Magnitude of Success vs Rate of Success, Inventing Wireless, & Company Towns
Small Cities Weekly | 06.21.2024
As part of the work we are doing on the Small City Segment, we send out a brief weekly post of thoughts, links, and research in progress that reflect the week’s work. I’d love to hear from you if you have any thoughts, questions, disagreements, or things to add. Please forward this on to people you think might enjoy reading it.
Magnitude of Success vs. Rate of Success
I’ve been thinking a lot lately about the the types of risk that different investment structures bring to companies, especially in light of a “for a place” investment strategy.
A “from” strategy benefits from the fungibility of outcomes. Good jobs are good jobs. Tax revenue is tax revenue. This means a portfolio approach can work. Survival rate matters less than the magnitude of your successes. The aggregate is the important measure, and if there is a risky, but power-law driven opportunity, you might be willing to take on that risk.
In a “for” strategy, the actual products and services matter too. They aren’t interchangeable. Survival rate matters more because each business represents a piece to the puzzle of making a place a better place to live. The magnitude of one solution doesn’t make up for the lack of another.
One way to frame it is through order of priorities. In one strategy, magnitude of success outweighs rate of success. The scale of the the surviving companies matters more than survival rate of the portfolio. In the other strategy, rate of success outweighs magnitude of success. The survival rate of the portfolio matters more than the scale of any given company.
I’m not sure what this practically means yet. I don’t want it to mean less innovation or less risk-taking in the products, services, and business models attempted. It also doesn’t mean that scale is a bad thing. But being cognizant of the additional risk that capital structure brings to the table seems important. Optimizing for survival rate first, magnitude second probably requires a different paradigm than optimizing for magnitude first, survival rate second.
Links
You can find links from this and all previous editions here.
For this week’s edition, I’m sharing three books that I’m actively reading and enjoying.
The Company Town, Hardy Green
Company town: The very phrase sounds un-American. Yet company towns are the essence of America. Hershey bars, Corning glassware, Kohler bathroom fixtures, Maytag washers, Spam—each is the signature product of a company town in which one business, for better or worse, exercises a grip over the population. In The Company Town, Hardy Green, who has covered American business for over a decade, offers a compelling analysis of the emergence of these communities and their role in shaping the American economy, beginning in the country’s earliest years. From the textile mills of Lowell, Massachusetts, to the R&D labs of Corning, New York; from the coal mines of Ludlow, Colorado, to corporate campuses of today’s major tech companies: America has been uniquely open to the development of the single-company community. But rather than adhering to a uniform blueprint, American company towns represent two very different strands of capitalism. One is socially benign—a paternalistic, utopian ideal that fosters the development of schools, hospitals, parks, and desirable housing for its workers. The other, “Exploitationville,” focuses only on profits, at the expense of employees’ well-being.
Adeptly distinguishing between these two models, Green offers rich stories about town-builders and workers. He vividly describes the origins of America’s company towns, the living and working conditions that characterize them, and the violent, sometimes fatal labor confrontations that have punctuated their existence. And he chronicles the surprising transformation underway in many such communities today. With fascinating profiles of American moguls—from candyman Milton Hershey and steel man Elbert H. Gary to oil tycoon Frank Phillips and Manhattan Project czar General Leslie B. Groves—The Company Town is a sweeping tale of how the American economy has grown and changed, and how these urban centers have reflected the best and worst of American capitalism.
Thunderstruck, Erik Larson
In Thunderstruck, Erik Larson tells the interwoven stories of two men—Hawley Crippen, a very unlikely murderer, and Guglielmo Marconi, the obsessive creator of a seemingly supernatural means of communication—whose lives intersect during one of the greatest criminal chases of all time.
Set in Edwardian London and on the stormy coasts of Cornwall, Cape Cod, and Nova Scotia, Thunderstruck evokes the dynamism of those years when great shipping companies competed to build the biggest, fastest ocean liners; scientific advances dazzled the public with visions of a world transformed; and the rich outdid one another with ostentatious displays of wealth. Against this background, Marconi races against incredible odds and relentless skepticism to perfect his invention: the wireless, a prime catalyst for the emergence of the world we know today. Meanwhile, Crippen, “the kindest of men,” nearly commits the perfect murder.
With his unparalleled narrative skills, Erik Larson guides us through a relentlessly suspenseful chase over the waters of the North Atlantic. Along the way, he tells of a sad and tragic love affair that was described on the front pages of newspapers around the world, a chief inspector who found himself strangely sympathetic to the killer and his lover, and a driven and compelling inventor who transformed the way we communicate.Freedom’s Forge, Arthur Herman
Freedom’s Forge reveals how two extraordinary American businessmen—General Motors automobile magnate William “Big Bill” Knudsen and shipbuilder Henry J. Kaiser—helped corral, cajole, and inspire business leaders across the country to mobilize the “arsenal of democracy” that propelled the Allies to victory in World War II. Drafting top talent from companies like Chrysler, Republic Steel, Boeing, Lockheed, GE, and Frigidaire, Knudsen and Kaiser turned auto plants into aircraft factories and civilian assembly lines into fountains of munitions. In four short years they transformed America’s army from a hollow shell into a truly global force, laying the foundations for the country’s rise as an economic as well as military superpower. Freedom’s Forge vividly re-creates American industry’s finest hour, when the nation’s business elites put aside their pursuit of profits and set about saving the world.
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