Andrew Tisch: Entrepreneurship is the key to creating jobs, increasing the pay of working people, resurrecting struggling communities and spurring growth and innovation.
Kazakhstan is one of the 48 countries around the world where it is easier to start a business than the U.S., he says
Editor’s Note: Andrew Tisch is the co-chairman of Loews Corporation and a co-founder of the political reform group No Labels. The opinions expressed in this commentary are his.
We all like a good creation story. That moment where it all began.
In America, we love one in particular.
The story of the great entrepreneur.
You know the one: The lone genius toiling away in the garage, equipped with nothing but an idea, a pocket protector and a relentless desire to succeed.
In the Bible of American business, vaunted names like Edison, Ford, Jobs, Gates and Zuckerberg are the heroes of these stories – and they are rightly celebrated for their exceptional innovations. As were millions of others who realized the American Dream through innovation, imagination and initiative. And each one brought countless others along with them on their dream ride.
These entrepreneurs were and are exceptional innovators. Entrepreneurs are a big part of the reason why a list of the World’s Most Valuable Corporate Brands features plenty of companies that didn’t even exist two decades ago.
But these stories also propagate a myth that is keeping America’s political leaders from focusing on what it will really take to revitalize our economy. The myth is that great ideas and great companies are derived almost entirely from individual greatness.
Real-life entrepreneurship is a lot more complicated. For starters, even the most brilliant entrepreneur can only build a thriving business in the right ecosystem; one that provides essential ingredients like access to capital, good infrastructure, educated workers and smart and consistent rules and regulations.
Unfortunately, these ecosystems that are essential to an entrepreneur’s success are breaking down in many parts of America. America’s can-do spirit—the kind that in the 1960s compelled a whole nation to put a man on the moon – is being threatened by creative “road blocks” many emanating from government.
But if you’re not planning to build the next billion-dollar tech startup, why should you care?
Because entrepreneurship is the key to creating jobs, increasing the pay of working people, resurrecting struggling communities and spurring growth and innovation. It’s the lynchpin of our economy.
According to the Kauffman Foundation, virtually all net new jobs created in the U.S. between 1980 and the middle of this past decade were created by firms that were five years old or less – about 40 million jobs.
Entrepreneurship is also a strong indicator of a region’s overall economic health. Researchers have found that cities with strong entrepreneurial ecosystems are generally wealthier, faster growing and have better employment pictures than other cities.
Unfortunately, the opposite is also true. Take Detroit, an almost textbook example of municipal failure. Among the 15 largest metropolitan areas in the United States, Detroit had the lowest rate of entrepreneurial activity of any city over the past few decades, something that Silicon Valley transplant Jerry Paffendorf is trying to change. Kevin Plank, CEO founder of Under Armour, is also trying to leverage his entrepreneurial spirit to revitalize Baltimore.
Show me a community with lots of entrepreneurs and an ecosystem that supports them and I’ll show you a place on the rise.
If entrepreneurship is this important to America’s economic health, you’d think promoting it would be a singular focus of our political leaders. Especially when you consider that for the first time in modern history, more businesses are closing their doors every year than being born.
That’s the kind of hair-on-fire finding that should have every politician in America trying to figure out how to stimulate entrepreneurship in our country – but they aren’t. Instead, our leaders are inexplicably complacent.
We’ve all heard a politician say some version of the phrase: “There’s no better place to start a business than here in America.”
But this is the second great myth about entrepreneurship in America. In fact, there are plenty of other places in the world where it’s easier to start a business.
Like Kazakhstan for example.
According to the World Bank, Kazakhstan is one of the 48 countries around the world where it is easier to start a business than the U.S.
That is true in part because of regulation and occupational licensing requirements run amok. The requirements are so ridiculous that some states require more training to become a manicurist than an emergency medical technician. Jumping through these compliance hoops takes time, and time means more money is needed upfront to start a business.
Of course, it’s hardly a secret that new and small businesses pay a heavy price to comply with ever-changing government rules and regulations. Regulatory compliance is estimated currently to cost small businesses more than $10,000 per employee, 36% more than for larger businesses.
So what is to be done?
Washington could start by directly addressing the biggest pain points for entrepreneurs and small businesses. Like loosening the provisions in the Dodd-Frank financial reform law that make it unnecessarily difficult for community banks and credit unions to lend to small businesses. Or making regulatory compliance and its cost more manageable, which is key to stimulation growth, particularly for startups.
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The political reform group No Labels, of which I am a co-founder, recently released a “Policy Playbook for America’s Next President” that features a number of common-sense regulatory simplification ideas like an automatic sunset for all federal regulations after 15 years and the creation of a regulatory “road map” that enables entrepreneurs to view in one place all the federal, state, and local regulations that may affect their business.
Aside from specific reforms, our leaders in Washington could give a jolt to small business creation simply by doing their jobs. Pass budgets on time. Don’t shut down the government. Start to rebuild public trust that the federal government can actually do and help the people’s business.
Because without trust and confidence in our public institutions, there is no confidence in the future and no more limited willingness to take risk.
Gallup polling has found that there is a strong correlation between people’s satisfaction with public institutions and the likelihood of starting a business. So long as the public’s approval of Congress is abysmal – with nothing but finger-pointing and posturing – fewer people will have the confidence to take a risk and start a business.
If you want to know which candidates are really serious about the economy this fall, pay attention to what they’re saying about entrepreneurs. Unless they are looking for an answer to restimulate America’s startup problem, they aren’t focusing on the right question.