Does Your Company Break Things or Add Value?


Good online essays start conversations. That’s how I feel about Growing Up Is Hard To Do, my colleague John Battelle’s tough-minded look at how companies need to change as they move across the continuum from insurgent to incumbent. Here’s my attempt to continue the conversation.

It’s hard to not be optimistic about the idea of NewCos and OldCos learning from one another. Their dialogues have already spawned partnerships, which in turn may yield breakthrough products and services. But what are the “established insurgents” — those NewCos that have moved from startup to dominance in their markets — teaching up-and-coming NewCos? It’s easy to look at the behavior of Uber or Facebook and determine that your company should move fast and break things — but only until you’re so big and visible that the risk of doing so becomes greater than the potential reward. The reasoning goes: It made sense for Uber to ignore laws that prevented its very existence or for Facebook to smash through privacy norms as it reached scale. But once they become grownups, with much more attention and responsibility, companies have to start acting like, well — grownups.

We can argue whether corporations are people, but how far do you go with that? Might you argue that younger corporations are children, and should be allowed to play by different rules? Is there a juvenile court for young companies? Companies built to last change over time, but you can’t write off behavior by companies because the companies are young. The people running those companies aren’t kids; they’re adults.

And when it comes to defensible behavior, it seems there’s a difference between “good” and “bad” lawbreaking. Ben Thompson and James Allworth devoted a recent podcast to the topic. To sketch Ben’s argument, he says that breaking the law to support your basic business model can be defended (Uber) but breaking the law to cut corners can’t (Zenefits). That’s true, but that’s not the key differentiation in deciding whether a particular act of lawbreaking is “good” or “bad.” The key is whether breaking the law creates, on balance, the potential for positive change in the markets they effect. Breaking laws to challenge taxi cartels might meet that definition. Uber broke laws because it could. It had a service so desirable that it quickly created a community of drivers and customers willing to take the risk along with it.

That makes what Uber did comparable to Apple’s current fight against the iPhone-unlocking ruling. It’s in that battle for business reasons, and it has a fanbase even larger and more loyal that Uber’s, but it is also explicitly couching its fight in make-positive-change terms. It’s a business acting like a business, but it’s explicitly aiming to create a society that is more secure and has a higher bar for privacy, and that arguably meets the criterion of positive change. The Supreme Court will likely have the final word.

Uber is now doing good works, and it’s hard to argue this new behavior is driven by anything other than the process of a company coming into its role as a powerful actor on the world stage. Some up-and-coming NewCos will look at the company’s early behavior and decide the way to get big fast is to ask for forgiveness instead of permission. Break the rules you disagree with. But if they do, they’ll have to pass a difficult and unpredictable test: Will their actions be judged as ultimately adding value to society? For startups, the answer to that question is more than strategic. It’s existential.

Want to follow the biggest story in business? Get our NewCo Daily newsletter.

Leave a Reply