Why does building things that last matter?

As William Baumol reminded us more than a quarter century ago, entrepreneurship can be productive, unproductive and destructive to societies.

Since then “novelty” in the forms of “creative destruction” and “disruptive innovation” have been oversold as (often unqualified) desiderata in both popular discourse and entrepreneurship theory.

In “Things Fall Apart” African novelist Chinua Achebe describes how the cultural systems of a precolonial Nigerian village began to break down internally at the onset of British colonization. Thomas Cole’s paintings Course of Empire evoke a similar warning from history about the institutional limits of change.

Some entropy is a desirable (and likely inevitable) feature of all human institutions. And entrepreneurial processes play a crucial regenerative role in the adaptive responses needed to create resilient institutions that can address the grand challenges of our age–inequality, prejudice, violence, ecological systems change, etc.

Indeed, without entrepreneurial action institutions become rigid and organizations become ossified.

But institutional resilience does not magically or inevitably follow from the visions of some short sighted entrepreneurs who (in the course of “moving fast and breaking things”) ultimately pick apart the economic and social fabric of society.

We are living through a time of weakening institutions in which many people experience a diminished sense of community.

In this context, creating sustained organized systems of human activity is increasingly a challenge for modern industrial societies where we experience difficulty bringing people together to support enduring organizations.

Nowadays most enterprises last less than six years. (The U.S. Small Business Association estimates that “21.5% of startups fail in the first year, 30% in the second year, 50% in the fifth year, and 70% in their 10th year”.)

And corporations that used to last an average of sixty years now have an expected lifespan of less than twenty years. (“A recent study by McKinsey found that the average life-span of companies listed in [S&P] 500 was 61 years in 1958. Today, it is less than 18 years. McKinsey believes that, in 2027, 75% of the companies currently quoted on the S&P 500 will have disappeared” (IMD, 2016)).

Of course, not everything should last.

Many organizations turn out to simply be bad for society. Organizational failure is an adaptive and appropriate response to dissatisfied stakeholder communities. All of this is part of the healthy cultural life of markets and the broader societies and cultures that sustain them.

My concern is with a growing economic culture that celebrates quick money, evanescent organization and socioeconomic churn.

To me, this isn’t just an economic issue, it’s a canary in the coalmine for the long-term survivability of communities and society. We’re losing our ability to make enduring value.

But we can relearn it.

I see the question of how to make things that can endure—in resilient and innovative ways—through history as a core conceptual and practical challenge underlying research in entrepreneurship, strategy and organization theory.

In a time of cultural divisions and fraying institutions, we need to cultivate theories that can help the rising generation of entrepreneurs and strategic managers to think institutionally about how to build things that last.

Trevor Israelsen

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