The Virtue of Necessity
The Amish renounce wealth, spurn technology, and reject self-advancement. And that only begins to explain their success as entrepreneurs
To Sam and Michael Stoltzfus, helping a direct competitor set up his business didn't seem the least bit misguided. The father and son were more than happy to show Jacob Kauffman how to construct gazebos just the way they had been doing at their Irishtown Shop. "We held the nail in one of his hands and the hammer in the other, and showed him one step at a time," says Sam. The tutoring worked well--so well that the start-up quickly eclipsed the Stoltzfuses' business, pulling in customers they might otherwise have claimed as their own.
Another entrepreneur would surely look back on the act with regret, pinning the blame on one uncontrollable urge or another: a sudden burst of altruism, a fleeting infatuation with a new management theory. But here in the Amish settlement of Lancaster County, Pa., the tale is emblematic of the unique brand of entrepreneurship that's transforming this famously unchanging 200-year-old community.
In a sparsely furnished shed at the edge of a cornfield, 53-year-old Sam Stoltzfus sits behind his office desk in a coarse blue work shirt and black trousers with suspenders. "It's just the way we were brought up," he says above the hiss of a gas lamp. "We were all farmers together, and when one of us needed help, we all pitched in."
Such homespun wisdom is not usually the stuff of competitive strategy. But like so much in Amish business, what at first looks like a completely unbusinesslike approach ends up yielding unexpected commercial benefits. Sam Stoltzfus and his competitors buy shingles and lumber together, saving money by getting bulk rates. They swap customer information, passing along orders that they can't fill themselves. In different circles, that kind of behavior has inspired fancy buzzwords like co-opetition. The Amish call it--are you ready for this?-- cooperation. "We get an inside edge because of our close-knit society," says Sam Stoltzfus.
Twenty years ago, 5% of Lancaster's Amish population worked in nonfarm businesses. Today that figure is more like 50%. More than 1,000 Amish-owned businesses--quilt shops, furniture manufacturers, construction crews, hydraulic-equipment factories--now dot Lancaster County's gently swelling plains. Donald B. Kraybill, a sociology professor at Messiah College, in Grantham, Pa., calls the proliferation of Amish enterprises "the most consequential shift for the Amish in the 20th century."
It would hardly seem the ideal environment for fostering entrepreneurship. First of all, it doesn't take an anthropologist to figure out that the values typically associated with company building--innovation, rugged individualism, a lust for BMWs--aren't high on the Amish list of virtues. And then imagine, for a moment, running a business without computers, motor vehicles, or high-power electricity. Rules of the Amish church prohibit entrepreneurs from filing lawsuits, using showy advertising, or growing their businesses much larger than a dozen employees. Never mind that everyone lacks an M.B.A.; no one continues school beyond eighth grade.
Yet precisely because of the elaborate cultural constraints they face, Amish entrepreneurs have become expert at twisting limitations into distinct competitive advantages. Collectively, their businesses boast a failure rate far lower than the national norm. But beyond the enterprises themselves, Amish entrepreneurs offer a quiet lesson about what matters most in running a business.
Michael Stoltzfus wasn't looking for trouble when he decided he needed to buy a telephone for his wheelbarrow shop, Scenic Road Manufacturing. He was just tired of walking half a mile to the nearest phone every time he needed to call a customer or a supplier. But when Michael requested permission from the leaders of his local church district--the arbiters in the constant clashes between competitive pressures and tradition--it unleashed a furious debate. Would a telephone harm the community? Would it intrude on Stoltzfus's relationship with his family? Eventually, his bishop ruled that he could put a telephone in a shed outside. "Provided I couldn't hear it ring from the shop," Michael hastens to add. "The Amish feel if they can hear a phone, it will govern their lives."
Michael betrays no frustration as he describes that compromise from the porch of his simple home, his dark hair spilling out from under his straw hat. Having helped his father start his gazebo business as a teenager, the 27-year-old now lives a short buggy ride away from his father's house and right beside the wheelbarrow-manufacturing shop he has been running for five years. Two-year-old Aaron and three-year-old Samuel, clad in black bonnets, jabber with their father in Pennsylvania Dutch until their mother, Linda, silently whisks them inside. They reemerge wearing new straw hats; the early-morning sun is getting stronger.
Scenic Road Manufacturing rolls out nearly 1,000 high-quality wooden wheelbarrows a year. Most go for $95 a pop--though Michael declines to proffer a gross-revenue figure, insisting that "a lot of Amish would consider that bragging." He exports to Canada and England and estimates that only 2% of his clientele are Amish. Still, the operation hasn't strayed far from the community's agricultural roots: the hum of hydraulic-powered tools mixes with barnyard noises, duly provided by two small goats, a rooster, and a neighbor's herd of cows. "It's just the kind of entrepreneurship there was in the 1880s and 1890s," says his father, Sam, an amateur historian.
Well, there are some concessions to this century, though they are all at least as hard-won as the phone. Consider Sam's forklift: he's allowed to have it, so long as its wheels are metal. Driving it in icy weather, he reports, "is like writing with a feather quill pen." But he's lucky to have one at all. "Anything an Amishman doesn't understand has to be evil," says Michael. "If a piece of machinery does two things simultaneously, he'll say, 'Whoa, now that must be a computer." One way to skirt the rules is to bring in a non-Amish partner to take ownership of all verboten items, Sam adds, but "that's the last resort before you break away from the faith."
Just as any seasoned English--as those who embrace minivans, hi-fi sound, and the Clapper are labeled here--can sense how far to push the government before a regulatory crackdown is triggered, Amish entrepreneurs develop a refined sense of boundaries, even though there are few written rules to mark them. "It's a little like that horse over there," says Michael, gesturing toward a neighbor's yard. "As long as you're inside the fence and don't hit the wires, you won't get shocked. If a guy starts crowding the fence harder, he'll start getting watched harder--and then he'll start getting accused of things he didn't even do."
Lawyers, for example, constitute a sort of third rail in Amish business: get near one and you're toast, excommunicated from the church and shunned by all. So when a customer stiffed Sam Stoltzfus for $12,000, Sam chose the obvious alternative to hiring a lawyer or a collection agency.
He baked him a loaf of bread.
"He gave it as a symbol of love," Michael explains matter-of-factly, as if that were standard procedure for collecting outstanding accounts receivable. "Then he called him a couple of times and said, 'You're still a friend, but I would appreciate having that money."
The Amish call that debt-collection method "heaping coals of fire on his head" (rough translation: The Mother of All Guilt Trips). "It doesn't mean you're trying to scorch his head," Michael says, "but that you continue living an example until he sees the error of his ways." Don't mistake that generosity for naïveté, though: the Amish run credit checks whenever possible. Says Sam, whose baked offerings have yet to produce $12,000 worth of gratitude: "After a bad experience, you develop a sixth sense."
Like litigation, company size is a highly charged issue. "Basically, the bishops like to keep a business to four to five employees," says Michael. His father relates that when he started making gazebos, "we had customers piling up to our necks, screaming and hollering. But I didn't want a big business. My neighbor, he got bigger and bigger, and now he rents a building with 12 employees. Once he's up there in the factory, he's just like an outsider--a factory worker." So Sam Stoltzfus merely takes on what his business can handle and lets "the rest float by."
By now, however, there's no shortage of entrepreneurs who have devised strategies for growing without igniting the church's wrath. One, reports Kraybill, the sociologist, is to scatter operations, thereby avoiding the conspicuous sight of so many bearded workers under one roof. "Another would be to keep things almost dilapidated," he says. "It's an issue of impression management--of giving the image that the business is less formidable than it actually is. If the owner is quiet and humble about it, and doesn't have three fancy personal carriages, he can get away with quite a bit."
Several businesses manage to gross more than $10 million a year.
In trading their plows for production lines, are the Amish turning away from their traditions? Quite the opposite. "That's the irony of the whole thing," notes Kraybill. "They are going into business to maintain their traditions and their farming way of life."
Since the early 1980s, the price of farmland in the county has roughly quadrupled. "It takes $600,000 to $700,000 to go out and buy a farm and put cows on it, let alone have a decent house," laments Sam. "It's not possible for the average Amish anymore." To understand the plight of the Amish, it helps to know that the typical Amish family has seven children (Michael is the oldest of nine), and that Amish farmers can't accept government subsidies. Worse still, most of the alternatives--such as migrating elsewhere or working for non-Amish employers--would undermine the central goal of maintaining an insular, family-centered community.
But by starting their own small businesses, the Amish could stay close to their kin and keep their work environment reassuringly plain. "It's a cultural compromise," says Kraybill, "a negotiated outcome."
Steeped as it is in compromise, though, it's tough to imagine that Amish-style capitalism could be a recipe for much more than day-to-day survival. But in a survey he conducted, Kraybill calculated a business-failure rate of just 5% in the first five years. Even allowing for a substantial margin of error, that's an astonishingly low figure, especially since the national average hovers at about 65%.
Not only are the cultural constraints surmountable, but they often, in a roundabout way, help.
Take the restriction on higher education: by blocking the route to the professions or higher management, it ends up funneling the keenest minds into small business through a strong system of apprenticeships. Or take the taboos on technology: they cultivate a bare-bones approach that, for some businesses, ultimately saves money.
"We hooked this up ourselves," Michael Stoltzfus shouts over the whirring machinery--a labyrinthine agglomeration of pipes, gauges, and spinning fan belts. "That way we know how to fix it if it breaks." In the basement of his minifactory, he stands proudly beside the diesel tractor engine that puts 2,200 pounds of pressure on a drum of hydraulic oil. It's his "own little Pennsylvania Power & Electric": the oil is pumped through hoses to power the shop's various machines, which have been jury-rigged with hydraulic equipment. (The Amish don't use public power lines.) Upstairs, Elam Lapp, an employee who is also Michael's cousin, is bent over a power-sanding station, wearing a protective mask with his standard Amish outfit.
"A strong point in our business success is that we use machinery that is basically obsolete in the world market," Michael continues, "because we have to strip it of electronics anyway." Nearby sits an automatic machining center just unloaded from a flatbed truck. "I got this for less than $10,000," Michael says with satisfaction. Machinery like this would cost about $150,000 new, he points out, but this one is 1977 vintage. "I'll detach these parts," he says, tapping a couple of components, "and sell off the other parts. That will lower the price enough to make it worthwhile."
Restriction often becomes the wellspring of innovation, and the constant tinkering to reconcile modern contraptions with religious tenets produces an unparalleled bootstrapping ingenuity. A friend of Sam Stoltzfus's, for instance, contrived a way to use the excess heat from his diesel motor to heat a water tank and then circulated the water to heat his shop. "Right there you gain $80 to $100 a month," Sam says. His son chimes in: "A lot of engineers would never even attempt to build half the machines the Amish build. We're too dumb to know better, so we blindly go ahead and generally finish up quicker and less expensively than they would." Sam claims that two Amish business partners who left the faith and then rejoined it found they could operate at least as cheaply with diesel and hydraulics as they had with 110-volt electricity.
The community's disapproval of anything remotely extravagant (wearing buttons is considered vaguely ostentatious) further serves to cut costs. Michael Stoltzfus's office is a picture of plainness: barren floor, unpainted walls of compressed wood. For seating, he uses a green-vinyl bench apparently uprooted from a van. Carpeting? Expense accounts? All hochmut--German for "proud," practically a four-letter word to the Amish. Paid vacation is an oxymoron.
The Amish culture's antipathy for individualism would seem likely to dampen the risk-taking urge. But the Amish devotion to mutual aid means the community picks up the tab for the social safety net, freeing businesses from the usual financial burden. Congress has exempted the Amish from social-security taxes; moreover, they're not required to pay into the state's workers' compensation fund. The community takes care of health insurance and retirement benefits. Non-Amish competitors sometimes gripe that they're put at a cost disadvantage. "The Amish don't have the expenses that the government brings on small businesses," says Omer Wagler, president of Harlan Cabinets, an Indiana cabinet company that competes against several Amish businesses.
The barn-raising mentality manifests itself in more literal ways, too. Last April one of the Lancaster settlement's largest manufacturing operations burned to the ground, causing $450,000 in damage and idling nearly 20 workers. Like most Amish entrepreneurs, owner Moses Glick had no commercial insurance. No matter. "Probably before evening the next day, everything was pretty well cleaned up," recounts Michael Stoltzfus. "Somebody donated the use of a bulldozer for reconstruction. Someone else contributed the use of a crane. Oh my God, there must have been almost 500 people who contributed to that project."
And then, the Lancaster Amish have access to what many would consider a dream workforce: a local population of 22,000 Amish. Their legendary work ethic stems from a belief that work itself, rather than the money it produces, is the true reward. Leisure, conversely, is somewhat unholy. So Michael Stoltzfus isn't considered a workaholic for arriving at the "office" at 4:45 every morning. "From a very early age," he says, "the Amish are taught to work--period." Those who don't are fired with impunity; the prohibition on lawyers means no employee lawsuits. In fact, like owners of most other Amish businesses, Michael doesn't even bother with employee contracts, except when hiring outsiders.
What's more, no one expects to be paid much. Hourly wages (hardly anyone draws a salary) rarely exceed $12, according to Michael. "Amish can live for well under $1,000 a month," he says. "I would guess that most are doing under $500--and that's with two or three children. Part of 'making it' is being able to cope with not making more than $30,000 a year." The culture of frugality works its way into the bottom line.
Nobody utters words like empowerment around here, but most Amish businesses naturally exemplify it. Business owners are far more likely to be found on the shop floor than in their offices. Unions don't exist. Of course, it doesn't hurt that labor and management are more than likely to be relatives: the average Lancaster Amish has an enormous kinship network of 75 first cousins to draw upon. Says Anne Beiler, a former Amish-Mennonite who founded fast-growing pretzel-shop franchiser Auntie Anne's (#405 on the 1995 Inc. 500), "Family support is so strong within the Amish culture that it's almost impossible for them not to succeed."
Finally, the restriction on business size begets more business owners. "If demand is too great," says Michael Stoltzfus, "we'll do a spin-off. That happens a lot. A guy in my church was getting too big, so he sold part of his business to an employee."
For all their commercial success, the Amish will judge their foray into entrepreneurship a failure if it undermines the original goal: preserving their distinctive community. As their business dealings force them into ever greater interaction with the outside world, even the most optimistic Amish worry that businessfolk will drift from the Ordnung, or rules of conduct.
"Every year it's a little more," says Sam, reflecting on the move away from the soil. "We now have three generations off the farm. The children break out in a rash at the smell of manure." In 1963, he observes, scrutinizing a map through his steel-frame spectacles, his church district was home to 22 farms and two carpenters. In 1993 there were 12 farms and 17 nonfarm families.
For some, it raises troubling questions about the future: As businesses prosper, will the community splinter into a class structure? Will women begin their own ventures, resulting in smaller families populated by latchkey kids?
No one knows, of course. But for now entrepreneurship appears to be a better option than working for outsiders--the choice of many midwestern Amish communities. "The people of Lancaster are wise not to take that route," observes Steve Scott, a local author who writes about Amish culture. In Geauga County, Ohio, for instance, "they don't really even dress Amish anymore. You have what amount to Amish suburban areas." Michael Stoltzfus concurs: "The kind of thing where you have a two-hour commute, stopping for coffee, will be far more harmful to the community in the long run than the shops."
There's another way enterprise is helping preserve tradition in Lancaster: about the only Amish who can afford to buy farms these days, paradoxically, are the successful entrepreneurs. It's not uncommon for an older business owner to set up a young married couple on a farm. "The shops are probably contributing to keeping the young people on the farm more than anything else," says Michael. "Everybody's going into business, it seems, but it's recycling itself, too. We need the businesses to support the farmers."
And yet Michael, who followed his own father into entrepreneurship, admits he found the "high risk and high investment" of farming too daunting to even consider. "The shop allows me to be at home with the family and have the children around me," he says. Quite literally: three-year-old Samuel already lends a hand. "He'll dream up some little task for himself," says Michael with a laugh. "It makes him feel like a million dollars. He'll come in and eat twice as much and tell Mom all about it."
Michael pauses for a moment, his voice becoming more subdued. All in all, he adds, having a business is "the next best thing to having a family farm."
What happens when Amish businesses meet the Web? Read Jerry Useem's follow-up article, " Entrepreneurship Unplugged: Amish and the Internet."
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