SXSW Interactive: Through the Economic Development Looking Glass

April 11, 2014

By: Jon Roberts, Principal & Managing Director, TIP Strategies

Photo Credit: "SXSW Day 5" by Flickr user Tony Carr

March 11, 2014, marked the last day of this year’s SXSW Interactive. Austin’s premier tech event has grown steadily since its inception in 1994. One notable mark of its reach, that may be overlooked by the standard measure of badges sold and tourism dollars generated, is the heightened presence of economic development organizations at the festival.

The industry’s interest in SXSW was apparent from the number of US states and cities, as well as foreign cities, regions, and countries, that set up shop at SXSW, all vying for one of the most desired of economic development targets: tech start-ups and young entrepreneurs. No doubt about it, this tactic represents a sea change in what counts as credible economic development. Where in the past the profession’s holy grail was the relocation of a major manufacturing company, we now see a shift to technology and high growth start-ups (though manufacturing is still seen as the primary objective in many parts of the US). We’ll leave for another time a more thorough discussion of how successful these efforts are. (The short answer: it varies widely.) At one end of the scale is the possibility that bringing companies to SXSW will only speed their exodus from less tech-savvy regions to (you guessed it) Austin. At the other end is the ability to connect with and recruit entrepreneurs to new markets. My panel, “Start-up Grind: What Makes Austin a Startup Hub,” touched on these issues, as well as the question of what made Austin successful in the tech space.

Clearly, industry recruitment and expansion is not the stated objective of SXSW Interactive, nor is it likely to be the primary draw for most participants. As suggested by their mission statement—encapsulated in three values: creativity, innovation and inspiration—SXSW Interactive is about stepping outside your intellectual comfort zone. At a minimum, spending time in the presence of so many creative companies and individuals gives you an opportunity to rethink assumptions behind your business—even, and especially, at a fundamental level. From an economic development perspective, for example, this rethinking of assumptions raises the question of whether measuring success by jobs created is the best way to grow our economy. Abandoning this gold standard is, in some ways, analogous to growing a business without worrying about profitability. It’s a radical notion, and one that, on the face of it, makes no sense. Just don’t tell that to Amazon or to Facebook.

But testing one’s assumptions is not the whole of the SXSW experience. The real power of SXSW lies in what Tony Hsieh, of Zappos fame, calls collisions—connections that occur spontaneously and bring together individuals and companies that might never have connected before. The sheer number and variety of panels, speakers, and registrants makes this goal relatively easy to accomplish. It can be as simple as colliding with the AT&T team during the Ping-Pong tournament (and, in my case, losing to them) then learning what AT&T is doing, what their talent strategy is, and what their new product line will look like. If I’m busy “recruiting companies,” I miss out on these chance encounters; my agenda gets in the way of making real connections. Sometimes an indirect approach is the surer path towards one’s goal.

And even if you weren’t able to experience the randomness of SXSW, you couldn’t fail to miss this year’s driving theme. It was already apparent on the first day and gathered steam throughout the event: Internet privacy. First Julian Assange, via Skype from the Ecuadorian embassy in London, then Edward Snowden from an undisclosed location in Russia (routed through multiple ISPs). Whatever one’s political attitude towards Assange and Snowden, their message is coming through loud and clear and is being fully embraced by the tech crowd: privacy matters.

The question of Internet privacy has numerous dimensions. It is not exclusively governmental. It extends to transactional privacy with corporations and to the question of who owns our personal data (our Internet identity). The default answer should not be that this information is “owned” by corporations or the government (or health care providers). We—it is being argued—have an absolute right to our personal data and we ought not to be giving it up (or having it taken from us) without our informed consent. This, of course, is a discussion that requires a much larger platform. At a minimum, however, SXSW is signaling a shift in how we think about our use of the Internet. I’ll venture to say it signals a sea change, one whose implications may be profound.

Among the immediate insights that arise from taking a privacy perspective on data are the following:

  1. Bitcoin is interesting far beyond its effects on financial institutions. The way to think about Bitcoin is as a means of ensuring transactional privacy. What could only be done with cash, can now be done electronically with the same advantages – and, as we have discovered, some of the same risks.

  2. Our health records are ours, and do not belong to a health care system or the government. The realization that our health records tell our personal story and that their ultimate value belongs to us and needs to be managed by us is still a startling fact.

  3. Every online transaction, from simple browsing to Internet (and credit card) purchases, reveals information about us that we have the right to control. Commercial transactions, by definition, are between at least two parties. E-commerce exponentially increases the parties involved in each transaction. Data collected during the initial transaction becomes a commodity in itself, which can be shared and sold many times over. Whether we explicitly agree to this extension of our transactions or not, we are entitled to know which of our data is kept and how it is being used.

These points—and many more like them—could have enormous business and social implications. It is immediately apparent that they relate to one another and foreshadow a changing relationship to the data and metadata that increasingly define who we are. In fact, we can expect to see a new wave of disruptive technologies related to managing our on-line activity. We are already beginning to note distinctions where before there were none: distinctions, for example, between privacy and security, and what it means to own our digital identity. Add in social media (in its multiplicity of forms), and every on-line activity is subject to a major re-thinking.

SXSW has a way of making small ideas very big. This was true of Twitter, and it may be true of a new wave of privacy-related companies. Stay tuned.

The Gray Jobs Enigma

March 14, 2014

By: Steven Greenhouse
Via: The New York Times

Gary Westerman, a volunteer job counselor, is looking for another job, but it is proving harder than he anticipated.

In her years as a probation officer north of Dallas, Patricia Lowell reckoned that she would work until age 65, confident that she could then retire halfway comfortably on her pension and Social Security. After retiring, she thought, she would pick up some extra spending money by working part-time retail jobs during the holiday season.

In that way, Ms. Lowell was like the three out of four Americans who say they plan to continue working after they retire from their main job.

But for Ms. Lowell, things did not turn out as planned. At age 58, she quit her job as a probation officer for Grayson County in order to care for her mother, who had cancer, diabetes and congestive heart failure. Her decision to leave her job of 23 years, she said, was made possible only by Texas’ then-recent decision to provide health insurance to longtime probation officers who retire before they qualify for Medicare at age 65.

“I wanted to continue working, but then this opportunity came up allowing me to retire and take care of my mother,” Ms. Lowell said. “It all came together very nicely.” She retired in late 2004, spending dozens of hours each week caring for her mother, who died in 2010 at age 92.

Now, nearly 10 years after leaving her job, Ms. Lowell is happily retired, with no plans to return to work. She is doing better financially than she anticipated, receiving her pension as well as $1,292 a month from Social Security. In an unexpected bonus, she remarried five years ago, and her husband’s retirement income has gone far to solidify their finances.

“I don’t regret at all that I retired,” Ms. Lowell said. She is an active volunteer in her church, and she and her husband love taking road trips to explore Texas. And every few months they drive 300 miles south to Houston to visit her son and three grandchildren.

Ms. Lowell personifies a disconnect among Americans: while nearly three-fourths of Americans say they will continue working after retiring from their main job, only 18.9 percent of Americans age 65 or older actually remain in the work force. Many workers in their 40s, 50s and early 60s are convinced that they will want to or need to work well past 65 and even after retiring from their principal job, yet many retire earlier than they anticipated. There are many reasons for this: Perhaps they had health problems or grew unsatisfied with their jobs, or they realized that their nest egg was large enough for them to get by in retirement — or, like Ms. Lowell, they needed to care for a loved one.

Sara Rix, an analyst at the AARP Public Policy Institute, sees numerous reasons so many Americans retire considerably earlier than they had anticipated. “A lot of people have expectations and desires to work in retirement, but the number who actually do is pretty low,” Ms. Rix said. “A lot of things happen — workers suffer ill health or job loss and that propels them out of the labor force.”

Alicia H. Munnell, director of the Center for Retirement Research at Boston College, notes that many Americans are working until later in life. The percentage of Americans 65 and over who remain in the labor force has grown significantly — to 18.9 percent from 12 percent two decades ago. Among the reasons she cites are people remaining healthier longer, fewer physically taxing lift-and-lug jobs, and, after the stock market plummeted during the recent recession, the conclusion that it is smart to work longer to build up one’s nest egg.

Ms. Munnell also puzzles over why most Americans say they want to work after retiring from their main job while a far lower percentage actually work after turning 65.

“Sometimes there’s a positive reason — your spouse retires, and you decide you want to retire, too,” Ms. Munnell said. She said there were numerous “shocks” that caused people to retire earlier than expected, like deteriorating health or an unanticipated change in wealth — perhaps because of a soaring stock market. Another common “shock,” she said, is a job change — maybe a layoff or a transfer to a less satisfactory position or getting a new, more demanding, hotheaded boss.

“Sometimes people quit their main job and think they’re going to find another job,” Ms. Munnell said. “But there’s still discrimination in the workplace. A lot of employers don’t like hiring old people that much. Older people look for work, but studies show that they then get discouraged pretty easily. You go, you look and then you give up.”

That was definitely not the case for Hue Galloway, who worked for 12 years as a field technician for Ticketmaster in Connecticut. In that job, he crisscrossed the state, maintaining and repairing Ticketmaster’s computers and printers at dozens of establishments, from the Mohegan Sun casino to theaters in Hartford.

In 2008, during the depths of the recession, Mr. Galloway was laid off. He was 58 at the time. “I figured I’d be working there until 67 or 70,” he said. “That’s what I was shooting for. I’d need the money. Plus, I enjoyed my job.”

Mr. Galloway was determined to find another job; he spent three years looking, applying for more than 200 technical jobs. “I got no place,” he said “I was like applying to five or six places a week, and over those three years, I might have gotten four interviews.”

“I really feel I was discriminated against because of age,” he added. “They found young people with two years of college to do basically the same kind of work I was doing, and they paid them less.”

He was earning $17 an hour when he was laid off. For two years he lived on unemployment insurance and his savings, but that was not enough to keep the bank from foreclosing on his house. He could no longer afford the $1,500 monthly mortgage payments.

“It was very hard,” he said. “But I just couldn’t pay for it.” He is at least fortunate that his son lets him stay in one apartment of a three-family house that he rents out; — in return, he serves as the informal superintendent.

In a survey of 1,502 Americans, AARP found that 31 percent of those who planned to continue working after retiring said they would do so because they “enjoy working.” Thirty percent said they would continue “for extra money” and 21 percent “to have something interesting to do.” Fourteen percent said they would continue working to be physically active and 11 percent to be mentally active. Ten percent said they would continue working to support themselves.

Many Americans think it won’t be hard to continue working into their late 60s or even their 70s. But Ms. Rix of AARP says it is not always so simple.

“Everyone is going to have to run faster and faster to stay in place at work, and that makes it more difficult for us to remain employed,” she said. And once people leave their longtime jobs, she added, “In this economy, it’s pretty tough to find something else.”

Teresa Ghilarducci, an economics professor and retirement expert at the New School, said many aging Americans underestimated the difficulties of continuing to work and overestimated the difficulties of retiring.

“People see the cost of not working isn’t so bad because they figure that they can get by,” she said. “And the benefits of not working are much greater than they thought — they can relax a lot more.”

Professor Ghilarducci added that today’s jobs might not require as much lifting, bending and stooping as the manufacturing or warehouse jobs of old, but a lot of jobs are plenty demanding, requiring keen eyesight and intense concentration. “People thought their jobs would get a little easier, but they’ve gotten a bit worse,” she said. “There’s a proletarianization of the jobs that older workers have.”

Helen Dennis, an author and consultant on retirement and an adjunct professor at the University of Southern California, says it is not surprising that a far larger percentage of Americans say they are going to work into their late 60s and 70s than actually do.

“A big factor is uncertainly,” she said. “People look at their savings and pensions and say, ‘I think it’s going to be O.K., but I don’t know. I don’t understand the Affordable Care Act, and my mother is 90 and I have a daughter who just got divorced who is coming to live with me. There are so many uncertainties that to be safe I’m going to work until whatever age.’ But then when people reach 61, 62, 63, a lot of them figure out that they can retire.”

Many Americans constantly weigh the pros and cons of continuing to work once they reach their late 50s and early 60s. Many conclude it’s not worth it. Ms. Dennis explained: “With the stresses of the workplace, with the mantra of doing more with less, now I’m doing two people’s jobs. We have a new manager. They’re changing the whole team again. The traffic here in L.A. is killing me, and my best friend just died and there’s a big message that life is short. I think that’s part of why people decide to retire.”

She added, “Some people realize that any job I can find is for a minimum wage, and it’s not worth my time.”

Ms. Dennis is pushing an idea called “Project Renewment” that seeks to help the nation’s first generation of career women plan for retirement. She says the hope is to make retirement more than “a return to the kitchen.” “The whole piece is how to help career women face their next 20 or 30 years — to find something you love to do and to give structure to the next chapter in one’s life,” she said.

Barbara Goldberg is a prime example of this approach. For 30 years, she conducted focus groups for Fortune 500 companies including IBM, Coca-Cola, American Airlines and General Motors. Ms. Goldberg, 72, held regular salons at her Los Angeles home for, in her words, “intellectual and socially aware women.” At one salon in 2008, a retired government official spoke about the problems facing drought-stricken countries in West Africa and the contaminated water that people drink there.

Within months, Ms. Goldberg closed her marketing firm and started a foundation to underwrite the drilling and construction of wells in Africa. The foundation, Wells Bring Hope, focuses on Niger and has raised nearly $2 million and financed 268 wells.

“I left my marketing work because I was so moved hearing about the dire need for water in West Africa and the plight of women and girls to get water,” Ms. Goldberg said. “At the time, my business was slowing down, which was fine with me because I was traveling more and enjoying life a bit more. When this opportunity presented itself, it was the most natural thing in the world for me to do, although I had never worked in the nonprofit world.”

Although economists would say she has technically retired because she no longer works for pay, Ms. Goldberg does not view herself as retired. She typically devotes 50 hours a week to raising money, holding meetings and speaking at elementary and high schools about Africa’s water woes.

“I loved doing focus groups, and doing that suited me just fine,” Ms. Goldberg said. “But I was very conscious of what I wanted to do in the next chapter of my life. This is something that’s very meaningful to me, and it will leave a very powerful legacy to my three granddaughters.”

Like Ms. Goldberg, Gary Westerman left his job voluntarily after three decades. He was an engineer and manager at a semiconductor company in Austin, Tex., and in the fall of 2012, his company announced plans to lay off 900 employees. “Two weeks before Christmas I volunteered to take the place of somebody else who had two or three kids,” he said. “I could have stayed another four or five years. I have been through 37 rounds of layoffs in 33 years. I survived all of them.”

Mr. Westerman, 65, is looking for another job, but it is proving harder than he anticipated. He is an adviser to several job clubs where he teaches people how to network better, because networking is such an important part of finding jobs.

“It will be another 10 years before I quit looking for jobs,” he said.

Jerry Tollefson shares that sentiment, still reeling from leaving his job in November when the 500-bed nursing home in Milwaukee at which he worked announced it would close. For six years, Mr. Tollefson, 63, was its events coordinator, coaxing residents to tell stories of their youth, serenading them with Ella Fitzgerald and Perry Como records.

“I loved it,” he said. “The nursing home gave me its above-and-beyond award.”

“I can probably sneak by financially, maybe not taking all the trips you want to take,” he said. “I can afford my home and have two squares a day.”

He has been looking for jobs, but “the job market is difficult,” he said. “Here in Milwaukee, probably like everywhere else, it seems that the jobs out there are geared to the I.T. computer business. When I get on a computer, I still hunt for the on-and-off switch. Young people who have grown up on computers, they have an advantage. Multitasking and being on the computer are not in my wheelhouse.”

Still, Mr. Tollefson, who once did fund-raising for nonprofits, is intent on finding a job. “The bottom line is, I get very antsy. I like to be busy,” he said. “I want to work until 70. Maybe it’ll be part time.”

A few days ago a nursing home invited him to interview for a position as its program and events assistant.

“It’s a nice fit, and hopefully something comes of it,” he said. “Half the battle is having something you really enjoy doing.”

America’s Sinking Middle Class

September 19, 2013

By: Eduardo Porter
Via: The New York Times
In some respects, 1988 has the feel of an alien, distant era. There was no such thing as the World Wide Web then. The Soviet Union was still around; the Berlin Wall still standing. Americans elected a Republican president who would raise taxes to help tame the budget deficit.

On Tuesday, however, the Census Bureau reminded me how for most Americans 1988 still looks a lot like yesterday: last year, the typical household made $51,017, roughly the same as the typical household made a quarter of a century ago.

The statistic is staggering — hardly what one would expect from one of the richest and most technologically advanced nations on the planet.

I have written several times before about how measures of social and economic well-being in the United States have slipped compared to other advanced countries. But it is even more poignant to recognize that, in many ways, America has been standing still for a full generation.

It made me wonder what happened to progress.

Consider: 36 years ago this month, when NASA launched the Voyager 1 probe into space, 11.6 percent of Americans were officially considered poor. The other day Voyager sailed clear out of the solar system into interstellar space — the first man-made object to do so — recording its environment on an 8-track deck.

Using the same official metric — which actually undercounts the poor compared to new methods used by the Census today — the poverty rate is 15 percent.

To be sure, we have made progress over the last 25 years. The nation’s gross domestic product per person has increased 40 percent since 1988. We’ve gained four years’ worth of life expectancy at birth. The infant mortality rate has plummeted by 50 percent. More women and more men are entering and graduating from college.

We also have access to far more sophisticated consumer goods, from the iPhone to cars packed with digital devices. And the cost of many basic staples, notably food, has fallen significantly.

Carl Shapiro, an economist at the University of California, Berkeley and an expert on technology and innovation who stepped down from President Obama’s Council on Economic Advisors last year, calls the progress in information technology and biotechnology over the last 25 years “breathtaking.”

“Most Americans partake in the benefits offered by these new technologies, from smartphones to better dental care,” Professor Shapiro said. Still, he acknowledged, “somehow this impressive progress has not translated into greater economic security for the American middle class.”

In key respects, in fact, the standard of living of most Americans has fallen decidedly behind. Just take the cost of medical services. Health care spending per person, adjusted for inflation, has roughly doubled since 1988, to about $8,500 — pushing up health insurance premiums and eating into workers’ wages.

The cost of going to college has been rising faster than inflation as well. About two-thirds of people with bachelor’s degrees relied on loans to get through college, up from 45 percent two decades ago. Average student debt in 2011 was $23,300.

In contrast to people in other developed nations, who have devoted more time to leisure as they have gotten richer, Americans work about as much as they did a quarter-century ago. Despite all this toil, the net worth of the typical American family in the middle of the income distribution fell to $66,000 in 2010 — 6 percent less than in 1989 after inflation.

Though the bursting of the housing bubble and ensuing great recession takes a big share of the blame for families’ weakening finances, it is nonetheless startling that a single financial event — only a hiccup on the road to prosperity of Americans on the top of the pile — could erase a generation worth of progress for those in the middle.

Though the statistics may be startling, the story they tell is, unfortunately, not surprising. It is the story of America’s new normal. In the new normal the share of the nation’s income channeled to corporate profits is higher than at any time since the 1920s, while workers’ share languishes at its lowest since 1965.

In the new normal, the real wages of workers on the factory floor are lower than they were in the early ’70s. And the richest 10 percent of Americans get over half of the income America produces.

“Almost all of the benefits of growth since the trough of the Great Recession have been going to those in the upper classes,” said Timothy Smeeding, who heads the Institute for Research on Poverty at the University of Madison-Wisconsin. “Middle- and lower-income families are getting a smaller slice of a smaller economic pie as labor markets have changed drastically during our recovery.”

This story is about three decades old.

In 2010, the Department of Commerce published a study about what it would take for different types of families to achieve the aspirations of the middle class — which it defined as a house, a car or two in the garage, a vacation now and then, decent health care and enough savings to retire and contribute to the children’s college education.

It concluded that the middle class has become a much more exclusive club. Even two-earner families making almost $81,000 in 2008 — substantially more than the family median of about $60,000 reported by the Census — would have a much tougher time acquiring the attributes of the middle class than in 1990.

The incomes of these types of families actually rose by a fifth between 1990 and 2008, according to the report. They were more educated and worked more hours, on average, and had children at a later age. Still, that was no match for the 56 percent jump in the cost of housing, the 155 percent leap in out-of-pocket spending on health care and the double-digit increase in the cost of college.

So either we define the middle class down a couple of notches or we acknowledge that the middle class isn’t in the middle anymore.

When It Comes to Streetcars and Economic Development, There’s So Much We Don’t Know

September 18, 2013

By: Eric Jaffe
Via: The Atlantic Cities

In the wake of the Great Recession, it's become common for city officials to describe public transportation as a tool for economic development as much as (or more than) an instrument for urban mobility. Take two recent examples.

Here's Senator Claire McCaskill reacting to a new federal TIGER grant awarded to the Kansas City streetcar:

"This streetcar project will encourage housing, construction, and business development in the city—and that will mean more jobs across the region."

And here's regional transport planner Carmine Palombo of the Southeast Michigan Council of Governments on the idea of bringing bus-rapid transit to Detroit:

"The stations with BRT are much more than just a bus stop. There’s example after example of economic development," he says.

The precise wording may vary, but what such quotes suggest that the economic effects of BRT and streetcars are well-known. Transport scholar and Transportationist blogger David Levinson isn't so sure that's the case. In two recent posts reviewing the evidence, he found that we know a lot about what BRT is worth to a city but very little about the value of streetcars.

First the BRT literature. Levinson scrounged up a good deal of it from around the world. In Seoul, Korea, for instance, BRT led to residential developers to convert single-family homes into multi-family apartments, created land premiums of 10 percent for residences and 25 percent for retail near stops, and increased employment density by 54 percent. In Bogota, Colombia, rental prices drop 7 to 9 percent for every five more minutes a person must walk to reach a BRT station.

There are some encouraging findings from the United States, too, despite the country's slow adoption of BRT. A study of the Pittsburgh busway found that properties a thousand feet from BRT stations were worth about $10,000 less than those a hundred feet away [PDF]. In Boston, recent condo sales showed a 7.6 percent premium along the BRT Silver Line, whereas no such premium existed in the corridor before the bus [PDF].

Now for the streetcar literature. Unfortunately, Levinson was able to find far less of it. A 2010 survey of 13 U.S. streetcar systems, sponsored by the Federal Transit Administration, concluded that the economic impact of streetcars remains largely unknown. System representatives "believed" that streetcars enhance development but didn't actually "seek information" about this economic impact — perhaps because there's not much to seek [PDF]:

The literature regarding empirical measurement of actual changes in economic activity, such as changes in retail sales, visitors, or job growth, is almost nonexistent for streetcars.

The glaring exception is Portland, Oregon, where one study found that streetcars did contribute $778 million in local development against a project cost of $95 million [PDF]. But while the Portland streetcar was the anchor or at least the featured element of this growth, it wasn't responsible for this boom by itself. Rather, it was part of a broader development plan in which zoning, public-private investment, street upgrades, and other renewal efforts also played considerable roles.

So for now, the research advantage clearly goes to BRT.

That's not to say streetcars don't give cities an economic boost — promoting walkability for residents and suggesting permanence to developments must carry some value — but it is to say that this boost isn't well-understood. The modern U.S. streetcar craze is a relatively new one, and isolating its economic impact will take time. This knowledge gap is a particular problem for streetcars, however, because their benefit to pure urban mobility is already questioned.

There's every reason to believe that strong public transit is worth loads to a city. In its simplest form: mobility creates access, access gathers people, people produce things. But the limits of transport funding make it important to distinguish weak transit from strong, and strong transit from stronger. Poor information won't stop public officials from making promises, but good information at least gives them a chance to spend your money in wiser ways.

The Government and the Entrepreneurs

August 23, 2013

By: Simon Johnson
Via: The New York Times – Economix

Entrepreneurship seems like the quintessential private sector activity.  An individual or a small group of colleagues decide to set up a business and raise some capital.  If things go well, sales grow and they can hire more people.  The business grows based on retained profits – or they may be able to attract funding from venture capital or some other risk-taking investors.  Success brings legitimate big rewards to the people who are willing to risk an equity investment, which could rise in value or become worthless, and to those who work hard to make the business growth possible.

What does any of this have to do with the government?

According to an authoritative series of reports on entrepreneurship around the world, the government has a key impact not just on how many new businesses are created, but also – and perhaps more importantly – on the nature of these firms and their ability to grow.

The reports in question are the Global Entrepreneurship Monitor series, which has been running since 1999. I’ll focus here on the 2012 Global Report (from which the quotes below are taken).

Tracking, monitoring and measuring entrepreneurship is not easy, and the Global Entrepreneurship Monitor team deserves a lot of credit for developing a sensible methodology and sticking to it.  They survey around 2,000 adults in a random representative sample, and they talk with at least 36 experts in each country.  Their goal is ambitious: “GEM provides a comprehensive view of entrepreneurship across the globe by measuring the attitudes of a population, and the activities and characteristics of individuals involved in various phases and types of entrepreneurial activity.”

The focus is on “the incidence of start-up businesses (nascent entrepreneurs) and new firms (up to 3.5 years old) in the adult population (i.e. individuals aged 18–64 years)” (see Page 14).

No measure is perfect, but the strength of this approach provides insight into some fascinating questions.  Where do people want to create new businesses?  And when do entrepreneurs seek to make these businesses grow, rather than lurk under the regulatory radar?

These are important questions not just for the United States, where we pride ourselves on new enterprises being created, but also in all countries.  All societies want jobs and preferably good jobs at high wages.  Ideally also, there is a process of productivity improvement, meaning the amount that people can produce goes up every year.  (This can be consistent with maintaining a sustainable environment or even using fewer resources, although I will readily concede that is not the path most of the world is currently on.)

The reports are rich in detail, but three points jump off the page regarding the role of government.

First, when the overall environment for business is bad, there are many entrepreneurs.  For example, while there is a great deal of variation shown by the data within Africa, it is also clear that this is a difficult place to do business, because, for example, regulation is unpredictable and property rights can be hard to defend against powerful people.

Lack of human capital is also a weakness.  You need capable engineers, managers and many others to help companies grow.  The education system in many African countries is not in good shape.

Yet, there are plenty of potential entrepreneurs in the study: “Sub-Saharan Africa reported the highest intentions of any geographic region (53 percent), which is consistent with their positive perceptions about opportunities and their belief in their capabilities” (Table 2.2).

The explanation is simple.  In such economies, entrepreneurship is a fallback option, when it is not possible to get a decent job in larger business.

“As per capita income increases, larger established firms play an increasingly important role in the economy,” the report says. “This provides an option for stable employment for a growing number of people, serving as a viable alternative to starting a business.”

Second, the negative effects of macroeconomic policy can crush new business creation even in places with plenty of human capital and good perceived opportunities.

For example, the prolonged recession in Southern Europe has reduced the perceived opportunities for potential entrepreneurs: “The Southern European countries show not only a consistently lower level of opportunity perceptions compared with the Nordic countries, but they have mostly showed declines,” the study finds.

Perhaps this will turn around – entrepreneurs are good at dealing with adversity (and that’s the point from Africa).  But it’s hard to break into a market when customers are squeezed and investors are cautious.

The Global Entrepreneurship Monitor reports make a fine but appealing distinction: do you see opportunities, and do you plan to do anything about it?  These are separate issues.  If your current job is good enough, you will stick with it.  Or perhaps you don’t have the skills necessary, in your own mind, to make the leap to start a company.

It would not be a surprise if entrepreneurs help countries like Portugal to recover from the euro crisis.  But this is going to take awhile.

Third, the most difficult question is for what the report calls the innovation-driven economies, most of which are already among the richest countries in the world.  What, if anything, should the government do to promote entrepreneurship?

Perhaps the answer is: not too much.  All kinds of plausible schemes are put forward to help entrepreneurs at various stages of their development.  No doubt some of these are effective, particularly when they involve private sector mentors and building networks of contacts.  Also, helping companies at an early stage reach foreign customers can be helpful, so, for example, a business in Portugal does not have to worry so much about local or even regional macroeconomic conditions.

But what strikes me from the report is its data on the fear of failure.  Part of what drives these numbers may be cultural, but there must also be economic incentives at work here, like the consequences of going bankrupt for a company or an individual.  Compared with other countries, the fear of failure is high in Japan and also in South Korea.  This fits with other evidence from those places.  (For further thinking on why this matters, I recommend “Entrepreneurship and the Stigma of Failure,” a paper by Augustin Landier.)

The fear of failure is even higher in Italy and Greece.  Although we should worry about how precisely we can compare such attitudes across countries, the United States has one of the lowest fears of failure among rich countries.

Reducing the fear of failure for potential entrepreneurs is not any kind of panacea for economic development. Malawi, a poor country, has a very low fear of failure.

Government is responsible for the overall infrastructure in a country, and this includes access to education, decent roads and other transportation links.  There is also a case for supporting basic technology development, like at the university level, for example, because of the spillovers or externalities throughout the economy. (I work at M.I.T., which benefits greatly from such support and which has had a major impact on new business creation.)

In innovation-based economies (as the Global Entrepreneurship Monitor classifies them), what governments really need to do is to encourage people – entrepreneurs and the equity investors who back them – to take risk and ensure that failure is seen in a positive light, rather than as some kind of stigma.

The message should be: Go out and start a business, based on your best idea.  Find a technology with a new application or develop a different way to make customers happy.  If it doesn’t work out, you have still developed important skills and made a major contribution to society.

Millennials Genuinely Think They Can Change The World And Their Communities

July 6, 2013

By: Ariel Schwartz
Via: Fast Company

Far from the jaded, disconnected image you might have of them, 18- to 30-year-olds have a bright view of the future, and are willing to work to make the world better.

Young people in the U.S. care less about the environment and are more optimistic than their counterparts in other countries. They’re more concerned about the economy than anything else, but they still believe their quality of life is better than their parents’ generation. And through it all, the vast majority believe they can make a difference in their local communities.

This is all according to a survey of 12,000 millennials in 27 countries (ages 18 to 30) from Telefónica that probed respondents on their feelings about technology, education, personal freedom, and more. The overarching message: this generation has a lot of hope, in spite of the many global crises staring them down.

“I have this image of people between 18 and 30 years old as isolated from the world, not having relationships with each other. I was surprised to see how they see themselves as really integrated in the world, in their own communities,” says Alfredo Timermans, CEO of Telefónica International, U.S.A.

The study looked in detail at millennials all over the world: North America, Latin America, Europe, Asia, and the Middle East and Africa. Here are some of the highlights.

• American millennials are worried about the effects of globalization; 58% believe that globalization only generates opportunities for select individuals. And 76% think outsourcing is bad for the U.S. economy.

• Millennials all over the world can agree on the value of technology: 83% think technology has made it easier to get a job, and 87% say that technology has made it easier to overcome barriers. At the same time, however, 62% think technology has widened the gap between rich and poor.

• In most of the world, millennials are more concerned about the economy than all other issues. But in the U.S. they’re the most concerned: 46% of respondents think the economy is the most pressing issue, while 12% think education is the biggest problem. In Western Europe, people are concerned about the economy (34%) and social inequality (15%). In the Middle East and Africa, respondents are most worried about terrorism (19%) and political unrest (13%).

• Here’s something else millennials can agree on: problems with government. In every region surveyed, most respondents said that the government doesn’t reflect their values and beliefs.

• Overall, millennials believe the best way to make a difference in the world is to improve education, followed by protecting the environment and eliminating poverty.

• An impressive 62% of respondents believe they can make a local difference, and 40% think they can make a global difference. But in most of the world–outside parts of Europe and Asia–the majority of millennials believe they can make a global difference.

“There’s a sense of optimism about this young generation. We are really optimistic about the values of society in the future, the ability to be making a difference in the rest of the world,” says Timermans.

Check out the full survey here.