Economic Army
Unleash America’s midcareer entrepreneurs
COVID-19 has brought us unemployment rates the likes of which we haven’t seen since the Great Depression — perhaps worse. Team Trump and the Federal Reserve have pulled all the fiscal and monetary fire boxes. For the first time since the 1930s, government is paying salaries of displaced workers on a mass scale.
But these stimulus plans overlook a critical resource that could help the recovery as we begin to exit lockdown. I’m speaking of aspiring entrepreneurs in their 30s, 40s and 50s.
These middle-agers defy the popular image of “entrepreneur”: Think Mark Zuckerberg in his signature hoodie, a talisman many 20-somethings seem to mistake as a substitute for a sound business concept that can grow and become a successful enterprise.
The prevailing image of who starts and, more important, who actually succeeds as an entrepreneur is deeply misleading.
Consider: When the Soviet Union collapsed, US defense spending was rapidly curtailed. The smart set predicted that
San Diego, home to much of the aerospace industry, would experience percent unemployment.
But that jobless crisis never emerged. Displaced engineers who had designed fighter jets and rockets turned their talents to starting companies that helped bring about San Diego’s technology boom.
These “entrepreneurs by necessity” were, just like the ordinary American entrepreneur, mostly in their 40s. They had the benefit of years of experience in big companies, seeing how businesses innovate, manufacture and market new products.
It’s no wonder mature entrepreneurs enjoy success rates five times greater than those who start companies in their 20s.
The lesson here: America’s big companies are our best schools for entrepreneurs.
To recover from the ravages of COVID-19, our economy needs a surge in entrepreneurship just as we need a vaccine. President Trump should set about changing the nation’s perception of entrepreneurs by celebrating midcareer Americans who start new 30 manufacturing, laboratory and logistics companies — the kinds of firms that can break our dependence on foreign suppliers, by the way.
Second, more than any other force, mindless regulation discourages entrepreneurs. The Small Business Administration requires entrepreneurs to submit detailed business plans to qualify for bank loans. The founders of AT&T, Apple, Ford, Google, General Electric, IBM, Intel, Microsoft and Xerox never wrote such plans. Why does someone aspiring to start a jewelry store, or to manufacture 3D-printed face masks, need one?
Local regulation is even more burdensome. Getting a building permit for a new store or factory can take months. In New York, a “nail technician” needs 300 hours of training to be licensed. The federal government should deny recovery funding to cities and counties that continue to impose pointless regulations of startups.
Third, the government should stop hurting entrepreneurs by trying to help them. In the last 20 years, federal, state and local agencies have devoted millions to encouraging startups. Unfortunately, by subsidizing college programs that teach would-be entrepreneurs whacky academic theories, supporting ineffective local business incubators and creating publicly backed venture funds, they have created a culture of government dependency.
The result: From 1996 to 2006, the number of high-potential startups, adjusted for population growth, has fallen by roughly 40 percent.
Fourth, governments at every level should exempt firms fewer than five years old with fewer than, say, 50 employees, from payroll taxes and regulatory requirements that require armies of lawyers to handle, privileging the big over the small. States, for their part, might cover the cost of workers compensation, unemployment benefits and catastrophic health coverage for young companies.
Finally, the nation desperately needs to reinvent local banks as partners for entrepreneurs. For most of our country’s history, long before the advent of venture capital, community banks financed new businesses. With the Dodd-Frank Act, smaller banks found it impossible to make those loans despite their up-close knowledge of local entrepreneurs and the likely risks those companies would face.
In World War II, Rosie the Riveter was an icon of America’s wartime economy. We should picture the latter-day, coronavirus Rosie as a recently unemployed 43-year-old engineer with two decades of experience. We should help her realize her dream of starting a company to make a product that the world doesn’t yet know it needs. That’s what entrepreneurs do — and we need lots more of them.
Carl Schramm, a former CEO of the Kauffman Foundation, is a professor at Syracuse University. His most recent book is “Burn the Business Plan.”