Why Entrepreneurs Are Real Life, Modern Day Action Heroes
Written by Jay Turo on Monday, November 30, 2009
A very, important study of U.S. Economic Census Data conducted by the Ewing Marion Kauffman Foundation, was published last week that statistically demonstrates who really creates jobs in the American economy.
Now let me be clear - the jobs issue is NOT a political football, as much as those in Washington would like to make it one. It is THE critical issue for us to solve here in America, and in fact all over the world, if our thriving, modern, global economy is to continue.
The 2008-2009 recession has cost the U.S. over 8 million jobs.
The entire fabric of the American "way of life" - from tax receipts to pay for government social programs, schools, and national defense, to the sense that the lives of our children will be better than ours is dependent on a society that creates LOTS of good jobs for those that want to work and are willing to work hard.
Let me be more stark. Let's look at two places in the world that are simply not creating jobs of any type for their people - sub-Saharan Africa and the Muslim world.
Even a cursory look at the deep and tragic social problems in these regions lead to two conclusions - 1) the incredibly wasted potential of literally hundreds of millions of people because there is literally "nothing to do" and 2) the source of the attractiveness of extremist, violent ideologies to young people (especially young men) where there is NO HOPE for them "earn their bread" and care for their families.
Now, thank God the problems in the U.S. economy are nowhere even near the magnitude of those in these fortune-starved places, but the connection between how we live and our society’s ability to create is one that too often gets lost in our entertainment and distraction - driven culture.
And more to the point, we here in America have VERY high standards for our lives. We don't just want any job. We want GOOD JOBS. I define a good job as follows:
1. A job that allows for a reasonably “worry-free” meeting of the base, human needs - food, water, shelter, and clothing.
2. A job that provides security from threats to health (yes, health insurance) and violence (making enough money to live in a safe neighborhood).
3. A job that is part and parcel of one’s overall life mission, whereby the successful performance of it creates the "self-actualization" stuff that appeals to the best in all of us - self-respect, a sense of belonging and community, and inherent satisfaction of the work itself, and the satisfaction of contribution to a cause larger than our own needs.
So Where Do These Good Jobs Come From?
Well believe it or not, folks, they don't come from government stimulus spending. Not from the "new" General Motors. Or from Goldman Sachs. Or from Fannie Mae or Freddie Mac or Citicorp.
No, nearly all net job creation in the U.S. economy comes from firms less than 5 years old, or brand new (startups) and young (one to five years old) companies. In the last pre-recession year of 2007, the U.S economy created 12 million new jobs. Of these, startups and young companies created 8 million of them, or almost the exact number of jobs that have been lost in the current recession. A few further points to illustrate:
• Since 1977, without startup companies, net job creation for the American economy would be negative (i.e. we would have LOST more jobs than we created) in all but a handful of years.
• Young firms - companies between 1 and 5 years old - over the past 30 years have accounted for the lion's share (more than 2/3) of all net job creation.
This is because while startups create a lot of jobs, the high failure rate of new businesses (less than 50% of them make it to age five) causes them to shed a lot of jobs too. In fact, companies between one and five years old create on average 4 jobs per year each.
Doing Well While Doing Good
Now as both a very patriotic American and someone that wants to see my children grow up in a peaceful, prosperous, opportunity-filled world, I want to see a whole lot more jobs being created worldwide because it is just a good thing.
And because my experience of over 20 years in business has taught me that the likelihood of a good job, as defined above, being at a startup or a dynamic young company versus being at a larger bureaucratic organization is somewhat self-evident, I want to see more startups and young companies thrive.
But I am also an investor and I want to make myself and my associates a lot of money.
And again, it may be self-evident but companies that are creating jobs are companies that are growing. And companies that are growing are companies that are creating more value this year than they did last year. And most importantly, have a better likelihood of creating more value next year than they did this year.
And yes folks, it is these kinds of companies that regularly earn investors a lot of money.
So, let's back them with government support (no bailouts needed - just get out of their darn way).
Let's back them as a society - by holding up the entrepreneur for what he or she is - a modern day, real-life action hero.
And let's back them as investors, because while we like to see the good guys win, it is even sweeter when we win with them.
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