More diversity, less regulation: What American businesses can teach our politicians

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As Republicans lick their wounds, and Democrats seek to build on their momentum, it seems like an opportune time to reflect on what real-world business experience might teach each political party.

GOP:  Recognize Diversity Drives Performance

In our increasingly flat world, businesses struggle mightily to compete - there's not only a fierce battle to attract talent, but also to build a culture that enables this talent to be most effectively expressed.

Smart businesses recognize that diversity isn't a sop to political correctness - it's good business, smart business - and something business leaders seem increasingly to appreciate.  (I suspect the demographic diversity already present in most Fortune 500 companies far exceeds the political diversity of our leading universities - to say nothing of our leading newsrooms.)

When I hear some on the right suggesting the Republican Party "needs more tolerance," I cringe.  That boat sailed a long time ago.  When I think of "tolerance," I am reminded of the summer before I started Harvard college, when I called to introduce myself to each of the new roommates I had just been randomly assigned.  After a few minutes of benign conversation with one of the fellows, a self-proclaimed conservative from the pacific northwest, he abruptly asked me "You a Jew?"  I told him I was.  "That's okay," he assured me.  "I'm tolerant."  I think we lasted maybe two months.

(Conversely, I also vividly recall several classmates from the far left who expressed unwavering support for The People in the collective, yet would systematically go through the class list disparaging almost every individual.)

If some (certainly not all, hopefully not most) on the far right think tolerance is theirs to magnanimously dispense, they are seriously out of date.  Deciding you may be willing to tolerate blacks, Jews, women, gays, Asians, Hispanics, or anyone else is lovely but inadequate - not even table stakes.  (Duke University Medical School Dean and Vice-Chancellor Nancy Andrews captured this point effectively at an innovation conference earlier this year; see also the discussion at the end of my WSJ review of "The Rare Find.")

Every company in which I've worked has aggressively sought the best people - survival in business depends critically upon your ability to recruit and retain talented employees.  I've attended a number of company meetings along the way - and I don't think I've ever experienced one that seemed as profoundly lacking in diversity as the GOP's Tampa convention. 

The benefit of diversity is perhaps best visualized in the context of start-ups, where there is no masking the raw need for talent, and where it's clear that solving difficult problems requires the best people, who must work effectively together, often days and nights for weeks at a time. 

To the extent that some start-ups and VCs remain stuck on traditional models of entrepreneurs (Twenty-something programmers in Silicon Valley), there are other VCs like 500 Startups whose entire business model depends upon leveraging underappreciated talent.

To be clear: business has further to go on the diversity front, especially regarding women; in my view, there's still seems to be a pervasive (though fortunately not universal) sense that at least at the top, "serious" business, especially where financial matters or significant transactions are involved, is something primarily for men.  (Not surprisingly, the least diverse area of business may be investing; perhaps if there was greater diversity among the hedge fund managers and others investing in companies, there might be more diversity - and better performance - among those leading these companies.)

To appreciate the hold ancient stereotypes still exert on us, look no further than the movie "Wall Street."  Certainly, no one would suggest writer Oliver Stone is part of a vast right wing conspiracy.  Yet even Stone's narrative relies on a crusty British billionaire financier, Sir(!)Lawrence Wildman, to serve (literally) as a white knight, and restore a sense of comfort and order to the system.  Old tropes die hard.

Dems: Learn to Love Successful Businesses, Not just Aspiring Entrepreneurs

Many on the left seem to have an ambivalent relationship with business - they seem to embrace the nobility of the struggling entrepreneur, but then despise the established business (see related discussion here).

I'm struck by the deep disrupt of capitalism I sense from many on the left.  To the extent they recognize the exceptional generative power of free enterprise; they view this more as a cause for concern than celebration.

There also seems to be a pervasive belief that for-profit enterprises are inherently corrupt - perhaps impure is a better word - and the revenue generated is viewed with suspicion and contempt, almost as if it represents an ill-gotten gain.

The place where the rubber hits the road here is regulation.  It seems common for many without experience in business to view regulation as effectively an unalloyed good, a mechanism for keeping untrustworthy and dangerously ambitious enterprises in check.

Most businesses, for their part, recognize regulation is vital for maintaining a level playing field; what they worry about is both regulatory excess and (even worse) regulatory uncertainty. 

In my own experience in biopharma, I've vividly experienced the impact of both - I've seen a nearby biotech company fold because regulators couldn't make a timely decision on a key product, and I've seen drug development in specific therapeutic areas expand and (unfortunately) contract in response to the outlook of the individual regulators responsible. 

A huge reason many investors are shying away from investing in biotech and medical devices companies is the regulatory climate.  A number of usually brazen tech VCs have explicitly told me they are reluctant to invest in digital health because they are concerned about being subject to ham-handed regulation (see this related op-ed from Gottlieb and Kleinke).

The most thoughtful comments I've seen on this subject are from the late George McGovern, in a 1992 WSJ op-ed (well-worth reading in its entirety) discussing what he learned from his ultimately unsuccessful attempt to run a Connecticut bed and breakfast after he retired from politics:

"I also wish that during the years I was in public office, I had had this firsthand experience about the difficulties business people face every day....We intuitively know that to create job opportunities we need entrepreneurs who will risk their capital against an expected payoff.  Too often, however, public policy does not consider whether we are choking off those opportunities."

Excessive regulation can have significant adverse consequence, McGovern learned.

It's a lesson many others on the left would do well to remember.


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