New Growth
The
ability to learn faster than your competitors may
be the
only sustainable competitive advantage.
— Arie
de Greus
Then
there was that law of life so cruel and just, that
we must
change, or else pay more to remain the same.
— Norman
Mailer
I’m so tired of
reading about how the U.S. economy is too “mature” to grow as fast as it
used to.
Singapore is a
mature, first world economy. It grows at about nine percent per year.
And many, many other economies grow faster then the U.S., which produced real
growth of 2.2% in GDP for 2007.
I think people are
confusing the “U.S. economy” with companies like Ford, General Motors
and Motorola — companies that employ thousands of people, and in which
growth today is slow or negative.
99.7 percent of the
U./S. economy is small business, i.e.: companies with fewer than 500
employees. They produce 28.6% of all U.S. merchandise exports. Small
business is where growth occurs. Starbucks, Facebook and Google were
all small businesses during the last decade.
To a small
business, the world is new and full of promise. It is also a hazardous
world, where stock-registered companies live only an average of
forty-four years, and privately owned companies only half as long. But
each business start-up is the realization of a dream, and there is no
greater reward on earth than seeing your dream come true.
The entrepreneurs
who start some 650,000 businesses a year in the U.S. don’t intend to
fail. But they do. Four out of five do not survive five years after
start-up. But because one out of five succeeds — and they produce a
steady flow of billionaires — there is always reason for hope. And hope
is a very powerful stimulant.
So, if we want the
U.S. to grow, should we focus on helping, or bailing out, large
business? Why? What prevents a large business from helping itself?
As for growth:
sixty percent to eighty percent of all net new jobs creation over the
last decade occurred in small businesses. In 2004, all
net additions to the workforce, 1.86 million, were created in small
businesses. In the 17 thousand large businesses in the U.S., 181,122
jobs were lost that same year.
What would increase
survival of such businesses? “Capital,” the entrepreneurs say. When
capital is provided to start-ups in Austria, survival rates reach 78
percent after five years.[*]
Survival rates are
highest for firms:
ž
that grow;
ž
that add employees;
ž
that have an owner who is
well educated (40 percent of all high tech businesses in the U.S., such
as scientists, computer experts and professionals work in small
companies); and
ž
that are owned by someone
motivated to be his own boss, seeking to eventually achieve a freedom
that would not be obtainable by working for someone else. |
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As in nature, a
small business, it seems, must either grow or die.
But the most
important factor in business success is hard to
quantify. What is it that makes people decide to do
something that has the potential to make them free
and financially secure, but that is so risky and
uncertain?
In part, it is a
driving dream. It is thinking, eating, sleeping a
vision of the future that is such a powerful
attractant that it consumes every effort, every
resource, and all the time you have. It is what you
most want to do in life, so you don’t consider it
work. You consider it a blessing.
But it is also
skills, experience, and leadership. Your own
performance is important, but it is other people’s
experience that will put you over the top. An
average American improves the performance of
everything he does by two percent per year. After
thirty years, he/she is 81 percent more productive
than when he started.
But what if he had
started with those thirty years of
experience? Two percent per year would have
leveraged the 81% improved performance to 328% over
thirty years.
What if he/she were
to start with ten thousand years of experience?
What if you could?
Wherever and whenever we have
collected that much experience and shared it with
everyone in an organization, people have found
improvement potentials of three hundred percent and
more. Capital invested in these potentials yields
100:1 returns.
We shall be working
with entrepreneurs over the next five years. We
shall find out if we could reduce the failure rate
from 80 percent to zero over five years, accelerate
growth through more employees and more
productive employees. Someone will be
studying this effort, and will consider it an
experiment. What is learned will be published.
We like that.
This is the
knowledge economy, and there are no limits to how
fast it can grow. Could we match Singapore’s nine
percent annual growth? Of China’s eleven percent?
Or Silicon Valley’s sixteen percent?
We’ll see. In a
universe where there may be no limits to growth, why
limit ourselves?
[*] Musler, J. and
Wanzenbrock, H. A General Study of the Post
Start-up Development of a Representative
Sample of Austrian Business Founders.
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