A version of this article appeared in the Summer 2020 issue of strategy+business.
The Passion Economy: The New Rules for Thriving in the Twenty-First Century
by Adam Davidson, Alfred A. Knopf, 2020
One of the difficulties of reporting on business is turning observation into actionable advice. Adam Davidson, a writer for the New Yorker and a creator of NPR’s Planet Money podcast, is one of the most perceptive explicators of the modern economy for nonexperts. Having first come to prominence during the 2008 financial crisis, reporting on the imploding economy, Davidson has written a lot about things that go wrong.
The Passion Economy is a book about what can go right. Its basic message is one of optimism. It’s not giving away too much to jump to the end and tell you that the book concludes with John Maynard Keynes and his exhortation not to give in to “the attack of economic pessimism.” Much of the work of journalists serves to warn you of dangerous waters ahead. This book aims to help you sail through those dangers.
People often search for restorative wisdom in times of economic malaise; Keynes warned against pessimism in the depth of the Great Depression. By contrast, by almost every measure the economy is now booming. Yet there is a festering sense of insecurity, fed by a common — and largely justified — perception that the fruits of prosperity have gone mainly to those tied to a narrow slice of the tech economy.
The Passion Economy is a trip through the worlds of the many people who have managed to find prosperity through small business. It introduces an entertaining hodgepodge of likable characters. There is, to start, an accountant who gets tired of the boring parts of accounting and decides to focus on people — largely by teaching them to work less on the boring parts of their businesses and more on the inspiring parts. There is the brand expert who grew up in California’s wine country and wants to help vintners create wines that express the essence of their land. The former Wall Street guy who goes to North Carolina hoping to save a textile factory and the livelihood of all the people who work in it. The brush factory owner who resurrects his family’s close-to-150-year-old business. And maybe most charmingly, the Amish toolmaker who adapts modern farm technology for horse-powered farming.
These diverse characters have a common backstory: They don’t try to serve everyone. One key piece of advice that Jason Blumer, the accountant who is one of the heroes of this book, gives to his clients is to turn away customers they can no longer help, even if they’ve been customers for a long time. And then Blumer advises his clients to charge those customers they can and do help an accordingly high fee.
The advice to steer clear of commodity businesses and offer something unique at a premium price may well sound familiar to those who have been in business school classrooms. And that’s largely the point: One of the things that irks Davidson most is that small businesses don’t get the same kind of advice about strategy that big businesses get. Without a sound strategy, businesses that start with a passion get mired in an effort to maximize sales, becoming unrewarding and unprofitable.
Davidson’s “premium, not commodity” template works for a surprisingly broad range of businesses. Consider, for instance, the brush-making firm, which was founded in 1875. Taking over the foundering firm from his father, the owner realizes that instead of competing with a flood of ever-cheaper imports, he can create products that solve very specific and very expensive problems. It turns out that brushes specially designed to clean water tanks in nuclear power plants can be very profitable indeed.
The model applies just as well to service businesses. One of the book’s case studies involves a marketing company whose growth has become a curse. In line with Blumer’s advice, the firm drops clients that are too small to be profitable. But it also drops big clients with layers and layers of bureaucracy. In the end, the owner gets back to what she wanted to do in the first place: Giving strategic advice to vintners who want to make great wine.
The combination of passion and strategy works over and over again because, in tandem, the two elements help business owners find a rewarding and defensible niche. Niches often are too small to justify getting all the machinery of a big company moving. Yet the many niches of the modern economy provide plenty of room for successful smaller companies.
You would probably guess that there is room in the market for a company that provides horse-drawn implements to Amish farmers. But it’s unlikely you’d know that there are six such companies. Davidson focuses on one of them, Wayne Wengerd’s Pioneer Equipment, and Wengerd’s efforts to solve a problem that at first glance seems to matter to only the narrowest slice of the population: How to work rocky ground with a plow that will not throw you off your horse. It turns out, though, that there’s a good market for plows that can do the job, at about US$6,000 each.
You would probably guess that there is room in the market for a company that provides horse-drawn implements to Amish farmers. But it’s unlikely you’d know that there are six.
Davidson provides a great play-by-play of how the problem ultimately gets solved thanks to highly specialized steel implements made by a Norwegian company. Modern global commerce gives an Amish equipment maker the ability to access cutting-edge technology, which he can sell to a base of customers tied to old-world techniques. And the beauty of this is that a similar process can be replicated at scale: All told, Davidson estimates there are 25,000 Amish farmers, who own a total of $12 billion worth of equipment among them. This may not be a market that John Deere is interested in, but it’s certainly big enough to support several businesses like Wengerd’s.
The strength of such stories is that they illustrate that we are all, in our own way, Amish. We are all part of subcultures and local economies, with unusual and distinctive interests that can appear strange to others. The sheer size of the world economy means that distinctive passions can support viable businesses.
One question that may be lurking in the background here is whether the world is evolving to create more openings for niche businesses fueled by passion, or fewer. Growth and globalization create ever-greater returns to scale, and winner-take-all seems to be the prevailing trend in many areas of the economy. Bigger companies have started to recognize that niches are worth their while, and have become more adept at mining them. And new businesses that are bootstrapped have to compete with money-losing venture-backed companies determined to grow very big, very fast. Perhaps cowed in part by that, fewer and fewer Americans go out to start businesses of their own. It does not seem that it will be easy to reverse that trend. But it is heartening to see that Davidson, and the passionate band of entrepreneurs he writes about, are trying.
- Mark Gimein is a managing editor at the Week and writes regularly about economic issues.