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October 01, 2014

Comments

Kyield

Hello Irving,

Appreciate the focus--since my teen years I've been building businesses and trying to help entrepreneurs, numbering in many thousands, and have invested a great deal of time and money attempting to educate the educators on the topic.

It's a highly complex issue with literally millions of variables, a great many of which are "layered in legislation that gets approved in order to see what's in them."

A couple of obvious issues popped up reading this-- one is that academic researchers & majority of book authors simply aren't good sources to cite on this topic, and frankly never have been. It is very much an experiential learning game including what works, what doesn't, and why. Anyone without a great deal of experience are frankly dangerous--and that's the problem for nations when they reach a tipping point.

When a super majority of the population are no longer directly engaged in most aspects of the private economy, as in SMEs and not a specialist in a company who is never exposed to most issues that impact that business, we begin to make very poor judgements. When the public education system becomes indoctrinated towards scientific socialism--clearly as ours has, with assumptions about economics that are frankly not accurate, well this is what occurs.

For example, ease of entry is obviously not conducive to successful business. It creates hyper competition, which favors predatory monopolists that tend to be backed by institutional investors. Sustainable economics with functional markets contains a dynamic balance of diverse forces, always under tension, but that consists of challenging barriers that are achievable. This process was part of the cultural memory until about 20 years ago when institutional capital buried markets, creating the most severe price war in human history. That's how we got Facebook instead of flying cars, or cancer cures.

A great deal goes into functional markets, particularly in business creation. Universities & pension funds in the U.S., among others--including gov't & major corps, could no longer grow without taking increasing share of the entrepreneurial process, and with disruptive technology, rapid scaling, etc. of our era, strategic engagement & competitive intelligence has been raised to a level never before seen, including full-time senior staff inside national labs, very unhealthy relationships with universities--some of which in my industry are primarily outsourced labs for market leaders now, lobbyists in every state crafting legislation, secret investments in venture firms--by company & individually--so one never knows who is looking at confidential material, and on and on.

As icing on the cake, or dagger in the heart, the financial crisis resulted in bailing out institutions at the direct cost of individuals, and in particular private businesses of all sizes and shapes. Public companies have access to literally unlimited funds thanks to the FRB, but private companies must pay for their capital if and when paying customers can be found. Amazingly that wasn't sufficient--after the largest realize moral hazard in modern history, a few years later we had the president of the U.S. tell entrepreneurs "you didn't build that".

The question is not why entrepreneurism is in decline. Rather the question is why on earth would an entrepreneur take such risk in a country that treats them so poorly?

One often missed statistic is ratio of SMEs to total population, GDP, and drilled down into sectors. One thing the U.S. in peak era had in common with Germany & China among others is/was a very large diversified mix of SME ecosystems that were not just outsourced contractors of gov't or major corporate ecosystems (SAP's comes to mind, but see FedEx ruling this week on contractors as employees).

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