Public Policy, Economics and Entrepreneurship: September 2008 Archives

The generation just entering the work force has many names  -- Generation Y, the Entrepreneurial Generation.

In her book RenGen: The Rise of the Cultural Consumer and What It Means to Your Business Patricia Martin labels them the Renaissance Generation, or "RenGen" for short.

She makes some fascinating observations about this generation. 

From a recent interview with the New York Times:

First of all, I predict that what we will see out of the younger RenGen is the largest class of entrepreneurs the United States has seen in a long time. Not only are they driven to do original work, but they are going to want to live that out in originally designed careers.

In order to do that, they'll work hard to create their own enterprises because that is where they can realize their dreams. Boomers are noted workaholics and appreciate the pluck of the young RenGen. But Gen X, often characterized as Dilbert-style middle managers, will struggle to lead these spirited young workers.

This is right on target with my observations of this generation.  They are eager to chart their own courses in life and see an entrepreneurial career as the best path to pursue their dreams.

She calls them the Renaissance Generation because she believes they will be a truly transformation generation. Again from the New York Times interview:

Two things are going on simultaneously, and they live in creative tension. One is that we are ending one civilization and we are creating a new one. Witness what is happening on Wall Street. The second is the outpouring of creativity facilitated by the Internet. There is a generation that will lead us into what will literally be a second renaissance.

I certainly see them as leading the transformation of our economy.   This is already underway.  That is why it is so important to break out of our 1900s paradigms.

We can only do this with less regulation and taxes, not more.  We are witnessing this week what happens when politicians muddle in markets.

It is time to turn the entrepreneurial spirit loose around the globe. 

(Thanks to Jennie Bowman for passing this along). 

The march toward socialism was slowed down yesterday with the courageous vote in the House.

Things will get worse before it finally gets better.  But, if we let the market work, our economy will come back stronger than ever.  And entrepreneurs will be at the heart of this economic resurgence.

We have now peeked behind the curtain and seen the truth about the Wizard of Oz that is our federal government.

Still confused about what has actually happened?  Wonder how we got into this mess to begin with?  Here is one of the best explanations of how we have got into this mess that I have seen direct from Bird and Fortune.

Always remember -- the same politicians now working hardest to pass a bailout are the very ones who created the mess by meddling with the housing market as part of their grand plan of social engineering.

For now remember that cash is king, debt is your enemy, and patience is a virtue.  Stay on track.

Inc magazine interviewed their list of top thirty entrepreneurs under thirty years old to get their take on the current economic conditions.  These young entrepreneurs will be leading this economy over the coming decades.  I was impressed by their wisdom and the realistic view they are taking regarding the current situation.

What gave me the most confidence for our future is their belief in the power and resiliency of the free market economy.  Here are two excerpts:

I think we should stop the bailouts to avoid creating a moral hazard that will engender worse market corrections in the future. It's best to take our hits now and build a solid foundation for the next 100 years of growth. American entrepreneurs are just as smart and hard-working as they were two months ago and we can grow our way out of this slump. (Matt Mullenweg, 24, founder of Automattic, a San Francisco-based software firm).

Historically, the market has always corrected itself. I feel very uncomfortable with the government picking and choosing what companies they bail out. The government and Federal Reserve must continue to make a business-friendly environment with lower taxes and other pro-growth policies. At the same time we must learn from this incident. The way companies will learn is by not getting get bailed out for making bad decisions. This country became great through capitalism and the free market. Over-regulation will hurt us in the long term. (Rob Van Etten, 28, founder of Brighton Cromwell, a Randolph, N.J.-based supply chain management firm).

My column in this week's Tennessean looks at the impact of the financial mess on small business (based on post I wrote earlier this week):

The impact of the financial crisis of the past couple of weeks has created lots of hyperbole.

With the quasi-nationalization of parts of the financial industry (and the auto industry may not be far behind, by the way) we have become the United States of France, according to an essay published at Time.com.

If you haven't seen the video "The Call of the Entrepreneur," I strongly suggest you tune to Fox Business Channel this weekend.

It will air from 5:00 to 6:00 p.m. EDT on Saturday 9/27/08 and from 12:00 to 1:00 a.m. EDT on Sunday 9/28/08.  I have my TIVO set up to record this one!  We hosted one of the premier showings last year here at Belmont -- it was truly inspiring.

You can find your local channel for Fox Business at their channel finder.  If you do not have access to this channel you can click here to learn how to set up your own viewing.

As you watch, think about how Wall Street and Washington are trying to strike a deal that will erode the free enterprise system in America.

And what do those in the VC world have to say about the economic mess created by greedy bankers and the abuse of power from Washington?  This segment of the entrepreneurial economy seems to be operating with a "business as usual" outlook according to a post at venturebeat.com.  The post includes comments from several tech insiders.  For example, here is Guy Kawasaki's take:

The collapse of greedy banks that loaned money to people who should not have bought homes should be unrelated to venture capital investing. In fact, it should make venture capital a more attractive investment class. But it won't because it's all a mental game. When Wall Street goes into a funk, it affects the mood of the venture capital industry. Truly, entrepreneurs and venture capitalists should be worried about what may happen in five years, not five days, but short-term emotions will rule. With regard to entrepreneurs specifically, if the Lehman debacle scares them from starting a company, they were going to fail anyway.

 (Thanks to Jim Stefansic for passing this along).

The impact of the financial crisis of the past couple of weeks has created lots of hyperbole.  With the quasi-nationalization of parts of the financial industry (and the auto industry is not far behind, by the way) we have become the "United States of France" according to an essay at Time over the weekend.  A caller to a radio show this morning said we've become the USSA -- The United Socialist States of America.

But what does all of this mean for the millions of entrepreneurs across the country and around the world?

Credit will become much harder to get.  In a statement released last Friday, Mike Diegel of the NFIB said "There is less for the Wall Street banks to lend to each other, and likely a little less for community banks to lend out."  But debt is the last thing any entrepreneur needs more of right now, so this is not as big of an issue as it may seem on the surface.

Credit will be harder to keep.  As I have warned for some time, banks will be setting higher standards for business loans and will start calling in loans from people who have never missed a payment.  Their businesses have just become too risky for the tighter standards the banks have to meet.  The events of the past two weeks will only make this worse.

Cash is King... and Queen, and Prince, and Princess and Emperor, and Ruler of the Universe!!!!  Need I say anything more??

Higher taxes will make all of this even worse.  Government seems poised to tax our way out of this mess.  We will have to if we have any hopes of paying for all of this mess.  The "soak the rich" strategy that is now gaining steam means that entrepreneurs will carry most of the higher tax burden.  Higher tax rates on entrepreneurs means less new businesses will form and our economy may stall.

Property rights are the hidden victim.  Layer the nationalization of our financial system on top of the Kelo Decision and we now have the most drastic weakening of property rights in the history of the US.  This will also dampen our entrepreneurial spirit.

This ride is only beginning, so hang on to your hats!

I believe that once again this year we have a choice between a gentle stroll toward socialism with McCain (although some argue he may actual take us on a rather brisk walk) versus a full sprint to socialism with Obama (think Usain Bolt).  I don't think either candidate is addressing what needs to be done in our economy to bolster and support long-term entrepreneurial economic development.

That being said, here are a couple of links that compare the stated policies of Obama and McCain that relate to small business:  from inc.com and CNN Money.com.

Some partially good economic news for a change.

The August ADP National Employment Report and ADP Small Business Report showed that small businesses (businesses with fewer than 50 workers) added 20,000 jobs during August.  

If we look at just the service sector, we see an increase in 36,000 jobs. 

However, of some concern to me is that goods-producing small businesses lost 16,000 jobs.  These jobs tend to be better paying.

I have all but given up on Republican politicians.  But Gov. Sarah Palin may make me change my mind.

James Pethokoukis' at US News offers this quote from her 2006 campaign for Governor:

"As Mayor and CEO of the booming city of Wasilla, my team invited investment and encouraged business growth by eliminating small business inventory taxes, eliminated personal property taxes, reduced real property tax mill levies every year I was in office, reduced fees, and built the infrastructure our businesses needed to grow and prosper."

He ends his assessment with the following:

And don't forget she was apparently a Steve Forbes supporter in 1996 and has spoken favorably of Ron Paul. While economic conservatives surely want to hear much more from her, they see things right now as "so far, so good."

Indeed.  Her addition to the McCain ticket may not be enough to win me back this fall -- only time will tell.  But, Palin in 2016 (or maybe even in 2012) may have a nice ring to it for those of us yearning for a pro entrepreneurship free enterprise agenda.