner  6:15 
take it means take two cases of ramen and see if you can live for four months.

Bob  6:18 
That's it, man. I mean, that's totally it, because that's what we're telling them, right? The reason you're being paid below minimum wage, right is because not because you're not an employee, you're an entrepreneur. And if you work hard enough, and are lucky enough to make a lot of money, you're driving Lady Gaga somewhere, right? Exactly right. You know, you know, and that's, to me, that's, that's how the changes that are happening in society, are profound. We used to in the 1960s, for example, we would justify CEO pay on the basis of their organizational ability that they're great organizers. They were cool organization people, you know, now we justify high pay on the basis of the risk they took. So we've replaced an organizational corporate idea with an entrepreneurship idea. Yeah, and you know, so it's an interesting way the world is changing.

Brad Werner  7:12 
So let me talk about the gig economy just for a second, Palo Alto, for instance, Uber and Lyft. Kind of our earlier examples. They've just created business models to work around minimum wage issues,

Bob  7:22 
right? Oh, and child labor issues. You don't have to worry about the minimum age laws, you just have to be old enough to have a driver's license. Some of this is insane to me. No, it is. That's what we worried about effect, we just paper that just is gonna come out in an hour. So vym, we start with that conundrum. proposition 22, here in California passed, and it basically legalized, if you will, the ability of companies to hire contractors, even if they're working basically full time for them, and not pay them benefits, not be subject to minimum wage laws and other things. And while we expected the Chamber of Commerce to support that, and we expected, who were lifted support they did with a lot of money. We did not expect the NAACP to support it would usually been allied with workers and unions, and we certainly didn't expect 62% of Uber drivers to vote in favor of it. Hmm, we're starting to get in the paper. And you know, we have a really specific format we do on the podcast, Bob, and you're just already throwing a monkey wrench in Ah, sorry

Unknown Speaker  8:25 
about that.

Bob  8:26 
Like I knew you would be rebellious guy you are. We need to drink something. Oh. All right. Let's have a drink. Oh, now, Bob, why are we drinking Japanese whiskey this week? Well, it's available. And B. B, the truth is, and I assume you're asking me about my background? Well,

Brad Werner  8:51 
I know the answer is I don't know, Bob. I know that there's Okay. Well, Japan, I

Bob  8:55 
started before I was an academic. I started a liquor distributor ship in Japan. And I was the first foreigner ever to get a wholesale liquor license in Japan. Cool. Which I thought was really really cool. And worked in Japan and studied Japan. I worked in Japan, I I grown up around Japan, my parents were married in Japan, there was Japan always around my house. And also I met an age where when I was in graduate school and late undergraduate school, Japan was like China's now everybody's worried about it was going to take over it was you know, we you know, all that stuff. Yeah. And so a lot of us and I was one of those General Motors paid me to learn Japanese language. Yeah, and I worked when I worked for Applied Materials. They sent me over to deal with the Japanese vendors and I was made president of a company in Silicon Valley of their Japan subsidiary. And that anyway, while I was there, I've started a company because I was born. Being a corporate guy and started a venture capital funding company by Japanese venture capitalists in Japan, we grew and grew, we became the largest independent wine distributor in Japan, selling mostly California wines on I think a cool technical inventory model, basically. And we did well and I sold the company in 2007. Bought a Jaguar and a house in town, you know. Well done, Bob. We help society, buddy, right. So I guess we're here drinking Japanese whiskey. Because Hey, you know, we couldn't find Japanese. Why? Well, I actually I said I texted Brad said, well, Bob suggested we could ever have suck. Am I pronouncing that right? Right socket, my daughter, my daughter admonished me if I was gonna be on a podcast, or we're not going to, we're going to drink Sakhi, y'all, right? Yeah. You don't want to do that, sir. But also it is also a mistake, because the actual word for his own shoe sock is just means it's a generalized alcoholic beverage. But anyway, the rice wine is nihonshu. So we have a single malt Japanese whiskey called the Matsui. It is a peated single malt apparently won a bunch of awards, which is why I bought it. It was also the most expensive one at our local liquor store and knowing you, Bob, I was like, Well, which one will Bob pick? The most expensive one probably knowing him. Are you familiar with what we're drinking it all? Yeah, I am. It's a wonderful scotch. I mean, it's just it's not very commonly seen in the United States. So it's actually impressive that you have it. I am drinking. We live in ºù«ÍÞÊÓƵ, Colorado. Yeah, well, I'm drinking. Being home with the Deming Center for Entrepreneurship also has an amazing array of fine liquors. Well, there you go, of course, because you're studying entrepreneurship, and you need to be drunk. But it is interesting, because number one, it's what I told you to get. And I tried to get it Yeah, we go. I totally believe you. And but this is also repeated. Okay. And I think it's the oldest got made in Japan. I went to the distillery once and it was amazingly technical. Really, let's give it a shot from this one. What I'm noticing, huh, different than I'd mean, so my go to is like Talisker, like, my drink whiskey. And this is a lighter whiskey. I'm noticing for sure the most of the Scottish whiskey I agree. This is this one I'm having is not as peated if you will, it doesn't give you this direct smell of that transparency to the fens of Scotland. No, it's not like burning a campfire. So yeah, this is more refined background beat that is really good. Huh, got up almost a honey like sweetness to it. Mine does, too. It's all the karma coming out of the cast. But of course, they design that in Japan, I mean, in. In Scotland, it issues the barrels that are out and back. And they only use the barrel that they test and comes out and specifications, you know, has the right amount of char and the right optical properties and all that kind of stuff. So you get a consistent product, but you get a very sweet and actually very delicious product to drink.

Brad Werner  13:25 
So when you were starting your business back in Japan all those years ago, was there such a thing is Japanese whiskey at that time, is it? Yes,

Bob  13:32 
Japanese whiskies ran for 100 years, and they hadn't won awards by that point. Okay. But it's just their approach that I saw. And no doubt there are craft makers somewhere in Japan. But their approach that I saw, both by the way, they made the scotch and the way they made the wine was almost as you'd expect them to do it. You know, it's a very precise, there were charts all over the brewery about you know, different chemical trends, and you know, all this other kind of thing. And they were made carefully. And they had meetings every day, you know, to discuss the production and you know, and Hank it out, you'd never see that in Scotland. Did everybody else about what they should be doing and doing it? Probably not. That's right. A long time ago, when I was in manufacturing, I was over at a Japanese company and my friend and I, we were making this part. We had a part that's who's being defective. And we saw what was wrong with the machine right away. And we wanted to tell them, but the Japanese who own the machine had to get 20 people in a room and sit down and talk for three hours and they came out with the same answer we have. And you know, the The point is that they probably will get it right more often than we do. But then again, we saved a lot of time so it's hard to tell. This is a real treat. And the reason I bought this one other than it was the most expensive. I figured that would be the best one, which is probably not right. But Wow, that's pretty good, too as it sits, man, holy cow. Yeah, this is really cool. Yeah, for sure. I would like to convince your audience that this is the only time I've drunk scotch this early in the day. However, you have a you have a big teaching commitment with your role there at Stanford. I do not have a big teaching camp. And it's kind of whatever, which I really like. It's kind of ad hoc. And this is my first year and nobody's asked me to and I haven't volunteered. Listen to podcast and they won't realize right, so. That's right. We got to be quiet. All right. So this is delicious. We now have a proper beverage. We've heard about why we're drinking Japanese whiskey. We're enjoying it.

Jeff York  15:49 
So let's, let's dive into the paper is a really cool paper. Thank you know, first, we start with making fun of the title. This is our tradition. So freedom's just another word for nothing left to lose. You like that? Yeah, I've heard the song. Yeah, yeah. Me and Bobby McGee, right. That's right. Was that originally by Janis Joplin? I don't think so. But I don't know. Oh, Kris Kristofferson. There you go. Anyway, that's the first part of town. All right. Now, entrepreneurial ism, and the changing nature of Employment Relations, right. Yeah, with that, right. This is the first time like, No, no, no, no, no, but so so Brad's down with it.

Brad Werner  16:30 
The first part of the title? I'm not sure why it dropped a song in there. But

Jeff York  16:33 
really, it's gonna be explained. Yeah. I can't explain that.

Brad Werner  16:36 
Is there a process even for these titles, because truthfully, Bob is an entrepreneur and listen to some of these titles. I need more than just scotch. You don't even want to know the first

Bob  16:45 
title we have. Nice explains the title. I'll send it to you in the chat. Okay. But we actually had this kind of obscene initiative to send it to our small group of people are reading the paper, you know, for us. And, unfortunately, thank goodness, Mike came up with an idea. So we didn't have to, and express the paper perfectly.

Brad Werner  17:16 
title is actually last correct. After the paper is written. Absolutely. Right.

Bob  17:21 
Yeah. Viewers reject the first title. Right? Well, the little quarter said, Well, we expected they would, there's no way it was gonna go to the review process with that title.

Jeff York  17:33 
This paper is co authored with Steve barley, also at Stanford, and Andrew Nelson, University of Oregon. Yeah, you said real quick about this appears at RSA volume, explain what the heck that is. Because people aren't gonna

Bob  17:43 
research in the sociology of organizations. And as part of our project, a number of us got together and decided to create a 10 chapter volume that kind of acted as a stake in the ground like this is what we mean by this, right. And so this is our chapter, but Dr. Lena rendova and her colleagues have a chapter, john Meyer and Patricia Bromley, have a chapter, Mike lounsbury has a chapter. You know, it goes on and just terrific people that are all admire. And we've put that together into a compendium that makes the statement. Entrepreneurship has grown up to be a big dog. And it's tracking mud in the house. Let's understand the mud and how do we clean it?

Jeff York  18:29 
Yeah. And then the title of that one is reversing the era of the far reaching effects of entrepreneurship,

Bob  18:33 
right. And it means reversing the arrow because we've been focusing on how do we affect entrepreneurship? How do we make it grow? And this reverses the arrow? How does entrepreneurship affect us? So

Jeff York  18:44 
cool. So that's how, that's how this paper in this volume came about. So why don't you tell us a little bit about paper, Bob?

Bob  18:49 
Oh, paper is actually kind of simple. We look at this question of why do people support new emerging ways of doing things that really aren't in their benefit for the sake of being entrepreneurs or taking on the entrepreneurship moniker? And so we particularly look at contingent employment, which is becoming in Silicon Valley, for example, 40% of the employees, you know, here in Silicon Valley, my son, who graduated from college with a math degree works for Google. That's nice, but he's actually works for a company. That's the concept of Google. Really. Yeah. And that's a great many of the employees of Google that does several things for Google one. They don't have to worry about developing these people. There's no obligation to pay them vacation or promote them or have regular. The second thing is it prevents a union from forming. Right? These are these people work for somebody else. And there'll be numbers union attempts at Google. And so interesting phenomena are happening. We're trying to explain it for example, Amazon just fought off a union The vote was turned down. And they were asking for wages, they were actually near minimum wage, which is surprising when I was a kid, 17 years old working in a iron foundry to pay my way through school. And I just went down a local Foundry and got a job as an unskilled laborer, I was making in constant dollars, $42 an hour, that's 10 times what minimum wage was. And that was unskilled labor work. And it was decent money, I get paid my way through college. And the point about that is, is that nowadays, people in their 20s, are getting even that deal. Now, they'll be lucky to make half of that now. And so something has changed. And what we asked about more than anything else, why did they vote for it? Why did they vote for unions? Why aren't they in the streets with science? You know, why don't we see and what we found in the paper basically says that in the post war environment, and we follow the writings of Reinhard Bendix, in the post war environment, the management in corporations were largely concerned with the relationship between management and labor. And there was this kind of contract. And we're not saying that, by the way, the 60s and 50s, were the greatest thing. You know, the people that were having this argument were largely white and male, you know, it was excluding a lot of others. There were all kinds of inequities. But in this realm, you know, there was a discussion, discussion was basically who would give the orders? Who would take the orders? And how do we structure that relationship. And the deal was pretty simple, right? I'm going to give the orders, but I will pay you and take care of you. So you will obey those orders. It was more of like a social contract between the company and the worker of like, hey, it's a social taboo to sacrifice. I mean, you're gonna sacrifice some freedom, your autonomy, right? Your job, gains for doing your job and working the factory floor and doing what you're told, we're gonna make sure you have a pension, you were gay, we're gonna make sure you can put your kids to college, while you don't screw up, you know, things for you and your kids. And, and by the way, we're gonna justify that the people above you they are there because they have some.

Yeah, some neat abilities. Right. And it really importantly, what they point out also is that if you as the personal bank, we're going to take care of you. But if you are enterprising enough and work hard enough, there's a possibility that you will become one of the people that gives orders, right? It creates stability, right? The people are being paid, according to a social contract. And they have the potential to join the ruling class, if you want to put it that way. Whether it's really realized or not, well, the paper points out, we take historical perspective, that this whole contract fell apart as large corporations fell apart, you know, conglomerates disappeared. And laws were passed in the early 80s. That allowed conglomerates to be broken up. You know, the whole private equity business of buying small companies, getting them up and spitting them out was enabled. Globalization happened, right, and communication happened. And so what happened is, rather than having some 40% of the population being unionized, it's down today to 6%. Yep. Right. And what's happened is, a new contract is emerged is what we discovered. And the contract is no longer about and this is the point of the whole paper is no longer about who gives the orders and who takes them. But who is allowed to be inside the organization, and reap the benefits of being inside your organization, and who must stay outside and only occasionally engage with different organizations in what some people call an entrepreneurial career.

Brad Werner  24:03 
Really, really interesting.

Bob  24:05 
And so what we ask how does this come things down? How does this great the same social lubricant and stability that the old and we call it the entrepreneur ideology, it is that you are not a worker, you have autonomy, we are now given autonomy. And you have that value. And you can engage with any organization you want for as long as you want to engage with it. And can you bend some songs, we have this free market agreement. And so we tell people, that your highest value is now satisfied as an entrepreneur that have autonomy and freedom of action. And we still hold out the possibility of joining the elite, because we say if you're willing to fail enough, and if you succeed, then you will start having an organization and then you'll be on the inside and you can now engage with contractors as you want to. So a comment Sit down both ways. And while contract work, I'm not complaining about contract work contracts was fine. It's just interesting when it starts becoming half the working population.

Brad Werner  25:10 
My direct question I'm thinking about this is what does this predict for 50 years forward?

Bob  25:17 
Well, I think that's a really good question. No, we've asked that ourselves. Um, there's two things, right. If this works as an effective social solvent, I'll guess I'll put it that way. If social lubricant, then you can expect to see increasing and large levels of inequality. Because the people inside gain more benefits right now. We celebrate CEOs making $30 million. And by the way, in Japan, that never holds, which is kind of an interesting thing. But, you know, you could easily see us moving in my view into the state of existence that was most of civilized time. And what I mean by that is this whole thing where they're most of us are middle class, and grew up with a dog, and you know, have a bicycle and a car and all that stuff, where most of us are like that, that's only about 100 150 years old, the rest of human history is about a 10th of 1% owning everything. And everyone else, you know, chasing the dregs. And when I'm afraid, so here's the downside. I'll give you the good sentiment. What I'm afraid is that is, yeah, there's a good side. So my my, my afraid is that it's going to just just continually drift more towards that direction, greater inequality, a new ruling class that has few social obligations to the working class. That's what usually use leads to social people in revolution, right? I mean, this is right, up on pikes, and, you know, get us get rolled out. Okay, so that's the good side. I mean, some would argue January 6, as we saw the start of that in America, I mean, you know, right. Well, right. So the other the good side, what I'm thinking about is that we seeing this happen right now in Silicon Valley, Silicon Valley, 90s. As you know, it was like 500,000, companies, all new, all growing all lit up. And now it's five companies, right, basically, you know, Google and, and here's what could happen. And this may be positive, the more and more companies try to selfishly gain by pushing people out and having them engage with them and push costs out. They are on training, their cadre of workers, they are D talented. themselves. They have a few very talented engineers on the inside, of course. But the broad, how do you market? How do you spell? How do you say how will change? And what will happen? I think likely happen is we'll see a reemergence of they have to hire talent, they have to support them left to pay them if they can educate themselves. And we'll see reemergence of these companies grow and become like the General Motors of 1940. Wow. Alternatively, you might see all those disenfranchised employees flip your original title around. No, I agree completely. We could have such a great deal of social instability. So that's why I'm drinking. And it's not a stable situation. Already, I mean, I guess that was my point earlier, it's like, I think we're entering into that period already. are like, you know, this is a raw deal and whether or not the remedies they look to are actually going to help them or not. Yeah, yeah, that's for not for me to say, but, but I think people are pretty fed up. You may be right, Jeff, if I survey, my children's friends, right? They are pretty radicalized over this issue. Oh, yeah. 14, I was talking to her last night about her career plan. She's like, I don't want work for anybody. I want to be a content producer. Like, I can just get companies to give me money. And that'd be fine. Like, yeah, you might end up being you know, rock star or like, but I don't think the odds are quite like that. I think I'm sad because I'm an old guy. I think actually, a lot of people are making a decent living and very happy with themselves as in sort of what I'm doing is the next phase the economy, which is people just are all independent contractors for themselves. You know, the ecology you're critiquing here. I mean, because no, no, Julian Sure. wrote a really good book last year, where she looked at the gig economy and the people in it, and she found that people who engaged in it as either a hobby or a lifestyle choice, yes, you know, they, they didn't need to eat, right actually found a very satisfying, very freeing you And they were happy with it. It's the people who needed it to eat. Yeah. Other words, I need debts job to put a house the roof over my head and feed my children. They're very unhappy and feel they getting robbed deal? Yeah.

Oh yeah. And you can imagine I mea n, these are extremely hard jobs not paid enough like an Uber driver, do you have the security of a dishwasher at like the local restaurant? Right? I mean, it's your job. That's a problem. Or what about vacation? You know, I mean, those are those always a frustrating thing for me in Silicon Valley. Whenever we had clients or suppliers in France, right, we had to be sure we talked to them before August. Because we're going to talk about Christmas or something.

Brad Werner  30:43 
I think of this theory, and I think of what you just laid out five, which I totally agree with. There's a big question mark there. And that's the political response. Right? Isn't that the wildcard in a sense that I mean, we're already hearing pressure to break up your big five that you just mentioned, God, I mean, the future is really uncertain tennis, in a sense, because of that political class in the middle.

Bob  31:08 
I think that's exactly right. But that's really wise. The political aspect, I think, is interesting. And let me tell you why. I just watched a video of Mike Wallace interviewing iron Rand in 1954. And his point to her was, I don't know why you believe in this individualism. And, you know, people should only be paid if they have great ability. We believe in the United States that we have obligations to each other, that there's a social good, that we need to be altruistic. And I thought how foreign Mike's description of the United States is to us now. Yeah, you know, and that's, to me, the political thing that's interesting. I have relatives that are Trump voters, their view of the world is very much an economists view of the world. You know, everything the market does is good. And they as to obligations towards others. Now, on the other hand, My children are very much believing in altruism. They want to be democratic socialists, and that kind of thing. So I see, that's part of the reason we're separating so much.

Yeah, you know, and I don't know who's gonna win and all that to have my hopes

Jeff York  32:25 
occurred to me reading your paper Bibles, like, if you went and talked to your children, or you went and talked to your relatives that were Trump voters, and you talk to them about some idea that you were representing as entrepreneurial. They both would say, Oh, that's cool. That's good, right? I mean, this is really, so I've been doing research, I've been finding that like, when you frame environmental problems as entrepreneurial opportunities, right, people on both sides of the aisle will get excited about them. It's defying ideology in America that right now. That's right, we actually without the pernicious downside of that is like, if you really buy into it, you really buy into this, this randian idea of the entrepreneur is the super person who we all have the ability to become and right. And we all have the same opportunity. it justifies an awful lot of things. Not so good for society.

Bob  33:19 
Well, that's the point, right? Because that's what the entrepreneur etiology is done. He put you articulated a beautifully Jeff, it creates a patina of goodness, on what in the past would have been reprehensible behaviors. For example, Elizabeth Holmes is excused by many people, because she at least tried to be an entrepreneur is too bad. She claims something before but all entrepreneurs do that she just went a little too far. In her know what she did was awful. But this is happening in social entrepreneurship and sustainability entrepreneurship, rather than saying, here's a more effective way to implement policies that we need, it's bringing the market in and so only if the market justifies this activity, will I then do it? And frankly, there's a lot of environmental policies that we need to put in place that are not good for markets, of course.

Brad Werner  34:13 
So here's my question. So I'm thinking of Milton Friedman's op ed in the New York Times in 1970s, where it's all about shareholders have evolved to the stakeholder. But it is that's that stakeholder seems to be a little bit of whitewashing, because the vial you just presented doesn't really consider those outsiders.

Bob  34:33 
Well, we do consider that we take a different view, we take the view of stakeholders that employees are a stakeholder that the community is a stakeholder. So we believe that the community takes help from long term stable employment from the companies in it and it creates social connections creates long term relationships that we think help communities grow. So we think I think anyway, that this whole idea of shareholder primacy Which was a new idea when I was in graduate school the first time in the early 80s. You know, it's kind of strange because the shareholders are the most protected class sub stakeholder, they can't be reduced below zero, right? They got all kinds of productions, but the employees don't got none of that. That's right, you know, and they can be fired and lose and start losing right away, you know, and the community loses. Part of this is just very, very guttural and visceral to me, because I grew up in mid Michigan, and of the five employers in Jackson, Michigan, where my wife and I went to high school, all of them are gone. And if you drive on the roads between Jackson mishmar grew up and say, like missionaries to go, you go through town after town, with you could tell where beautiful towns, but the factories closed, half the houses are boarded up. And so, you know, we tried to think about stakeholders is actually, I think, a center of what we need to do in the future. And that's why I say I hope maybe these companies just grow and then develop stakeholders.

Jeff York  36:08 
I mean, to me, that's, that's a Freeman's insight, and the whole driving thing behind stakeholder theory is in the long run, right? That's actually going to benefit the shareholders, or it should. And if it doesn't, then something is broken. Something is wrong, when a company can destroy value for all of its stakeholders, rather than shareholders. Right? And the shareholders somehow benefit from that that's not capitalism anymore. Some Kind of,

Bob  36:38 
yeah, who knows what is called we did, like I said, in that 1954 interview, Mike Wallace didn't think of it. He said in it, he said, we are not a capitalist country. You know, here's a CBS This is you know, that he said, We are a modified capitalist, you know, with government. And here's the thing, if entrepreneurial ism tends to be a an idea and ideology focused on the winners, we need to take care of everybody in society, we need to have a place for someone who wants to be an artist to do well. We need to have places where someone who isn't say, you know, the brightest or hardest working to have just a good job. We need to allow for various levels of ambition and ability and be inclusive, and I don't know how we can get to our goals in diversity, inclusiveness unless we have a sufficiently robust economy that employs a broad swath of people. So it isn't allocating a few jobs among different groups. It's, you know, let's all decide where we want to go. And so I think it's important. That's why I thought it's a good thing. Maybe this development will result in large

Brad Werner  37:46 
flags that happen, right, if you see if you think about where you and your wife grew up, and towns are dying, think of the generations of children, those still no schools?

Bob  37:55  
Absolutely right. The high school I went to, was a good High School, we learned Latin as a required class, we had advanced physics, we had advanced chemistry, I, probably and yeah, in calculus and all that. And now that system ranks about, I think, in the one percentile of schools. And, and, and it's gone down when I when we graduated high school, or 60,000 people in this town, there's 29,000. Now, and so, you know, when we celebrate, one of the things we pointed out is that Instagram grew really, really fast, right? got maybe 13 employees, and they got sold for a billion dollars, you know, that would not affect anyone other than investors really. Mo darcars Cup Corporation in Mason, Michigan has been there since 1960, employs several 1000 people year in and year out. I'm not saying it's a wonderful company, or that the owners of it are wonderful, but it's, you know, it's there against community support, they give them tax breaks when they get in trouble. And you know, and people get employed and their children work there. So there is some value in that. And I think we it's been unrecognized. And what makes it get value less is this idea of, we should all be entrepreneurs.

Jeff York  39:13 
Now. At the same time, maybe we need entrepreneurs to create the alternatives. I mean, I know it's hard to say I mean, I remember during the.com boom, you know, we all were like thinking man, Jesus, like this is great, you know, he's figured out this genius idea and even proved like ultimately Still, this is fantastic. There are efficiencies, right? All kinds of I guess maybe it's just a generational thing. But I think what's really interesting about the the argument you lay out is how the entrepreneurial ism ideology as you describe it, is pulled society further and further apart. And I hope that we're not guilty in reporting this mythology in the podcast or in our teaching or anything else we do. I don't think Brad and I are because I know we make our Class is super demanding. And I always tell my students this, I'm like, I'm gonna do everything I can in this class convince you not to be an entrepreneur. That's what I do everything to show you why your idea will not work to push back on your ideas to show you can't commit, you can't get this play, you can't you can't make it work. You decide to do it immediately become you know, your biggest advocate and try to help you out. This doesn't mean you're gonna succeed, it's likely gonna it's gonna be difficult, I think, right? I think universities bear a little bit of the Well, maybe not even a little bit. I think Scott Shane has pointed this out now, as well, like we bear a bit of the responsibility for this. Well, students like the story that they can all be entrepreneurs. Let's tell them that. Yeah. All right out that, you know that what we teach them doesn't match the environment that we're sending them into? You know, and no, I think you're, I think you teach it exactly what I do. Because the fact of the matter is that if you start a company, four times out of five, maybe even, you know, nine times out of 10, you're not going to make it and some of those not making it means bankruptcy and losing your house. And let's not do that. Let's focus on affordable risk. Like I always teach them like, like, you don't want to not bet your parents house on you're gonna work, there'll be people knocking at the door with money, trust me, and they're not your apps not gonna work anyway. So don't do that. It's, that's what I love about the effectuation people, you know, they actually talked about that. Well, they did. They did a cute study, they did a wonderful study, actually, they found that experienced entrepreneurs acted to minimize risk more than anything else. They didn't bet the farm, they

Brad Werner  41:43 
wasted 4 million bucks on that study.

Bob  41:48 
Costs 4 million bucks. But man, there's all these other narratives like I mean, you say big surprise, but I mean, it's like, there's all these other narratives like the lean startup or whatever. It's like, Look, just pivot he'll be exactly right. And break. Bread. Oh, sorry to mean, you're not what expert entrepreneurs do. They aren't like those goofus is who just do stuff and hope for the best. Right? And that's why I teach it, and it's why I'm glad you do. And I'm sure it's what Brad is saying. I love. I built a company, you know, part of the reason for writing this was just that, and the reason VCs are funding it, you know, a lot of what is being spread around. And I'm not going to blame anybody you know, but a lot of swing out is kind of hooey because, you know, nobody that I know ever, who was running a company or investing in company was first going to look at your technology and your prototype. When I was investing, I wanted to see the size of your market, how new it was and how fast it was growing. Yeah, if you identify as really cool market niche that's growing really, really fast. We're talking business at that point.

Brad Werner  42:56 
That's right. And I want to talk to the executive team. I want to know who's there?

Bob  42:59 
Yeah, who's who's who knows how to drag money out. And I tried to explain VCs aren't trying to find some incapable people that they will coach.

Right? They're trying to, they're hoping john Rockfeller walks in with oil all over him saying, Hey, I found this in a field of St. Peter, this right now. And that's what you're looking for. And that's why in this paper, we make the point, the organizational act of entrepreneurship, where you create a company to make a profit is different than the ideological meanings we take from that, and then apply in other social realms.

Jeff York  43:37 
That's awesome. I can't think of a better place to conclude, Bob. That's cool. Congratulations, the paper. So what once again, the paper is called freedom is just another word for nothing left to lose realism in the changing nature of Employment Relations, and it's part of a volume called reversing their the far reaching effects of entrepreneurship. Again, our guest is Bob Everhart, the director for research, entrepreneurship and society at the Graduate Business School at Stanford University. Thanks for joining us, Bob. Hey, it was a lot of fun, Jeff, and great to meet you.

Brad Werner  44:12 
back my takeaway is for entrepreneurs is this focus on stakeholders, this is no joke. This is not something to take lightly. You really need to understand that pretty much as well as your customers.

Bob  44:23 
I think if you take this perspective, you actually can create a competitive advantage. I think that's exactly right. If people know the difference between actual entrepreneurship and the ideological nature of entrepreneurship, they can focus on what they need to actually do and take the appropriate risks. Yeah. Like I said, I'll leave you with this. I tell my students I ran an entrepreneur company for seven years and I had one good night's sleep and that was the night I sold it.

Jeff York  44:51 
Well, there you go. Those years getting ready to start your company. You can look forward to a good night's sleep sometime. Future or you could turn your exit

Unknown Speaker  45:00 
Would you describe

Bob  45:01 
it drive for Uber? not get any sleep at all. We'll see you guys later.

Brad Werner  45:08 
Thanks, Bob.

Jeff York  45:09 
Hey, Bob. Well, that was a creative distillation. Thank you for joining us. If you enjoyed the podcast brought to you by the Deming Center for Entrepreneurship elite school of business, hit the subscribe button on wherever you purchase. Listen, acquire whatever you do with your podcast, click subscribe or leave a review or pass this on to someone else that really helps us. Let's get my name is Jeff York, research director at the Deming Center for Entrepreneurship, joined by

Brad Werner  45:32 
Brad Warner and by the way, if you'd like to ask Jeff or I a question or we can ask any of our guests a question our email addresses cdpodcast@colorado.edu. We'd love to hear from you and we'd answer your questions on our next show. So great seeing you, Jeff Joel. Bob.

Thank you very much.

Bob  45:50 
Take care. Take it easy guys. leave you now. Bye bye later.

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