Politicians Continue to Pressure Job Creators

Last week my friends at SchumpetersCentury emailed me an post by Jonathan Ortmans — a Kauffman Fellow — arguing that Obama gets entrepreneurship. Then my father sent me an editorial from the Investor’s Business Daily exposing how our policy makers are destroying America’s job creation engine — entrepreneurs. I know which is closer to the truth.

Even more sick is that today’s WSJ highlights Biden’s saying that the administration ‘misread how bad the economy was’ — what this really means is that their policies are not working and they want another stimulus plan. Don’t let it happen. From the must read IBD Op-Ed – Stop the Madness That’s Killing Jobs:

But 18 months into this downturn, we’re still losing jobs — with 2.7 million gone in the private sector just since January, when the Democrats took full control of the government.

Shrinking GDP has crushed investment. First quarter gross private domestic investment — a proxy for business investment — plunged 20%, or nearly $450 billion, annually. The outlook is grim.

Worse, the June jobs data mark a milestone of sorts: Our unemployment rate equals that of the no-growth Eurozone nations.

Why is this job decline happening? The private sector — the real engine of economic and job growth — won’t hire because it’s scared of what it sees coming out of Washington.

On the horizon, as far as the eye can see, are higher taxes, uncontrolled spending and layers upon layers of new regulations.

Who would hire new workers faced with that?

Also, the federal government is meddling in the private sector as never before — in essence, nationalizing two of the three major carmakers with $200 billion in subsidies and capital infusions, turning our banking system into a fourth branch of government through the $700 billion TARP program, spending $200 billion to take over Fannie Mae and Freddie Mac and put them back in the business of lending to people who can’t pay their loans — which is how we got into trouble in the first place.

And that’s only what’s been done in the last half year or so. What really scares private businesses is what’s in the pipeline.

Please, read the whole editorial and then call your elected reps: tell them to stop the madness!

Gladwell Reviews Anderson’s New Book, Free

While it feels a bit incestuous to me, Malcolm Gladwell reviews Chris Anderson’s new book Free in the New Yorker. The review titled Priced to Sell: Is Free the Future. The book and the review hit on a lot of concepts we discuss here — digital readers, the value of information, and the future of media. As many of you know, my startup — FamilyFantasySports.com — is based in part on the free model as we offer free games to families interested in playing fantasy football together.

From the review:

Anderson is the editor of Wired and the author of the 2006 best-seller “The Long Tail,” and “Free” is essentially an extended elaboration of Stewart Brand’s famous declaration that “information wants to be free.” The digital age, Anderson argues, is exerting an inexorable downward pressure on the prices of all things “made of ideas.” Anderson does not consider this a passing trend. Rather, he seems to think of it as an iron law: “In the digital realm you can try to keep Free at bay with laws and locks, but eventually the force of economic gravity will win.” To musicians who believe that their music is being pirated, Anderson is blunt. They should stop complaining, and capitalize on the added exposure that piracy provides by making money through touring, merchandise sales, and “yes, the sale of some of [their] music to people who still want CDs or prefer to buy their music online.” To the Dallas Morning News, he would say the same thing. Newspapers need to accept that content is never again going to be worth what they want it to be worth, and reinvent their business. “Out of the bloodbath will come a new role for professional journalists,” he predicts, and he goes on:

There may be more of them, not fewer, as the ability to participate in journalism extends beyond the credentialed halls of traditional media. But they may be paid far less, and for many it won’t be a full time job at all. Journalism as a profession will share the stage with journalism as an avocation. Meanwhile, others may use their skills to teach and organize amateurs to do a better job covering their own communities, becoming more editor/coach than writer. If so, leveraging the Free—paying people to get other people to write for non-monetary rewards—may not be the enemy of professional journalists. Instead, it may be their salvation.

Don’t think I will shell out the $26.99 for this book. I also wonder why it is not free? Is that too obvious a question?

UC Berkeley Football Tickets — $225,000 Seat License

As a grad of U of M who buys one off tickets when I go visit, I find it to be insane when I read the UC Berkeley is asking 3,000 of its season ticket holders to purchase $225,000 personal seat license — (H/T Newmark’s Door). From the original USA Today Blog entry:

So no, Berkeley hasn’t exactly been a football factory the last half-century. But that hasn’t hurt the self-esteem at Cal, where the university is asking fans to pay $225,000 — yes, $225,000! — for personal seat licenses.

That’s the per-seat tab being sought from about 3,000 fans who have spots between the 30-yard lines at Memorial Stadium, which is slowly eroding because it sits on a major earthquake fault line.

Across the bay, Stanford ticket director Rich Muschell couldn’t help but take a shot at his school’s archrival. “They’re asking $225,000?” he told the Chronicle. “And they give us crap for being elitists.”

3 (or 4) Reasons Why Entrepreneurs Should Take Cold Showers

Over the past 2 weeks I have been taking nothing but cold showers and have come to believe that entrepreneurs should only take cold showers. Here are the 3 (or 4) reasons why entrepreneurs should take cold showers.

1. Taking cold showers saves time. There is no lolly gagging, singing, or day dreaming while in a cold shower. This saved time allows entrepreneurs to get more done. It also reminds us that time is precious and shouldn’t be wasted in the shower or other places. I would have to say my shower times have dropped from 12-15 minutes to 3-4 minutes. This at least an extra hour a week or 52 hours (2 days) a year.

2. Taking cold showers saves money. Using cold water means my hot water heater works less, lowering my utility bills. This saving on hot water is a reminder to entrepreneurs that we should always be thinking about spending less. There are two sides to the income statement — revenue and cost. As Ben Franklin noted, “a penny saved is a penny earned.”

3. Taking cold showers builds character/fortitude — the whole Goethe “whatever doesn’t kill us makes us stronger.” It reminds the entrepreneur that a strong character is needed if success is going to be achieved. Entrepreneurs will be in uncomfortable situations and be required to do new and awkward things often. While taking a cold shower is really not that difficult, almost no one chooses to do it (so there is clearly discomfort there).

4. Taking cold shower is humbling (for men) as the cold water has an obvious effect on certain male body parts. (See the famous Seinfeld segment for more information if needed.) The point is that entrepreneurs must be humble, constantly aware that we will make mistakes and that we should always be looking to learn from others; the cold shower is a great reminder of this (for male entrepreneurs especially).

So go take a cold shower and grow as an entrepreneur — while shrinking physically (& temporarily) if you are a male entrepreneur.

Jack Welch Launches Online MBA – Snooze

The cover of the Wall Street Journal featured a story on Jack Welch and his involvement with a new online business school. Its clear to me that Welch is trying to cash in on one the few areas that have seen successful IPOS over the past few years — he has invested with an entrepreneur who was able to take online Golden Gate University public during the darkest days of the financial crisis. My favorite part of the story is the last line where Welch says, “I think its a real education.” What he doesn’t say is, “I think this is a great investment for me.”"

My gripe here is not that Welch is trying to make money and partnering with successful educational entrepreneurs — its that the media is fascinated with him. I don’t get it? Am I alone? Am I the only one who doesn’t care about his management books and his ability to ‘manage’ quarterly earnings while running GE?

Its one of the reasons I have switched off CNBC and paid more attention to Bloomberg. Between Welch and Buffet, CNBC anchors are always up some old dude’s backside. Bully for writer Paul Glader, but why is this story on the front cover of the WSJ?

From the WSJ cover-story by Paul Glader:

Mr. Welch is paying more than $2 million for a 12% stake in Chancellor University System LLC, which is converting formerly bankrupt Myers University in Cleveland into Chancellor University. It plans to offer most courses online. Chancellor will name its Master of Business Administration program The Jack Welch Institute.

Chancellor’s leading investor is Michael Clifford, an entrepreneur who has launched two publicly traded companies in the past year: Grand Canyon Education Inc., which operates Grand Canyon University, and Bridgepoint Education Inc., which operates Ashford University and University of the Rockies.

Investor groups led by Mr. Clifford bought those three institutions out of troubled situations and converted them to primarily online universities.

Mr. Welch’s name may help add allure to for-profit, online education, which is growing rapidly despite nagging questions about quality.

A couple side notes — I believe Trump has some kind of online university. Also, according to a recent study out of East Carolina University (a bricks and mortar school) drop out rates among online students is dramatically higher than traditional students.

In fact, when it came to online business degrees — 43% dropped out vs. 11% in ‘real world’ programs. The sample is limited, but its worth looking into further. To Mr. Welch and wife: Any thoughts? Are you concerned that your Institute may see lots of drop outs? Or is this a more financial engineering to get an exit with an IPO? You can tell me, this is just a little blog — few people read this.

VC Continues to be Overrated; Policy Makers Beware!

For years I have been reminding people that less than 5% of firms ever take any kind of venture investment — that is one of the reasons I find the growth of business plan competitions so odd. Why prepare students for pitching to Venture Capitalists when most of them will never do it? (We’ll answer that in another post).

Well, there is a growing chorus of entrepreneurship bloggers sounding the alarm that policy makers are focusing too much on the VC model when talking about economic recovery.

Growthology (a blog out of Kauffman) and The Entrepeneurial Mind (Jeff Cornwall) have both pointed to a study by Paul Kedrosky of Kauffman: Right-Sizing the US Venture Capital Industry. From the study (p.5):

External capital is sometimes required by some private companies in their early stages, and it is good that there is a class of professional investors with enough financial resources to provide that assistance when it is needed. However, venture capital and entrepreneurship are separate phenomena, even among growth companies, and conflating the two, let alone implying that the former causes the latter, is untrue and unhelpful.

This is a short paper and well worth reading. Thanks to Kauffman and Kedrosky for putting this out there.

Recession is Here, Time To Launch A Biz!

I was fortunate enough to be interviewed recently by a personal finance magazine writer (I will let you know which mag it is if I make it into the article) and was asked whether I thought a recession was a good time to start a biz. I thought yes because a) fewer people are willing to take a risk and just want to hold onto their jobs and b) larger firms are also in a conserve position.

It appears that some researchers at Kauffman have some data that shows that more than 1/2 of the Fortune 500 was founded during recessions. From our friends over at the Growthology Blog:

I started with a question posed by our Kauffman colleague Keith Mays: how many companies on the Fortune 500 list were founded during a recession? It turns out that well over half of the companies on the 2009 list started during a recession or bear market.

This, in and of itself, is remarkable. But it also turns out that the Fortune figure, when broken down by decade and when looked at in the context of recent Census papers that Kauffman has helped fund, fits neatly into a narrative of the American economy moving from the bureaucratic capitalism of Galbraith’s New Industrial State to the entrepreneurial capitalism of the past two or three decades (and the entrepreneurial capitalism of a prior era). The composition of the companies on the Fortune list is rather dynamic (surprisingly, I think), but even more importantly, startups have been enormously important in terms of job creation. Without startups, we would have had only a handful of years in which overall net job creation in the economy was positive.

So, whether you are a student, mid-career professional, senior manager, or retiree, if you have ever wanted to launch a biz, now is the time — the trends are on your side. Get out there and do it.

Is Cause Marketing Causing Problems?

Angela M. Eikenberry has an interesting piece (h/t Zoe Weil) at the Stanford Social Innovation Review questioning cause marketing — you know, pink flashlights supporting breast cancer or yogurt that ’saves’ trees by directing a portion of the profits to rain forests. Eikenberry aceepts many of the benefits of this growing part of philanthropy, but also points out many pitfalls. Here is a snippet from her essay:

Perhaps a more disturbing feature of consumption philanthropy is that consumers need not be aware of the supposed beneficiary of their actions. The morality of philanthropy comes from acting for other people, according to scholars Warren Smith and Matthew Higgins.⁹ Acting for other people, in turn, requires figuring out what they really need.

Yet consumption philanthropy sidesteps both this requirement and, more generally, contact with people in need. For example, a person who uses a charity-licensed credit card to pay for an expensive meal, and thereby sends a percentage of his purchase to a cause that fights hunger, may no longer feel obligated to find out who is hungry or why they are hungry. Without this knowledge, he may feel less empathy for poor people, and therefore less compelled to change the conditions that caused their plight.

More broadly, in the absence of people’s active and effortful moral engagement, corporations and their profit-driven needs set the tone for acceptable ways of being philanthropic. As a result, people’s genuine benevolent sentiments are co-opted for profit, and their care is reduced to a market transaction.

Seth Godin Goes After Textbook Industry (and Profs)

We have covered a lot of startups (& startups) and technologies going into the textbook market — the cost of books have been a pain for students and families for decades. Seth Godin, ‘marketing genius,’ has decided to enter the fray with his posting Textbook Rant. Godin claims professors who assign textbooks are practicing academic malpractice — he may be right! His piece covers old ground but it is concise and worth a read. Importantly, he offers advice for professors on spending their time “devising pages or chapterettes or even entire chapters on topics that matter to them, then publishing them for free online,”

Here is a snippet:

They are incredibly impractical. Not just in terms of the lessons taught, but in terms of being a reference book for years down the road.

In a world of wikipedia, where every definition is a click away, it’s foolish to give me definitions to memorize. Where is the context? When I want to teach someone marketing (and I do, all the time) I never present the information in the way a textbook does. I’ve never seen a single blog post that says, “wait until I explain what I learned from a textbook!”

Any thoughts? Especially those of you who are Professors?

Govt Goes After Biz Cell Phones

In yet another attack on free enterprise and entrepreneurs –see yesterday’s post on the Campaign for Free Enterprise — the government is considering taxing cell phone’s issued by business. According to the WSJ, the government is thinking about counting cell phones at ‘fringe benefits’ and thus eligible for taxation.

Gotta love the US Government — tax a tool/technology that has brought incredible efficiency and opportunity to business users so that corporations such as GM, Chrysler, and AIG can be bailed out.

Am I the crazy one here or is it ‘our dear leaders’ in DC who are off their rockers?