Zero Barriers To Entrepreneurship

I am glad the Kaufmann Foundation is moving forward with this. In the last ten years, I have spent a lot of time with entrepreneurs. I can assure you, when people think about problems they think about inner cities. But, rural areas of the US are not that much different.

We need zero barriers to entrepreneurship.

Entrepreneurship moves society forward. It fills markets and cracks that can’t be filled by large monolithic institutions like government agencies or corporations. Entrepreneurship has been trending down in America. Back in 1945, 49% of all WW2 vets came home and started a business. Entrepreneurship was alive and well.

What’s killing it?

The first thing that comes to mind is rules and regulations. Chicago and my home state of Illinois have thousands of rules, regulations, and hoops that an entrepreneur has to jump through in order to get a business off the ground. There are lots of fees associated with it as well.  If you can’t afford to pay a bunch of fees, too bad.

Many of these things on the books are meaningless. They are designed as barriers to entry to protect entrenched competitors.

The other thing that is killing it is student debt. I am not for “forgiving” student debt. But, the cost of college has skyrocketed relative to the costs of other things in society. Having a lot of debt without a lot of job prospects makes it awfully hard to take a risk.  Reforming our college loan system and putting it in the hands of private competitors versus government mandates might help.

One thing society needs to do is telegraph paths better. That college-lite degree you worked four years for and borrowed huge sums of money to get is basically worthless after you get your diploma. Sure, not everyone can study engineering or accounting or a hard science. But, there are a lot of people going to colleges that aren’t getting educated either. It’s a four-year party, with one semester of overseas partying tossed in.

When I look at bills that are passed by Congress or regulations enacted by agencies, they aren’t designed to protect citizens. They are designed to protect existing businesses. Even in this rollout of the repeal and replace Obamacare, you can see where lobbyists did their job.  The Republican bill is better than Obamacare, but it has a way to go before it is a lot better.

The way to cut costs and move forward is through intense competition.

One way to illustrate how the lack of competition kills momentum is through our political process. Gerrymandering has been top of mind for many of my liberal friends lately. They are realizing gerrymandering is terrible for politics. It kills competition. In my home state of Illinois, we have had one Speaker of the House for 40 years. Every single political district in the state, and in the city, is gerrymandered to ensure a permanent majority for one party. Here is an example.

No need to steal an election at the ballot box when you can draw lines like that. Elections are fait accompli.  If you believe in your ideas, then let’s win on the field and not in the backroom.

A lot of our laws and regulations are just like that district. They eliminate entrepreneurial competitors from even getting started. They raise the costs and increases the barriers to entry so that the problem being solved has to be pretty acute before anyone will try to attack it.  The laws and regulations also create a lot of hoops so it takes longer for an upstart to get through the process.  That allows entrenched businesses to get a “heads up” and pivot before an entrepreneurial competitor has a chance to attack.

As I watch different dramas play out, I watch how fear is being used as a motivator to try and keep the status quo.  I watch “respected” people spread fake news and statistics that are skewed to make a point.  There is only one solution.  Intense, hardcore, head to head competition.

If we are going to do great things, we have to be willing to be wrong. Failure has to be tolerated. Loss has to be tolerated. Not getting what you want has to be tolerated.

In entrepreneurial ecosystems, not everyone gets funded. Not everyone wins. There is a lot of failure. First time entrepreneurs take an idea, and start to build it. It’s in those first stages when they realize that it’s hyper competitive and resources are scarce. The ones that win have grit, and get creative.

I have been mentoring a couple of companies over the past couple of years. Watching them take the idea from spreadsheet to operating has been fun. I have huge respect for those that can do it. It takes a lot of energy, and guts. You have good days and bad days. It can be lonely. But, the end of the journey makes it worth it.

If we want more entrepreneurship, hard-nosed competition ought to be the first principle of our society.

  • awaldstein

    I don’t believe that entrepreneurship is dead. In the least.

    In the least. I don’t, for the most part, think that government is the enemy.

    The percent of winners and losers is the same today and five years ago.

    What needs to change is how capital is raised, distributed and controlled. That’s the stalemate of today.

    • It’s not dead, but it continues to trend downward. Especially when you think about small cash flow businesses.

      Government restricts who can invest in startups. If you aren’t accredited, you can’t write a check.

      If we accept your point about how capital is raised etc-how do we do that with a base principle of competition so it’s competitive on each side of the market?

      • awaldstein

        small cash flow businesses have never really been part of the vc/startup/incubator world.

        i agree they are underserved but they are a subsection of a larger category and their plight is unique.

        • in the broad case of entrepreneurship, they have to be included. Entrepreneurs come in all shapes and sizes. The person that starts a cash flow business can train the next generation of entrepreneurs, or find a vein and exploit it becoming a big startup type business.

          • awaldstein

            yes and no.

            sure there is shake shack but beyond the idea, beyond f & f dollars it is a different animal. the last five years in the wellness biz was forcing a tech model from vcs on cash flow bisuinesses and it didn’t work. circle up won’t either in my opinion unless they get more creative.

            you work in a high multiple portfolio approach and for everything from juice to pickles to cookies that by definition have to rely on standard distribution it is not a fit.

            i agree of course entrepreneurs are entrepreneurs but the models drive the financing and that is where we separate ways.

            consumer businesses are simply brand based and work in a different universe.