Reflections on what I learned from an incredible mentor
Yesterday, my friend Bill Ackman and I flew up to Boston to attend a very special all-day event at Harvard Business School ("HBS") to honor and celebrate our friend and mentor, Professor Michael Porter.
Here are pictures of the classroom and luncheon yesterday:
As I flew home last night, I was reflecting on how much I learned from Professor Porter – which I wanted to share with you.
It's hard to explain to someone today what a big deal Professor Porter was (his bio doesn't do him justice).
Ever since he laid out his famous "five forces" concept in his seminal 1979 article, "How Competitive Forces Shape Strategy," he was the guru of strategy and competitiveness.
His follow-on book in 1980, Competitive Strategy: Techniques for Analyzing Industries and Competitors, which has been translated into 19 languages, was required reading for all CEOs, consultants, and MBA students.
Put simply, Professor Porter said five forces are at play in any industry:
- Internal competition
- Potential for new entrants
- Suppliers' negotiating power
- Customers' negotiating power
- Customers' ability to find substitutes
He's also well known for his 1998 article, "Clusters and the New Economics of Competition," in which he argued:
Today's economic map of the world is dominated by what I call clusters: critical masses – in one place – of unusual competitive success in particular fields.
Clusters are a striking feature of virtually every national, regional, state, and even metropolitan economy, especially in more economically advanced nations. Silicon Valley and Hollywood may be the world's best-known clusters.
Clusters are not unique, however; they are highly typical – and therein lies a paradox: the enduring competitive advantages in a global economy lie increasingly in local things – knowledge, relationships, motivation – that distant rivals cannot match.
Professor Porter wasn't just the best-known professor at HBS... He was the most famous business thinker and strategist in the world. Presidents, economic ministers, and CEOs hung on his every word.
He was a brand.
The story of how I came to work closely with him for six years began over six days in April and May of 1992, when the Rodney King riots in Los Angeles shook the nation and focused everyone's attention on the poverty and joblessness in America's inner cities.
This led my old friend Willie Woods (on the left in the picture below from yesterday), who was then a first-year student at HBS, to ask, "I wonder if Professor Porter's work on competitiveness might be applied to inner cities?"
When Willie approached Professor Porter with the idea, he was enthusiastic about it and told Willie to put together a team of five students to initiate a research project.
Fast-forward a year, and Willie and his classmates had collected a massive amount of data, interviewed hundreds of owners of companies located in inner cities around the country, and were working with Professor Porter on an early draft of an article entitled "The Competitive Advantage of the Inner City." (In the picture above, my friend Dorien Nunez, HBS '84, is holding a copy of an early draft that Professor Porter asked him to review, which he has kept all these years).
But more research was needed for the project, and Willie and his classmates were graduating...
So in the spring of 1993, during my first year at HBS, Professor Porter sent a letter to all first-year students, describing the project and inviting students to apply to work with him on it.
I still remember my excitement as I read it...
It was a brilliant idea that offered the prospect of helping address one of our nation's most pressing problems.
This really resonated with me...
My parents met and married in the Peace Corps, I had grown up in Tanzania and Nicaragua, and just a few years earlier I had helped Wendy Kopp start Teach for America. Plus, this was an opportunity to work with the legendary Professor Porter – it was a dream!
I was lucky enough to be one of the five students he picked, and we continued the research full time over that summer and then part time through the next school year.
At that point, as I neared graduation in the spring of 1994, the paper was much further along, but was still a year away from publication.
So Professor Porter was looking at hiring another team of students who would be starting from scratch. To help him manage this, I agreed to stay on another year, giving up the job that was waiting for me (and the bonus that would have paid off all of my business school debts) at my previous employer, the Boston Consulting Group.
A year later, in the May-June 1995 issue of the Harvard Business Review, Professor Porter finally published "The Competitive Advantage of the Inner City," which contained some radical ideas. Here's an excerpt from the introduction:
The time has come to recognize that revitalizing the inner city will require a radically different approach. While social programs will continue to play a critical role in meeting human needs and improving education, they must support – and not undermine – a coherent economic strategy.
The question we should be asking is how inner-city-based businesses and nearby employment opportunities for inner city residents can proliferate and grow. A sustainable economic base can be created in the inner city, but only as it has been created elsewhere: through private, for-profit initiatives and investment based on economic self-interest and genuine competitive advantage – not through artificial inducements, charity, or government mandates.
We must stop trying to cure the inner city's problems by perpetually increasing social investment and hoping for economic activity to follow. Instead, an economic model must begin with the premise that inner city businesses should be profitable and positioned to compete on a regional, national, and even international scale. These businesses should be capable not only of serving the local community but also of exporting goods and services to the surrounding economy. The cornerstone of such a model is to identify and exploit the competitive advantages of inner cities that will translate into truly profitable businesses.
We must stop trying to cure the problems of the inner city by perpetually increasing social investment and hoping for economic activity to follow.
Our policies and programs have fallen into the trap of redistributing wealth. The real need – and the real opportunity – is to create wealth.
It generated a great deal of interest and attention, so Professor Porter and I decided to create a nonprofit called The Initiative for a Competitive Inner City, which I'm proud to say is still going strong to this day, to "foster economic growth and opportunity in underserved communities through groundbreaking research and programs."
Professor Porter was the part-time chairman, and I was the full-time executive director for the next four years through 1998.
It was an exciting time...
We continued our pioneering research on the economic opportunities in inner cities, had teams of students from HBS (and, later, many more top business schools) do pro bono consulting projects for inner-city companies, and partnered with Inc. magazine on the annual "Inner City 100," in which we identified and celebrated the 100 fastest-growing inner-city companies in the country.
In 1998, we came up with the best idea we ever had: to create an investment fund called Inner City Ventures (now ICV Partners) to tap into the opportunities we'd uncovered in inner cities and among minority-owned businesses.
And who better to run it than our old friend Willie Woods – he had experience in private equity and investment banking (here's his full bio).
Thankfully he gave up a secure job and paycheck, joined us, and, incredibly, 25 years later, he's still running it... and they're now raising their sixth fund!
I was going to be part of Willie's team, but eventually – in part fueled by the hubris of being a late-1990s "bull market genius" – I decided to instead start my own tiny hedge fund out of my bedroom, which launched on January 1, 1999.
The markets and our offices are closed tomorrow for Good Friday, so on Monday I'll share the many important things I learned from Professor Porter. Stay tuned... and enjoy the holiday!
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.