Is entrepreneurship dying in America?

(g) I can now be boring on the goodole topic of economics and Schumpater and the theory of long cycles and innovation clusters. For the "cut to the chase" gang, these theories say that recessions occur at certain predictable levels and what's needed to bring us out of them is a cluster of innovations.

And that clusters of innovations fuel an economic boom. We've seen that in our own recent history, when the tech bubble roared ahead to fantastic proportions on the basis of the home computer. Just think of how many innovations are associated with that!

But the rush stagnated and things fell apart. Now (according to Schumpater's theories) we need a new cluster of innovations to get us all buying and wake up a new sector.

Entrepreneurship is still there and is doing fine if it's being managed with some sense. Enterpreneurship based on the "if you build it, they will come" theory is falling apart, however.

IMHO, of course. And Schumpater's (but he's dead, so he probably doesn't count!)

I had to ask, because some of that's classical economic theory.

..........Mel.

Innovation is the key. But it has to be innovation that gets *results* that is the key.

The false dawn of web sites and the internet for offline businesses and start up entrepreneurs has magnified the problem.

Billions, for example, has been spent worldwide by small and medium sized business on web sites that have produced diddly squat. Just imagine the boost to the economy if that money had been invested in something truly productive.(Or invested in the markets)

The internet myth has a lot to answer for.

Regards
Andy


http://www.riskfreegroup.com

That's a good one...

Has anyone thought that maybe what is being called a "start up" has been re-defined? Or that maybe, people are starting things without going through all the government red tape? How is a "start up" or self-employment measured anyway?

To quote: "self-employment rose as laid-off workers started companies"

If they are basing a rise in self-employment by seeing new companies being started, then the figures will certainly be wrong.

"the share of all workers who are self-employed fell, a USA TODAY analysis of Labor Department data found."

A USA TODAY analysis? Oh yeah... that's just got to be accurate, eh? Now a JOURNALIST can analyze data? Who was it... the writer of the article?

I would also be interested to know the political leaning of the writer and the newspaper overall. Because these things have an effect on the slant of the news.

"Experts say entrepreneurship has been hurt by..."

WHO are these experts? And WHAT are they experts of?

This is scare-mongering news... written to paint a certain picture...

"Many would-be entrepreneurs say they can't afford to start a company because employer health insurance premiums are so high"

How do you find a would-be entrepreneur? Are they like "gonna" people? I'm gonna do this and gonna do that - but it never ever happens.

I would have done such and such BUT.... [insert your pathetic excuse here]

"Many firms begin with less than $20,000, often borrowed with credit cards, the source of 39% of small-business loans, Federal Reserve data say"

So unless my "start up" is funded by credit card the Fed Res doesn't think I've started anything. Oh gosh gee... that's an accurate way to measure start ups... NOT!

"Would-be entrepreneurs might be hesitant because CEOs are in the doghouse amid alleged wrongdoing"

Oh Pulease... what a load of felder carb. I can just see it... "honey, I can't start up a lawn mowing business because the CEO of Worldcom riped people off." Sha!

"VCs pumped $5.7 billion into start-ups in the second quarter, down 53% from a year ago."

Oh, what about the first quarter? (Better not mention that one because it showed a vast increase... hmmm... and how are things looking for the third quarter?)

But the best is yet to come...

"Just 16% of parents want their children to become CEOs, a Harris Poll found in July, down from 28% in 1992"

WHO are these parents? WHAT was the actual question asked of them? WHERE do they live? WHAT is their political leaning?

"And 76% of adults respect entrepreneurs, down from 91% in 1999, a Babson College poll of 2,000 adults found last year"

Again, WHAT was the question? WHO precisely were these "adults"? (21 year olds at some socialist infected college?) WHERE were these "adults" located? WHEN was the question asked?

Asking 2,000 people a question is not a true representation of anything. And the results mean nothing unless they are also released with the full details of the questioning - actual question, time of day question was asked, political leaning of person answering, sex, employment status, and so on.

Thanks for the laugh, Boyd.

Michael (I REFUSE to participate in a recession) Ross


Laugh at the recession... all the way to the bank

> The front page of USA Today (Wednesday)
> mentions that this is the first recession in
> the last 50 years where entrepreneurship has
> failed to assist with a recovery. According
> to the study they cite self-employment is at
> record lows relative to previous recessions.
> They cited a few reasons why people are
> opting "out" of entrepreneurship.

> 1. Rising Health Care Costs (This is a worry
> that I have myself since the premium for my
> family and I would be rougly $800/mo. The
> only solution I can come up with is to take
> a high deductible and never get sick ;-) We
> should probably start another thread on how
> self-employed people manage their
> health-care costs...)

Several business owners I know take care
of their Dental needs through "dental universities"...at dental board exam time
many dental students look for "free patients"...
and many dental schools offer services for
a reduced fee....

I'd like to see a thread on this too....

I can tell you if you are lucky enough to
live in a state which carries State Disability
Insurance, it can be a life saver should you
become ill...you of course need to pay a
small quarterly premium, but it's worth it
if you are injured and unable to work...you
would be surprised at the number of self employed
people who ignore "disability insurance"....

I also refuse to participate in this
"recession?".

Remember the last so-called recession. In the election cycle for President in 1992, we had Ted Koppel, and many others in the media proclaiming the "Worst Economy in 50 Years!!" Amazingly, after Bill Clinton was declared the winner in November, that phrase disappeared from every newcasters lexicon. By late November and into December and January, all evidence of a rebounding economy were attributed to Clinton's election and how it was stimulating the public's perceptions and spending habits.

Hindsight paints a slightly different picture.

Enough on the political side, now for some capitalistic comments.

One of my first customer's helped me shape my business with one simple point he made.

I asked him how during the downturn ('85-'86) he could sell so many more cars than the dealer he had bought out. The previous owner had the dealership during the greatest economic expansion of the second half of the 20th century.

He explained that he didn't worry about the 15% unemployment. He chose to focus his advertising and marketing to the 85% who were driving to work in used cars. So stock the inventory to the max and offer them to people who are working, as the unemployed wouldn't be shopping for cars anyway.

Since I have $0 invested in the stock market, the $3000+ drop has no direct impact in my net worth. It may affect my sales, as my customers are possibly affected, so I may need to change my strategy and expand to some additional accounts.

But, since many businesses have cut back on the mass media advertising purchases, some of those unspent dollars have been shifted to targeted media, including Promotional Advertising.

For the record, the company I represent as an independent agent, posted a 8.7% increase in sales from 2000 to 2001. That includes the quarterly sales after Sep 11th.

Like them, I choose to not participate in this recession.

Dennis Bevers


Help me fight the recession, order your imprinted business advertising and executive gifts now! LOL

Well, while I was referring to personal economics, my statement applies to businesses as well. Really it goes all the way back to Adam Smith (which I suppose is classical economics, but I think some would disagree), but I believe he was essentially correct.

The way to grow in wealth is to produce more than you consume. (And by "produce," I'm refering to anything that's of value to someone else, of course. It does you no good to "produce" something if nobody values it, as many big companies are finding out. When we say someone is being "productive," we are usually not referring to busywork, we usually mean high-value labor.)

I recently picked up a lecture by Earl Nightingale called The Top 5%. He addresses the "produce" part of the equation by saying: if you wish to increase your rewards, you must increase your service.

I like his choice of words -- they are very deliberately chosen. Really, that's all that anybody who makes money does: increase their service. Some do it literally; they have a service business and they constantly work at improving the customer's overall experience. Some do it by owning several companies, each one providing a service to many people. Product businesses also provide service -- after all, we buy products for the "services" they provide us (a "service" business can be thought of as just a big product). Some people use leverage in their businesses to either provide more service to some people or some service to more people (or both).

And, I think it's important to not take "service" too narrowly. I mean it in terms of the overall customer experience -- not just the actual product or work. For example, I've worked with several contractors on my house who have done good work, but my experience with them was so lousy that I'd rather not call on them again.

Money, in essence, is a representation of value for labor. (That idea also comes from Adam Smith, not the communists. The communists twisted the idea to include any labor, whether or not it was valuable to others. Smith was referring to valuable labor and he felt that the free market, in general, was the best directory -- indicated by the changing prices and wages -- to reveal which labor was valuable and which was not. And his idea is correct; everything you buy with money had to be produced by the labor of one or more people. It's ultimately that labor which you pay for.)

I think the really wealthy work on this aspect, but also address the "consume" part of the equation. They generally live below their means and take the extra and compound it: invest, reinvest, reinvest, reinvest, relentlessly...

So, I'm saying a few things:[*]Produce more than you consume.[*]To produce more, increase your service -- or you can think of in terms of the value of your service -- and you increase your reward. It's a cause-and-effect relationship.[*]To consume less, live below your means and compound.


Ok, that was a mouthful, but hopefully it was helpful. (It was helpful to me to just get it out of my mind and put it into words.)

Best,
Phil

P.S. -- I realize that the above is overly simplistic and I haven't addressed important issues like giving/tithing, attitude/relationship to God, planning, etc. But I think the above gets at some fundamentals that are sorely neglected by many.

... for turning off my brain again.

It's for this reason that I avoid the news -- it's generally written to make you more foolish.

I once thought there was something to investment cycles. Now, I feel that even if they do exist, they are completely irrelevant. It does not matter what is going on; rather it matters what you do.

There are lots of stories about people who "did not participate" in the great depression, even. As for today, I know an investor who has made lots of money in this "downturn" in the markets (even after the so-called tech-crash), and he made it by investing in the same stocks you and I can buy. He has also chosen not to participate in this recession. (I too, have made money doing the same thing, but I'm newer at it and my story is not as interesting.)

Thanks for the wake up, Michael -- I needed that.

Best,
Phil

P.S. -- Nice job on your MSI report. I'll have to post some comments on it when I get a chance.

> That's a good one...

> Has anyone thought that maybe what is being
> called a "start up" has been
> re-defined? Or that maybe, people are
> starting things without going through all
> the government red tape? How is a
> "start up" or self-employment
> measured anyway?

> To quote: "self-employment rose as
> laid-off workers started companies"

> If they are basing a rise in self-employment
> by seeing new companies being started, then
> the figures will certainly be wrong.

> "the share of all workers who are
> self-employed fell, a USA TODAY analysis of
> Labor Department data found."

> A USA TODAY analysis? Oh yeah... that's just
> got to be accurate, eh? Now a JOURNALIST can
> analyze data? Who was it... the writer of
> the article?

> I would also be interested to know the
> political leaning of the writer and the
> newspaper overall. Because these things have
> an effect on the slant of the news.

> "Experts say entrepreneurship has been
> hurt by..."

> WHO are these experts? And WHAT are they
> experts of?

> This is scare-mongering news... written to
> paint a certain picture...

> "Many would-be entrepreneurs say they
> can't afford to start a company because
> employer health insurance premiums are so
> high"

> How do you find a would-be entrepreneur? Are
> they like "gonna" people? I'm
> gonna do this and gonna do that - but it
> never ever happens.

> I would have done such and such BUT....
> [insert your pathetic excuse here]

> "Many firms begin with less than
> $20,000, often borrowed with credit cards,
> the source of 39% of small-business loans,
> Federal Reserve data say"

> So unless my "start up" is funded
> by credit card the Fed Res doesn't think
> I've started anything. Oh gosh gee... that's
> an accurate way to measure start ups... NOT!

> "Would-be entrepreneurs might be
> hesitant because CEOs are in the doghouse
> amid alleged wrongdoing"

> Oh Pulease... what a load of felder carb. I
> can just see it... "honey, I can't
> start up a lawn mowing business because the
> CEO of Worldcom riped people off." Sha!

> "VCs pumped $5.7 billion into start-ups
> in the second quarter, down 53% from a year
> ago."

> Oh, what about the first quarter? (Better
> not mention that one because it showed a
> vast increase... hmmm... and how are things
> looking for the third quarter?)

> But the best is yet to come...

> "Just 16% of parents want their
> children to become CEOs, a Harris Poll found
> in July, down from 28% in 1992"

> WHO are these parents? WHAT was the actual
> question asked of them? WHERE do they live?
> WHAT is their political leaning?

> "And 76% of adults respect
> entrepreneurs, down from 91% in 1999, a
> Babson College poll of 2,000 adults found
> last year"

> Again, WHAT was the question? WHO precisely
> were these "adults"? (21 year olds
> at some socialist infected college?) WHERE
> were these "adults" located? WHEN
> was the question asked?

> Asking 2,000 people a question is not a true
> representation of anything. And the results
> mean nothing unless they are also released
> with the full details of the questioning -
> actual question, time of day question was
> asked, political leaning of person
> answering, sex, employment status, and so
> on.

> Thanks for the laugh, Boyd.

> Michael (I REFUSE to participate in a
> recession) Ross

Phil:

> Well, while I was referring to personal
> economics, my statement applies to
> businesses as well. Really it goes all the

Great post! It is important for each individual to understand they have their own personal economy to look after -- it is their responsbility to take care of that.

Now business people (or those who own businesses) may understand this completely, but how do we teach the rest of the population. It's not like we provide budgeting and personal finance training in our general school studies.

Great discussion. Good to see people talking about these important issues.

Sincerely,

Justin