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Steve Mariotti

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The Power of Owner-Entrepreneurship Education to Restore Our Middle-Class

Posted: 01/26/2012 12:44 pm

President Obama focused squarely on the middle class during his third State of the Union address. He declared that, "We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by. Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules."

Obama's speech has set off flares from the right about "class warfare" and from the left about "the disappearing middle class." There's no denying that the wealth gap is widening. In June 2010, a report from the Center on Budget and Policy Priorities confirmed that the gap between rich and poor in the United States had reached levels not seen since 1929. Currently, the United States ranks fourth in the world in income disparity, after Chile, Mexico and Turkey.

The fact is, the middle-class is in serious trouble. The key question is: What are we going to do about it? As the founder of the Network for Teaching Entrepreneurship (NFTE) and an educator of at-risk youth who has been in the poverty trenches for over thirty years, I can tell you that I've seen only one thing consistently create new members of our middle-class: Owner-entrepreneurship education.

At NFTE, we call our programs owner-entrepreneurship education, in order to stress the power of ownership as a means to create wealth. Disadvantaged youth are seldom let in on this secret to wealth creation. I once asked a leading venture capitalist and philanthropist, who has donated millions to helping low-income children attend private schools, "What about teaching kids the ownership skills that made you your fortune, so they can become financially independent?" He responded, only half-jokingly, "But then who would do the work?"

His comment illuminates a core issue in our society: If only the wealthiest people own the increased profits resulting from the better education of our low-income youth, how much has really been accomplished in helping our most impoverished citizens achieve the American dream?

This is why NFTE teaches owner-entrepreneurship education. We teach not only entrepreneurial skills like record keeping, sales, finance, negotiation, opportunity recognition, and marketing, but also the power of ownership. Our students learn how to properly value and sell a business, and how to build wealth utilizing franchising, licensing and other advantages of ownership.

Let me share with you the story of two courageous at-risk youth who traveled from extreme poverty into the middle-class through the power of owner-entrepreneurship education. Jabious and Anthony Williams were living crammed in with their mom and eight other family members into their aunt's two-bedroom apartment in Anacostia, a violent southeast Washington, D.C., neighborhood. Every day the boys walked miles to the nearest Exxon station to pump gas for tips. "Typically, we would earn about thirty to fifty dollars a day to help support my mom," says Jabious Williams.

Luckily, the Williams brothers met Mena Lofland, a caring NFTE-certified business teacher at Suitland High School in Maryland. She got the boys into a NFTE entrepreneurship class. NFTE currently reaches over 60,000 students a year in the United States, as well as in ten countries. There are 400,000 NFTE graduates globally.

Like many of our low-income students, Jabious and Anthony experienced tough childhoods that encourage independence, toughness, salesmanship and hard-won street smarts, and as a result, both showed great aptitude for entrepreneurship. I've seen this repeatedly: Our at-risk youth are uniquely equipped to handle the risk and uncertainty inherent in entrepreneurship. They also have valuable insights into their local markets.

The Williams brothers started their own hip-hop clothing line, for example, with support from Lofland, and two local mentors -- Phil McNeil, managing partner of Farragut Capital Partners, and Patty Alper, a dedicated volunteer, philanthropist and former entrepreneur.

Now 24, Jabious is a scholarship graduate student at Southeastern University and operates Jabious Bam Williams Art & Photography Company. Anthony heads a youth-mentorship program. They recently gave their mom $5,000 as a down payment on a house. "If it weren't for the NFTE classes and the support of our teachers and mentors, we would have likely dropped out of school," Jabious notes.

The story of the Williams brothers is just one of countless examples from NFTE's files that beg the question: If entrepreneurship education can create jobs, prevent students from dropping out, and provide economic rescue for people in our low-income communities, what's it going to take to open a conversation about making owner-entrepreneurship education standard in every high school in America?

Professor Andrew Hahn of Brandeis University points out the social consequences for an entire generation brought up in poverty that has never set foot in a workplace-and the potential benefits of entrepreneurship education. Hahn notes:

Research shows the scarring effects of early unemployment. The lack of work experience among minority teens contributes to a host of more serious challenges in their early twenties. Studies demonstrate that NFTE's entrepreneurship programs create jobs and are among the few strategies that work during these periods of massive youth joblessness.

I've seen firsthand that entrepreneurship education gets disaffected teens excited about school again, and about their futures. It teaches them that they can participate in our economy and make money. They quickly realize that to do so, they must to learn to read, write and do math. I've also seen how owning even the simplest small business fills a teen with pride.

Owner-entrepreneurship education is a great way to teach basic subjects to children who are failing to learn through traditional academic approaches, because it provides concrete incentives. Owner-entrepreneurship education teaches young people that they can create jobs for themselves and do not have to be victims of this economic downturn, but rather view it as an opportunity to start a business. It also makes them more employable in the long-term, because by running their own small businesses, they learn how business works and what makes an employee valuable. This shift in viewpoint can immeasurably benefit the psyche of an unemployed teenager, and also benefits companies that hire them.

Currently, our national strategy to combat poverty among low-income youth is built around improving K-12 education. That's a good choice, yet we're not teaching entrepreneurship, even though most Americans would probably agree with President Obama that small business is the driving engine of our economy.

Instead, most of our national education efforts seek to teach low-income youth to become better workers. Given the widening gap between rich and poor in this country, I'd like to raise one critical point: Why aren't we also teaching them how to own? If entrepreneurship is the engine of the American economy, why aren't we raising more creative entrepreneurs like the Williams brothers?

On an income statement, workers are located on the "wages" line. Professional business owners, venture capitalists, and private equity firms have a distinct advantage in the creation of wealth because they can sell the profits generated by workers for a multiple of a business's earnings. One dollar of profit can become $3, $10, or even $50.

This is how fortunes (and jobs) are created -- an entrepreneur starts a business, sells some or all of its ownership, and uses the resulting capital to start and build other businesses that he or she can sell in the future, creating more capital. Workers, on the other hand, spend their lives selling only their time for hourly wages, or perhaps a salary.

Teaching business skills without also teaching the power of ownership potentially creates wealth for an owner down the line, not necessarily for the entrepreneur who created a business. Even well-educated entrepreneurs can find themselves at a disadvantage when dealing with professional owners who are experts in valuation and procuring a high rate of return in exchange for investing in a business.

We seek to demystify wealth creation for our low-income students, so they will have the same knowledge that a child of wealthy parents might pick up at the dinner table. Owner-entrepreneurship education empowers young people to make well-informed decisions about their future, whether they choose to become entrepreneurs or not. They become aware of five assets that every individual has: time, talent, attitude, energy and unique knowledge of their communities. They learn to use these assets strategically as they move along in their careers -- which may include creating businesses and jobs, and building wealth in their communities.

Owner-entrepreneurship education reveals that anyone can start a business and use it to create wealth. This awareness can be a matter of life or death for at-risk young people like the Williams brothers. Through owner-entrepreneurship education, they discovered the value of their assets and created a business out of a comparative advantage -- in this case, their unique knowledge of hip hop culture and what kind of clothes would appeal to other kids in their community. As a result, they became motivated to stay in high school, went on to college and helped their mother become a homeowner.

As the Williams brothers learned, owner-entrepreneurship education can help solve the youth unemployment crisis, rescue our low-income communities by increasing home ownership and employment, and even bring about a fairer distribution of wealth. We need a national debate on owner-entrepreneurship education, particularly for low-income youth. We must raise the consciousness of those who have been left out of our economic system, so that they comprehend the joys and responsibilities of ownership.

As Jabious Williams says, "Because I own my business, I know I have a future."