We need more entrepreneurs
My Brunswick News column tomorrow will be on entrepreneurship in New Brunswick. I don’t want to fully let the cat out of the bag but the data suggests we have less locally owned businesses now in New Brunswick than before the pandemic and the addition of tens of thousands to the population.
I speculate on some reasons why but the biggest concern is the lack of young people going into entrepreneurship. New Brunswick ranks 9th among the 10 provinces for the share of 25-34 year olds who are self-employed with employees (a good proxy for an entrepreneur).
From the 2021 Census, 43% of everyone who was self-employed with employees in New Brunswick was 55 and older.
That is a potentially dangerous combination. Only a trickle of young people getting into entrepreneurship as a wave of business owners retire.
I know we have been talking about this for more than a decade. It is a wicked hard problem because you certainly can’t force young people to start or take over businesses. It takes a specific set of skills to step out like that.
But if nothing happens I worry nothing good will come from it. There will be less local competition in many key industries and possibly less NB companies exporting into national and international markets. Investment decisions that impact the economy will increasingly be made in Toronto, New York or Mumbai. Profits made here could be increasingly shipped outside the province.
I am not trying to glamourize small business but we need a healthy sector to ensure we have robust, competitive markets in the province and to foster new exporting companies.
Entrepreneurship is not as attractive as it once was for many reasons, but the main one is competition. Large corporations are taking over what small businesses used to do, from publishing books to selling clothes. The online publishing business is a good example, where self-publishing has become a business designed to shift money from the author to Amazon, Facebook, and a myriad of marketing companies. A small business selling clothes, shoes, or toys faces the same oppressing competition. The economies of scale are enormous... ask Jeff Bezos, Mark Zuckerberg or Elon Musk.
If a young person starts a business, they need capital, and personal guarantees are a given, meaning if the fail, they will lose everything including their house and any investments they've made in a pension fund. The risk/reward is heavily skewed against anyone who starts a business. If the entrepreneur succeeds in a substantial way, a large corporation will sell under his cost, with prices the small entrepreneur can't compete against. It is death by a thousand cuts, and it is a soul-destroying experience.
Government 'lenders of last resort' demand the same personal guarantees as banks, and are at least as merciless when it comes to collection. The most ruthless of all is the government-owned Farm Credit Corporation, and they are responsible for more bankruptcies than any bank I know of.
Good ideas are out there, and there are young ambitious men and women who are willing to invest their ideas and time. They should not be threatened with poverty if the idea doesn't make money. ACOA, IRAP and other government programs employ experts to look at ideas before they invest, and personal guarantees should not be required. The idea and the work should be enough.
I worked for Google X for a short time as an independent contractor and was exposed to their search for 'Black Swans,' investments in ideas that would certainly fail, and when they failed, the losses were spectacular. No one lost their job—Google paid the bill and considered the whole thing worthwhile because of the knowledge they had accumulated. Google considers a 'black swan' from a monetary perspective to be a knowledge asset, and education of their employees and the public, and thereby the accumulation of information from failed projects is part of their business model. Profitability flows from there. Our government should take a page from Google's book and invest in ideas without destroying the entrepreneur for a 'black swan.' Black swans can be a beautiful thing.
"You can't pre-business-plan a moonshot any more than you can paint a masterpiece using paint-by-numbers given to you by a committee." Astro Teller at Google X.