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Tuesday, October 9, 2012

America Needs to Inspire Entrepreneurs’ Confidence -- and Fast

The state of entrepreneurship in the United States is “weaker than ever."

So writes Hudson Institute economist Tim Kane in a recent article titled, "The Collapse of Startups in Job Creation." Kane goes on to say that the number of startup jobs in the U.S. -- once steady at 11 jobs per 1,000 Americans for more than 25 years running -- has now dropped to fewer than 8 jobs per 1,000 Americans.

This is a deadly statistic. Missing a few more years of these startups -- let alone a generation of them -- will make the unemployment problem, and the U.S. economy in general, unfixable.

Given this, I’d love for the first question of the next presidential debate to be, "President Obama, Governor Romney: What are you going to do to boom entrepreneurship and startups in the next four years so that authentic job creation, GDP, and our economy don’t continue to collapse?" Their answers, and subsequent policies, will make or break the success of the country for generations.

And I cannot overstate the urgency. Here’s a quick story that helps explain why: 16 college math students came by my office here in Washington, D.C., a couple of weeks ago. Of that 16, 10 said they wanted to work in government and six in business. When I asked the 10 why government, every single one of them said, "security."

This answer is cause for real worry. If young people crave security, not the risk and thrill of building new businesses, the dynamism of the national workplace will be squelched. Somebody has to start businesses. Sure, a certain percentage can certainly work for reasons of security in the government, but a bigger percentage must seek the risk of free enterprise or the U.S. economy is doomed.

My theory is that entrepreneurship is a very fragile phenomenon rooted in emotions and human spirit, not “rational” transactions. Someone willing to take a risk and start or grow a business has to be in a highly inspired, extremely confident state of mind. This phenomenon is honestly what first built America, and up until recently, magnificently continued to inspire growth.

But will America remain a country that fosters entrepreneurial confidence? When Gallup asked small businesses why they aren't growing, they didn’t say "access to capital," they said, "government regulations." The way I see it, red tape and regulations undermine confidence and discourage job creators. Couple this with economic uncertainty and the end result is that when would-be risk-takers look out the window at the business climate, they see cloudy weather with the threat of rain. They’d rather stay inside.

This problem also has international implications. I leave you with this striking poll result: When Gallup in 2011 asked people in 160 countries, "Do you believe the government in your country makes it easy to start your own company?" 69% of respondents in China said yes. How many Americans responded affirmatively? Just 28%.

The leadership of the world could be hanging in the balance.


Anonymous said...
October 10, 2012 at 2:18 PM  

For my family, it is access to health care that stops us from starting a business.

My husband would like to start his own business. He is very confident of success, but as a fifty-year-old couple , we are scared of giving up on the safety of his employer's health insurance for our family.

Anonymous said...
October 10, 2012 at 11:53 PM  

I hear everyone complain about government regulations, but no one specifically names the "problem" regulations. Are they federal, state, or local regualtions?? Please help the non-entrepreneurs understand the specifics.

Bharat K said...
October 11, 2012 at 5:25 PM  

Also I would like to add an important point that I believe is leading to few entrepreneurs in America are Immigration Policies.There are more protectionist strategies put in place by the US government which has led to the brain drain.

Instead the aspiring entrepreneurs now have a chance to move to new havens like Singapore,Malaysia,Canada and Australia.

Earlier most of the entrepreneurs in Silicon valley haved stepped in this country as students but the influx has taken a beat with cheaper education and better permanent residence options offered by other countries like Singapore,Canada and Australia.

Moreover the confusion in clearing the STEM visa bill might make the prospective entrepreneurs more jittery to find resources or avail an equal opportunity to spawn a startup and act as a catalyst to the growth of the land once immigrated by Christopher Columbus.

Anonymous said...
October 11, 2012 at 11:57 PM  

I have been an entrepreneur my entire life, and a rather successful one at that. I have never read an article that so succinctly stated the problem with America. I have started and sold over a dozen companies over the past 20 years. Government regulation is out of control. Licenses, permits, inspections, compliance, fees, fines, all the professionals you have to hire to make sure you comply with everything and the total cost of all of this made it simply no longer worthwhile to try and do business in the US any longer. I got fed up. I am no longer in the US, and working on getting my citizenship elsewhere with the intention of relinquishing my US citizenship by the end of the year.

I already have a new business in my new country with a minimum of hassles. I have to pay taxes here too, so it isn't for tax reasons that I left and am going to relinquish my US citizenship is because I feel it is no longer worthwhile to pursue my profession there. And I sure as heck am not going to keep paying taxes back to a country from earnings I make in other countries when it was that country's business climate that forced me to leave in the first place!

Mark Batten said...
October 16, 2012 at 11:38 PM  

'Condition-making' is at the very heart of behaviourial economics. This is where State and Local governments can do their best work, if they have a mind to. Create the right environment where the private sector are confident and prepared to enagage risk in their freedom of enterprise endeavours. This is a quadruple bottom line approach to a sustainable economy where governance sits as a primary catalyst to business investment, entrepreneurialism and innovation

Anonymous said...
October 17, 2012 at 1:09 AM  

Business people leave the United States for two reasons: to pay extremely low wages and to avoid environmental regulations. They prefer to pay slave wages and pollute without consideration for anything other than money and their own wealth. Their complaints about the government are complete nonsense. There are lots of people starting and running profitable businesses who don't whine about paying people a fair wage or being responsible citizens regarding things like pollution, workplace safety and paying their fair share of taxes. Those that do aren't entrepreneurial, they are greedy, selfish traitors and we lose nothing--especially good paying jobs--when they move overseas. Good riddance. Get out of the way and let creative, responsible entrepreneurs take your places.

Richard Mello said...
October 23, 2012 at 2:51 AM  

Lawmakers must also act to strengthen OSHA’s authority to regulate rapidly evolving industries, such as poultry processing, and strengthen the agency’s ability to crack down on repeat bad actors, who currently consider the agency’s weak fines and legal recourse a cost of business rather than a deterrent from breaking the law. Protecting workers from deadly injuries at work requires serious consideration of these and other important legal and workplace safety programs.fiscal debate, in which cuts to OSHA’s budget could total $46 million if sequestration proceeds.

Anonymous said...
October 25, 2012 at 3:09 AM  

You have to be innovative to be an entrepeneur.

The biggest problem we have is that most entrepeneurs do not have the innovative bug in them and thus their business fail.

Innovation drives the market. Just opening or starting a business without having a unique identify to your business is a step toward faliure, you need to stand out from the pack.

Innovation bring competition, competition increases revenue.

Anonymous said...
December 28, 2012 at 1:32 AM  

We are a mature economy; we also no longer enforce anti-trust laws. Innovation isn't the answer; we can't all innovate. Only a very small portion of entrepreneurs have the technical expertise to come close to being innovators. Plus, Innovation's main purpose now is engineering away jobs through automation; those jobs the company couldn't offshore. Good Luck!!!

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