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Tuesday, February 5, 2013

The Secret Weapon That Will Save U.S. Entrepreneurship

January's Wells Fargo/Gallup Small Business Index survey has me more frightened than ever about America’s future.

I already knew that our GDP was stalling, if not falling. The Department of Commerce reported recently that GDP declined in the fourth quarter of last year, at an annualized rate of 0.1%. Meanwhile a minimum GDP of 2.5% is required just to tread water economically, in my view, though I think we really need GDP growth of about 4.5% to get the economy humming again.

And I already knew that unemployment was stuck at right around 8%; when you add in those who are “underemployed,” according to Gallup data, it jumps to 17%. These figures tell the story of what was a prosperous and stable democracy that’s now going nowhere.

But the Wells Fargo/Gallup Small Business Index survey reveals the biggest nightmare metric of all: 30% of small-business owners are worried they may not be in business in 12 months. I am also worried because new business startups have fallen below 400,000 per year, and the country needs a bare minimum of 1 million new startups annually, in my estimate, to keep the economy running. We cannot, on top of this, have existing companies going out of business.

These findings are so alarming because the total number of U.S. employees within small businesses is significantly larger than in big business. The fact is, new business startups mean everything to America, because without them, our GDP cannot grow and unemployment will continue to rise. The miracle of economic life in the United States begins with one business starting up -- that moment of conception, if you will.

Now, the most important question America must ask is: Does that miracle happen as the result of government policies and regulations, or does it grow out of a spirit of entrepreneurship and free enterprise? The answer is crucial. Get it wrong and the country’s GDP shrinks -- and we lose jobs and global standing. Get it right, and America roars back and becomes a powerhouse again.

The right answer is that the miracle springs from a spirit of free enterprise, a will. It springs from risk takers’ insatiable demand for independence and success. America must understand, encourage, and renew this spirit, or it’s game over for the country.

I wish I could be more optimistic right now, but this story explains why I’m not: A group of college seniors stopped by my office recently in Washington, D.C., and I asked them how many want to start their own business. Just two seniors raised their hands. I asked how many want to work for the government; nine raised their hands. When I asked why the government, every single person said “security.” This is a perfect example of the absence of free-enterprise spirit. When the desire in young people for the security of a government job overwhelms the demand to take an entrepreneurial risk, America sinks.

Sorry about the depressing observations. But there’s a fix that’s simple and doable -- and it doesn’t cost much.

We should give every American kid in grades K-12 an opportunity to experience the miracle of free enterprise. Great nonprofits are doing this already. Lemonade Day is teaching kids how to start businesses, and Operation HOPE’s Business in a Box program mentors kids in business and finance. These organizations are inspiring future miracles, because they’re creating moments in which young people feel the thrill of enterprise. Other nonprofits, schools, and public-private partnerships could do the same.

If and when we overwhelm the more than 50 million kids in grades K-12 with the magical experience of entrepreneurship, we’ll create a bright economic future for America and leave behind our current debilitating problems. These young risk-takers will grow up to start small businesses, many of which will shoot up and boom, and the economy will thrive again. America will rebound because our young people will bring the spirit back.


John Wren said...
February 6, 2013 at 11:31 AM  

Thanks for this, you make some great points. Only 400,000 startups! That's a real wake up call.

Why the drop in interest in startup? In my opinion it the Small Business Administration and all of it's off-shoots. They dwell on the risk of startup. We'll what's the risk of taking a job with a large corporation? Or getting married? Life is filled with risk, but small business is the only part of life that has a tax-funded agency, it's snuffing out the entrepreneurial spirit!

John S. Wren, MBA+
Founder & CEO, Small Business Chamber of Commerce, Inc
Facebook/Small.Business.Chamber Twitter @IDEACafe

Steve Veltkamp said...
February 6, 2013 at 12:18 PM  

John is absolutely right, the SBA is a contributing factor. Still, as Jim points out, it is a culture of entrepreneurship and risk-taking that needs to be instilled in the youth - or they won't even get to the point of SBA discouragement. We've created the problem with our emphasis on safety and security. How many of us rode bicycles without helmets as kids? How many roamed outside on our own till it was dark (or later)? The media of course also constantly instills fear. The same culture of security over individual risk is at the heart of much of our political and social woes.

Andrew Stein said...
February 6, 2013 at 3:43 PM  

In targeting education, teaching "entrepreneurship" alone is not enough. All too often, the focus is on case studies of "luck" and "being at the right place at the right time." Let's shift the curriculum to be one of "Firm Formation" and "Firm Creation." If everyone knew how to do that, it would get easier to garner new growth from this resource. And, it would shine a light on the abyss of regulation required, and perhaps loosen that noose, over time. But, to be sure, Kauffmann and other research shows, your conclusion is correct. But, to fix it, we need people that come out of school prepared to "create a firm" not just trained to "work in a firm." Let's break this horrid cycle.

Scott T Whitaker said...
February 8, 2013 at 11:41 AM  

Mr. Clifton, You have a very insightful perch from which to observe and assess situations. A friend of mine worked for Gallup; through him I learned a lot about your work in addition to the polling (e.g Gallup University). LIBERTY AND FREEDOM, and the cost to maintain them, require attention TODAY, and from those values emerges the heart's desire to own one's own venture (e.g. starting, buying, turning one around). Until we interpret today's mainstream teaching and culture as a specific STRATEGY to suppress these values and the related heart's desire which emerges, we entrepreneur proponents remain defeated. The number is not 50 million children, the number is 1-2-3- or however many children two parents have in their home. It's those children that will be future entrepreneurs. A 16-year old in the home can start a web-development company, and Peter Theil will finance it. With the 10 hours of free time they have each day, then can start a business- not ASPIRE TO WORK FOR GOVERNMENT as your research shows they want now Or they can start a non-digital company- whatever. For $1,000, an 18-year old can acquire a 3D printer and PRINT products for his friends or his school or for people in another country in another hemisphere by shipping it via FedEx. This is EXTRAORDINARY OPPORTUNITY today. The repression today is OF THE SPIRIT AND OF THE MIND, through state-sponsored AGENTS, not of anything else. I see you have most of the picture; help us by using your perch to transform the minds of individual parents, and turn their hearts to their children, moment by moment. Thank you.

Anonymous said...
February 9, 2013 at 9:44 AM  

The desire to start your own small business has been inate in our culture. The characteristics of the individuals who actually act on the thought are high energy types with the optimism of an idiot. These characteristics, in my opinion, are the primary ingredients of success. The question of how to get these types to act on their vision/dream is the key question. Sadly, there seems to be very little understanding of these types of people.

Anonymous said...
February 11, 2013 at 3:08 PM  

The costs associated with small business start-ups are high for the average dreamer.

Which makes me wonder if these children entrepreneur empowerment associations are offering small grants for the young people to start their entrepreneurial activities once they complete the program.

Great read! Thank you.

-Victoria Love

Sophia Walker said...
November 25, 2013 at 3:20 AM  

I love how emphatic you are to the cause and the future of entrepreneurs. Is Canada doing better than America in terms of small business funding and entrepreneurial support and innovation? I would like to hear your thoughts on this subject. Thanks.

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