“That’s how we give rise to the virtuous cycle of job creation and innovation. We seed an environment with both human capital and financial capital and we engage for years. We make it so that building things is the valued path for our top graduates around the country.” (Smart People Should Build Things – p177)
Author: Andrew Yang
Publisher: Harper Business
Publication Date: 2014
Origin: Last year I noticed a colleague’s Skype handle/mood had an interesting quote (although I don’t remember what that quote was). I pinged him to ask about the origin, and determined that the ultimate source was this book.
Summary: In Smart People Should Build Things, Andrew Yang reveals a huge problem (and a source of many other problems) in the United States: that many of the country’s most promising minds are being sucked into occupations in which they can do little or no public good: primarily the financial services and business consulting industries.
The reason this happens is largely because those industries invest hundreds of millions of dollars every year to recruit these bright minds. This force of recruitment, combined with the students’ own uncertainties, draws them away from entrepreneurship and away from most of the country and into specialized roles in a handful of locales.
That may sound extreme, but Yang provides ample stats and figures from the industries and the various universities to prove his claims. Also, my Skype colleague just passed me this link (Bloomberg: “Is Business School Gutting the Economy?”) that’s in somewhat the same vein – so the problem at least is getting more visibility.
The ultimate impact of this misapplication of energy and intelligence is fewer new companies and a massive detrimental impact to the economy.
The first part of Smart People Should Build Things introduces the problem. The rest addresses the solution: from Yang’s own efforts to his recommendations for public policy that will encourage people to pursue “builder” roles by joining young companies.
Yang then introduces the reader to Venture for America, an organization he co-founded that has a refreshing and positive three-part mission:
- To revitalize American cities and communities through entrepreneurship.
- To enable our best and brightest to create new opportunities for themselves and others.
- To restore the culture of achievement to include value-creation, risk and reward, and the common good.
Yang makes a convincing case that there is a real problem, with enormous ramifications, and that the solution is a cultural and policy-driven shift that will link more young people up with more start-ups, so that they can learn how to build things.
Note: I encourage you to check out Yang’s TEDx talk, Fixing the Flow of Human Capital.
My Take: I enjoyed Smart People Should Build Things, for a few reasons. First, I like that it’s casting a spotlight on a significant problem in the Western world. Second, because it highlights efforts to correct this problem, and has made me aware of a promising organization. Finally, it has caused me to pause and think about my own choices.
I found myself relating in some ways to the folks introduced and described in the book. For instance, I only ended up at the University of Waterloo by accident and by ambivalence – I took what I was told was the hardest program at the best school. Additionally, I’m still trying to figure out what I want to do in life, similar to many of the Venture Fellows before they became aware of the organization. Where I lag behind them, though, is that I’m still in that undetermined state, just cruising along (although, in my defense, I did join a start-up and I’ve learned a great deal that I intend to apply elsewhere), while they’re off taking risks for a greater good.
This book’s made me think, and for that reason it’s a winner.
Read This Book If: you’re wondering why so many bright minds are going into finance and consulting, why they aren’t venturing off on their own, and what can be done about it.
Notes and Quotes:
- xi: “What if 25 percent of our top graduates went to startups around the country each year instead of to Wall Street? How long would that take to generate thousands of new jobs, companies, opportunities, and even industries?”
- p11: “Unfortunately, hardworking, academically gifted young people are kind of lazy when it comes to determining direction. If you give them a hoop to jump through, jumping through that hoop can take two, twenty, or two hundred hours, and it won’t make a big difference. But they are quite lazy when it comes to figuring out what path to take or – more profoundly – building their own path. They’re trained to get the grade or ace the application.”
- Here’s an excellent op-ed that appeared in the Stanford Daily and outlines the problem
- This quote on p25 is from James Kwak, as he writes about the recruitment and acculturation process, and why so few graduates who go into finance or consulting with the intent of staying for just a few years actually make it out, after those few years: “It’s just human nature. Your expenses grow to match your income. As the decades pass and you realize that no, you’re not going to save the world, the money becomes a more and more important part of the justification. And when you have kids, you’re stuck; it’s much easier to deprive yourself of money (and what it buys) than to deprive your children of money.”
- Dang, this part from James Kwak makes Wall Streeters seem almost human: “Sure, there are self-parodying, economically delusional, psychotherapy-needing, despicable people on Wall Street…but there are also a lot of people who went there because it was easy and stayed because they decided they couldn’t afford not to and talked themselves into it.”
- As a computer engineer, it saddens me to know that some of my classmates went into finance. p28 explains why technical degrees are in such high demand: “A Kauffman Foundation study published in 2011 concluded that because financial instruments have become more complex, ‘the [financial] industry now focuses its recruiting on new master’s- and doctoral-level graduates of science, engineering, math and physics, and pays them starting wages that are five times or more what they would have earned had they remained in their own fields. Because these new hires are often the very individuals who otherwise would have comprised the most robust pool of prospective founders of high-growth companies, the financial services industry’s steady rise has had a cannibalizing effect on entrepreneurship in the U.S. economy.'”
- p35: “Much has been made about how companies struggle to innovate and challenge themselves if they have a business that is successful. People function the same way.”
“Much has been made about how companies struggle to innovate and challenge themselves if they have a business that is successful. People function the same way.“
- p38…I just liked the distinction: “Presenting, which many professionals are excellent at, is not exactly selling. Presenting means there’s a logo and a dozen people sitting in the boardroom waiting to hear what you have to say. Selling means trying to get someone’s attention about your little company – on they’ve never heard of.”
- p57: “But most people will not actually go off and start their own company. And with good reason. Building things is very, very hard.”
- p63: “There is a common and persistent belief out there that entrepreneurship is about creativity, that it’s about having a great idea. But it’s not, really. Entrepreneurship isn’t about creativity. It’s about organization building – which, in turn, is about people.”
“There is a common and persistent belief out there that entrepreneurship is about creativity, that it’s about having a great idea. But it’s not, really. Entrepreneurship isn’t about creativity. It’s about organization building – which, in turn, is about people.”
- p69 picks up and continues the previous thought: “It’s less about creativity and intellect, and more about will, determination, and the willingness to take on the multitude of micro-issues in service of the big goal.”
- p91, from the author’s own experiences…and something to keep in mind: “I found out pretty quickly that you didn’t need to play in a billion-dollar market to be successful. if you’re a company that reaches $10 million in revenue with 10 percent margins, that’s $1 million a year to reinvest or distribute to shareholders. That’s a lot for a small group of people, even after taxes.”
- This quote from p94 holds lessons beyond the specific world of tutoring/instructing: “Students pay more attention to what their friends say than who’s on the cover of what.”
- Also from p94: “It’s easy to get PR and success confused.”
- p99 talks about cybersquatters and how they deliver no value to the economy or to the world, and reminded me of the leeching plague that is high-frequency trading.
- This quote from p109 somewhat echoes the snippet from p11: “What’s interesting is that many of the people I meet who are young, highly educated, and from good families [Lee’s note: by which he means that the young folk have a support network if things don’t work out] are among the most risk averse. They feel like they need to be making progress along a ladder with each passing month or year. Their parents have often set high expectations for them. They measure themselves each period against their peers, who are generally following well-defined paths.”
“What’s interesting is that many of the people I meet who are young, highly educated, and from good families are among the most risk averse. They feel like they need to be making progress along a ladder with each passing month or year. Their parents have often set high expectations for them. They measure themselves each period against their peers, who are generally following well-defined paths.”
- This is the three-part mission of the author’s initiative, Venture for America: “To revitalize American cities and communities through entrepreneurship. To enable our best and brightest to create new opportunities for themselves and others. To restore the culture of achievement to include value creation, risk and reward, and the common good.” How utterly refreshing!
- Remember that little snippet from p94? Well, that’s not the whole story; from p129: “I quickly realized that for a nonprofit it was different; press and goodwill matter a lot.”
- p131 links to an excellent TED talk by Dan Pallotta, founder of AIDS Ride: The Way We Think About Charity is Dead Wrong
- I hadn’t really thought about it like this, but it’s very true. p132: “Cities tend to produce startups that are either solving local institutions’ problems or building on existing strengths.”
- The idea from p132 continues on p136, with some profound implications: “The problems that startups tackle are dramatically different in different regions…If only a few US cities attract the talent to become innovation hubs, we’d miss out on most of the opportunities for value creation throughout the country.”
“Cities tend to produce startups that are either solving local institutions’ problems or building on existing strengths. The problems that startups tackle are dramatically different in different regions.”
- p149, similar to the thoroughly debunked Great Man Theory of history: “We have a very human tendency to associate large organizations with their leaders, particularly if the leader is also the founder. It makes the narrative easy. You can show a picture of the person, interview him or her, and ask for lessons learned. This also shapes people’s aspirations…But with every growth story, there’s a whole team of capable, talented, motivated people who have worked for years to make it happen and whose lives have been transformed as a result.”
“With every growth story, there’s a whole team of capable, talented, motivated people who have worked for years to make it happen and whose lives have been transformed as a result.”
- p151 continues: “These people – the builders who work with the founders to help these companies grow and prosper – are, in many ways, more important role models.”
- p152: “Have confidence that if the company doesn’t work out, you will take lessons from the experience and apply them to your next endeavor, giving it a much greater chance for success. People can grow from adversity as much as they do from prosperity.”
“People can grow from adversity as much as they do from prosperity.“
- It always annoys me both when politicians promise to create jobs, and when voters demand that politicians create jobs. Job creation is the result of people, not politicians, and takes a time-frame that can’t be measured in an election cycle. At best, politicians can adopt policy that might create a favourable environment. p177: “That’s how we give rise to the virtuous cycle of job creation and innovation. We seed an environment with both human capital and financial capital and we engage for years. We make it so that building things is the valued path for our top graduates around the country.”
- p181, reiterating that it isn’t just about starting a company, it’s about joining a team: “We should do whatever we can to encourage not just starting a company but joining a recently founded one.”