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How to Create Jobs
There are two kinds of people: Those who prefer to work for others, and those who prefer others to work for them.
It is those of the latter category who create jobs.
MBAs tend to be in the first category. Their talents are best utilized in bringing a semblance of order to the entrepreneurs who hire them. But unless MBAs know how to produce, or how to sell, they are overhead.
Most new jobs come from startups. Old companies shed jobs. And if they are large, they often choose to go where wages are the lowest around the world. Start-ups create American jobs, they are small, and they don’t carry the legacy costs of the “too-big-to-fail” companies that were bailed out by the Bush administration in 2008.
The average life expectancy of a stock-registered U.S. company is forty-four years; for a private firm, 22 years. That’s how long jobs are likely to last in best-case scenarios. We depend on entrepreneurs to grow and thrive. Academics write about job creation: “Find a need and fill it. Make sure you have access to capital. Innovate! Learn all you can about accounting, finance, lean production, supply lines, customer service, payment scheme, fringe benefits . . .”
Academics usually don’t have to meet a payroll, but researchers compete for grants and contracts and have to manage this in exemplary fashion. If they do, the entrepreneurial universities which employ them will have an edge on the others: they tend to be best-in-class at what they do.
The job creators must know that the core of every business always involves two fundamental functions: How to sell and how to produce a product or a service. The rest can be outsourced.
Selling has never been “re-engineered.” Salesmen are born; they are not made. If you don’t love to sell, you have no business trying. Entrepreneurs must ensure that the core functions are handled by people who are good at executing them; without sales and production, there won’t be a business.
But entrepreneurs cannot find anyone else to do what they alone can do — what they must do. People don’t flock to “entrepreneur schools.” There are none. To be an entrepreneur is to be driven, to be curious, eager to learn, stubborn, tenacious. A famous Harvard Business School study could only find one quality in common among all successful businessmen: Tenacity.
We found one more: The need to be on a quest, freely chosen, that never ends.
To create jobs, we must let the entrepreneurs loose. A true entrepreneur is not in it for the money. He is in it because he has an idea that won’t let him rest, won’t let him sleep, and won’t let him give up. Someone asked Earl Bakken to make sure that a heart would beat regularly, so, in a garage on the north side of Minneapolis, he and Palmer Hermundslie cobbled together the first pacemaker.
Fifty years later, a pacemaker became necessary to save Earl’s life. Mr.Bakken thus earned the ultimate reward for his inventiveness and drive.
A couple of students wanted to place all the knowledge of the world at everyone’s fingertips, and Google went from zero to $166.66 billion in stock market value in five years.
A Minnesota man couldn’t sleep because of a stuffy nose. He invented the Breathe Right nose strip, and now athletes everywhere wear them.
And who hasn’t heard about Scotch tape and Post-it notes?
Anyone can have an idea, but unless that idea is transformed into a product or a service that can be sold, it won’t create any jobs. An entrepreneur can do that. So can an entrepreneurial organization. But most people can’t.
Entrepreneurs don’t always succeed: Sir Richard Branson did not do too well with a homemade “Coca Cola” or with running a railroad. But he became a billionaire through Virgin Records, Virgin Airlines, and through innumerable simple and good ideas that built his business empire.
Why would we think that anybody other than entrepreneurs will create jobs? Do we have any evidence that such is the case? Are we impressed with the job creation efforts of governments, the International Monetary Fund, or charitable institutions? Not unless they fund the entrepreneurs!
Consider the tinker whose dilapidated old car now runs at 125 miles per gallon, or the lab worker who makes biodiesel out of pond scum. Think of the artist who heats his house with solar power from beer bottles on his roof, or the engineer who puts a disc on his window which neutralizes all sounds and creates perfect quiet in the middle of a noisy city.
These people attract entrepreneurs not bureaucrats, not MBAs, not big companies with hardened arteries and enormous legacy costs, not foundation executives, and not politicians.
Capitalism counts on investors to fund the entrepreneurs. But investors are not investing now. It is as if everyone is holding his breath. From where will the capital come?
It will probably come from the most entrepreneurial country I know.
China.
Last month, I made a presentation in the Auditorium of the Communist Party School in Nanning. I talked about growth, entrepreneurship, freedom, productivity and initiative, to an audience of scholars, statesmen and, yes, entrepreneurs.
I don’t speak Chinese and most of them did not speak English. Yet there was no communication problem. We spoke the same language.
It was the language of hope, the language of achievement, the language of dreams. It was about how to create massive value in a world that seemed to be on hold in most other places.
China is rising. They are entrepreneurial, and they might teach us a thing or two about how to grow at 10% per year.
We can do better, can’t we? Yes, we can, and now would be good!
Do we have a better word for those who create jobs than “entrepreneurs”? It is not the ideal word; the term carries too many negative connotations. Most people associate the word with capitalists, fat cats or rich people. “Job creators” might be a better term.
You can find them everywhere. I’ve seen them in government, in the army, at the university, in health care, in schools, in athletics, and even in the ministry. But mostly, they are found in business and industry.
The history of my hometown of Harstad, which grew from nothing to rank among Norway’s 20 largest cities in my lifetime, was written by a handful of entrepreneurs. These individuals were maligned, envied, feared. Some were even liked, but they all were indispensable. They built the waterworks, the power company, the fish processing factory, the meat processing plant, and the stores that created a livable community. They paid taxes and that, in turn, built the schools, the hospital, the college, the athletic fields, the parks and the roads. They were the “go to” people for ideas and requests.
The town erected a bust of one of those individuals, Richard Kaarbö. It looks over the city square and down the Richard Kaarbö’s Gate (Avenue). There are more statues in town celebrating the great sons of Harstad: One was a general, and one a musician. And that is as it should be.
Milton Friedman once remarked that, whereas consumption was the dominant part of the gross national product, it was a handful of entrepreneurs who made the GDP grow each year and created new wealth.
We all know who they are, and they are the ones we should look to for job creation. If you don’t know who they are, ask any teacher. They’ll tell you. Entrepreneurs can be spotted at all ages, and in all places.
At a time when 17.5% of this nation’s labor force is unemployed, underemployed, or has given up on finding a job, we need to make it attractive for entrepreneurs to start new businesses. That’s where more than 95% of the new jobs in business and industry will come from. If you want to stimulate job creation, stimulate entrepreneurs. Subsidize the wages they pay new employees until they can afford to pay them full wages. Help them retrain their workers. Make health care reform work for start-ups. And make venture capital available to entrepreneurs on terms that are as good or better as those given to the banks and automobile companies that were bailed out by taxpayers in 2008.
What do you think will happen if $700 billion, the same amount Bush used to bail out banks, were made available to entrepreneurs for these purposes?
That would create 17.5 million jobs. Theoretically, it could make it possible to rehire, and retrain, all those who are currently unemployed (15.7 million as of October, 2009) and bring back into the labor force some 1.8 million more people who have given up looking for work. And we shall have the historical opportunity to make American labor the most productive work force in the world.
The return on investment would be incalculable—far higher than any other investment we could make.
Entrepreneurs are the executors of the American Dream. They don’t just pursue it for themselves—they make it possible for others to reach their dreams, too. That’s why we must help them, so that we may help ourselves.
Tor Dahl & Associates Productivity Improvement Seminar
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