Preface
There are any number of “How to succeed in business” books. Even more books tell you how various people have already succeeded in business. But very few books honestly address why some entrepreneurs succeed—and others don’t. Still fewer even challenge the notion of success itself in this context.
Take Donald Trump, perhaps one of the best-known businessmen in modern times. In Trump 101,
“The Donald,” as he is popularly known, tells readers they can succeed if they “tough it out,” “listen to your gut,” and “take chances.” What he doesn’t tell them is that they will have a better chance to succeed in the real estate business if real estate is the family business, if they work in the family business before venturing out on their own, if they have access to the right connections in that world, and if they know how to look, talk, and act once they start operating in that world.
Success comes easier if you start with capital—not just cold, hard cash, but a kind of hidden capital most people don’t even know they have. Donald Trump spent his first five years in business working with his father, Fred Trump. He learned the art of the deal from his dad. He learned from his father the elements of success that few books can teach you—from what jokes to tell to where he would have the most success with different types of people (in the office, at a restaurant, or on the golf course). The young Donald could get his calls answered just by saying he was Fred Trump’s son. That’s invisible capital.
You and I have invisible capital of all kinds. Our cultural background, occupation, age, gender, educational training, and sexuality give us entree to some social groups—and may make it more difficult for us to enter others. Where you went to school, whether your parents were in business, what neighborhood you lived in as a child—all these factors can either propel you further or hold you back.
I saw the workings of invisible capital when I served as a legislative aide in the U.S. Senate. Each summer, interns would flood our offices, most of them recent college graduates. Among those interns were Congressional fellows who had received stipends to allow them to live and work on Capitol Hill for the summer. These prized fellowship opportunities were few and far between—and the process was therefore highly selective. As a result, they often went to talented college students whose parents or other adults in their lives had strong ties to one or more members of Congress or their senior staffers. These relationships exemplified the mantra of one of my earliest professional mentors, who would often say, “Network or not work!”—and who also, and not so coincidentally, was the benefactor of my very first corporate internship as a college freshman.
These young collegians all had enough invisible capital to secure fellowships to work on the Hill. But when autumn arrived and their stipends ended, they virtually all disappeared when no entry-level jobs in members’ offices were available. Most of them could not find work elsewhere in Washington and were forced to go back where they came from despite their newfound connections, skills, and work experience.
One summer, however, I noticed that an intern who was not affiliated with that fellowship program continued working in our office even though there were no new job openings that fall. I learned later that she came from an upper-middle-class family that was both able and willing to support her while she sought employment on the Hill. In the interim, she continued working diligently as an unpaid intern in our office, building up her skills and connections within and beyond our office—just as the fellows had done, but over a longer period of time. When a job finally became available in our office, she was hired on the spot, even though at that time (during a recession) she was competing with job applicants who had more work experience and formal education than she had.
That is the essence of invisible capital. This young woman had been able to leverage invisible assets. One of those assets was the wealth of her family. But the story goes deeper. Her parents had made the strategic decision to bankroll her through the fall because they knew how the system worked, having gotten the scoop from several colleagues and relatives over the years. Most of the fellows came from high-income households with professional, college-educated parents. But they did not all share the same social networks—networks that when tapped into afforded them specialized knowledge, insights, and opportunities that their parental peers did not benefit from. Both sets of parents had invisible capital, but of a different composition and value based on the needs of the situation at hand.
Clearly, the unpaid intern would not have succeeded if she hadn’t worked hard or was unruly or incompetent. Working hard matters. But what made the difference for her in terms of upward mobility was the interplay of these unseen forces.
It is noteworthy to mention here, for a number of interrelated reasons, that the unpaid intern was White and that her paid summer counterparts were Black and the recipients of Congressional Black Caucus Foundation fellowships. While employment discrimination is still rampant in the labor market, in this example based on a very real scenario, race was not a factor—not a direct one, anyway.
Invisible capital is not a euphemism for whiteness or, for that matter, any of the other dominant statuses in society such as maleness, a high income, advanced education, occupational prestige, place of birth, or heterosexuality. However, there is a direct link from invisible capital to the opportunities and advantages that all these factors so often confer.
The intern in my office did not get the job because she was White, nor because she was necessarily a harder worker or more intelligent than her counterparts in the fellowship program. She got the job because of the kind of invisible capital she acquired through her family. The summer interns did not lack invisible capital. It was not a matter of rich versus poor, or educated versus uneducated. In this situation, the networks that were strong enough to secure these fellows the opportunity to work as interns in Congress were still not enough to compensate for the specialized knowledge of the Capitol Hill job market that so greatly advantaged the unpaid intern. That knowledge was a direct benefit of the networks to which her parents had access, networks that were born of opportunities in environments that until the late 1960s were virtually inaccessible to communities of color and to women.
Nevertheless, the fellowship program is a modestly successful initiative despite its nontrivial structural flaw. It provides consistent summer employment opportunities for African Americans who are still woefully underrepresented at virtually every level of participation on Capitol Hill. However, it is that fundamental design flaw that allows one form of invisible capital to trump the kind that successful fellowship applicants have leveraged to make it to Washington, D.C., though they rarely stay when the summer internship comes to an end.
The lesson here is that “no good deed goes unpunished”—if it fails to adequately challenge the assumptions inspired by prevailing myths around how to succeed in society. If intelligent, well-intentioned nonprofit managers can fall for this mythology, so can you, as you try to assess what it takes to excel in business. Too many people read “howto-succeed” books and try to start a business without understanding what they really will need to survive and thrive. Like many newly minted (also referred to as “nascent”) entrepreneurs, the young summer interns were quite successful in starting their journey on Capitol Hill, but when it came to expanding their opportunities after the fellowship, they came up short.
If you haven’t surmised it by now, this book is not going to give you a simple recipe for success, nor will it show you how to make a million dollars in thirty days or while working in your pajamas. But if you’ve been paying attention so far, you’ve probably already gleaned some insight into how you must change the framework through which you process how we define, improve, and expand entrepreneurial opportunities for all.
And the “we” here is all of us who believe (or would like to think) that some more enlightened approach to expanding entrepreneurial opportunity will benefit not just ourselves or our loved ones, but entire communities.
This book is about invisible capital, and how invisible capital shapes the entrepreneurial gauntlet and influences the quality of entrepreneurship experienced by new and prospective practitioners who may have the necessary passion and perseverance, but lack the insight and perspective to adequately gauge the terrain they must navigate as entrepreneurs and business owners. Invisible Capital reveals the context in which businesses operate, grow or stagnate, flourish or falter. It shows what it will take to level a playing field that so privileges those with the most invisible capital.
One of the main messages of invisible capital is that entrepreneurs don’t succeed on their own. So Invisible Capital is also for people who care about whether entrepreneurs succeed—and that’s all of us, even those of us who do not consider ourselves entrepreneurial, business savvy, or particularly profit hungry.
What I learned from managing the entrepreneurial programs for a business assistance organization in an inner-city community was that the hardworking residents of these neighborhoods needed help operating on a playing field that does not tilt in their favor. It is a precarious plane not navigable by the faint of heart or those invested primarily in the “rags to riches” mythology. (I refer to the mythology that so many Americans, whether newly immigrated or descendants of multiple generations here, have so deeply internalized through what I describe later in this book as the Entrepreneurial-Industrial Complex.) Our efforts to help poor and working-class people become entrepreneurs fail when we don’t take into account the invisible, often society-wide barriers to success. To create a truly democratic marketplace, we need to understand what invisible capital these folks bring to the table—and what they lack. When we radically improve entrepreneurial literacy, we will be better able to design more comprehensive business assistance programs for the next generation of American entrepreneurs.
Entrepreneurship is about much more than money. Entrepreneurs bring innovation and opportunity to the table. Entrepreneurs build wealth, create jobs, and bring us new products, services, technologies, processes—even new ways of thinking. The businesses they create are not just financially profitable, but offer the possibility for our whole society to profit. When someone starts a hair salon in an inner-city neighborhood and employs local residents to cut hair, the entire neighborhood profits. When an entrepreneur devises a new seat for bicycles so that women can safely bike their children to day care, the whole community—and the environment—profits. Entrepreneurship done well can create profits with principles.
My passion for entrepreneurship is personal. I come from a family of entrepreneurs and have spent my professional life working to understand the impact of entrepreneurship on our economy and society at large. After working in the U.S. Senate, I went on to join the staff of the White House Conference on Small Business as writer, researcher, and trainer, and there I coordinated lively panels of entrepreneurial experts and business owners from all walks of life. The White House Conference was a nonpartisan federal commission tasked by the 103rd Congress to gauge the status and concerns of “Small Business America,” having been inaugurated in 1980 by an act of Congress and resuscitated in 1986, and again, most recently, in 1994.
For a brief time, I worked for a small, local chamber of commerce in Chicago, and years later ran a nationally acclaimed business incubator in Philadelphia. I also have real-life experience as an entrepreneur. I helped raise a quarter million dollars to fund a high-tech product design firm I founded with my older brother—an inventor, engineer, and gifted computer scientist.
When it comes to entrepreneurship, I’ve been involved in this ecosystem in a range of highly complementary roles that have given me practical, policy, and programmatic perspectives on this important subject. I’ve also advised entrepreneurs as a consultant and served on the board of directors of two family-owned businesses, including one that spans three centuries and five generations—a regional newspaper acquired by one of my great-great-grandfathers in the 1890s.
Invisible Capital reflects all of these experiences. I draw on the latest research on American entrepreneurship, including the Kauffman Firm Survey, the Panel on the Study of Entrepreneurial Development (PSED), and scholarship based on U.S. Census data to show how entrepreneurship really works in this country—who tries, who succeeds, and why broad-based success matters to our nation as a whole.
I offer up fictionalized examples of the real-life issues faced by many entrepreneurs. And I bring to the table my own experience as an entrepreneur and the years of hard work I put into my own business ventures, which give me a practical sense of which assumptions are well founded and which ones aren’t.
The Introduction explains what invisible capital is and how it shapes entrepreneurial failure and success. You will learn why hard work and a great idea are important, but not sufficient, to achieve success, and what you can do about that. In chapter 1, I start with my own tragic assumptions about what I thought it took to start, fund, and grow a business, which leads into a broader description of the challenges that await most prospective business owners. It is essentially an exposition of the difference between the ease of starting a business and the radically harder endeavor of keeping one afloat.
Chapter 2 explores the landscape of modern American enterprise. This chapter will give you a brief overview of the composition and performance of U.S. businesses. What does it take to be an entrepreneur? In chapter 3, I explain how invisible capital operates, using composite cases and other illustrative examples to make these theoretical ideas real. It’s the best chapter to read to truly understand how to assess your own invisible capital: to inventory what you already have, and to learn what you need—or, for that matter, learn what your colleagues, clients, peers, or loved ones need.
Why don’t we know more about invisible capital? In chapter 4, I examine all the different things that explain how and why we seem to know so little about something Americans seem to value so much: striking out on our own in search of greater independence and good fortune. Drawing on numerous scholarly studies, I argue that the very governmental and other programs designed to help entrepreneurs don’t seem to know where to start to level the playing field; as a result they so often come up short by overlooking the unique value of thoughtfully merging democratic opportunity with entrepreneurial advancement.
In chapter 5, I offer solutions. Here are practical steps and measures we can take to systematically enable entrepreneurs to achieve success—starting with reshaping how we define entrepreneurial success, both for ourselves as entrepreneurs and as members of communities in which we are deeply invested.
Chapter 6 shows what those of us who do not self-identify as entrepreneurs can do to support and promote the growth of what I call “commonwealth enterprises” and the new, amazing breed of enlightened entrepreneurs who will be at their helm. I sum up what we must keep in mind as we expose the role of invisible capital and advance the kind of entrepreneurship we so desperately need more of. And though “doing good while doing well” is great, I believe doing good for, with, and in our communities might just help us do well! Quite well, and in ways that matter most to us as interconnected people—not just as individual consumers.
We face a crisis of entrepreneurial illiteracy in our country—not just among the ordinary people who want to become entrepreneurs, but even among the politicians and leaders who promote entrepreneurship. Too many think tanks and business books act as if all it takes to achieve entrepreneurial success is to follow the Yellow Brick Road of hard work. Make it to Oz and, like Dorothy, you will get what you want. That story of entrepreneurship would be great if it were true. But it’s not. It’s time to pull the curtain aside and see how invisible capital really works. Entrepreneurs need this knowledge to build their own success. Moreover, our communities need this knowledge to understand how our fragile economy actually works—and what can help where we need help the most.
Invisibility always protects someone. We also need to draw the curtain aside to make sure that a small group of people do not benefit unfairly by claiming their success came from hard work when it was actually a combination of work and the gift of privilege, be it inborn or acquired. Just by revealing the workings of invisible capital, we make democratizing entrepreneurial opportunity that much more possible and level a playing field that too few of us even realize is not flat. The better we understand the workings of invisible capital, the better we will be able to address equalizing its effects. We have the power to better align our individual and collective goals by promoting community-centered enterprises that draw from and contribute to local economies rather than continuing to reflexively validate a “growth for growth’s sake,” consumption-stunted mind-set.