Are we asking more of the broad-based ownership economy than it can actually deliver?
Thoughts on marriage, parenting, good jobs, small businesses, employee ownership, and more
The best dads are the best husbands first
When we first started dating, my wife asked me whether I was more excited for my role as a husband to my future spouse or as a father to my future children, and I said the latter. In hindsight, it wasn’t the best thing to say to someone who I would propose to a year and a half later. Luckily, she didn’t hold it against me, and I’ve grown a lot since then.
It was my honest answer at the time, and I think most young men would say the same; we’re socially conditioned to expect more fulfillment as a dad than as a partner.
Part of that is for the same reason that most kids say they want to be a teacher, doctor, or firefighter when they grow up. Children think they know what it means to be a parent because they see how someone looks and feels when they play that role in their lives. They can’t fully intuit what it’s like to actually be inside of a marital relationship just by watching two other people do life together.
Another part is that married men do a poor job about telling other men about the real benefits of a healthy marriage (despite all the data suggesting that it’s a much better deal for them than their wives), but they will gladly talk about how much their kids mean to them.
But if children do get visibility into marriages that aren’t unhealthy or don’t last, especially if that’s common in their families and communities, and even if they want to break that cycle, it’s hard for them to have as positive an association with marriage as they do with parenting.
I got married and had a kid earlier than most of my peers, so when they ask me for advice now that I’m 6 years into marriage and 3 years into parenthood, I tell them that the best thing you can do to be a great dad is to be great a husband.
There are plenty of men who seem like cool dads to their kids but aren’t great partners to their kids’ mothers. Their children may seem like they love them while they’re young, but they will eventually grow up to know that they shouldn’t want to be anything like them, or want to be with anyone them as adults.
How you show up as a husband and father feed into each other, for better and for worse. How you show up at work plays a role, too. It’s hard for someone whose struggling financially and pessimistic about their career and life prospects to be a good person at home. Getting a better, higher paying, safer, and more stable job can reverse that downward spiral and change a family’s trajectory for generations in terms of financial, physical, and emotional health.
You can’t compartmentalize all the different parts of your life, at least not for long, and not without consequences. There are always spillover effects, both good and bad, but we get to choose which they will be.
Good intention cannot overcome a structure that’s not set up to reinforce its own success, and that is as true in marriage and parenting as it is with running a small business and creating a broad-based ownership economy.
Good intentions don’t create Good Jobs
In her book The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits, Zeynep Ton, MIT Professor and President of the Good Jobs Institute, shows that a similar relationship that exists with being a great husband and dad also exists with being a great company and employer.
While parts of the book empirically reinforce the common sense notion that you can’t serve customers well if you don’t do right by the employees who serve them, across her 15 years of research, my first takeaway from Ton is that efficiency, not generosity, separates the businesses who offer good jobs from those who don’t.
You need a great product, but then you need a great process to provide that product to the market at a great price. Only then, do you have the profit margin to invest back in your employees so they can reinforce the process that creates and delivers the product. You need every piece, from product and pricing to process and people, to be operating at a high level and working together.
Most of the case studies focused on bigger companies: Southwest Airlines, UPS, Toyota, and In-N-Out Burger, with a deep dive on four retailers: Costco, Mercadona, Trader Joe’s, and QuikTrip.
However, it still left some unanswered questions for small businesses:
What if you don’t have access to the financing needed to invest in providing good jobs that ultimately lead to higher profits?
What if you’re a sole proprietor whose personal and business finances are one in the same experiencing a decline in revenue growth?
What if the only types of small businesses you’re qualified to start are in low-margin, low-growth industries, so every dollar that goes to increasing wages means you have even less money to provide for your own family, if you’re getting any income at all?
What if you can’t weather the turnover necessary to stay in business and find a team of employees who can produce at high enough levels of output to make it all worth it?
I have started, ran, and served dozens of small businesses, including three I owned and operated myself. The #1 driver for me and the entrepreneurs I worked with was to kickstart the virtuous flywheel of capitalism for their company (and family), their community, and their employees.
An impactful small business plays many roles in society, among them being a reliable product or service provider at affordable prices, a patron of and partner with other small business, a contributor to the tax base, and an institution that’s involved in the community. The role I took the most pride in was as an employer, particularly as a restaurateur.
Running a restaurant was the best business training (and butt whupping) I’ve ever received.
Even when the top-line and/or bottom-line numbers weren’t where I hoped they would be, the line item I was most proud of was actually an expense - wages - especially because they were going mostly to my family members who also had other people that depended on them. A family-owned and operated business in an ideal state is a work of art, but if things are not going well, it can make an otherwise stable kinship very fragile, if not break it entirely.
We paid a strong living wage as well as tips, hired people who struggled to find employment elsewhere, and offered more flexibility than a corporate entity would. Yet, we were still a long ways from being a great employer. I would’ve loved to offer benefits like retirement, healthcare insurance, childcare support, and salaries instead of hourly pay, but we weren’t even sure we’d stay in business on a monthly, weekly, and towards the end, daily basis.
The reality for us, and most small businesses that society says it wants and needs to win, is that we never had a chance to be a great employer, and our efforts to do so before we were mature enough sped up the timeline of our shut down. If we had not prioritized our employees, maybe we would have survived long enough to figure out how to get back to being the employer we desperately wanted to be from the beginning.
While the intentions of entrepreneurs can embody an altruistic capitalist spirit, most small, local, owner-operator, sole proprietor, and family businesses are grappling with the challenging economics of a pie that’s small, shrinking, and can only be split so many ways before there’s nothing left.
“Don’t look for a financing solution to an operating problem”
It’s tempting to think that greater access to capital could solve some of these challenges for small businesses, but it doesn’t.
“I think we thought that in solving the financial access problem that we would see this unlock of small business longevity and resilience. In fact, those numbers haven’t changed.”
- Malika Anand, Community Investment Management
“Don’t look for a financing solution to an operating problem. Sometimes you have to make the hard decision to lay someone off or do something different. Sometimes that short fix looks like the right answer. It might not always be.”
- Samir Shergill, Highbeam
Let’s say you solve the operating problem. Some problems get easier with scale, but often the underlying challenges - like providing good jobs for employees - not only remain, but increase in complexity alongside, if not before, revenue growth:
“Businesses say their primary challenge is hiring and retaining workers. And then we ask them what they’re spending the most time on, and it is acquiring customers, retaining customers, not workers. And so we do see this gap between ‘my biggest challenge is workers, but I don’t know what to do about it. And so I’m spending the limited amount of time as a business owner on places where I feel like I can make a difference in my business.”
- Tim Ogden, NYU
The ability for businesses to be provide good jobs might have a lot more to do with macroeconomic trends and market dynamics (consumer spending, interest rates, unemployment rates, wage levels, demographic trends, and global trade patterns) than their operating acumen, cash flow management skills, or corporate values.
“Does it matter who owns your desk?” Yes and no.
Like small businesses, employee ownership is a story that writes itself, especially given the pending silver tsunami and generational wealth transfer of many small and middle market businesses.
“Does it matter who owns your desk? Are you more productive if it’s owned by [the government], [a corporation], or yourself? Holding forth everything else constant, employee-owned [businesses] were much more productive. It matters quite a bit it turns out for the motivation of people to have a little stake in the ownership. There’s something innate about an employee-owned company that boosts productivity”
- Ike Brannon, Jack Kemp Foundation
However, rather than just focusing on who owns your desk, the more important question is whether or not, and at what price, and on what timeframe, does someone want to buy and sell that desk.
“[In] a lot of effort in the past, the storytelling has been around the worker, and I think we need to move some of that storytelling to the owner. Because we can talk until we’re blue in the face about how great it is to be an employee at an employee-owned business, but if we can’t get business owners to want to do this transaction, it’s all for not.”
- Phil Reeves, Apis and Heritage
“Employees don’t own a thing until a deal is done. We can’t get all the benefits, the positive things we’ve all been talking, everyone in the room acknowledges…until a deal is done. And the deals don’t get done when there’s this tremendous uncertainty, the deals don’t get done unless there’s regulatory clarity.”
- Greg Facchiano, The ESOP Association
In a similar way that we know the actual footprint of venture capital in financing new businesses is minuscule compared to the airtime it takes up in media, we shouldn’t be surprised when private equity firms that market the big opportunity to help finance employee ownership don’t end up being viable for most businesses.
The market value of the underlying asset and the efficiency of the market in which it is traded is much more important than the pursuit of ownership in of itself.
“We need work more than work needs us”
In The War on Normal People, Andrew Yang not only outlines the consequences of joblessness, under-, and unemployment on individuals, families, and communities, but he also argues that the economy has ran off with technology and globalization and is never coming back, even if we want it to.
Dani Rodrick reaches a similar conclusion, dispelling the myth that reshoring manufacturing means that all of the jobs for the masses from the 20th century will come back with it, leaving us no choice but to embrace the physical service sector as the primary job creator in the US.
Noam Scheiber’s insights on the declining ROI of a college education suggest something similar. The wage and job outcomes of degree holders seem to signal that our desire for young people to go to college is greater than the demand for college graduates in the labor market, and has been the case for quite a while before AI. Improving college access might actually be setting up entire generations for failure.
Paul Graham is famous for his essays on startups, but his 2007 piece on “An Alternative Theory of Unions” is a sober reminder that the success of the 20th century pro-worker movement may have had more to do with the economic leverage the masses had in the global economy than the consciousness of corporations and governments that we feel they’ve since lost touch with.
On the surface, The Box by Marc Levinson tells the story of the mechanical breakthrough that was the shipping container, but after understanding the longshoremen market in which the innovation was conceived, it’s clear to me that Malcom McLean desperately needed to engineer his way out of a massive labor problem that was severely hamstringing global trade.
It is always smart and wise to make the financial case for doing the “right thing”, as has been done with good jobs, small business entrepreneurship, employee ownership, college access, and all the historic and contemporary iterations of DEI.
However, when we’re fighting for a more democratic version of capitalism that we want to see, the economic rhetoric for those models can’t manifest or sustain the movement on its own.
We may find that we’re asking more of the broad-based ownership economy than it can actually deliver.