America Needs To Reclaim Our Entrepreneurial Spirit
We need to invest urgently in a stalwart, but unheralded sector of our economy: new small and medium-sized enterprises.
If we fail to come up with good answers for America’s workforce, the American Dream and all that flows from it will not survive. To rebuild America’s vital middle class, create tens of millions of new jobs, and reclaim our entrepreneurial spirit, we need to invest urgently in a stalwart, but unheralded sector of our economy: new small and medium-sized enterprises (SMEs). I believe in technology and all it can do. However, whether or not automation is destroying more jobs than it creates; the process is moving faster than we can retrain those who are left behind. The ultimate outsourcing is robot-sourcing; no complaints, no healthcare, and fewer costs. Such productivity gains represent an achievement—unless of course all the benefits flow to a tiny percentage of the population, and eventually leave everyone else unemployed.
One sustainable and scalable answer for America’s workforce is to nurture a new generation of SMEs. I’m talking about local bars, boutique firms, craft manufacturers—an ecosystem of small companies that enrich a neighborhood. According to the SBA, we have added 8 million small business jobs in recent decades, while large companies have slashed 4 million jobs. Today, some 28 million small businesses together account for over half of American jobs and 66% of net new jobs since the 1970s.
Unfortunately, entrepreneurship rates have been falling for the past 30 years. Yes, you read that right: in the age of Facebook, we are actually less entrepreneurial. The start-ups we seem most driven to launch are moonshots trying to be the next Snapchat. Each year, that recipe leaves us with a couple massive tech IPOs, hundreds of bankruptcies, and far fewer long-lasting good jobs (even the big successes employ only a few thousand people). In contrast, SMEs tend to stay small, but they last. Out of a thousand new SMEs, maybe one will grow massively (like the five-and-dime store that became Walmart), but many will continue to employ a few people or even a few dozen. New SMEs promise the greatest job growth.
For example, in Detroit, a flurry of new SMEs has enlivened the city’s economic scene. Detroit Bikes’ fifty employees will turn out 10,000 bicycles this year. Detroit Denim’s seven-person team produces high-end jeans, bags, and leather goods. The Social Club Grooming Company focuses on community-building projects while doing people’s hair. SMEs care about their local area and being part of a thriving ecosystem. These are small but innovative businesses (and many are tech-enabled, by the way); I’m not saying these are the best in class, but they make the point. They won’t become the next Google or Facebook—and they don’t have to and they aren’t trying to.
Rather than pressuring large companies to keep their big factories here, or giving up on the very idea of paid work and providing everyone a Universal Basic Income (though we may end up needing that, too), we should strive to build new SMEs and the necessary infrastructure, especially in struggling areas that have been left behind by automation and globalization. Unfortunately, most young people in school these days don’t think of small business as a viable, desirable career choice, and those that do often lack the support they need to get started and succeed.
This is a big task, but we can make it happen. Let’s launch a broad range of efforts across the new business lifecycle, from college campuses, to communities, to training, to financing options, and beyond. Our college campuses should offer hundreds of SME launch-pads, as well as small business classes taught by actual SME entrepreneurs. Let’s actively retrain people to start and join SMEs in post-industrial communities, and bring successful entrepreneurs into emerging-community fellowships.
Moreover, let’s light the path to existing SBA and commercial bank options, and create new financing and tax incentive options. Community venture funds like New Jersey’s Rising Tide Capital focus on local returns, not high-risk Silicon Valley exits, and can be powerful ecosystem creators for just these types of SMEs. Let’s also make sure that everyone, including women and minority entrepreneurs, have a clear pathway to owning their own SMEs.
Most of all, let’s change the conversation and reclaim the word “entrepreneur.” We used to use that word in a quintessentially American way to mean “business starter,” but more recently, it has been hijacked to mean “present or aspiring tech billionaire.” We should celebrate our local SMEs every bit as much as we do our hot technology companies.
For millions of people, SMEs offer a viable alternative. Tech-enabled business is actually an ally in this process, but Angry Birds is not an economy. Your coffee shop might not seem like a powerful economic force, but with the right policies in place, such enterprises could offer a real future for millions more hard-working Americans.
Oliver Libby is the Co-Founder and Managing Director of venture firm Hatzimemos / Libby and Co-Founder and Chair of the Board of social enterprise accelerator The Resolution Project.