America loves entrepreneurs. And for good reason, as small businesses are incredibly important to the country, generating 44% of US economic activity. There’s something about the grit and determination it takes to launch a business and the American ethos of individualism, determinism, and hard work that jives really well.
The start-up founder is an almost legendary figure in American culture. People like Elon Musk, Bill Gates and Jeff Bezos have an enormous influence on our society — sometimes good, sometimes bad, but always significant.
During the pandemic, it seems like everyone has been building their personal brands, launching some kind of side-hustle, or “pivoting” with the realization that job security at large firms is never a guaranteed thing.
The so-called “gig economy” is growing every year, with more and more people operating as independent contractors and taking on multiple, part-time opportunities for additional revenue.
It makes total sense to diversify your income stream. It’s very difficult to argue with the fact that we all need to take precautions not to rely solely on our employers to provide for ourselves and our families.
However, we take this theory too far when we pretend there is the potential for some glorious capitalistic future where everyone founds their own start up or enters at the ground level at someone else’s and there is no need for the government to create jobs and provide basic human services.
Presidents and presidential candidates, from Barack Obama to Mitt Romney to Donald Trump, have all called for or created policies that foster entrepreneurship. This is a good thing. Entrepreneurship breeds innovation, creates wealth, and can help move society forward.
What it doesn’t do is create a social safety net or provide answers for a future of automation where there might just not be enough jobs to go around. It doesn’t ensure that firms remain competitive and don’t dominate the market or punish bad players who violate the rules of society.
In short, entrepreneurism doesn’t address any of the problems that government can.
The Pitch for Entrepreneurship and “Start-Up” Ecosystems
I wouldn’t even be writing this article if there weren’t some strange theory floating around that instead of things like Universal Healthcare or UBI what we really need is for school-age children to take more classes on entrepreneurship so that that they can pull themselves up by the bootstraps.
In a February 20th article for The Hill, former Cisco CEO John Chambers said, “we find that people today are less optimistic about the future and the classic ‘American Dream.’ … as a result, we are beginning to hear cries for socialism and drastic reform, especially from younger generations.”
Ok, so far pretty accurate.
Then, he goes on to say that rather than , “dividing up the pie” and a “redistribution of wealth”, we must focus “our legislative, educational, and investment efforts on creating an atmosphere where the true cornerstone of the American Dream can thrive once more: Entrepreneurism.”
So, the answer to climate change, lack of healthcare affordability, a changing world where we may all be replaced by computer algorithms is…an “atmosphere of entrepreneurism”.
We’re facing some pretty huge challenges, is the next Facebook really going to solve them?
Not to be flippant, I do believe that free-market innovation is necessary to our progress as a species. But we can’t seriously think that everyone is going to go work at a start-up and that’s going to solve all the world’s problems, can we?
Entrepreneur Naveen Jain says in his book Moonshots that “entrepreneurs play an unmatched role and the accelerating pace of innovation is transforming the face of global challenges” and “governments take too long to get things done.”
This is a common, and accurate, critique of government — that it is slow and lumbering, unable to quickly change and evolve.
The thing is, the slowness of government is a feature, not a bug. It’s there so that a tyrannical leader can’t come to power and change everything overnight. This is the whole concept of “checks and balances” that the framers of the Constitution envisioned.
The thing about start-ups is that, while some are wildly successful and change the world, most of them fail. We can’t afford for the government to fail — too many people depend on it.
Government is good at scale — once an innovation has been made through emerging technology or a new discovery, government can scale and implement that innovation like no other. Government can also pour billions of dollars into R&D to come up with things like the internet.
Private companies need to make a profit. Government is there to serve the people. If you ask a start-up when they are going to turn a profit and they say in 20 years, that is a problem. Government can take the long view and invest in projects that might not make a difference in the short term but can lead to progress in the long term.
The Healthcare Challenge
Being in the midst of a public health crisis can really put things into perspective. Especially in the US, healthcare is an issue that needs attention. The essential debate boils down to whether you think healthcare is best administered by private companies, by the government, or a combination of both.
We’ve seen the result of healthcare being administered by the private sector with government regulation — costs continue to rise, care does not get any better, and spending on healthcare takes a greater and greater percentage of the average American’s salary.
The other major downside to our current system is that access to health insurance, and therefore healthcare, is tied to your employer. In a major economic crisis, many people lose their employers, and with it their health insurance.
This is also an obstacle to creating a “start-up economy”. Automatically, anyone with a family or an underlying health condition needs to think twice about starting a business because they can’t afford to lose the access to health insurance that comes with steady employment.
Start-ups are often thought of as a young man’s game, the stereotype being the college student who founds a billion-dollar company in their dorm room or parent’s garage.
But is this really because young people are better at starting companies? Logic would dictate that professional experience can be very helpful in founding companies. Perhaps young people just have more time on their hands and less people counting on them.
The fact that healthcare is tied to employment makes it less likely for people to take risks like leaving their job for part-time employment to work on a business or quitting entirely to dedicate their full time to a venture. It also makes it more difficult and expensive for start-ups to hire the people they need at crucial times when they need to keep costs under control.
Employers spend nearly $15,000 per employee to cover health insurance costs. Start-ups are the least equipped to pay for this. Large, established companies can attract the best talent by offering lavish benefits packages, while startups are limited to less experienced workers who do not have families or mortgages.
When we talk about fostering a “start-up economy”, how can we ignore the fact that a plan like Medicare for All would be a huge boost to start-ups everywhere?
If healthcare costs continue to rise, it will be harder and harder for anyone to start a company and for those that do to hire qualified employees.
Jobs of the Future
The world is changing. Jobs that didn’t exist 15 years ago now are a major part of the economy. Technologies like AI and robotics are increasingly able to perform tasks that humans used to monopolize. Right now, these technologies are still difficult to implement or not quite good enough. But that won’t be true for long.
2020 Democratic Presidential Candidate Andrew Yang has been very vocal about this issue. He founded a nonprofit, Venture for America, that seeks to revitalize depressed cities through fostering entrepreneurship and compared what he was doing to, “pouring water into a bathtub with a giant hole ripped in the bottom” because even as his start-ups were creating jobs, tens of thousands of jobs in the states he worked were being lost due to automation.
Some of the most dire warnings say that up to 40% of jobs could be replaced in the next 15 years, especially “boring and repetitive” jobs.
Even white collar, traditionally high paying jobs in finance, accounting, and coding could be replaced by advanced AI in the near future.
Optimists say that all of these jobs will be replaced by new jobs we don’t even know about yet. They point to jobs like UX designer and Social Media Manager that didn’t exist 20 years ago.
It’s difficult to prove or disprove this assumption, but it doesn’t make sense logically. Society is getting more efficient — we are doing more with less. Why would more jobs be created by increased efficiency in the long term?
We need to protect the most vulnerable among us. Already, large swaths of the country have seen years of depression due to automation. That trend will only continue.
It seems we have two choices: a future where there is a massive underclass of people who do not have the skills to compete for the ever-dwindling number of jobs left, or a future of abundance where robots and computers do most of the work and the average human lives a life of leisure.
The way to ensure that the fate of the world follows the second path is not clear. What is clear is that governments and societies around the world will need to come together, working with the most innovative companies and individuals to create solutions.
Ideas like Universal Basic Income are a step in the right direction, but we will need to go much further to ensure that our children and grandchildren live in the kind of world we all want them to.
Entrepreneurship is incredibly important — it breeds innovation, creates jobs, and allows people to have financial independence. But when we use entrepreneurship as some kind of be-all, end-all solution for many problems we are facing as a species, we are severely underestimating the actions that society will have to take.