5 Startup Lessons From America's First Cofounders

The United States was built on an entrepreneurial spirit. Here's how the country's first leaders paved the way for modern-day entrepreneurs.

In the late 18th century, a motley crew of lawyers, farmers, merchants, and disruptive freethinkers had an idea for a startup. Few of them figured the fledgling startup had much chance of success. They came up with many names--including Columbia, the United Colonies, British America, and United Statesian--until they finally settled on the United States of America.

But how exactly do you go about starting up a government, especially if it is unlike any other that has existed before? It wasn’t as if they could go online and read up on how to do it.

The Founding Fathers were an exceptionally innovative collection of men. Not only has the government they conceived of lasted for more than 200 years, but it’s a model of democracy around the world.

It’s fascinating to realize that the political strategies the founders argued passionately about are still being argued today in business schools, boardrooms, and in the garages and basements of those aspiring to become the next Steve Jobs or Mark Zuckerberg.

1. Surround Yourself With Smart People

George Washington wasn’t an ideologue, and he wasn’t a genius. But when he was elected unanimously as the country's first president, he was smart enough to hire two of the most brilliant people to work in his cabinet--Alexander Hamilton and Thomas Jefferson. Hamilton and Jefferson were considered ideologues and geniuses of the era.

In 1789, the U.S. government was a work in progress. Washington would have one of the men pitch an idea, and then send it to the other for comments. Although Hamilton and Jefferson were on opposite sides of the political spectrum, much of the eventual design of the U. S. government was a blend of their opposing ideas, so artfully synthesized by Washington.

Many a startup founder has bemoaned his or her lack of foresight in collecting a group of people with a diversity of opinions and skills. Richard Branson, who knows a thing or two about smart people, recognizes the value of dynamic debate.

“Bringing in strong managers . . . allowed me to focus on our latest ideas and projects, and on finding the next businesses to start up,” Branson says.

Branson credits his success to his listening skills and his recognition that sometimes other people’s suggestions are better than his own. David Ogilvy, a founding father of modern advertising, summed it up well when he wrote: "If you always hire people who are smaller than you, we shall become a company of dwarfs. If, on the other hand, you always hire people who are bigger than you, we shall become a company of giants."

2. Get the Powerful on Your Side

Unlike some of the more power-to-the-people inclined Founding Fathers, Hamilton believed that even in a democracy the rich and well-connected would rule. To get anything accomplished, people have to persuade the powerful by satisfying their self-interest.

When he served as treasury secretary in the early 1790s, Hamilton lobbied Congress to pass a debt bill that would give the federal government extraordinary financial power by taking over all of the individual states’ debt--a whopping $25 million at the time. Many Southerners opposed the scheme. They saw a dismal future in which the federal government, the wealthy urban elite, and speculators would have all the power. So they voted Hamilton’s proposal down.

Hamilton then had to figure out something that was in the Southerners’ self-interest. He brokered a deal--vote for my debt bill, and we’ll vote to move the U.S. Capitol south along the Potomac River. It worked. After winning the debt vote, Hamilton went on to consolidate the federal government’s power by creating the first Bank of the United States and the U.S. Mint to print money. Any entrepreneur that ignores Hamilton’s policy of winning over the powerful does so at his or her own peril.

Nearly 230-plus years later, Uber, the ride-sharing application startup, broke into the Washington, D.C. market in 2011. A councilwoman tried to pass regulations known as Uber Amendments. These regulations would kill the startup in the nation’s capital by making an Uber ride cost at least five times more than the same ride in a metered taxi. To stay alive in D.C., Uber would have to fight city hall.

Uber then pushed back, as this was their sixth city launch. The company had an extensive collection of strategies, known internally as the playbook, to overcome obstacles on the local level. Straight from the playbook, Uber rallied its customers, who sent 50,000 emails and 37,000 tweets hashtagged #UberDCLove to local officials.

The councilwoman not only dropped the amendments, but made a U-turn. To please her pro-Uber constituents, she championed legislation that made private car services like Uber legal in the District. In another brilliant Hamiltonian tactical power move, Uber went even further this year, hiring the former deputy commissioner for policy at the New York City Taxi and Limousine Commission as the head of policy development.

3. Down With the Hierarchy

A central argument consumed the Founding Fathers. Was it better to have a strong central government that could levy taxes and raise armies? Or would the people be better off in a loose confederation of states? Men like Patrick Henry, the first governor of Virginia, believed that if the federal government became too strong, it would wield dictatorial power and men would lose all the rights they had fought for in the Revolutionary War. They preferred a flatter, less hierarchical, loose confederation of states. Although Henry and the anti-federalists lost the battle, they won a great victory for Americans by vehemently demanding that the Constitution include a Bill of Rights to protect freedoms such as rights to assembly, free speech, religion, and fair trials.

Most American businesses--from the industrial giants of the 19th century to Apple--have organized themselves into strong, centralized top-down models. But some companies have dared to organize themselves in loose anti-hierarchical structures.

For one, Wikipedia, that is based in part on massive multi-player games. Founder Jimmy Wales practices hands-off management so that creators of the site learn to self-manage and find their best approaches.

Zappos recently announced its goal to reorganize itself into something called a holacracy with no managers or job titles. Zappos’s employees won't function as cogs in a machine, but rather they’ll be empowered to act like entrepreneurs within their specific roles. The wrinkle in these anti-hierarchal organizations is that they only work when all employees are accountable and share the same purpose.

4. Reinvention

“A little rebellion now and then is a good thing,” Jefferson once wrote in a letter to James Madison. Jefferson was suspicious of centralized power. He believed that the occasional uprising was “a medicine necessary for the sound health of government,” and that bottom-up rebellions keep the rulers from forgetting whom they serve.

But how does a startup founder keep reinventing what he or she started? The rulers of organizations usually have too much at stake to revolutionize from the top down.

3M has solved this problem by building complex autonomous networks that allow revolutionary change to come from the bottom up. Knowing that most revolutionary ideas fail but that some succeed beyond all imagination--such as Post-it Notes--at 3M radical ideas are bounced around, shared between departments, and revisited whenever new technologies make them feasible.

3M leaders believe so strongly in reinvention that they have mandated it. 3M researchers, 8,500-strong, are encouraged to devote 15% of their time--nearly a workday a week--working on whatever they want. If one of those researchers has an innovative idea that their own lab won't support, they can shop it around to other 3M labs or to apply for a Genesis grant that offers seed money funded by the company.

5. The Customer Is Always Right

Unafraid to offer opinions on far-flung topics, Benjamin Franklin didn’t write much about politics. His fascination was human nature. Franklin believed that since man was fallible, any government created by man was fallible, too. A document like the Constitution, he said, is imperfect, and would reflect all of the “prejudices, passions, errors of opinion, local interests, and selfish views” of its drafters. A proof of good government, he stated, is, if "we, the people" believe the government is good.

Franklin’s philosophical heirs are companies like Unilever that focus more on pleasing the customer than the minutia of their corporate structure.

“At Unilever, we go straight to the consumer to gather insights that will lead to breakthrough ideas and communication,” says David Rubin, U.S. marketing director for hair care at Unilever. “We believe in . . . creating products they need and want. . . . Focus groups and quantitative research have their place, but are in no way replacements for first-hand, direct, consumer contact.”

The United States is far from perfect. It’s been guilty of some egregious flaws--permitting slavery, contributing to Native American genocide, and participating in ill-advised wars. In addition to their big ideas, the Founding Fathers' legacy has been inspirational to those Americans currently seeking life, liberty, and the pursuit of happiness.

Even though they had competing visions of what the best government should be, in the end, instead of devolving into self-centered factionalism, they saw that getting their own way was less important than coming together for the common good.

[Image: Flickr user david__jones]

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8 Comments

  • m52go

    Great article in a sea of link-bait crap. I don't click many listicle-type links on Twitter anymore, but this is well-researched and insightful. Great job, and thanks.

  • josh

    Thanks M52GO --- It was Gore Vidal's book "Inventing a Nation" that inspired us to write the article. Read it and you'll realize that these very smart guys didn't have a lot of empirical evidence about what would work so they made it up as they went along. Shocking, in a way, that what they invented has (more or less) stood the test of time.

  • josh

    Thanks Sean. Factually correct nit-picking is always appreciated. It should read "The first United States Bank" We'll get it changed,