Leading the Revival of Individualism & Self Reliance

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Barstool Sports Is Helping Struggling Small Businesses Far More Effectively Than The Government.

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There is overwhelming evidence that government lockdowns are ineffective at containing the coronavirus. Yet city and state governments continue to employ the economically crushing tactic amid rising COVID-19 case counts even though it means forcing millions more out of work.

Heavy-handed politicians have pummeled small businesses the hardest of all this year. Many are teetering on the edge of fiscal solvency. Nearly 100,000 independent businesses have already closed for good, and one estimate predicts more than 40 percent may close by the end of quarter four. Instead of offering those owners a lifeline by reopening, politicians are giving them a final push over the edge with more lockdowns—attempting to, inadequately, justify it with an inefficient, wasteful, and second corrupt stimulus package.

To be clear, the pandemic would have seriously hurt the economy no matter what, but government lockdowns have exponentially worsened the financial pain. Even worse, politicians did this while also flouting the rules themselves and unnecessarily increasing COVID-19 deaths by mandating that nursing homes accept COVID-positive patients. So, if there are Americans still looking to the government to help them after all we’ve seen this year, it’s time to give up the ghost. These people are not coming to save you.

But while our politicians are out to lunch (quite literally, and in the very establishments they’re trying to ban for the general public), actual leaders are stepping in to fill the void.

Dave Portnoy, the founder and president of popular media company Barstool Sports, has vocally opposed the shutdowns. But beyond criticism alone, Portnoy is rising to the occasion and using his reach to provide real assistance for small business owners.

But while our politicians are out to lunch (quite literally, and in the very establishments they’re trying to ban for the general public), actual leaders are stepping in to fill the void.

Last week, Portnoy launched a fund to bail out small businesses and alerted his 1.8 million Twitter followers to the cause. It seems he is spending this money out of his own pockets, a heroic and commendable endeavor, and challenging others to join him in the cause.

They say when a strong man takes a stand the spines of others are stiffened, and that certainly seems to be the case here. Social media influencers across Twitter began donating to Portnoy’s fund, many of them unsolicited.

Michael Rapino, the CEO of Live Nation Entertainment, contributed $50,000 despite concert venues being one of the hardest hit industries in the pandemic. And there were countless others like him. Dana White, President of the Ultimate Fighting Championship, contributed generously. Gary Vaynerchuck of VaynerSports joined in. The list goes on.

Everyday Americans are stepping up too, giving generously out of what they have to help others. Across the board, all have been motivated to action by Portnoy’s leadership.

As of this writing, Portnoy has raised an impressive seven million dollars and counting.

His timeline is now filled with heartwarming stories of the people whose livelihoods he has saved. These are the stories of hard-working Americans. People who were simply seeking to do the right thing, offer a service, and provide for their families. Watching their reactions is both heartwarming and infuriating. These are our fellow citizens and they’ve been victimized by our government.

This is the America you can be proud of.

Our government lets us down repeatedly. Our politicians fail us. They tread on our liberties, they bet against us. And yet we still rise.

Americans are generous people. In fact, we have been ranked number one in the list of most generous countries for the past decade. Now just imagine what we could do for one another if the government weren’t seizing—and largely wasting—a huge chunk of our income each year.

The moral of the story is that we do not need the government to come save us. When left to our own devices, Americans will rally to help each other—and do it far more efficiently than the government ever could.

The Government’s Repression Of Small Business Occurs With The Full Approval And Support Of Big Business.

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This year, fear of a deadly pandemic triggered the ruling class to spread authoritarian lockdown orders.  The god of science, like a burning bush, told them to remove their sandals and deliver policies of regression.  A paranoid public was quick to comply.

Humans have been battling viruses since well before the wheel was invented.  According to archaeologists, a fast moving epidemic roughly 5,000 years ago wiped out a prehistoric village in what is today northeastern China.  Dead bodies were stuffed inside a dwelling – the Hamin Mangha – that was later burned down.

Another mass burial, the Miaozigou site, took place about the same time and in the same general area.  Together these discoveries suggest there was a rapid outbreak of an acute infectious disease.  An epidemic ravaged the entire region.

Elizabeth Warren Gets Something Right: Government And Big Corporations Are Aligned Against Small Businesses.

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Elizabeth Warren has been talking a lot about small business, a constituency that hasn’t figured in Democratic Party politics in a long time. The senator from Massachusetts and Democratic presidential candidate has sparred with Amazon over how the tech giant treats the businesses that rely on its platform to sell their goods. She’s unveiled a plan to put small businesses on a more equal footing by closing tax loopholes that allow “the very largest companies to pay a lower effective corporate tax rate than smaller companies.” She’s pledged to reverse consolidation in the banking industry on the grounds that the decline of local banks has “made it more difficult for small businesses and farms to get loans.”

In her speeches, Warren has linked the hopes and fears of small businesses with those of a more familiar constituency of the left. It’s time, Warren has said on the campaign trail, “to put more economic power in the hands of the American people — workers and small businesses.”

To connect these two groups today is to confound our expectations about who belongs on which side. Americans have grown accustomed to seeing small businesses as supporters of the GOP. Since the 1970s, lobbyists backed mostly by big corporations have portrayed taxes, labor unions, and government regulation as the primary threats to the success of smaller enterprises. In reality, the interests of Main Street businesses and the largest corporations are often at odds, but Democrats have done little to discourage the latter from speaking for the former.

Warren is now advancing a different theory—that big corporations’ political influence and market dominance are killing smaller rivals, and that small-business owners share interests with other victims of corporate power. (Full disclosure: Warren’s team contacted my organization for input on policy proposals. We provided feedback, as we have for other candidates.) While other Democratic presidential hopefuls have questioned the power of the tech giants, Warren’s rhetorical embrace of small business has been emphatic. She is at once bidding for votes that Democrats don’t normally seek and inviting her party to see small businesses in a new light. She’s also reviving what once was a core tenet of her party: In a democracy, a primary purpose for government is to disperse economic power.

The past three Democratic presidents—Jimmy Carter, Bill Clinton, and Barack Obama—all oversaw and indeed welcomed periods of significant economic consolidation. But before then, from the 1930s until the 1970s, Democrats recognized the threat that monopolies and other corporate behemoths posed to workers and small-business owners alike.

In accepting renomination at the 1936 Democratic convention, President Franklin D. Roosevelt decried the concentration of economic power in the hands of “new dynasties” of “economic royalists.” “There was no place among this royalty for our many thousands of small-business men and merchants who sought to make a worthy use of the American system of initiative and profit,” Roosevelt declared. “They were no more free than the worker or the farmer.”

As Democrats of this era saw it, forming a union and starting a business were two avenues toward the same ends: checking corporate power and giving ordinary people economic agency and a fair share of the returns from their labor. The career of Senator James E. Murray was a case in point. Elected in 1934 with support from Montana’s miners and timber workers, Murray spent the next 26 years championing the twin causes of labor and small business. He blocked several bills that would have made it harder for workers to unionize. He also founded and led the Senate’s Special Committee to Study Problems of American Small Business. Through a remarkable series of reports, his committee detailed how the same monopolistic corporations that menaced the rights of workers were also using their market power against their smaller competitors.

Another leading Democrat of the period was Estes Kefauver, who served in Congress from 1939 until 1963. The son of a Tennessee hardware-store owner, he was a lifelong supporter of organized labor and a fierce opponent of concentrated economic power. During a live address on ABC in 1956, Kefauver denounced President Dwight Eisenhower’s support of a bill to limit the ability of workers to strike. “It is easy to see what happens when an administration favors big business over the working man,” he said. He then turned to the plight of the nation’s independent enterprises. “Small businesses are not getting protection against the onrush of monopolistic big entrepreneurs,” Kefauver declared. His signature legislative achievement was the Celler–Kefauver Act, which vastly expanded the government’s authority to review and block mergers.

For more than four decades, Democrats governed from this vantage point. They sustained majorities in both the House and the Senate for nearly all of those years.

But then, in the 1970s, the party underwent an ideological shift. A group of young, newly elected lawmakers spurned economic populism and dismissed concerns about the power of big business as old-fashioned. This new bloc used its growing majority in Congress to marginalize the party’s long-standing anti-monopolists. It helped elect Carter, who, beginning with the airline and trucking industries, dismantled regulations that had previously constrained big business. Ronald Reagan continued this project in sweeping fashion. His Justice Department reinterpreted the nation’s antitrust laws in a way that all but gutted them.

Clinton went further still. In 1992, the Democratic Party scrubbed all references to economic concentration and antitrust from its platform. Clinton then led a successful, multiyear effort to overturn the Depression-era laws that had constrained the size and reach of banks. Obama followed in the same vein, presiding over a period of extreme consolidation that saw aggressive new forms of monopoly power emerge, uninhibited, from Silicon Valley and Seattle. While Democrats still evoke the image of small business in political speeches, it’s not a serious focus of the party’s policymaking.

Meanwhile, small businesses have seen their numbers and market share plummet in one industry after another. From 2005 to 2015, the number of independent retailers fell by 85,000 and small manufacturers by 35,000. Local pharmacies, community banks, family dairy farms, and independent grocers have all been in decline. Meanwhile, starting a business has become much harder. The number of new firms launched each year has fallen by nearly two-thirds since 1980.

These trends are often dismissed as proof that larger corporations are simply better and more efficient than smaller ones, but the evidence suggests otherwise. Take local pharmacies. As they shutter their doors, we assume that they just can’t compete with national chains. But according to studies by Consumer Reports and by my organization, local pharmacies provide lower drug prices and better care. The problem is that their reimbursement rates are set by three dominant pharmacy-benefit managers, all of which also run their own competing pharmacies. Last year in Ohio, the largest of these, CVS Health, further slashed the rates it pays local pharmacies and then sent many of them letters offering to buy their struggling stores.

This kind of predatory behavior is widespread. It can be found in the hefty swipe fees Visa and Mastercard impose on independent retailers that have no alternative but to pay up, and in the loss of shelf space that local breweries face when Anheuser-Busch InBev buys or bribes their distributors. Over the past few years, I’ve talked to hundreds of small-business owners about the challenges they face. Most describe dynamics in their industry that are largely about the exercise of unconstrained market power. In 2016, my organization surveyed more than 3,000 independent businesses. By a 61 percent to 7 percent margin, they said the federal government “should more vigorously enforce antitrust laws.”

Right now, though, neither party speaks to these fears and frustrations. It’s not only that Republicans and Democrats alike are corrupted by corporate dollars and lobbyists. Both parties are ideologically captured by the very idea of bigness itself. As a result, efforts by groups such as the U.S. Chamber of Commerce to blame government—rather than monopoly power—for the troubles of small business go largely unchallenged.

While reliable data on the actual voting habits of small-business owners are hard to come by, surveys suggest that they’re only loosely attached to either party and that, like other Americans, many identify as independents. What might happen if the Democratic Party offered a different story to explain what’s happening to America’s small businesses—a story that speaks to the common cause that entrepreneurs and workers share in breaking the grip of dominant corporations?

For many voters, the idea of independent business evokes something they desperately want: the freedom, as Kefauver put it, to govern their own fate, subject to no master. Warren’s focus on small business is more than an appeal to a constituency that lacks a political home. It’s also a kind of shorthand for Americans’ deep-rooted desire to govern ourselves.

Small Businesses Are Key In Improving the Lives of Workers – And Everybody Else.

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While one often hears a lot of talk about the virtues of “mom and pop” shops (and the evils of “big box” stores) policy makers do remarkably little to encourage the growth and health of small businesses. While the federal government has created a federal boondoggle ostensibly designed to favor small business — known as the Small Business Administration — only a tiny number of businesses ever benefit from anything the agency does.

Policies Stacked Against Small Businesses

In actual practice, policymakers fawn over large firms, creating special programs for tax breaks and subsidies, as made obvious every time a large firm looks for a new place to put a corporate headquarters. The stated political justification is often that “this business will produce a large number of jobs!” This rationale, however, ignores the fact that if a thousand of the city’s small businesses were given a similar tax break, they would likely produce a comparable number of new jobs. This is conveniently ignored, and policymakers instead choose to favor certain large firms, which in turn makes it harder for small firms to compete.

At the same time, governments at all levels relentlessly hand down ever more regulations and mandates to businesses of all sizes. Yet it is small firms who suffer the most because they have less access to financing, equity, and resources needed to cope with mounting regulatory requirements. Licensing and labor regulations create more pitfalls for small business owners to fall into, while locking many potential business owners out of industries entirely, unless they comply with arbitrary “training” or certification mandates. These mandates can be quite draconian, such as Iowa’s requirement that barbers receive 2,100 hours of training — more training than is required of a paramedic — in order to cut hair.

Other regulations indirectly disadvantage small businesses as well. As finance researcher Karen Petrou noted in the wake of the Great Recession, banking regulations in recent years have made it harder on small businesses:

[C]apital requirements imposed after the banking crisis make it a lot more expensive for banks to do a startup small-business loan than go into wealth management. Startup loans are riskier than wealth management, of course, but the capital costs have become prohibitive, and banks don’t lose money on purpose.

Small Businesses Increase Competition for Workers

It’s at this point that a seasoned reader might expect me to go into a variety of explanations about how the small business economy is important to GDP growth, and to employment growth, and to vague notions of “innovation.”

But that’s not where I want to go with this.

Yes, the small business economy is good for employment and economic development. But small businesses also serve very important social functions, while offering benefits to many workers as well.

The small business economy offers more options for workers who are competing for wage work, while also offering a potential exit from wage work altogether — and entry into sole proprietorship.

In Human Action, Ludwig von Mises  notes that one of the greatest limitations on a worker’s bargaining power with employers is the ability of a firm to exercise monopoly power over hiring. The thing is, this is impossible in a relatively free market. So long as new firms can enter the marketplace, hiring firms will come under pressure from competitors, and thus bid up workers’ wages. As Mises notes, firms must compete with each other for all types of resources, whether building materials, square footage, or financial services. It is no different with workers. Consequently, one of the worst things that can happen to a worker is for governments to create what Mises calls “an institutional restriction of access to entrepreneurship.” If governments act to limit the ease with which new businesses can enter the marketplace and compete with existing firms, this lessens the power of workers. The more firms a worker has to chose from, the better off the worker is. This is, of course, facilitated by a diverse and healthy small business economy.

More Potential Opportunities for All Types of Workers

Benefits for workers also extend to “eccentric” or “niche” workers who might find themselves otherwise relatively unemployable.

After all, large firms often become large firms because they excel at catering to the needs of the most common preferences in the marketplace. Workers who are accustomed to dealing with these mainstream preferences — whether they be along linguistic, cultural, or socio-economic lines — will be a good fit at the large firms. On the other hand, a worker who has poor English-language skills, but who is well versed in in dealing with customers of a certain ethnicity, may find employment far more easy to come by among certain small business owners who cater to a niche, ethnic-enclave, or socio-economic group.

In other words, the existence of numerous small businesses don’t just provide more employment opportunities in the abstract. They often provide more opportunities to workers who have the most trouble in finding employment otherwise.

This is part of the reason why small business ownership has so long been an important part of economic development for ethnic minority groups and for immigrants. Today in the United States, around 25% of U.S. firms are founded by immigrants, and this share rises to above 40% in states like California and NewYork.

And immigrant small business owners are often just part of a growing economy of minority-owned businesses, whether founded by native-born or immigrant owners. According to CNBC:

Business ownership among minorities has been on the rise in recent years. Between 2002 and 2007, minority-owned businesses increased 46 percent, while nonminority-owned businesses grew 10 percent during that same period…

In 2007, Asians owned 1.6 million businesses, African-Americans owned 1.9 million, [and] Hispanics owned 2.3 million.

It’s not a coincidence that many people outside the cultural mainstream are founding their own businesses. Often, these businesses are founded precisely because they provide relatively better job security and flexibility to owners and workers who could not find similarly attractive terms at larger mainstream firms.

Benefits Beyond Money Profits

Economists often debate whether or not the small-business economy is “efficient.” Some have even suggested that small businesses should be regarded as harmful because they use resources that larger firms might be able to more “efficiently” use due to advantages of economy of scale.

This is, of course, a terrible way of looking at small businesses

In addition to the benefits offered workers, small businesses often provide a wide variety of benefits to both owners and consumers in the form of services to the community, and the psychic profits afforded to owners.Unfortunately for small businesses, many of these benefits don’t show up as money profits, and thus economists ignore them.

For example, it is clear that that demonstrated preference of a small business owner is to run a small business even if, in theory, he or she might be able to command a higher wage some other way. It’s not difficult to imagine why this might be. Many small business owners — even if the enterprise does not provide for an especially high income — prefer self-employment to collecting a wage because it offers the sort of flexibility, control, and peace of mind that is not often available to wage earners. While self-employment can often mean long hours, it also often means the proprietor is unlikely to lose all of his income at once, due to being laid off. Even if the business becomes less profitable, the proprietor is not going to walk to his desk one day to find a pink slip. Moreover, if the economy is weak, a business owner can temporarily cut his own wages with more flexibility and ease than he can normally cut the wages of an employee. If times are good, a business owner can temporarily increase his own hours (and income) to take advantage of the sudden increase in demand. For a great many business owners, this sense of control over one’s schedule and career are worth it, even if the full benefits do not show up in any government statistic.

Negative Attitudes Toward Small Business Endure

In spite of all of this, we can expect both policymakers and pundits to largely ignore small businesses and to continue to ignore the high costs imposed on small firms and small entrepreneurs by government regulations.

Some even continue to attack small business owners because they are allegedly not regulated enough.

Last year, for example, the left-wing Jacobin magazine declared that “small businesses are overrated” and that “[w]e shouldn’t fetishize mom and pops. They offer lower wages, skimpier benefits, and inferior labor protections.”

This “analysis” by author Matt Bruenig attempted to make the case that since some government regulations don’t apply to businesses with fewer than 15 employees, this creates a “loophole” through which workers can be oppressed with impunity by small business owners. The ideal economy for Bruenig, it seems, is one in which even the smallest firm must do all the same paperwork and pay the same government mandated benefits as huge corporations.

In real life, of course, this would ensure that few new small firms are ever created at all.

Fortunately, even the center-left Institute for Local Self-Reliance sees the danger in attacking small businesses. As noted by the ILSR’s Stacy Mitchell, small businesses disperse economic resources more evenly throughout a community, and, as Mises noted, they provide more options to employees while creating more competition for large firms. Nor do small firms really pay less, unless we’re talking about highly-paid managerial jobs. Although Bruenig thinks small business should be trashed because they allegedly pay lower wages than large firms, Mitchell writes:

For low- and middle-income workers, there is no wage gap between small and large firms. People in the bottom 50 percent of the income distribution earn about the same working at large firms as they do at small. In other words, the fact that big companies pay more on average is solely a function of the earnings of their highest paid employees.

In fact, this myth that larger firms offer a cornucopia of higher wages for everyone has become widespread across the ideological spectrum. A belief in this trope is partly why Kevin Williamson at National Review last month insisted that big business is getting the short end of the stick thanks to a romanticizing of small business. But in the age of “too big to fail,” the idea that big firms are America’s punching bag is not terribly convincing. Meanwhile, recent efforts by conservatives and leftists to denounce small businesses as overrated is not an encouraging trend.

Ryan McMaken (@ryanmcmaken) is a senior editor at the Mises Institute.

Here’s How Small Business Will Take Over The Planet.

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Small business generates about 45% of US GDP, provides close to half of the jobs in the US Economy, and, in a typical year, accounts for more than 60% of the new job creation.

That all adds up to big economic impact. And the news is that small business impact is going to get bigger. In fact, small business will grow to dominate and take over the economy as the problems of managing big business compound.

Big Technology Comes To Small Business.

We have become habituated to the idea that big business deploys technology at scale to achieve reach, coverage and efficiency that small business can’t match. Giant telcos have vast, expensive networks; cable companies have their wired infrastructure; amazon has warehouses and airplanes and unlimited computing power. Today, all infrastructure is variable rather than fixed. It can be rented by the minute and on demand, so that small business can use big technology at the time and in the amounts and for the highly targeted purposes it is needed. Big technology can be downloaded from the internet, and economies of scale are no longer the barriers to entry or to efficient operation that they used to be. Flexibility, agility and timeliness are far more important economic attributes for a winning business, and small business has a good shot at not just competitiveness but at superiority on those dimensions.

Science Comes To Small Business.

We may traditionally think of small business as the product of hard work, super-specialization and local relationships rather than as a child of advanced science. Artificial intelligence and adaptive machine learning will change all that. Small businesses will be able to employ the cognitive assistance of software and robotics to personalize and tailor their services for individual consumers. Aestheticians will be able to offer and implement individually tuned facial treatments and cosmetic procedures. Landscapers can design and manage plantings and gardenscapes and irrigation systems customer by customer. Vehicle fleet owners will pick up and deliver at precise times door-to-door for their local and global clientele. Lawyers will have the searchable data from every relevant case, judgment and law text at their disposal with a robot paralegal who is smart and fast and productive: the best in the world at what they do. Personalized medicine can be practiced by the local doctor, and the local dentist will be able to implant the latest in dental construction and architecture into their patient’s mouth at the neighborhood clinic. Rapid prototyping and fast-turnaround micro-testing will be fully available to small businesses and keep them on the leading edge.

New Organizational Forms Favor Small Business.

The age of bureaucratic management is coming to a close. Bureaucracy has always been a problem for business. Big business needs it to exercise control over far flung organizational outposts, over budgets, over project management and resource allocation and HR policies. But bureaucracy slows response times down in an era when agile responsiveness is a requirement to maintain customer loyalty, and it alienates talented employees in an era where individual creativity is becoming the most important tool to manage in-market performance.

The replacement for bureaucratic management is small, agile, customer-obsessed networked teams with unrestricted autonomy for responding to customer requests and marketplace changes. There is no waiting for HQ approval. There’s no actual organizational model – every company is capable at arriving at its own form of organization that works best for its customers in its geography and its business. Therefore this organizational style is not mediated by business school-imposed standards or consultants’ print-outs. As a result, it’s hard for big business to adopt, which is one reason why small business will take the lead in organizational innovation.

Small Business Will Win With Humanity.

It’s remarkable how many people complain about their jobs in large corporation. Gallup’s global survey (2016 edition) on the subject of employee engagement (whether employees find their jobs meaningful and look forward to their work) indicates that only 13% of employees worldwide say they are engaged. The rest actively hate their jobs or merely put up with them. If they can’t engage with their jobs, how can they engage with customers? Gallup calls it an engagement crisis.

Entrepreneurial small businesses operate on empathy. They are tasked with understanding their customers’ needs and responsively designing services that meet those needs and are simpatico with customers’ values and are able to compete with every other offering that’s available. Small businesses depend on their humanity to succeed – their success in matching values with their customers in an extended and deep relationship depends on it. Digital tools can help in tracking the state of the relationship, but it is the subjective, emotional, and idiosyncratic elements in business exchanges that will be the mark of future winners. Big business will find that they can’t be successful on these dimensions.

People Prefer To Deal With Small Businesses.

We live in a time when people’s tolerance for unresponsive, insulated institutions is at a low point. This is true for political institutions like Congress and the Presidency. NPR reports that only 8% of Americans have a great deal of confidence in Congress, 19% in the Presidency, and 22% in the Supreme Court. The number for big business is 12%. If you let people down, and don’t act with humanity, you lose trust. Small business has a much greater incentive than a bureaucratic management team to be human, to engage, to respond and to earn customers’ trust.

In a 2017 Public Affairs Council poll, 41% of respondents expected small business owners to exhibit high honesty and ethical standards and only 5% expected them to have low standards in those departments. For employees of major companies, there was an expectation of high ethical standards among only 18% of respondents, and that number declined to 9% for big company CEO’s.  (Only elected officials in Washington polled lower: 7% of respondents expected high honesty and ethical standards there!)

People prefer to deal with those they know, like and trust. Small business can win big on these three fronts. More and more customers will make the choice to buy from small business, especially now that technology, science, efficiency and organizational effectiveness are no longer reserved to big business.

 

 

 

 

 

 

 

 

The Term “Small Business” Is Pejorative, Discriminatory And Out-Of-Touch. Naturally, It Comes From The Government.

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The unprecedented interconnectedness of today’s world can give rise to new kinds of business structures that we’ve never seen before. An individual entrepreneur can build a global supply chain from the desktop, with custom manufacturing in China, automation software to manage the logistics of shipping and the related financial services like credit and insurance, sophisticated marketing automation, and precision delivery to the customer’s door. Single entrepreneurs and young start-up teams can download computing power from AWS and run algorithms and A.I. that they find open-sourced on Github. Freelance creatives can get projects from UpWork or join distributed global teams working together on large communications campaigns, and do better (in both performance and compensation) than they would have done while working at behemoths like WPP or Omnicom.

Efficiency, effectiveness and financial and business performance no longer have anything to do with size or scale. Nor, as Bill Gates points out, does economics. What we learned in school about supply and demand and economies of scale no longer applies. We need to unlearn it if we are to have any hope of understanding the future. His blogpost was prompted by reading Capitalism Without Capital, a book (by Jonathan Haskel and Stian Westlake) whose title tells us a lot about the possibility of new organizational structures for firms in the global economy where traditional measures of company size are no longer relevant.

So why, in this day and this age, do entrepreneurs have to put up with the term “small business”? It implies something inferior, less capable, or incomplete. And nothing could be further from the truth. So-called small businesses create two-thirds of the new jobs in the economy in a typical year, and account for just under half of GDP. Since there is a lot of output government fails to include in the flawed statistic that is GDP, especially in services and retail, it is probable that small businesses are a much greater component of real output. And now, with the new structures we can see emerging, they will no doubt account for much more in the future, probably in a way that is hard to understand for the government bureaucrats who try to measure and report these things.

Because that’s where the term “small business” originates and where it is maintained: in the bureaucracy of the administrative state. As the SBA (Small Business Administration) points out in their Table Of Size Standards (where “you can check whether your business is small”), their interest in size is all about how they can tax a business, regulate a business, subsidize a business or allow a business to sell to the government. Their size standards can be based on firm revenues (as the SBA defines revenue), and/or based on number of employees, and /or on structural or legal variables. And their criteria can vary by industry type and over time. It’s not an exact science, by any means. But once a business definition is determined to be “small”, a cascade of bureaucratic triggers are tripped and the appropriate tax, regulation, subsidy and procurement machines begin to roll. The result for the small business owner is generally seen in the form of the interminable stream of demand letters that appear, delivered by USPS: taxation notices, demands for compliance and reports, insistence on meeting various government codes, and so on and so on and so on, ad infinitum. Nothing helpful.

Not only is the characterization of a business as small, it’s insulting. Many so-called small business owners and operators find the term prejudicial. They are rightly very proud of their economic role and size is not something they focus on. Their concerns are about producing a great product or service, serving their customers immaculately, creating jobs for the community, addressing the creative challenge of continuous improvement and the personal challenge of wearing many hats as they deal with operations, finance, marketing and sales from one desk.

Here are some self-evaluations from entrepreneurs who were asked about their perception of the term “small business owner” (from carolroth.com)

SMB Owners Are The Risk Takers For The Rest Of Society.

Sometimes, people that work for large corporations can use “small business” in a negative connotation. I find this very frustrating, because the risks that small business owners take are so much greater than what they take working for a large company. They don’t understand the stress in being available 24/7 or knowing that you have other people relying on you for their livelihood. In fact, small business owners should be embraced by the public and the government for what they do–take risks.
Bob Bentz of ATS Mobile.

“Solopreneurs” Are Unique In The Important Resources We Provide.

Although I do identify myself as a small business owner (SBO), the phrase means many things to different people. If you’re trying to get a loan from the government, a small business can have 200+ people (see http://1.usa.gov/20RKwfF). Most SBOs would consider 200 people to be a large business. Many SBOs are by themselves, so my favorite term is “solopreneur.” I am proud to be part of the small business community. We provide important resources that I wasn’t aware of before I started.
Linda Lovero-Waterhouse of WSI Web Systems.

Small Business, Exceptional Customer Service, Big Loyalty.

There is great local support for small businesses. The top positive attribute people think of when they think “Small Business” is exceptional customer service and a willingness to go above and beyond for customers. Because of this service, customers remain loyal. Behind the curtain, being a Small Business Owner means that I can move faster and be more nimble than a large company. If I want to try something new, there is no red tape holding me back or board to go to for approval; I can innovate.
Michelle Stansbury of Little Penguin PR.

Operationally Excellent And Customer Focused.

After spending 20 years with a Fortune 200 company and 15 years owning a small business, I know which situation requires more knowledge and effort to succeed. Currently, I have several eCommerce properties and we compete with the big brands on a daily basis.

Small businesses can be both operationally excellent and customer focused. I know we can’t out-Amazon Amazon. But, we answer the phone every time it rings.
Robert Shirilla of Tapestry Throws.

Under-appreciated In Silicon Valley……

So, I think the term small business is a loaded term where I live. In SF, we often talk about startups and disruption, a small business isn’t capable of, quite frankly, growing quickly enough to be interesting to many people. I know that’s a local thing and not everyone is the next Uber… but in Southern California, I found the term small business to be a positive one… here, not quite as much.
Mark Aselstine of Uncorked Ventures.

…. Small Business Owners Are The Heart of America.

A “small business owner” is someone I consider the “Heart of America”. They are the people who have an idea, the desire to serve others through their talents, and the belief to make that idea a reality. These are not overpaid fat-cat CEO’s with Ivy League pedigrees. They are people like you and me, trying to provide for their family and contribute to their community. They are what people talk about when they say, “Buy American”.
Mike McRitchie of Critical Path Action.

You Can Make a Big Difference

Small Business is the life blood of the American economy. It accounts for 65% of new jobs created. If we were smart, we’d be developing programs that focus on helping this business segment with capital and mentoring to give existing small businesses a better chance to survive and create new jobs. The government should also be working with funding sources to foster the creation of more new businesses. I am very proud to be a small business owner. I can’t think of a higher calling.
Greg Gottsacker of North Star Business Systems, Inc.

Small Business = Huge Impact

No entrepreneur considers his business to be “small” and, yet, this is a category they may fall into. But no matter the actual size of the operation, the ideas, the reach and the impact of any “small” business is great and the charisma required of the owner to bring a business to fruition is huge. Your business and your efforts will make a big difference in many people’s lives. And that must always be acknowledged.
Kate Edwards of Kate Edwards Consulting, LLC.

Let’s Get Rid Of The Term “Small Business”.

In short, the term “small business” misses all the value and purpose of entrepreneurship: innovation, service, growth, job creation, community involvement, personal lifestyle and individual self-reliance. Let’s get rid of it.

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