Leaving The Box
Have you noticed that more and more people are not just thinking “out of the box”, but leaving the box altogether? This trend started some time ago, but significantly accelerated as the pandemic took hold in early 2020. Two years later it is in full swing as the economic toll of COVID19 and other global issues (supply chain disruptions, wars, climate change, growing income inequality, etc.) have now negatively impacted equity markets, with ripple effects down through all stages of the biotech entrepreneurial ecosystem.
In May an article was published in the New York Times titled “Fear and Loathing Return to Tech Start-ups” (https://www.nytimes.com/2022/05/11/technology/tech-start-ups.html). The author commented on the fact that workers in the trenches at many early stage companies were dumping their stock and jumping ship, either by choice (often due to stock options becoming worthless), or as a consequence of layoffs as part of cost cutting measures in response to over-staffing in the heady days of the past few years when valuations kept rising and enormous amounts of money were poured into new ventures. Whether by choice or not, many workers were deciding to seek new directions, and it didn’t appear they were simply making lateral career moves. This whole phenomenon began to be called the Great Resignation.
In June a book written by David Gelles was published called “The Man Who Broke Capitalism.” Gelles tells the story of Jack Welch, the famous/infamous CEO of GE who took control in the early 1980s, but does not treat him as the iconic hero of American business as he was viewed around 2000. Welch took the helm at GE during the first years of the Reagan era, which was arguably the beginning of the “me movement” (it was all about “me”, and what’s in it for the individual; every person looking out for themselves). Neutron Jack, as he was known, is now famous for at least four things: (i) annually laying off the bottom 10% of performers in his workforce as a cost-cutting tactic, (ii) focusing the company solely on increasing shareholder value (as reflected in quarterly stock performance), (iii) making GE the most valuable company in history at that time, and (iv) compensating himself, the CEO, to a much greater degree than any other employee.
Other public companies soon followed suit, and while Welch was heralded as a genius by some due to the enormous shareholder value he created, it’s also arguable that his approach fundamentally changed American capitalism. Most notably, companies stopped caring for the well-being of their employees and communities in the way they did previously. Many stakeholders other than those owning stock suffered as a result. There was a fundamental change in values that occurred, and many people today are questioning whether that was in our collective best interests as a society.
In early July an article appeared that was particularly damning of another aspect of the way business has been conducted over the past 40-50 years. Titled “It’s Time to Stop Living the American Scam” (https://www.nytimes.com/2022/07/07/opinion/work-busy-trap-millennials.html?referringSource=articleShare), this Op-Ed column questions the whole notion of the traditional work week, and of incentives to keep busy all the time, and points to an entire generation that is deciding en masse to simply leave that box behind and find a new way of working that is more personally fulfilling and less tied to one particular notion of why, how, when and where work must be done.
What does all of this mean for startup ventures and entrepreneurship in general? It clearly means change, but with change comes new opportunities. Having lived through several economic downturns and cultural “revolutions”, I take comfort in the fact that some of the best companies have gotten started during some of the most challenging times. Reconsideration of our collective values is a good thing, in my opinion, but I don’t believe that will lead to people discontinuing to think up new ideas, to become passionate about solving society’s problems, or to start new companies as a means of achieving these goals.
There is no shortage of talented creative young people, or pressing problems to be solved, or capital sitting in venture funds, hedge funds, and in the coffers of corporate strategic investors. Valuations will no doubt be a bit lower than in the past few years. The fundraising process will be a bit slower with more in depth diligence. In the long run, however, this should lead to a crop of stronger companies being formed and grown, ideally in which all stakeholders share in the enormous value that stands to be created. Economic indicators may be down, but there is plenty of reason to remain optimistic about the future.