Dean Barber

What This Country Needs

In Corporate Site Selection and Economic Development on October 23, 2016 at 10:23 am

It is not a good five cent cigar. Those days are long gone.

Nor is it what writer Ambrose Bierce’s suggested: “What this country needs, what every country needs occasionally, is a good hard bloody war to revive the vice of patriotism on which its existence as a nation depends.”

Bierce traveled to Mexico in 1913 to gain first-hand experience of the Mexican Revolution. He was not seen again.

I must admit that Edward Langley’s observation in 1982 nears closer to the truth: “What this country needs is more unemployed politicians.”

The problem is that unemployed politicians are replaced by employed politicians. Eradicating this replicating breed is something that we have not yet figured out.

If you were to ask me what this country needs, my answer would be simple: more business creation. Even if 90 percent of new business startups fail (and they do), I see entrepreneurship as a strong indicator to the health of a local economy and really the long-term future for our country.

Cities with strong entrepreneurial ecosystems are generally wealthier, faster growing, and offer more opportunities for upward mobility.

A Nation of Risk Takers

America has always been a nation of tinkerers, inventors, and entrepreneurs. We have the likes of Benjamin Franklin, George Washington Carver, Henry Ford, Steve Jobs and Elon Musk.

And now we have access to more technologies such as 3D printers, laser cutters, easy-to-use design software, and desktop machine tools.

We have the internet where we can scour for freely available information about how to use, modify, and build upon these technologies. And we have crowd funding platforms.

Despite All That

Despite all this at our disposal, U.S. entrepreneurship has been on a decline for decades.

A study published in December 2015 by the National Bureau of Economic Research (NBER) shows that start-up activity has been slowing down in this country for about three decades, dropping sharply over the past 10 years.

New firms less than a year old accounted for about 13 percent of all companies in the late 1980s, but only about 8 percent two decades later. Commerce Department data show the number of jobs created by establishments less than one year old has decreased from 4.1 million in 1994 to 3 million in 2015, limiting a historical path to the middle class.

And while Millennials may be a creative and independent bunch, they are not particularly entrepreneurial. The number of people under 30 who own a business has fallen by 65 percent since the 1980s and is now at a quarter-century low, according to a Wall Street Journal analysis of Federal Reserve data.

Indeed, the only age group with rising entrepreneurial activity in the last two decades is people between 55 and 65. (Hey, I’m not alone!)

The Biggest Culprit

We can blame “the usual suspects” — big government, high taxes and over-regulation. Maybe. But startups were booming in the 1970s and 1980s, when tax rates were higher, and deregulation for many industries was still in its infancy.

We can blame credit constraints, rising investments in automation that reduce the need for people, offshoring and larger companies acquiring younger firms at an earlier stage of development. All maybes in my book.

I think the biggest reason, the biggest culprit for the decline in new business startups might be student debt. About 41 million Americans carry more than $1.3 trillion in outstanding student debt, with one out of four student loan borrowers struggling to repay their loans or already in default.

In 2016, over 70 percent of the graduating class of 2016 took on an average of about $37,000 in student loans to finance their degree. The total sum of student loan debt for the Class of 2016 comes out to around $60 billion — 12 times the amount that graduating classes from the early ’90s held. Yikes.

According to a Inc.com article last year, more than 40 percent of 25-to-34-year old Americans said a fear of failure kept them from starting a company in 2014; in 2001, just 24 percent said so.

Job Creation as the Be All and End All

Few politicians or economic developers really talk much about the entrepreneurial climate of their communities.

Come to think of it, I cannot recall of a single conversation in which an economic developer has lamented the lack of business creation in his or her community. And I hang out with a lot of economic developers.

While U.S. entrepreneurship has been on a decline, most economic developers see job creation as the be-all and end-all. Certainly, it is how they are typically judged by the boards who hire and fire them. (Never mind that not all new jobs are good jobs.)

So it is understandable that economic developers will concentrate on growing existing businesses, the basis for business retention and expansion, and recruiting new businesses to their communities.

Incubators, Accelerators, Makerspaces, Oh My!

In short, business creation in most communities is still given short shrift, even with the advent of incubators, accelerators and makerspaces.

Now, don’t get me wrong, I have seen some great success stories of business startups all over this country, and where economic developers have played important support roles.

Indeed, as a consultant for industry and economic development organizations, I would like to see more incubators, accelerators and makerspaces, as it only strengthens a community’s entrepreneurial climate.

These type of places, where new businesses can essentially be nurtured and grown, show me that a community is at least trying to make a difference. In short, a community is placing a bet, even if a small one, on another gambler.

Not for Timid Souls

I am reminded of a quote attributed to President Theodore Roosevelt. It is long and verbose, and it sounds like it comes a blowhard politician from a bygone era. But there is a lot of truth to what Teddy said.

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”

To entrepreneurs and economic developers alike, I would advise that you not be timid souls, knowing full well that you could go broke or get fired in the process. But you knew that.

The Project: Inside Corporate Locations

I seldom mention or plug other consultants in this blog, unless I have worked with them and am therefore confident in their services and abilities.

Andy Levine, president of Development Counsellors International, fills the bill on both of these marks. DCI has launched a podcast called “The Project: Inside Corporate Locations” on iTunes.

Essentially, Andy and company identify recent corporate location decisions, interview both company and economic development officials and produce 12-15 minute segments which follows the “trail of the sale.”

The first three episodes detail projects with iCIMS (“Fast Growth Tech Company Finds New Home in Old Space”), Dana Incorporated (“If You Build It…Dana, Toledo and the Spec Building”) and CAEK (“Go West Young Firm”). Future episodes will explore recent site selection decisions by Charles Schwab, Gerhardi and Alorica.

We can all learn from these podcasts, even consultants.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. He can be reached at dbarber@barberadvisors.com or at 972-890-3733. Mr. Barber is available as a keynote speaker.

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