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Why Giant Corporation, Inc. doesn’t create jobs

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And why Smallnand Local Business Does.

We’re addicted to big, and part of that addiction is the assumption that big corporations are the answer to job creation. But if jobs are created, it’s going to be almost exclusively by small and local businesses. Here’s why.

In July 2010, The Kauffman Foundation for entrepreneurship released the findings of their research on job growth, titled, The Importance of Startups in Job Creation. They reported a stunning fact:

“All net job growth in the United States comes from firms less than one year old, formally defined as startups.

All other ages of firms, including companies in their first full years of existence up to firms established two centuries ago, are net job destroyers, losing 1 million jobs net combined per year.

Startups (businesses under one year old) aren’t everything when it comes to job growth. They’re the only thing.”

Only Small and Local Business Creates Jobs
This proves what many have said for decades, that small and local business is the engine of job creation in America. 98% of all companies using an Employee Identification Number (EIN) have 19 or fewer employees. If you include companies using the owner’s Social Security Number instead of an EIN, it’s closer to 99.9%.

Approximately 600,000 new businesses are established each year with EIN numbers, and probably a million more with the owner using their Social Security number. 99.9% of EIN and SSN startups will always be small, and since all net new job creation is in the first year of business, we should be doing everything we can to promote the establishment of small and local businesses.

Local Government Should Court Small Businesses, Not Big
The Kauffman report goes on to say that local governments should never court giant corporations to their towns because they are net job destroyers and will do more damage than good over their life cycle. The emphasis should be on encouraging new startups.

If we want job growth in America, we need to focus on helping small and local business owners in their first year of business. But that’s not something the government or big business wants to do.

Startup America is not for Startups
Startup America is a White House initiative that includes a venture capitalist based corporate counterpart, Startup America Partnership. Although it uses the word “startup” in its title, it is not about startups at all. Their stated focus is existing 3-12 year old (not startup) businesses, what they call “speedups”, that want to become giant corporations.

Scott Case, the CEO of Startup America, the White House press releases, and the mission statement of Startup America all say repeatedly that Startup America is not focused on small business in any way. Scott Case says Startup America is focused solely on “giant businesses that just haven’t scaled yet.” And they go on to describe them as companies that are up to 12 years old that want to be giant corporations. These are not startups by any definition.

Sadly, Startup America and Case have a demeaning view of small business owners who actually create the jobs. Case says, “Small business owners, if they fail at their first attempt, they’ll immediately go take a job in their industry.” After saying they’ll fold like a cheap suit when under pressure, he also labels them all “mom and pops”, a belittling description.

This contempt and disregard for small business owners isn’t new. Politicians on both the left and the right are largely addicted to big and have no regard for the small and local businesses that are the engine of job creation in America. No one in Washington on either side is a true advocate for the small and local business owner.

It is always “big” (big business and/or big government) that gets us into economic messes, and small and local businesses and local government who get us out of them. Kauffman has put the full weight of their research behind this fact.

Small is Bigger than Big
Small and local business is the engine of our economy and the source of 99% of job creation. It’s too bad that both sides in Washington are addicted to big, because the biggest thing we have in America to solve our problems is 28 million small businesses.

Government Killed Small Biz Jobs on July 15

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And the SBA is non-responsive.

In April I shared Why Small Business is Fed Up With Government – both sides are addicted to “big”. That addiction continues to escalate and hurt small businesses nationwide. And a Washington Post survey say you’re tired of it.

In early 2009 both sides declared the 19 largest banks “too big to fail”, and vowed at every photo op to change that. It was the political buzz-phrase de jour for a few months designed to make us “small” guys feel like someone was looking out for us while they gave hundreds of billions to their big business friends.

Today, three years later, those same few banks now control an even LARGER percentage of the banking industry. That’s how big government dealt with the issue; with their handouts they made the banks even bigger and an even greater national security risk for us. They assumed we would go back to our pitiful little lives and ignore them.

In 2010, Olympia Snowe, the self-styled Republican Senate advocate for small business, introduced legislation to kill the only small business loan actually designed for very small businesses. She had championed the loan through Congress, but received strong opposition from her big bank friends as well as her big government friends. She showed that her allegiance is to the bigs.

And now, in the midst of the biggest recession in history, government is killing small businesses with new regulations. On July 15, the State Department introduced requirements that forced small businesses to put as much as $500,000 in escrow (a business I know would have had to escrow that amount), and leave it there for 12-24 months without touching it.

This drove thousands of small businesses under in only a few days. The big businesses swooped in behind like vultures on a wire and took over all the customers these small businesses had cultivated for decades. They couldn’t get back in business now if they wanted to. Big government now has fewer, bigger clients to regulate. All the bigs are happy.

How did our government help the little guy with this? The business owner and I approached the SBA Office of Advocacy on July 11 and sent repetitive requests for intervention, the very thing that this bureaucracy was designed to do. For 24 days we received no response to many emails until July 29, which was a very unprofessional reply making the SBA out to be the victim. Since asking us a question on August 4, we have again received no responses to many more emails over the last 15 days. Simply inexcusable for an agency supposedly designed to advocate for small business.

Giant business and giant government got us in this mess, then turned around and looked behind and asked us to get them out of it. But they don’t invite us to the table to help them see how to do it. We couldn’t possibly know – we’re small and they’re big, and big knows better than small. Washington has Jeffrey Immelt, former CEO of GE who paid no taxes last year, in charge of fixing this. He, too, has no clue what a small business looks like.

Talk to any banker who used to give small business loans, and they will tell you very quietly and in complete anonymity that the reason their lending standards are beyond the reach of most healthy small businesses is because the government regulators are putting such pressure on them that they can’t adopt REASONABLE (not loose) lending standards. 73% of small businesses who need capital haven’t even bothered to apply because they know it’s useless. 48% who do get rejected – astonishing statistics. The 25 biggest banks control 32 percent more deposits than they did in 2006, but made 30 percent fewer small business loans.

This is your small business advocacy in Washington. In case you wondered if anyone is looking out for you, the small business owner, on either side of the aisle or in any of the halls of the giant bureaucracies there, you might think again.

I’ve said this in dozens of places on the internet for three years – access to capital is the #1 issue for small business and has been since October 2008. #2 is predictability from our govt., and #3 is regulations that hurt small business and help the big ones. The SBA says the #1 job growth sector is businesses with 1-9 employees and the #2 job growth sector is 10-19 employees. Then they, the rest of the government, and the giant corporations who all got us into this mess, continue to use this crisis to help each other just get bigger. Expect large donations from giant corporations to both sides next year.

Small business doesn’t want a bailout. And I personally don’t have time for recessions – I have somewhere I need to be with my business. None of the above make it impossible to succeed, but it does make it harder. And when government proactively kills jobs and small businesses like the State Dept. did on July 15, that is interventionism in commerce that is unacceptable and needs to be addressed, even if the SBA doesn’t have the spine to do it (in case you wondered, the SBA isn’t focused on small businesses under 19 employees).

Caveat emptor – for too long we have bought that someone in Washington is looking out for us. Think again. You won’t get help and you don’t need it. You can succeed without their help; just know that they are not in Washington to make it easier for you, but to make it easier for themselves and their giant corporation donors. It’s time to expose the game for what it is, one “big” scratching the back of another “big”, all at the expense of 28 million small businesses and the American economy.

This isn’t a lack of courage to act. This is simple self-preservation at work – both bigs (giant government and giant business) will protect their “bigness” at any cost, even the worst recession in history. And certainly without blinking an eye at the demise of small businesses.

Bismarck had it all wrong – Retirement blows chunks.

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Shut up. Sit down. LIve invisibly. Go out quietly.

I’m working on my third book “Retirement is a Bankrupt Industrial Age Idea” and the research confirms everything I’m seeing in the world around us – the title of my book reflects reality. We’ve got to rethink the whole idea.

The Industrial Age, which is a very short 175 year snapshot of life in the last 10,000 years, left us with a lot of great toys and a luxurious lifestyle, but we’ve paid dearly as a society for it. The whole bankrupt idea of retirement is one of those casualties. You should get a Business Maturity Date instead.

Retirement – The Worst of the Industrial Age
We were sold a bill of goods by Bismarck who thought up the crazy notion of retirement in 1889 (he set it at 70 when the average age at death in Germany was about 49). The entire idea is only 121 years old – for 10,000 years before that we did just fine without it.

It is the icon of the worst of what came out of the Industrial Age – “Shut up, sit down, work hard, live invisibly, don’t talk back, make the company successful, be loyal, and go out without making waves. We’ll take the best 45 hours of your week and the best 45 years of your life, and if you survive all that, we’ll let you do something significant with your life when you’re done.”

The Next Generation Has Already Opted Out
The X,Y and Z generations know this is bankrupt. But they’re still hearing their mothers voice in their ears telling them that the top three priorities in life are safety, security, and stability – all three which are deadening to the idea that anything significant will happen in your life.

Great reward only comes from taking a risk – it doesn’t even have to be a great risk, just take one.

Big Business is Dead, Long Live Small/Local Business
Retirees who bought the lie know by experience it isn’t working. There is a better way. Fortunately the world is actually going back locally.

The era of big business is as dead now as the railroad was in 1903 – neither one of them knew it at the time, but it’s over. Long live the local business owner, which is exactly what they will do – without the bankrupt notion of retirement and all it represents hanging over them.

Read more on what Rieva Lesonsky says about the retirement myth here, then come back and talk with me.

Here’s some ways to solve it, too.

I believe you will enjoy life more, have more fun, relax more, and probably even take more vacations if you never retire. Love to hear if you think I’m nuts.