Expanding Entrepreneurship: Capitalizing on German-American Synergies

John F. Kennedy Atlantic Forum
ESMT European School for Management and Technology
Berlin, January 27, 2014
Ambassador John Emerson

Thank you, John.  Kimberly and I are thrilled to join you this evening to discuss a topic that, as Californians, we are very interested in – entrepreneurship and innovation.  In preparing to come to Germany, we both knew that this would be an area for exploration.  We are obviously very proud of our home state of California, with Silicon Valley’s “gold standard” entrepreneurship ecosystem, not to mention the creative energy of the movie industry and our great research universities.

But we also knew that there were exciting developments here in Germany, and in particular here in Berlin.  Kimberly has visited the Microsoft center on Unter den Linden and learned about its new accelerator program.  She also hosted a roundtable for female entrepreneurs at the Embassy in November.  I spoke at the opening of the Amway Business Center on the Ku-Dam.  Together and separately, we have had the chance to meet many business people in Germany, including leaders of the Mittelstand – many of which were started by previous generations of entrepreneurs and innovators.  We have visited plants and trade fairs, and participated in business roundtables.  And we were pleased to learn that one of the main priorities of the newly established John F. Kennedy Atlantic Forum was to build, expand and capitalize on relationships between entrepreneurs in Germany and the United States.

But entrepreneurism is much broader than business or Internet startups.  It is a spirit that can infuse every field of endeavor – from art and culture to philanthropy and the work of non-governmental organizations, to even the work of politics and government.

Taken as a whole, by bringing together the creative energies of current and future innovators across oceans and borders, we can reinvigorate the trans-Atlantic relationship and the commitment that the name John F. Kennedy means to our partnership.  As Ambassador Kornblum tells me, this was the founding idea of the John F. Kennedy Atlantic Forum.

The 50th anniversary of President Kennedy’s historic visit to Germany in June 1963, culminated in the visit of President Barack Obama just this past year.  Both Presidential journeys were markers on the timeline of our partnership, and the distance that the United States and Germany have travelled together.  One lesson we have learned along the way is that global prosperity is in everybody’s interest.  That was true in 1963, and it is true today.

Often the significance of Kennedy’s visit to Germany 50 years ago is summed up by the iconic phrase: “Ich bin ein Berliner.”  But his visit was marked by another important message as well.

For example, in Frankfurt, Kennedy gave a thoughtful speech on the responsibilities of our two nations: “partners in peace” in a trans-Atlantic “system of cooperation, interdependence, and harmony” in which we could jointly meet our burdens and opportunities throughout the world.  “Our roles and our goals,” President Kennedy said, were, “distinct but complementary: peace and freedom for all men, for all time, in a world of abundance, in a world of justice.”  Those words ring true today!

It was the height of the Cold War, so obviously, the President spoke about military security and the threat of nuclear war.  But he also spoke to economic security, the need for economic cooperation, and the creation of a favorable climate for freedom and growth – across the Atlantic and around the world.  He warned against allowing trade negotiations to evolve into technical discussions of commercial rules and regulations.  He challenged us to take a broader perspective and use such talks as opportunities to build common industrial and agricultural policies that recognized the aspirations of free men and women everywhere.  How apt that we are now in negotiations to create the largest free trade zone in the world through the Transatlantic Trade and Investment Partnership.

President Kennedy ended on an idealistic, visionary note, with words from Goethe that sum up the essence of the sense of responsibility that underlines the values we share. “Das ist der Weisheit letzter Schluss:  Nur der verdient sich Freiheit wie das Leben, Der täglich sie erobern muss.”

And so today, fifty years later, we call for a trans-Atlantic Renaissance – a new burst of energy, confidence, innovation, and generosity, rooted in the opportunities that freedom, democracy, mutual respect, and a good measure of hope and optimism bring.

President Kennedy called for “peace with justice for all mankind.”  President Obama, too, believes that people are bound together by certain common aspirations.   In his speech at the Brandenburg Gate last June, he said: “Peace with justice means free enterprise that unleashes the talents and creativity that reside in each of us; in other models, direct economic growth comes from the top down or relies solely on the resources extracted from the earth.  But we believe that real prosperity comes from our most precious resource – our people.”  Unquote.

And in terms of developing a climate where a spirit of entrepreneurship can thrive, people are the common denominator.  Throughout history — think Gutenberg, Edison, or Jobs — entrepreneurship has been the most powerful force the world has ever known for creating opportunity.

And that is what I would like to have us focus on this evening: how to make that possible.  Despite my California heritage, however, I am not going to talk about how you can re-create Silicon Valley in Germany.  In many ways, the Valley has it all: technology, money, talent, a critical mass of ventures, and a culture that encourages collaborative innovation and tolerates failure.  It is understandable when people throughout the world point to California and say, “I want that.”  But Valley envy is a poor guide for success.

And, you know what?  Even Silicon Valley could possibly not become itselftoday if it tried.  Its ecosystem evolved under a unique set of circumstances that included a strong local aerospace industry, the open California culture, Stanford University’s supportive relationships with industry, a mother lode of invention from Fairchild Semiconductor, a liberal immigration policy toward doctoral students – and also pure luck and timing.  All those factors set off a chaotic evolutionary process that defies definitive determination of cause and effect.

Today, we think of Silicon Valley as a place that breeds local ventures.  In reality, it’s as much a powerful magnet for ready-made entrepreneurs, who flock there from around the globe, often forming their own subcultures and organizations.  Remember the advice given to the young Harvard student, Mark Zuckerberg, in the movie The Social Network: “Move to Palo Alto.” And he did!  Difficult as it is to foster an ecosystem that encourages current inhabitants to make the entrepreneurial choice and then succeed at it, it is even harder to create an entrepreneur’s “Mecca.”

That said, Senator Cornelia Yzer, we all know that Berlin has its own unique attractions and its own dynamic spirit.  It has the combination of toughness, glamour, creativity, experimental nightlife, and affordable cost of living that made New York the world’s cultural capital in the 1960s.  Of course, Kimberly and I, as Los Angelenos, know that our city, Berlin’s sister city, is also a cultural capital.  Without a doubt, however, there is a current in the air here in Berlin that is almost electric, unleashing new ideas and sparking creative forces.  No wonder that when hearing of my posting, so many of our friends said, “Berlin is the most exciting city in Europe.”

Democracy and diversity, and openness and pluralism are essential elements of successful societies.  Berlin has all that.  It is not only the capital of a reunified Germany; for decades, it has been a magnet for the adventurous and disadvantaged.  No city in Europe has changed more in the past decades than Berlin.  And in this century, it has already captured the imagination of many creative thinkers.  This is the spirit of Berlin.

President Obama once said that the essence of what makes America special is our art, our culture, and our science.  I think you could say the same thing about Berlin – and about Germany.  The connective tissue of the bonds created through business, art, culture, and science is what makes our trans-Atlantic partnership special.

But back to Silicon Valley.  If not the Valley, then what entrepreneurial vision should communities aspire to?  The most difficult, yet crucial, element in building an entrepreneurial ecosystem is to tailor the suit to fit its own local dimensions, style, and climate.  It’s almost better to observe which direction entrepreneurs take and “pave the footpath” by encouraging economic activity to form around already successful ventures, rather than planning new sidewalks, pouring the concrete, and keeping non-conformists off the grass.  There’s no exact formula for creating an entrepreneurial economy; there are only practical, if imperfect, road maps.

But here are a few ideas:

First, don’t forget that the work is never really done.  In 2009, the Commonwealth of Massachusetts and the City of Boston launched a global business-idea competition, “MassChallenge.”  Once a year, the nonprofit organization selects over 100 startup companies “from any industry, anywhere in the world” to participate in an accelerator program.  Ultimately, grants are awarded to the program’s top companies.  The bottom line: you can never have “enough” creativity and innovation.  There is no choice, but to continue to experiment and learn.

Another observation:  Innovation is multi-disciplinary in nature – it is not constrained by borders, business fields, or academic specialities.  Globalization has ushered in a swiftly evolving new paradigm of borderless collaboration among researchers, developers, institutions, and entrepreneurs spanning the world.  For that reason, universities – like the European School for Management and Technology – are now training their students and faculty on the strategic needs of innovation-driven, high growth organizations.  President Rocholl, the ESMT is a great partner for the John F. Kennedy Atlantic Forum.  We are lucky to have you on board.

Third, earlier I mentioned the need for experimentation.  Well, any experimental process entails more failure than success.  In fact, failure leads to success.  As Bill Gates once said, “It’s fine to celebrate success, but it is more important to heed the lessons of failure.”  We need to accept that failure is a natural part of doing business.  Venture capitalists say that failures come early; but successes take time.  Sometimes policy makers who encourage entrepreneurship as a strategy for economic development see low failure rates as a sign that their policies are working.  They should, however, be looking for failures that generate lessons that can be turned into successes.  The fact is, failure is a normal aspect of the experimental process, and of growing new ventures.  The ones who get it right off the bat, like Mark Zuckerberg, Bill Gates, and Sergey Brin, are so well-known because they are the exceptions.

What policy makers can do is to remove structural obstacles to reduce the objective risks of a failed venture.  Laws that increase the costs of failure stifle engagement from new players and discourage the kind of risk-taking that is necessary for innovation.  The right legal and regulatory frameworks are critical to thriving entrepreneurship.

We need to think beyond capital requirements, and also facilitate access to talent and opportunity.  I am talking about reform of technology-licensing practices; immigration reform to attract and retain high-skilled immigrants; and regulatory reform to update, modify, or eliminate excessive and costly rules.  Earlier I mentioned the Transatlantic Trade and Investment Partnership.  T-TIP is designed to do just that.

Finally, when thinking about entrepreneurship, we also need to think more broadly than business and technology.  Entrepreneurship includes new kinds of organizations that combine a social, environmental, or cultural mission with that spirit of innovation.  There is a new brand of social and cultural entrepreneurs who go where traditional for-profits, non-profits and government organizations cannot or dare not go.  Some of the most innovative and fast growing private companies in America are profitable, but consider profit to be the means, not the exclusive end goal of their business.

Ben & Jerry’s, the ice cream company, was one of the first to make social consciousness central to its strategy.  One of its suppliers is Greyston Bakery, which has been baking gourmet brownies and good will since 1982.  The for-profit bakery is famous both for its status as Ben & Jerry’s brownie supplier and for having an open-hiring policy that provides the people of Yonkers, NY with employment opportunity regardless of work history.  Greyston Bakery hires men and women who have little or no credentialed work experience, many of whom have histories of homelessness, incarceration, substance abuse, welfare dependence, domestic violence or illiteracy.  All of its profits go to the Greyston Foundation, which operates several intensive self-sufficiency programs including permanent housing and support services for the formerly homeless, low-income working families; children and youth services, a technology learning center, health and social services including housing for individuals living with HIV/AIDS, and a community gardens project.

Committed to a double-bottom line, Greyston Bakery is one of an increasing number of companies that have a dual mission: to earn profits for shareholders, the traditional business goal, and also to pursue the social good in other ways, ranging from protecting employees to safeguarding the environment — even if these goals come at the cost of short-term financial gain.  Known as “B corporations” or B-Corps or “for benefit companies,” these companies see profits as a means to fuel growth in social impact as well as to generate attractive returns for stockholders.

The entrepreneurial spirit can infuse culture and the arts as well.  Recently I met the head of C/O Berlin, an exhibition center for photography that recently moved to the Amerika Haus.  C/O Berlin is a private foundation that distinguishes itself through innovative arts administration.  It started over a decade ago, and its founders, motivated by civil commitment, first looked at various business formats but decided that a foundation was best for them.  I believe that with a formalization of new corporate structures here in Germany, we could see the emergence of a new sector of the economy, interacting with, but separate from, government, nonprofits, and for-profit businesses.  That is certainly the case in the U.S.  I note that some of the companies represented on the panel this evening also have social and cultural goals.  No matter what side of the Atlantic you call home, I am convinced that finding innovative solutions to the world’s biggest problems could become one of the most purposeful, profitable and relevant entrepreneurial models of our time.

As President Obama, perhaps one of America’s most well-known social entrepreneurs often says, “real change comes from the bottom up, from the grassroots, starting with the dreams and passions of single individuals serving their communities.”  This is what he learned, not as a politician, but as a community organizer in Chicago, fresh out of college.

President Obama has often said that John F. Kennedy was one of his heroes.  I think that the challenge that President Kennedy issued to the students of the Freie Universität Berlin on a June afternoon in 1963 would have resonated with a young Barack Obama; and I hope that it resonates with young people, on both sides of the Atlantic, today.  He said: “This school is not interested in turning out merely corporation lawyers or skilled accountants.  What it is interested in – and this must be true of every university – is turning out citizens of the world, men who comprehend the difficult, sensitive tasks that lie before us as free men and women, and men who are willing to commit their energies to the advancement of a free society.”

Again, it all comes down to people, which is why the engagement of each of you in this new Atlantic Forum is so exciting.  Kimberly and I, and our colleagues in Mission Germany, look forward to exploring with you the many aspects of entrepreneurship and best practices that go to the very core of our deep partnership and friendship.  In the coming years, I think we’ll see a number of exciting models emerge from our trans-Atlantic collaboration and the new networks that will emerge there from.  And I have no doubt that the John F. Kennedy Atlantic Forum will be integral to this dynamic process.

Vielen Dank.