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The Founder: The New Story Of The Old America

What can MBA students learn from watching The Founder

In 2013, a British company, Hailo, tried to import their mobile app that matches drivers and passengers to New York City. The app would allow a user to get a cab at any time of the day, including those hours where it is nearly impossible to get a taxi because of congestion or rain. A fantastic idea.

You probably have never heard of Hailo. You have, however, heard about Über, which started a similar service at the same time. While Hailo did things the slow and proper way, Über bulldozed through the process. Hailo spent days in negotiations with the taxi medallion services, with the city authorities, with all the regulators, and with all the relevant parties, to get the new service through the door. Über did little of that. They mostly focused on getting as many drivers as possible to sign up. Despite a number of warnings and pleas from regulators that this is going to end badly – price hikes, unsafe drivers, and altogether a clash between the taxi unions and the fast-growing company – they just kept moving forward.

It worked out well for Über. Three years in, Hailo had a number of agreements and satisfied legislators on their side, while Über had all the customers and brand recognition. A year later Hailo discontinued their NYC efforts. Über was too big to be fought at this stage. Now they could also afford to negotiate new terms with the regulators. Maybe they will even reach a balance that will benefit everyone.

FOR EVERY GOLIATH, THERE IS A BIGGER GOLIATH THAT MAKES HIM FEEL LIKE DAVID

Kellogg Professor Moran Cerf reviews The Founder

Last year I met Über’s CEO, Travis Kalanick, as we both spoke at TED. We got to chat a little and I asked him about this, as his talk mimicked the conversations I had with the management of Hailo three years before. In his mind, he was in a similar place to that of Hailo three years before: he was worried that his company was experiencing an unjust bulldozing stemming from over-regulations that would halt the forward-movement of Über. I guess for every Goliath there is a bigger Goliath that makes him feel like he is David. But whether you are big or small in your mind, it seems that there is a certain size by which you have a chance of winning the battle. A size where you are big enough to be able to argue a point.

This is not a unique story. It repeats itself throughout history. Recently, however, it is starting to be the law of the land – a recommended mode of operations. One that professors like myself, who teach the next generation of leaders, need to reflect upon. Is it a good message to teach our students that it is ok to ignore the rules and grow fast, because when you are in a position of power you will get to bend the rules anyhow?

Steve Jobs, as a young entrepreneur wanted to name his company ‘Apple’ – possibly as a tribute to the Beatles’ music label. The music label, however, did not appreciate the tribute. They threatened to sue Jobs over trademark violation. Steve renamed his company to “Apple Computers” avoiding further litigation – settling the problem. Once Apple computers was big enough to withstand a legal battle against the music label, “Apple Computers” was renamed to “Apple”. The music label could not fight anymore.

BACK TO THE DAYS OF MCDONALD’S BIRTH

Facebook’s Mark Zuckerberg was sued for his alleged bullish tactics at the inception of the company, while focusing on building his endeavor. The slow legal system was trailing in identifying the workings of the growing company. By the time the lawsuits matured Facebook was able to afford winning or settling them.

The new Robert D. Siegel film, “The Founder,” serves as a reminder for this fact about history repeating itself. Taking us back 60 years to the days of McDonalds’ origination, the film tells the story of Ray Kroc’s McDonalds’ takeover. The similarity between the stories of Aaron Sorkin’s “The Social Network” and Siegel’s film show that whereas the product has changed – McDonalds changed how Americans eat, and Facebook the way we take pictures of what we eat – our thirst for fast, cheap and easy solutions has not. Greed and the desire to demonstrate greatness to those who mistreated them on the journey drives many founders to plow through barriers in order to get their company going.

The story of a salesman (hacker) who persuades the McDonalds (Winkelvoss) brothers that they can work together on a franchise (Ivy league dating site) but turns the business to a real-estate (social media and sharing) platform and ends with a business card saying “Founder” (“CEO, Bitch”) can be a powerful outlook on the take-home message that the writers suggest: 1. human traits like vengeance, dishonesty and greed, infused by a weak or slow legal system and Capitalism have repeatedly driven people to behave in ways that are morally questionable at best; 2. in such a world of questionable morals, you can bend the rules while you grow a business. History forgets the path to the win, and remembers the winner.

Similar to how there already are many who forgot the story of McDonald or Apple, so will the stories of Facebook and Über be spinned, as their PR teams will get to control over the narrative.

KROC IS SOMETIMES SEEN AS A VILLAIN IN THE MOVIE

Whether it’s the witty dialog-driven Aaron Sorkin, or the character-driven Siegel, neither film is taking sides. Siegel’s Kroc is sometimes seen as a villain, who does not rest even when his tactics nearly kill Mac McDonald, but then also gets frustrated when he proposes improved products and gets turned down by the brothers who refuse to even listen to his arguments. If one wants to find Kroc as a hero – the film ends with a reminder of all the contribution that McDonalds under his leadership have brought to the world – posing a question, we can ask about many of the successful entrepreneurs of our time: When the CEO of a company, or a president of a country, arrives at the helm using questionable tactics but then does good, will we remember the multi-million donations to NPR or the public school systems, or will we still remember that the money and power were earned unlawfully?

As a neuroscientist I tend to be pessimistic about our memory. It often highlights recent outcomes at the expense of a longer, more complex narrative. We probably will forget any president’s way to the White House if it doesn’t end with a scandal, but rather with a positive outcome. It is not illegal if the president does it.

This is a difficult picture of us that the film paints. Justice is not blind. It is tied to the two main commodities of our Capitalistic world: money and time. If you have either of those – you can assume that the battle will tilt on your side. If a powerful real-estate mogul (the main revelation of the shift in Michael Keaton’s Ray Kroc is the understanding that he is one, rather than a food vendor) is be sued by a working class employee who was cheated off his business, do we really believe that the little man has a fair chance? In the movie, Kroc is not shy of this. He explicitly says to the McDonalds brothers: “You will win a legal battle, but it will take you forever and you cannot afford it. You better settle now”.

‘WHAT LESSON SHOULD WE TEACH OUR STUDENTS?’

As long as greed is part of the system within-which we work, bankers selling bad mortgages to families of immigrants will not be criminally charged, big hedge funds engaging in inside trading will keep getting away with minuscule fines, and politicians using fraudulent tactics and winning elections will prevail. Sure, they might get caught – but money/time will fix things.

The question professors in business schools are now asking themselves is: what lesson should we teach our students in such a world? If the examples of success involve bending the rules first and asking for forgiveness later, can we expect our students to behave differently?

I, for one, strongly believe in the next generation – our young MBA students. I feel they are dismayed with the type of greed and corruption that they see. They are upset with small and cheap marketing tactics (think pricing a product at $6.99…) and are offended when they learn about corporate misbehaviors. They remind me time and again that if we leave the reigns to them things will change. I sure do hope that is the case. That when they hold the leading positions they will remember the feeling they had as students. For this to happen our job as professors (and, incidentally, as artists and filmmakers as well) is to make sure we help them overcome the challenge of our brain: our lacking memory. It is ours to tell the story of Hailo to our students so they can fix the world.

Moran Cerf is a professor at Kellogg School of Management at Northwestern University. He also teaches at the American Film Institute. Moran was named one of Poets&Quants’ Best 40 Under 40 B-school Professors in 2016.

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  • WoWoW

    Kellogg is an Advertising school. Of course they will say that their MBAs are honest and way different from the rest of the M7 😉

    Dont belive the hype. Even the (fake) do-gooders at crooks. The fact-based finance quants at Booth are no saints. The finance product salesmen at Wharton will sell their souls for money. The techs at Sloan are probably your best bet since they are mostly navel-gazing. The HBS guys are full on corrupt because the case method encourages loud liars to rule the roost. That is how they are trained.

    Kellogg is no different.

  • PModi

    The Last Paragraph is all made up and not true at all. MBA is nowadays seen itself as a degree of dishonesty. MBAs have a singular desire – earn more and more money by hook or by crook.But when asked why they want to do an MBA – most will say they want to do something good for society. MBA schools are temples of US’s greed based capitalism system.