How a Company Can Help a City

Sound founder Don Katz in Beverly Hills, California, on 1… May 2017.

Photo:

David Paul Morris/Bloomberg News

Growing up in New Jersey, Newark was always a walkable city, in the sense of: quick transit via the airport, the train station, the interstate. Newark keeps showing up on lists of the biggest criminals, the biggest corruptors and the biggest killers. Many have tried to turn the tide.

I met

Cory Booker

when he ran for mayor in 2006. That was before he became Senator Spartacus. I don’t like to give money to politicians, I only encourage them, but I gave them advice. Given its international airport, thriving seaport, Amtrak station, highways, proximity to pharmaceutical and chemical companies and refineries, and proximity to Wall Street, I said the city should require federal and state tax exemptions for companies based in Newark and hire more people. Deputy Booker interrupted: I don’t think we can offer tax cuts. It won’t be pretty.

Instead, as mayor, Booker received $100 million from the CEO of Facebook.

Mark Zuckerberg

for Newark schools – the deal is considered bogus after the dust settles. The crime rate in Newark rose during his seven-year tenure from 2006 to 2013, though the financial crisis didn’t help. The government has failed again.

It doesn’t have to be this way. I met

Don Katz.

Shortly after Audible was founded in 1995, I even bought one of their MobilePlayer devices. In 2007, Katz moved 125 employees from Willowbrook Mall in Wayne, N.J., to downtown Newark – and he did it without government incentives. Sound hires a lot of talented readers, and the fastest train is 13 minutes from Manhattan. Although

Amazon

bought the company in 2008. Audible is still headquartered in Newark and today has 1,700 employees, plus subcontractors who help make up the difference.

Mr. Katz told me that he has always been dismissive of companies and executives who give money but do not use the same inputs and outputs in their activities. More splash and pray, they rarely measure effectiveness. The same goes for the government.

Instead, Katz firmly believes that there are evolutionary models that are good for business and good for society. His favorite is a live restaurant. He began paying employees $500 after taxes for monthly rent when they moved to Newark. People called him crazy. He said he’s seen measurable productivity just by walking to work – at least before Covid – and besides, young professionals want to be involved in urban renewal.

Technology companies hire a lot of programmers, but how does that help current residents? Newark, whose population is half black and one-third Hispanic, needs jobs. So Mr. Katz created a program called Sonic Interns. He decided to forgo nepotism in internships and required paid interns to come from Newark to give people a chance. Many are homeless, some from Covenant House, a home for abused and neglected youth; Katz describes them as being in the whirlwind of single parenthood and on welfare. They were not MIT engineers, but people without university degrees for this high-tech work. I wanted to introduce them to the vocabulary of the working world. It was a big gamble.

The audible and the brilliant are more likely to seek the sociable and the brilliant than the authoritative and the experienced. The Sound Scholars program offers university students support and guaranteed employment during the summer break. Katz says the model works: Graduates of the program now make up 10% of Audible’s workforce. Most of them quickly adopt the technology and become productive, more than repaying the cost of the card system.

To scale the model, Katz founded Newark Venture Partners in 2015, which funds 93 small accounting firms selected from more than 8,000 applicants. The fund’s investors are primarily Audible and other companies that provide mentorship to entrepreneurs. Government money accounts for less than 5 percent of funding, Katz said. One interesting investment is MoCaFi, a Newark-based financial platform for low-income communities. And yes, my tax plan for Mr. Booker was probably wrong, innovative companies don’t pay corporate taxes, at least not yet.

When the pandemic broke out, Newark went into survival mode. Mr. Katz quickly organized Newark’s worker kitchens to save the restaurants. Using most of the suddenly unspent $10 million for food and travel, the group hired local restaurants to each prepare 200 meals a day, then used healthy trucks, volunteers and logistics code to deliver the meals to the homeless, public schools and households without food. It worked so well that the program received $2 million from the New Jersey Economic Development Authority. Government funding for a proven private program: Slim fit.

Large government programs often fail. San Francisco is spending $16.1 million on safe dorms, with a total of 262 homeless tents. That’s $61,000 each, about the average income of a San Francisco resident, but they still live in tents. One company can’t change the city, but perhaps Don Katz and Audible can serve as a model for private companies to change the trajectory of other transit cities.

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