You may remember when Ronald Reagan said, “The best social program is a productive job for anyone who’s willing to work.” He was right.
If there is anything America has learned from governors going wild and shutting down their states’ economies, there’s no bailout or stimulus that can provide for Americans as well as their own entrepreneurial spirit can.
One place in America where you can see the difference in the performance between government and the private sector is Newark, NJ.
For years then-Mayor Cory Booker and other politicians tried to engineer resuscitation efforts for the city via every level of government. None of them worked.
Then in 2007, Audible moved to town and things began to change. Andy Kessler, an avid student of market success (as you can see here, here, and here), explains the effects of Audible’s presence on Newark. He writes in The Wall Street Journal:
I met Don Katz soon after he founded audiobook company Audible in 1995—I even had one of their MobilePlayer devices. In 2007 Mr. Katz moved the 125-person company from the Willowbrook Mall in Wayne, N.J., to downtown Newark, and he did it without government-proffered incentives. Audible hires lots of area talent for readings, and the fastest train is 13 minutes from Manhattan. Though Amazon bought the company in 2008, Audible is still in Newark, now with 1,700 employees plus contractors, and it is helping turn things around.
Mr. Katz told me he’s always disdained companies and executives who “give money away but don’t apply the same inputs and outputs as they do with their business.” More spray and pray, they rarely measure effectiveness. That’s also true of government.
Instead, Mr. Katz strongly believes there are “scalable models that are good for business and good for society.” His favorite is “live local.” He began to pay employees $500 after tax for monthly rent if they moved into Newark. People called him crazy. He says he noticed “measurable productivity just from walking to work”—pre-Covid, anyway—plus, “young professionals want to be part of an urban recovery.”
Tech companies hire lots of coders, but how does that help current residents? Newark, whose population is half black and one-third Hispanic, needs jobs. So Mr. Katz set up the Audible Interns program. He decided to toss “nepotism internships” and instead require paid interns to be from Newark, to “give people a chance.” Many were without homes, some from the Covenant House, a residence for abused and neglected youth; Mr. Katz describes them as “in the vortex of single-parent, welfare existence.” These were not MIT engineers but “people without high school or college degrees for these really high-tech jobs. I wanted to expose them to the vocabulary of the workplace.” That was a big bet.
Audible looks for “gregarious and bright” versus credentialed and experienced. An Audible Scholars program offers aid and guaranteed jobs at summer breaks for those who go on to college. Mr. Katz says the model works: Graduates of the program now make up 10% of Audible’ employees. Most pick up the technology quickly and become productive, “more than paying for their cost of onboarding.”
To scale the model, in 2015 Mr. Katz started Newark Venture Partners, which has funded 93 companies—“little Audibles”—chosen from more than 8,000 that applied. Investors in the fund are mainly Audible and other corporations that provide coaching to entrepreneurs. Public money makes up less than 5% of the funding, Mr. Katz says. One interesting investment is MoCaFi, a Newark-based financial platform for underbanked communities. And yes, my tax plan for Mr. Booker was probably wrong—small, innovative companies don’t pay corporate taxes, at least not yet.
When the pandemic hit, Newark went into survival mode. Mr. Katz quickly set up Newark Working Kitchens to help save restaurants. Using much of Audible’s $10 million in suddenly unused food-and-travel budget, the group hired local restaurants to make 200 meals a day each and then used Audible vans, volunteers and logistics code to deliver meals to the homeless, public schools and homes without food. It worked so well—750,000 meals and counting—that the program just received $2 million from the New Jersey Economic Development Authority. Public funding for a proven private program: That’s a smart model.
Big government programs often fail. San Francisco is spending $16.1 million on “safe sleeping villages” containing a total of 262 tents for the homeless. That’s $61,000 each, approaching the median individual income in San Francisco, yet they still live in tents. One company can’t turn around a city, but maybe Don Katz and Audible can be a model for private companies to change the trajectory of other pass-through cities.
Newark isn’t in a growth corridor and will be weighed down by the big-government tendencies of the cities and state surrounding it. But Audible’s effect on the city is great evidence of the power of the private sector to make change in people’s lives.
Instead of letting businesses like Audible flourish, President Joe Biden and Democrats like Governor Andrew Cuomo want to raise taxes on their citizens. Places like New Jersey, and Cuomo’s New York already punish businesses with some of the highest taxes in the country. New York residents could be paying as much as 63% in taxes on their marginal dollars under Democrats’ new plans.
All those new taxes are going to kill any hope for businesses to make an impact on their communities themselves, as they save any extra money they have in order to pay for the demands of their local bureaucracies.
Despite those high taxes, businesses like Audible do what they can to change the world around them for the better.
Action Line: Many of you are small business owners. Tell me how your business has made an impact on your community. I want to hear from you. Email me at email@example.com.
E.J. Smith - Your Survival Guy
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