Posted on Friday, February 4, 2011
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.
Tim Berry, THE HUFFINGTON POST