The Problem with Inheritance and Why Founders are the Solution
This post is a review to Founding vs Inheriting by Balajis Srinivasan.
When I first read Balaji Srinivasan’s (@balajis) post, Founding vs Inheriting, I was stuck by how explicit the difference was between institutions on the East Coast and West Coast of the United States.
I realized that the majority of the systems that govern our society, such as the political, economic and major education systems, were located on the East Coast of the United States. Washington D.C. was the political Hub, Wall Street was the economic hub and universities, such as Princeton, Harvard, MIT or Columbia were some of the strongest education hubs.
The East Coast is defined by traditional institutions that were established when the Founding Fathers first pronounced the United States as a sovereign country. And for that reason, so many of the individuals who are now responsible for governing these institutions are from the same lineages of those who previously were responsible for governing them. Who you know and where you come from is valuable. People will overlook some and provide opportunities to others, simply based on a person’s last name. There is a certain degree of competence required to move upwards along the social ladder, but East Coast culture does not determine who should be running things based solely on competence.
This is largely why things on the East Coast move slowly and often turbulently. The individuals who are in charge are often not the most competent, and although they have been elected to lead a certain institution, it is highly unlikely that they could have built the institution themselves. The ability to build an institution is different than to run it.
The West Coast, on the other hand, is characterized by a group of individuals who had the intellectual capacity to compete with those who were in charge of things on the East Coast, but instead chose to pursue something on their own. The West Coast is home to many of the world’s largest technology companies, such as Google, Apple, Tesla, Facebook, Microsoft or Amazon. The CEOs and founders of these companies could have easily moved onto professorships within Harvard or MIT, established themselves as renowned hedge fund managers on Wall Street or pursued a seat in the White House. Fortunately, these individuals came to develop their own interests and their own passions.
They were not swayed by the influences of their peers because they had what those who inherited institutions did not:
To understand conviction at a deeper level, I would like to provide a brief summary on the life of the 16th president of the United States.
A Short Lesson on History
Abraham Lincoln was born to a family of poor farmers. From the beginning of his life, he was exposed to the hardships of the lower class. His mother died when he nine years old, and he became distant to his other relatives as he grew older.
People like Abraham were not awarded the good fortunes of a formal education. He was mostly self-taught, while attending rural schools when they were available (he moved several times during his upbringing).
After moving to Illinois, Abraham first experienced life in politics and war; first, the Black Hawk War began in 1832, and Abraham was elected as the captain of the Thirty-first regiment — the Illinois Militia. Around the same time, he entered politics by running for a seat in the Illinois General Assembly. Although Abraham could draw crowds, he lacked a well-refined education, campaign funding or any influential friends he could garner support from. He eventually lost.
In 1834, Abraham began to teach himself law. He read the works of Sir William Blackstone until he built a sound understanding of the constitution and of the laws that governed it. While studying law, Abraham was eventually elected as Whig candidate for Sangamon County in the Illinois General Assembly, where he was reelected for three additional consecutive terms.
Fast forward to 1846, where he was elected from the Whig Party to the United States House of Representatives. He served a single term from 1847–1849, representing the state of Illinois.
From 1849–1855, Abraham focused primarily on his law practice. However, in 1855 he unsuccessfully ran as a Whig candidate for the United States Senate. He eventually transitioned to the Republican party, and in 1858, he ran as a Republican candidate for the United States Senate. He lost again.
On May 18, 1860, Abraham’s fortune turned around; he was finally nominated as the Republican party’s Presidential candidate. And on November 6, 1860, Abraham Lincoln became the 16th president of the United States.
The rest is history.
The Problem with Inheritance
I have often wondered how Abraham Lincoln was able to stay on his path to political success.
He was repeatedly rejected as a politician, having lost first in the Illinois General Assembly, then again as a Whig candidate for the United States Senate and then again as a Republican candidate for the United States Senate, among several other smaller defeats throughout his life. Even as a president, Lincoln’s political stance was often rejected or criticized.
Aside from political loss, Lincoln suffered from personal adversity for the entirety of his life. First, he was born to a poor farming family. Then his mother died, followed by his sister. Then, his first love, Ann Rutledge died, and second romantic interest, Mary Owens rejected him. Finally he married Mary Todd, who gave birth to four boys. Out of the four, only one lived to maturity, while the other three died before concluding adolescence.
The difficulties of Lincoln’s life — although challenging — were what made him a great leader. His political views on slavery were not based on the views of a long line of Lincoln values. He believed slavery was wrong because he witnessed firsthand the oppression that African-Americans were subject to. He believed that everyone should have the right to life, liberty and freedom and he felt it was his responsibility to manifest that belief in reality.
I believe that Lincoln managed to continue moving forward, despite the endless setbacks he faced, because he was convinced that what he was aiming at was the right thing.
Conviction is often a defining character trait of some of the world’s most pronounced founders and thinkers, including Steve Jobs, Elon Musk, Mahatma Ghandi and Martin Luther King Jr.
Conviction is not something that can be passed on — it must be acquired by oneself. And it is acquired when one is able to find something they believe in; something that they can hold on to when things start to go awry. Conviction is the true north star that guides us when we have every reason to give up, but choose to continue pursuing what we believe in.
When someone inherits something, they don’t require conviction. What they are inheriting has already been established. They need not endure the hardships, the rejection, the disappointment and the difficulties associated with creating something new. But enduring and understanding how to navigate those difficulties is what makes founders qualified to lead what it is they are founding.
Balajis describes inheritance as being similar to a read-only culture:
“Read-only culture is similar to partial bilingualism: the ability to understand a language, but not speak or write it, a phenomenon which is common among children of immigrants.”
This is the idea that those who inherit something only understand it at a surface level — they don’t know what it took to build what it is they inherit. They only see the results and the artifacts that remain. They know something was built and they know it was difficult. But they don’t understand how difficult it was or what it took to turn that something into something great.
The Power of Founders
Inheritance is often ill defined; it is not limited to having something be handed down from generation to generation. As Balajis states, “A more subtle way to inherit an institution is to win an election.”
Being elected is similar to inheriting something because the process of being elected to lead an institution is far different than the process of building the institution itself. Balajis continues “…when they inherit a seat they have inherited something they could never have built from scratch.”
When Steve Jobs resigned from Apple in 1993, Apple saw limited success under John Sculley’s leadership (who, again, was elected by Apple’s board to replace Jobs) before entering one of its most unstable periods. Eventually, Jobs came back to Apple after having established NeXT and eventually Pixar. Upon his return to Apple. he brought the company back from the brink of bankruptcy and turned it into what would become the world’s most valuable company.
We can’t blame John Sculley. He wasn’t a bad guy, or even a bad business man. But he didn’t build Apple.
Steve Jobs built Apple. And without Steve, Apple would have died.
So, why is inheritance a problem? Because inheriting something means arriving at the top of the mountain without having to have endured the climb. When things go wrong, there is no conviction to keep you anchored to what you are pursuing. You can disregard whatever you inherit or leave it to others to manage.
But to found something — to have acquired a belief in something — is to stand tall against the nearly infinite number of possible things that could go wrong. It is to pour your time, energy and commitment into something and to dedicate your life to that something.
Founding is the manifestation of passion and will combined with discipline and perseverance. Inheriting is the misallocation of leadership to someone who lacks conviction — they have no skin in the game, as Nassim Taleb would say.
This isn’t to say that all inheritance is senseless and inefficient. But I am saying that inheriting something will almost always yield worse results than founding something on one’s own.
Long after Elon Musk, someone will come to inherit the leadership role Elon holds within Tesla and SpaceX. And although they may be a sound leader, they will never understand the commitment that Elon Musk made to Tesla and SpaceX. They will never relive the consecutive days spent at the office, the sleepless nights, the time away from family, the hardships, the critics, the pain and disappointment. They will take over the helm of a ship that was built and curated over a lifetime of dedication. And when things get tough, they may choose to step down, or garner support from others. But they won’t understand what it took to overcome all odds and accomplish what Elon has accomplished.
The power of founders is rooted in their conviction. When the institution one leads is the institution they built from the ground up, they will shoulder a load for 10 kilometres what someone who inherits that institution couldn’t carry for 10 metres.
Why Founders will Create the Future
The world was made aware of the incompetence of the governing institutions as a result of COVID-19.
The economy collapsed, public education was shut down, government officials lied, emergency services failed to protect, media corporations failed to report facts, and the US military could do nothing, despite having nearly $800 billion in federal funding.
These institutions are run by those who have inherited power. Jerome Powell didn’t build or organize the Federal Reserve; Janet Yellen didn’t create the US Treasury; Betsy DeVos didn’t invent public education.
These individuals were elected into their positions. And, as stated above, being elected isn’t that different from inheriting. What unfolded as a result?
The world broke down. People were let go from their jobs. People went bankrupt. People dropped out of school. People couldn’t pay their rent. People were afraid of the police. People bought into lies being told by major media corporations.
But out of everything that failed, what succeeded? Technology.
As Balajis states:
“Where heirs failed, founders succeeded. The internet stayed up. The state couldn’t deliver checks, but Amazon could deliver packages. The legacy universities were closed but the MOOC platforms were open. The restaurants were shuttered by the state but the delivery apps were shipping. The media corporations reported that the virus was at best a remote threat while the tech companies prepared for remote work. And the billions spent on military biodefense didn’t do much, but the millions invested in Moderna did.
We have seen the consequences of what happens if we rely on unqualified individuals to deliver us from our struggles. And because of the failures of those who were supposed to support us, the architecture of the future now lays in the hands of founders.
We don’t need politicians. We need entrepreneurs. We don’t need universities. We need globally accessible, practical education. We don’t need mainstream media. We need critical thinkers. We don’t need more military funding. We need funding for innovation to deliver prosperity.
Founders are not just entrepreneurs. Founders are those who create.
And it’s about time we let them create the future.