Founder led companies outperform, negative externalities, and how to live

The future of innovation is global. We discuss it here. July 2021 Edition.

News of the month

In my book Out-Innovate, I interviewed the CEOs and founders of 200+ startups around the world. Most of the leading companies (by size/valuation) were still led by their founders. I often thought it was a coincidence.

Yet there is “a growing mountain of evidence of the superior and more lasting performance of companies where the founder still plays a significant role as CEO, chairman, board member, or owner or adviser.”

What drives this?

Great piece that attempts to answer why. Three factors explain this phenomenon. The first is what the authors describe as insurgency, which the capability gives special purpose. The second is ‘front line obsession’, the maniacal focus on product and customer experience. Third is ‘an owner’s mindset’, which propels stronger alignment of interest, accelerates speed of action, and personal responsibility.

Source: HBR Magazine, reproduced with permission

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Interesting discussions

When we think about social impact, it is easy to think of the positive outcomes. But it is equally important to factor the negative externalities of the business. Solar is a salient example. “It’s sunny times for solar power. In the U.S., home installations of solar panels have fully rebounded from the Covid slump... Over the next 10 years, that number may quadruple, according to industry research data.” But here’s the catch: “In an industry where circularity solutions such as recycling remain woefully inadequate, the sheer volume of discarded panels will soon pose a risk of existentially damaging proportions.” This would represent incredible volumes, up to 78m tonnes by 2050. Managing these negative externalities of an otherwise positive business will be critical.

In the last few years, Silicon Valley has faced a reckoning to its lack of gender and ethnic diversity. As I’ve explored in previous pieces, diversity has strong advantages and there is much we can learn from global entrepreneurs. Yet at the same time, in many emerging markets, diversity challenges can look different. One is race, and this piece asks whether “white founders in Africa have an easier time getting capital”.

Entrepreneurship is a huge driver to the economy around the world. Yet, it is shocking how expensive it can be in different geographies to start one. In the US it costs on average $725. That might seem cheap compared to the UAE which can be 10x costlier. But it also seems expensive relative to other western countries (e.g. in Canada is is $166 and in the United Kingdom it is only $17). Many emerging market leaders are also cheaper (e.g. China is $137 and Brazil $212), but of course this doesn’t adjust for purchasing cost parity. This seems like a huge opportunity to decrease cost and friction to make starting a business more accessible for all.

Metaphors and narrative can be used effectively in business strategy. “The use of metaphor in business is nothing new. Metaphors have been harnessed for decades to guide a company’s mission, shape its storytelling, and create a culture. As companies battle for attention from customers, employees, and investors, an effective metaphor can help a company craft a narrative that distinguishes itself from others.” How do you use metaphors in your business?

The last [99%Tech] deep dive explored how should you build your insuretech. The next question of course is how to distribute insurance? As the old adage goes, insurance is sold, not bought. But new distribution models, including embedding into the final product experience are changing things. Great round up of the key dynamics at play.

How are problems solved? Fascinating read about human nature, and our innate desire to add complexity, rather than to simplify. “There are a variety of explanations for why we might favor addition over subtraction in problem solving… ‘Numerical concepts of ‘more’ and ‘higher’ may map to evaluative concepts of ‘positive’ and ‘better,'‘ for instance. In many fields it may be easier to gain recognition for creating something than for taking something away.” This has real world implications, not just on how we build products, but how we organize our society - think regulation, infrastructure, and our own time management. What will you simplify?*

When I started this newsletter five years ago, few were preaching the global innovation opportunity. But when Sequoia writes a memo about it - in this case LatAm tech - you know it’s mainstream. And when my alma matter McKinsey does a podcast, then it’s really mainstream. :-)

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Book of the month

This month I read a book that helps answers one of life’s most fundamental questions: how to live. The book is Sarah Bakewell’s How to Live: Or A Life of Montaigne in One Question and Twenty Attempts at an Answer.

As the Guardian reviews it: “‘Read Montaigne,’ said Flaubert; ‘he will calm you.’ And indeed he does. If his philosophy could be boiled down to two mottoes…they "would surely be 'anything for a quiet life' and 'if it ain't broke, don't fix it.' He is the most disarming of philosophers, the least didactic – to the point that many people wouldn't consider him a philosopher at all.”

But his essays each delve into serious topics, and offer a chance at reflection and introspection. Bakewell’s book doesn’t just explain his philosophy, but contextualizes it for today and reveals his influence across the ages.

I actually loved this book, much more than I thought I would. I am considering writing a longer form piece about what Montaigne means to innovation.

Would you want to read it?

How To Live: https://amzn.to/3zTDZbs

*Special thanks to 99%Reader Steve Moffatt for the suggestion