Perspective: A Job Saved Is A Job Created?

As referenced under the 12 Myths of Economic Development, the jobs-saved-versus-jobs-created debate makes for some rather creative accounting.

Now, though, the concept is making its way into the public psyche, given the prevalence of the stimulus bill:

http://newsbusters.org/blogs/noel-sheppard/2009/10/30/cbs-white-house-stimulus-jobs-numbers-hard-believe
http://blogs.abcnews.com/politicalpunch/2009/10/160000-per-stimulus-job-white-house-calls-that-calculator-abuse.html
http://apnews.myway.com/article/20091029/D9BKMVMG0.html
http://www.washingtonpost.com/wp-dyn/content/article/2009/10/28/AR2009102804540_pf.html
http://www.bloomberg.com/apps/news?pid=20601039&sid=aUuHhaDx8Hr8

Perspective: Theodore Roosevelt Malloch

Attending a luncheon today, hosted by the winners of the most-interesting name contest, American Values Investing.

"To be sure, there have been a number of robber barons - perhaps 2% - to allow a continual perpetuating of the claim against capitalism," said Theodore Roosevelt Malloch, PhD. "But I ask you if this the norm, and does it negate the qualities that we and others around the world enjoy from capitalism?"

"Which is it? This is, as my friends in logic are keen to say, this is a key decision mechanism," said Malloch. "Is it possible that a key number of businesses can be constructed in a way that counters the narrative of anti-capitalism?"

Malloch said he was motivated to write Spiritual Enterprise by Sir John Templeton, his mentor, who comes from a town I lived in for a few years, Winchester, Tennessee. Templeton in his later years founded a research institute close by, on Sewanee Mountain, adjacent to the University of the South.

"I feel defenders of capitalism have missed the key concept of virtues," said Malloch,  a"nd the concept of calling - a theological concept whose basis has been forgotten - of which we need to remind ourselves. Those who question the benefits of capitalism must also be shown examples where an ethical implementing of capitalism is wholly consistent with moral, ethical and spiritual reasoning."

Social capital is enhanced by interactions and relationships within society, according to Malloch, while spiritual capital is enhanced by a completely different relationship with a higher power.

"A business flush in spiritual capital will generate the virtues of faith, hope and love," said Malloch, listing several of the more than 60 examples of servant leadership from Chick-Fil-A and Herman-Miller to Interstate Battery and several public firms.

He also spoke of the differentiation of the hard virtues of perseverance and leadership, as well as the softer virtues of humility and compassion.

"These softer virtues exist," said Malloch, "in American business. My mentor, Sir John, taught me the virtue of gratitude, saying that it does not represent weakness, but rather lightness, openess and strength."

Additionally, the concept of primary and secondary virtues, as well ad Plato's heirarchy of virtues, are gaining merit within organizations - and even the lecture hall.

"The book, which sold 25,000 copies in its first version, is being translated into French and Chinese, as we speak," said Malloch. "Additional research has been done in the meantime, including cross-discipline work being done between Yale's school of business and its school of divinity, to look at 24 real case studies of the benefits of spiritual capital."

A second edition of the book will be forthcoming, after the release of Thrift in early Novmeber, which Malloch calls one of the forgotten virtues.

"The companies with spiritual capital have been around for a long period of time," said Malloch, noting that about 40% of the companies in the examples were privately held. "There may be more strength or ease to keep the founder's virtues within the company's long-term DNA in a private company, but I hope to use the additional research to explore leadership as a virtue as well."

Malloch posits that leadership is a a quality potentially contained in everyone in an organization, but stressed that a leader must equally be a "good listener and follower"to actively maintain leadership.

iPhoned

Kingsport wins small business award

[Update Nov 3, 2009, 3PM Eastern: Ugh. CNN Money made an error. Apparently this has happened before, and the community took a proactive approach.]


[Update Oct 14, 2009: A growth rate of almost 44 percent over four years seems a little high, even for a “most improved” award. The methodology of the numbers deserve a second look to confirm, which I’ll do when I return from my business trip to San Francisco and London. Still, congratulations to Kingsport for getting national recognition of the City and the Chamber's joint program!]





Kingsport, TN, my adopted home town since late 2002, is number 1! The new CNN Money small business poll ranks Kingsport first—by a long shot—in the Fastest Small Business Growth category, which measures growth from 2004–2007.

The national recognition for Kingsport is especially exciting for me, personally, because I worked with the Kingsport Area Chamber of Commerce from 2004 to 2006 to create and implement a business plan for the Kingsport Office of Small Business Development and Entrepreneurship (KOSBE).

The Chamber sought my participation partially for my work with tech startups and small business incubation and partially for my work in technology transfer and assisting large businesses looking to provide additional benefits for employees being downsized. (The KOSBE plan was funded both by the City of Kingsport and a local Fortune 500 company in the process of offering early retirement lump sums to a number of executives and senior managers.)

In June 2004, when we completed the initial business plan, the Chamber's CEO asked me to become a Chamber employee to implement it. Instead, we agreed on a twelve-month contract to launch the program and find a permanent successor to run it.

The KOSBE program experienced significant growth over the initial 20 months (I extended my contract to 20 months at the request of the CEO, who was called up for a year in Fallujah). In mid 2006, we found a successor, Aundrea Wilcox, who has continued to grow the program, and I went on to help launch the MountainSouth World Trade Center (the first non-metropolitan WTC).

The KOSBE program has been a great success, and I’m glad to have been a part of it. Is Kingsport the best place in the country to start a business? I would say “yes!” It’s great to see the city get the recognition it deserves, and I can attest to the quality of Kingsport as a place to run a small business, which I've done now for almost 8 years.

Small business development is economic development!

Ok, I admit that I complain alot about the lack of technology development and small business development (and especially small technology business) in old-school economic development, but this quote from a recent article really drove home the need for stimulating small business ....

Turns out we're now at the highest youth unemployment rate since World War II, with over 9 million or 52% of youth unable to find a job. During previous recessions -  early '80s, early '90s and 2000s - unemployment among 16-to-24 year olds never went above 50 percent and job growth followed within two years. This recession, though, is different.

In the NY Post article, Al Angrisani, a former assistant Labor Department secretary, states the construction of the current stimulus bill may delay small business job growth.

"There is no assistance provided for the development of job growth through small businesses, which create 70 percent of the jobs in the country," Angrisani said in an interview last week. "All those [unemployed young people] should be getting hired by small businesses."

There are six million small businesses in the country, those that employ less than 100 people, and a jobs stimulus bill should include tax credits to give incentives to those businesses to hire people, the former Labor official said.

"If each of the businesses hired just one person, we would go a long way in growing ourselves back to where we were before the recession," Angrisani noted.

Hmm. Small business and entrepreneurs as the path toward recovery? Makes perfect sense to me. But do they teach this @ IEDC?

iPhoned

Innovation in Governance, Education Style

During my return trip from the IBC tradeshow in Amsterdam, I sat next to a fellow attendee who also happens to be from the Tri-Cities of Tennessee and Virginia. He brought me up to speed on several pieces of news, since I had been in Europe for over two weeks with limited connectivity.

One of the most interesting was the news that Kingsport, TN, has been honored by Harvard's Ash Institute for Democratic Governance and Innovation for educational innovation.

While DevelopedEconomy.com is not a Kingsport blog (Jeff Fleming's widely read Kingsport! blog sweeps that category), writing about national achievements my "adopted hometown" receives fits nicely within DevelopedEconomy.com's overall mission of educating readers on the basics of innovative economic development. Or at least that's my excuse to broadcast this news.

Each year, the Ash Institute, part of the John F. Kennedy School of Government at Harvard University, honors winners in six categories of governance, including the education category that Kingsport was nominated for - and ultimately won.

Here's a brief excerpt from the award press release, dated 15 September 2009:

"Formerly a rustbelt city with an overreliance on heavy manufacturing, Kingsport’s growing aging population, shrinking younger workforce, and dropping education levels of area residents threatened to further depress the region’s standard of living."


"In order to reverse this impending economic crisis, Kingsport launched a successful ‘Educate and Grow’ campaign to attract new business investment to the region by upgrading the quality of its workforce. Started in 2001, the program is one of six government initiatives honored at yesterday’s awards reception in Washington, D.C. and will receive a grant towards sharing its innovation with other jurisdictions around the country."

Kingsport's most innovative concepts came out of an economic development summit, hosted in 1999 by the City's forward-thinking Mayor, Jeanette Blazier. Attendees included the city manager, the city's aldermen, and key economic development entities. One of the key tenants of that summit was an innovative educational scholarship which allows "any Kingsport high school graduate is eligible for a four-semester scholarship at the city’s Northeast State Technical Community College. Such funding allows students to earn a two-year associate’s degree or transfer credits towards a four-year bachelor’s degree."

The current mayor and aldermen are reaping the rewards of this decade-old "sowing" of broad innovations on not just the scholarship concept, but also the revitalization of downtown, which was first planned in 1999. The current administration is implementing the original Educate and Grow vision, and re-emphasizing Kingsport's commitment to a downtown growth through the "academic village" concept that the Ash Institute also noted in awarding the education category to Kingsport.

Publicity and national recognition is the primary capital for this type of award, although each of the six winners receive grant money to share their innovations with other municipalities.

As part of the awards ceremony, a video was shown. The 2009 Visionaries video has yet to be uploaded to the Ash Institute's YouTube channel, but the fact that the Ash Institute has a YouTube channel - and used streaming video during the presentations by Kingsport and others - is worth noting as a beneficial use of technology in economic development.

Economic Development Myth 12 - We've Tried That Before

I’m just finishing off two events that remind me of the phrase:

We’ve Tried That Before

The corollary, in reality, is this belief:

It Didn’t Work, So Why Try It Again?

The first event was a dinner meeting with a group of VCs and an executive from an early stage startup; the VCs are - for the most part - people I worked with or for during the heyday of the late 1990s, doing go to market strategies and market / competitive landscape strategies. They’re now back in the business of moving video from one place to another, but doing it with handsets instead of desktop computers (the song’s the same, only the devices have changed).

The second event is a recap article I’m writing for one of the magazines I have the honor of writing for in my spare time between consulting projects - www.streamingmedia.com - as the magazine / website turn 10 years old this year. This has brought me back into contact with another group of peers that I’ve interviewed to find out “where are they now?”

Guess what? Some of them have moved to different industries but are shaking those industries up as well (one went into real estate technology, another into early influencer marketing, and a third into fashion). Still others have taken a break from the work, after selling a company, and are back in the game in the venture, angel or executive role. 

Some of them are even trying again what they tried in the late 1990s but couldn’t complete because the technology, environment and user base weren’t honed to the level that they now are.

So the next time you hear a government official say “we tried that before,” give this one back to them

If the situation is exactly the same - including the same customers, constituency and backers - maybe the failure wasn’t the idea. If the situation is different, are we trying it again or a different way?

My favorite use of the phrase “We’ve already tried that” comes when talking about entrepreneurs and incubators. Those government agencies which have tried an incubator and failed did so not because they didn’t have potential success stories, but because they refused to prune the system of the dead wood of “wannabe” entrepreneurs to let the true success stories grow. And then they made matters worse by stunting the success stories by asking them to remain as “anchor tenants”. Entrepreneurs that use incubation the right way get the heck out of Dodge when it’s time to grow, and then return to the incubator again when it’s time to seed the next idea.

Pushing the incubated business out the door often means you’ll get two or three more within six-seven years from that same entrepreneur. My former colleagues - the new VCs - will attest to that as many of them are looking to start private incubators to remedy the ill-attempted public incubators.

Economic Development Myth 11 - Seed Capital Must Be Private

I’ve often heard this phrase:

Seed Capital Is a Private Affair

At the core of this myth is this belief:

Government funds can’t be used to benefit a particular entrepreneur

I’ll be the first to say that government money (with government strings attached) isn’t in the best interest of entrepreneur: for one thing, the government’s not really qualified to make direct investments, and cronyism or nepotism could more than likely result.

There IS a way that works for government investment in the best and brightest, one that is being used in countries that have a limited amount of seed capital and one that fits within the boundaries of Myth 3.

In a fairly timely conversation, I just spent an hour with an investment manager that walked me through the way that Denmark is approaching seed capital. Denmark has Lego, Skype and a few other key industries but had never really figured out how to do seed capital.  Then, in 2005, it decided to put place a seed capital fund in the hands of a private investment firm called, appropriately Seed Capital. The first fund, at DKK 500 million (just over $100 million), was established in 2005 and required that at least $60 million of that be directly invested in new businesses and the remaining was invested as shares in existing businesses.

The fund’s investments are to be made by a team of professional investors with experience within financing of businesses in the very early stages as well as experience in the combination of public and private sector financing.

The investment partner told me an interesting thing happened: at first the government wanted to completely protect their money, which makes an investment manager’s job impossible; then it moved to asking for just half the money back, at least getting the point that some companies are going to fail (most, without incubation or mentoring) and need to be put down, regardless of whether they’re funded by private or public funds; then finally on to requiring a particular ROI from Seed Capital.

Based on the current capital base, the fund is expected to be able to invest in between 20 and 25 new businesses. The goal for the fund is to raise additional capital during the next year.

Guess what? Here’s the great part: the investment managers can also pick a few of the growing companies that they’ve invested the public funds in, and then put VC money into them for the second round. In essence, the 10-12 companies per year that government capital is invested in may yield a few companies that are ready to move to the next level, and the private VC money that is used matches or far exceeds the government funds put into the initial seed capital fund.

I know, some will cry “foul” because a few people profited off of it. But look at it this way: these people (the VCs and investment managers) will make this money anyway on other deals. The lack of serious capital within the country (or in a state, for instance, in a US example) only means that the VCs may have to invest in another country (or state).

What are the implications of that? No tax revenue, no jobs and eventually no entrepreneurs - a vicious cycle that’s not beneficial to anyone. On the flip side, government seed capital, in the hands of a wise investment manager means wealth creation for entrepreneurs and company owners, returns for the government, and jobs for the workforce.

In other words,

The government’s way of “investing” via tax abatements has no benefit to the startup entrepreneur; try investing the way an angel or VC fund would invest for measurable results.

How ‘bout them apples?