I am launching a series of articles called Apple Pie Economics to identify the obstacles that get in the way of the American entrepreneur. Apple Pie Economics was inspired by the stories I hear frequently about the games of high stakes Frogger that business starters have to play with the American economic system. Just to give you a flavor, I’d like to tell you about Laura.
I met Laura on New Year’s Day at a party. Laura told me she was glad to meet a business lawyer because she had some questions. I was deeply inspired by her story – here it is:
Five years before, Laura was a consultant at a big accounting firm married to an actor. Laura and her husband had two big professional problems: he couldn’t find steady, paid acting work; she, stuck in endless corporate meetings, was bored. Together, Laura and her husband decided to launch a business in Chicago to produce corporate meetings using actors as the facilitators. Although she was entering a crowded field, they planned to compete on quality and originality.
First, Laura created an environment of respect for the actors by treating them well and paying them better. Second, Laura hired an expert in industrial communications to contribute strategies and insights based on academic research into communications and learning patterns. Then, Laura applied her experiences in the corporate world to create novel, engaging programs. By honoring both the actors and the corporations who hired them, she coaxed better performances out of her actors and deeper participation from the corporate employees who attended the sessions.
From the beginning, her company was a smash. Her first client was a Fortune 50 company located in New York, who loved the work; good word of mouth brought more jobs.
“I expected my little business to go slowly and to take years to build, but it took off from the very beginning. I was overwhelmed, but I handled it and kept thinking ‘what a great problem to have’.”
The US needs more entrepreneurs like Laura to create jobs and create wealth. Most net new jobs get created by new ventures – so says the Kauffman Foundation, which looked at 40 years of census data to count the jobs created in America. (If you are interested, you can also take a look at the US Census Bureau’s analysis here, here and here. I plan to talk more about these numbers and what they mean in a later post.) Even though older companies create more jobs, they also cancel more jobs, which means that the new jobs created by startups are where we actually make employment gains. For instance, from 2007 to 2009, startups created 8,206,452 jobs. Existing companies did create 26,125,966 jobs during those three years, but they also canceled 35,347,539 existing jobs. That means that existing businesses terminated 9,221,573 more jobs than they made. But, startups almost made up for that deficit – almost. Here is a chart demonstrating the jobs created and jobs taken away.
In spite of the importance of startups to American employment, not only are there still doubters (e.g. this nuance-free, misleading post), our current commercial systems seem almost booby trapped to stop entrepreneurs in their tracks. Laura’s story highlights some of the mines.
After only six months, Laura had booked jobs across the country. Using her husband’s theater networks, she was able to produce meetings in different cities, using hometown actors, providing local flavor to her productions and jobs for communities of actors in and outside Chicago. After a mild dip in 2009, her business started to make real money and she felt creatively and intellectually fulfilled.
I expected Laura to ask me the standard business law questions about commercial insurance or negotiating. I didn’t expect her to ask me,
“What do I need to do to shut my company down?”
Laura had taken a new job with a big accounting firm; her first day was Monday. She is an employee again, and her employees are looking for jobs.
Apple Pie Economics will look at the obstacles in the path of the American entrepreneur. Some of those obstacles include:
Life without a net
A game “rigged for big”
Hidden laws and regulations
Can’t do attitude
Our American core is entrepreneurial but our American economy is rigged against entrepreneurs. I believe this because I’ve spent over a decade working with entrepreneurs and I’ve seen the struggles they have endured or lost trying to make their dream go. Businesses must adapt or die; but, there are forces and accidents that are getting in the way of us living up to our entrepreneurial potential. I want to examine this, to gather the tools and advantages in the American entrepreneurial arsenal. And, I want to expose and propose fixes for the obstacles.
Over the next few months, I’m going to write about real challenges faced by entrepreneurs, how government can propel startup activity (and how they fail trying) and how you and I can do our part to help entrepreneurs start businesses and create jobs. And, we’ll also get back to Laura and the forces that ultimately propelled a successful, creative entrepreneur back to regular employment.
September 20, 2011
Hi Coco, I have to jump in and defend Professor Shane on this one. As someone who started my own business in 2003, I certainly appreciate and agree with the sentiment of the importance of startups to the economy — I will be the first gung-ho supporter of that.
But you and the good professor are really talking two different things. To suggest that his chart is misleading is actually a misleading statement on your part.
You’re talking about “new” jobs, i.e., job creation. He’s talking about overall employment figures at any snapshot in time.
In fact, if you look at Table 1 in the Kaufmann report that you cite, it actually supports exactly what Professor Shane stated.
You see, I think you’re really talking apples and oranges.
I like your overall point about startups and new job creation. But I just think mischaracterized Professor Shane’s numbers.
Anita Campbell, Founder
Small Business Trends
September 21, 2011
Anita, I understand that we are talking about different things. And, I totally respect your point. But, I still think that his post appears to denigrate the importance of startups to job creation. By headlining the article “Few Americans Work in Start ups,” and then only focusing on how many Americans work for mature vs startups, the juxtaposition appears to elevate the importance of mature companies over start ups without much more. All of this, against a backdrop of a policy debate on job creation and supporting start ups. If that wasn’t the point, was he merely pointing out that in fact most people work for mature companies? I agree. But, I still think the juxtaposition is misleading. But, I also know. i love your site. Thanks for writing and disagreeing with me and I hope you come back and disagree some more.
October 10, 2011
A casual browser, first time commenter. (A nice well put together site btw).
In the spirit of friendly discussion and debate…
A note, you actually seem to be correct in your assessment that the chart could have been more clear. Not only is it the first thing I thought when I looked at it, but also if we throw out the previous discussion, a few obvious points still remain.
The internal consistency of the comparisons is not “ideal” since it compares apples to oranges within the same graph with the grouping of the years. Moreover, it isn’t particularly clear what numbers or source he is using. As I recall the BDS website has quite a bit of factors to it, and the reference given for the graph does not point to the actual census numbers or methods he used to support the graph. (I do assume though based on the title of the graph that the graph shouldn’t be taken to be an “overall snapshot in time” but rather the findings for the specific year.) A look at the actual database overall is very interesting in itself, and I am still deciding what I would have done for analysis in my previous life.
Irrespective of intent, I would say that these issues by themselves make the graph either misleading or at the very least almost a non-sequitur. I am curious given the plethora of factors within the census, why he didn’t pick more relevant data to analyze? It certainly would have made for a more juicy post.
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