Who Built That?

The “Great Recession” has cost America over 8 million jobs. 

The entire fabric of the our "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’s be more stark and look at two places in the world that simply don’t create very many jobs of any type - sub-Saharan Africa and the Middle East.

Even a cursory look at the deep and tragic social problems of these regions lead to two conclusions - 1) the incredibly wasted potential of literally hundreds of millions of people because there is so little to do and 2) the source of the attractiveness of violent ideologies to young people when there is no hope for them to “earn their own bread.”

Now, thank God America’s problems 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 jobs is such a fundamental and moral issue that it should never be made into any kind of political football. 

And more to the point, as Americans we don't just want “a” job.

We want a GOOD job, or one that:

1. Allows for a reasonably “worry-free” meeting of the base, human needs - food, water, shelter, and clothing.

2. Provides security from threats to health and violence (i.e. making enough money to live in a safe neighborhood).

3. Is part and parcel of one’s overall life mission, whereby the successful performance of it is "self-actualizing," and generates self-respect, a sense of belonging and community, the inherent satisfaction of the work itself, and the satisfaction of contribution to a cause larger than ourselves.

So Where Do These Good Jobs Come From?

Well, they obviously don’t come from government. 

Perhaps less obviously, they also don’t come from Fortune 500 America – as big companies on average shed more jobs than they create in time of both prosperity and recession. 

No, according to multiple studies of U.S. Economic Census Data and from the Kauffman Foundation nearly all net new job creation in the U.S. economy comes from new (startups) and young (one to five years old) companies. 

By way of perspective, in the last “good jobs 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.

Additionally:

•  Since 1977, without startup companies, net job creation for the American economy would be negative (i.e. more job would have been LOST than 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. 

And it goes deeper than that.

My experience of over 20 years in business has taught me that there is far greater likelihood of a good job - as defined above - being at a startup or a dynamic young company versus being at a larger and normally more bureaucratic organization.

And it should be self-evident that companies that are creating jobs are one that are growing.

And yes folks, it is growth companies and growth companies alone that drive equity values and lift stock markets.

So, let's back them governmentally - not with handouts but how about for starters with just simple and predictable tax and regulatory policy.

And let's back them culturally - by holding up the entrepreneur and business owner for what he or she really is - a modern day, real-life action hero.

And from these bases of understanding and agreement, yes we can all build something great together.