Everybody agrees that small business is good for an economy, that it promotes jobs, and so on. But what does anybody want the government to do about it? And what can governments really do about it, effectively?
More small business loans, perhaps? Lower taxes? Cut regulations? Sure, all easy to say, but then we get into partisan politics. Who puts up the money for the loans? How do you lower taxes for business owners without getting into partisan politics? And how do you cut regulations when most of them are supposed to protect employees and customers?
Tough problems, and I don't have direct answers; in fact, what I've seen in about 30 years of owning my own business and helping others to start theirs, is that people starting or not starting businesses isn't about tax rates or regulatory environments. It's about opportunity, education, technology, infrastructure, risk, custom, and attitudes.
In "Entrepreneurship is a Passion, Not a Program," Kevin Swan offers a good list of things "entrepreneurship is not" (emphasis is mine):
- It is not a program set in place by decision makers.
- It is not a building you put innovation in and commercialize.
- It is not grown from public money.
- It is not developed by having a bunch of venture capital available.
- It is not focus on certain sectors or markets.
- It is not an easy way to get rich.
- It is not chaotically chasing after ideas and projects.
I think he's right on all points, and particularly, on those points in bold that cast doubt on public policies. To help explain, he cites Vivek Wadhwa's "A Better Formula: Connecting Risk Takers." Vivek counters the cluster theories of government-sponsored entrepreneurship growing in a would-be petri dish of favored locations and industries:
All of those are well-intentioned efforts to build Silicon Valley-style technology hubs, but they are based on the same flawed assumptions: that government planners can pick industries they want to develop and, by erecting buildings and providing money to entrepreneurs and university researchers, make innovation happen.
It simply doesn't work that way. It takes people who are knowledgeable, motivated, and willing to take risks. Those people have to be connected to one another and to universities by information-sharing social networks.
So what -- if anything -- should governments, whether federal, state, or local, actually do? (That is, aside from lowering the volume on the partisan politic.) Could this be a classic quicksand problem for governments, meaning a problem they can make worse, but not better? Perhaps, but maybe there is something.
Vivek has some good ideas. He recommends, for example, "work toward removing the stigma associated with failure." And "teach entrepreneurship, not just to university students, but also to experienced workers." And, one of my personal favorites: "Bring in skilled immigrants from all over the world" (which I think means relax restrictions, rather than actually bringing them in). In short:
To boost entrepreneurship, they need to focus their energy not on infrastructure, but on people. They have to be connected to each other and be given the means to innovate and take risks. The obstacles in their path need to be removed.
I like that: Remove the obstacles. And really, for those of you who haven't started a company, or worked in a startup, or been involved in any way with a startup, I can confirm this for you: nobody's startup business plan hangs on tax rates or employer regulations. Those aren't the real triggers.
Vivek takes it a step further, and relates it to higher education: "Reward university researchers ... invest in capacity-building networks such as the New York Academy of Sciences," and "create linkages between university researchers and entrepreneurs." He concludes:
There is nothing to prevent there being many Silicon Valleys and nothing to stop most regions in the world from innovating. The focus just has to change from investing in real estate to investing in people.
And that's where I come in with my suggestion, with apologies for leaving this down here at the bottom: Improve public education. Is there a better way to invest in people? To remove obstacles? To foster innovation?
How ironic is it, with all this national talk, the volume increasing since the recent great recession, about small business and job creation and entrepreneurship, and competitiveness too, that the funding of public education is crumbling all over the United States? If you want entrepreneurship, and if you want to create jobs, support the schools, from pre-school on through the university. With all the other verbiage about small business, there's not much governments can do. Education is something they can do. And something that, frankly, they aren't doing.
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Jack Jennings: Get the Federal Government Out of Education? That Wasn't the Founding Fathers' Vision
Ray Leach: Will The Midwest Become The Next Silicon Valley?
Tell me again how our future depends on funneling trillions more down the rathole?
Let's try something different; dismantle the Dept of Education & return schooling back to the control of states and localities. Disband the teachers' unions and their stiffling control of education. Give PARENTS the power to choose where and by whom their kids are educated.
Doing the same thing over and over and expecting different results is insanity...
Please explain to me how my parents cheated the public schools.
Over 200,000 Religious Charities and Religious Non Profits are taking BILLIONS of U.S. Tax Dollars from U.S. Grants !!
The INTEREST ALONE on all those Billions is Bankrupting the USA !!!!!!!!
The businesses they form will probably be in the industry where they currently work either because they have a better idea or find a niche their current employer isn't filling (my case.)
They will never make it to the Fortune 500. They may never have more than 10 employees. They will never have to worry about unions. If they did, you would see small business formation come to a sudden, screeching halt.
What they will have to contend with is a byzantine tax code and many contradictory and generally useless regulations--most of them strictly state and local. For those small businesses approaching the 50 employee limit, a whole new set of onerous requirements kick in--the most recent being the new health care law.
Entrepreneurs will work about 60-70 hours per week, and their business profits will be run through their 1040 for tax purposes since they are mostly partnerships, sole proprietorships or LLCs. They will not be eligible for about 99.9% of the write-offs and exemptions targeted to big business. However, when the "big guys" catch cold they sneeze because, for many, these are our customers and clients.
What they need is far fewer regulations, mandates and reporting requirements and much lower taxes. .Risk must be rewarded.
Exactly true.
And the entire article evades the problem with the banks. Once upon a time, people got loans for start-ups.
And, by the way, if you look at the Kaufmann Foundation demographics of tech entrepreneurs, they tend to be in their 40s, and college. Here's the link:
http://www.kauffman.org/uploadedFiles/FactSheet/EduTechEntr101508SFS.pdf
And @thePeacemakers, I object to "evades the problem with the banks." Banks are private, no? This post is about what governments can (or can't) do and recent history shows us we want the government regulating the banks, not owning them. Which leaves us with education, public education, as something we want governments to do that they actually could ... if we all forced them to.
Many would open Business if they would ROLL back the Bankruptcy Laws to 1980 Levels.
Got anything that will make a difference in the next year or so?
Privatization can NOT deliver any better results - this has been proved repeatably in the US.
Note also that ALL the much better school systems around the world are PUBLIC not private.
The free market has flunked the real world test when it comes to education.
What we do need to do is have very stringent learning requirements for all grade levels and severe punishment for parents when their kids do not meet requirements. We also need to spend a lot more to endure that all kids are fluent in writing, reading and speaking English as soon as possible. Students that enter US schools not knowing English, should be taught ONLY English via immersion until they master it. If the US military and the Mormon church can get people up to speed on non-native languages in less than a year we can do the same for kids.
Once kids are fluent in English then we need to get them up to grade level on other subjects, especially math and science including the subject that religious extremist want to forbid.. This will require lots of individualized (expensive) teaching and long hours for the students (8 plus hours per day).
The people of the US should expect US students to work harder than our competitors.
NOTE: Chinese students are REQUIRED to be fluent in BOTH Chinese AND English! should we expect anything less from American students?
ELL usually is taught by immersion method, especially when not all English language learners come from the same linguistic background. That being said some students, depending on level of education in their home countries, need more time to get up to speed than others. Some students aren't literate in ANY language, others may already have studied English extensively. The goal should be to promote good English language skills in all of them, and to take as much time as necessary to do it. The former group of students may very well need quite a bit more than two to three years of ELL to fully understand mainstream instruction.
I'd love to hear that those statistics are wrong, as so many are. I don't claim to know the truth on this issue, just to be worried about it.
Pay Teachers $70k and $80K a Year and you will get the BEST and Brightest
And wait until you see the caste system in action. Get ready to see guys with no skill but the right caste get promoted.
And who said we need more engineers? And why is it the federal government's job to interfere in labor markets when corporations cry about wages being to high?
I don't pretend to know what the solution is but I do know that hiring 100,000 new teachers and throwing more money at the problem is not the solution. Perhaps the example of the Colorado school the President mentioned would be an enlightening example.
http://dailycaller.com/2011/01/25/school.../#ixzz1C7GcIDbJ
The problem is that the system is so "out of control" that most systemic solutions are hidden in the noise. Sure, there are individual, isolated success stories. Some of those successes have even grown beyond single schools and even school systems (e.g., Harlem Success Academy and KIPP). But, it probably will not scale in any significant way because of the system noise.
What needs to happen is for the system to be brought under control, and allowed to stabilize to its natural levels. Then, strong suggestions like your can be implemented. With a system in control, it can be determined if a particular change is making a real difference, or if we are merely dealing with a Hawthorne effect.
The problem is that the sort of systemic thinking that is required is exceedingly rare. It is cloaked in arcane statistical techniques, like statistical process control, that masks usefulness. It is hidden behind budgets, standard allocations, and averages that obscure data from all but serious accountants and analysts. And those professionals lack the process knowledge to properly communicate for real change.
If we don't make these changes, school systems will simply "try" your suggestions and in short order declare them unworkable, unsustainable, or some other "un" that will regulate them to the trash bin.
Cheers.
That said I have a challenge for you and other Silicon Valley entrepenures; please teach a pilot, one quarter entrepreneur class in high schools to teach and develop young people to become the next generation of innovators and then track their achievements.
Government isn’t the answer. If they actually cared they would make education as valuable as healthcare in this country. With the global economy, cheaper labor and manufacturing a very accessible world away, America is producing a nation of workers whose work place battle cry is “Do you want fries with that?”
If your program is successful, it could be implemented in local high schools and community colleges throughout the country and spark people to create a new economy.
Thank you for you story and maybe your ear. BTW- Grass Valley, California is a great place to start.
Like this one Israel Venture Network got $ 1,875,519 Million Dollars last year they send 99 % straight to Israel to help Israeli Youth find jobs. That is $ 7, 690,490 Million Dollars in the last 8 YEARS !!!!!!
There many other that get $300 Million a year to help Jewish Businesses all over the World.
See what I mean about Federal Grants.