As America pursues economic recovery from the pandemic, a shift is happening. More communities are realizing that prosperity comes not from recruiting corporations from afar, but from nurturing homegrown businesses. And the best way to do that is by connecting people and removing barriers in their way.
It’s a lesson from which every community can benefit. But it’s a lesson that keeps being obscured by the “allure of big.”
Traditional economic development assumes that growth comes from big businesses. That’s why so many communities subsidize efforts to recruit corporate headquarters, manufacturing plants, distribution centers, and other large facilities. These programs make great headlines. It’s easy to count the jobs. Lawmakers love the ribbon cuttings.
But this approach is flawed in three respects. First, it’s new emerging businesses–not old established businesses–that create virtually all net job growth in America. Second, there simply aren’t enough corporate site selection projects to go around; thousands of cities, counties, and states fight over about 200 per year. Third, big businesses can pick up and leave just as fast as they arrive. They’re usually not loyal to any place.
The “allure of big” is captivating. Many cities look admiringly at Silicon Valley and often envy its concentration of big companies like Google and Facebook. Silicon Valley seems like proof that prosperity can be planned like a formula. But that’s not how it works. I’m always amazed at the number of people who try to capture Silicon Valley’s magic in a bottle and get it wrong.
I lived in Silicon Valley for a decade, studied it closely, and wrote about it extensively. The key to understanding Silicon Valley is not what it looks like outwardly today, but its origins. As I wrote, with Greg Horowitt, in The Rainforest: The Secret to Building the Next Silicon Valley (Regenwald, 2012), it was people’s informal actions–not any grand master plan–that spawned Silicon Valley, and still power it today. The real magic happens in scenes that tourists don’t notice: coffee-shop conversations, casual meet-ups, and random collisions. That’s where napkin sketches turn into startups. Where people gather, collaborate, and innovate. Where serendipity happens.
Four years ago, the “allure of big” was irresistible when Amazon announced a national competition to host HQ2, its second headquarters. Lured by the prospect that prosperity could be planned, 238 cities submitted proposals. One of those cities was Kansas City, Missouri, where I had just moved to become vice president of entrepreneurship at the Ewing Marion Kauffman Foundation, a leading philanthropy for entrepreneurs.
Kansas City couldn’t resist joining the contest. But here’s the reality: Entrepreneurial businesses in Kansas City regularly create more new jobs (75,000 in five years) than Amazon promised (50,000 over 10 to 15 years)–and without the extraordinary cost. The co-winners, New York City and Virginia, offered a total of $3.4 billion in tax incentives and grants. Public outrage over the cost eventually forced New York to withdraw.
The silver lining of the pandemic is that talent has been unshackled from geography. Remote work means that Silicon Valley-grade talent doesn’t have to be in Silicon Valley. Economic development must adapt to this new reality. Just as you can’t plant a rainforest, you can’t grow an economy through corporate subsidies. What works best is connecting talent and tearing down barriers, and that can be done anywhere. That shift in thinking is already happening. In May, the International Economic Development Council, a Washington, D.C.-based nonprofit, began offering a training certification to economic development professionals on how to grow homegrown entrepreneurial businesses, not just follow the “allure of big.”
But that’s far from enough. More than ever, America needs new businesses to spur job growth and regenerate small businesses destroyed by the pandemic. That’s why I founded a nonprofit movement called Right to Start to prioritize entrepreneurial opportunity in our communities. We believe everyone has a fundamental “right to start” and pursue their dream business, and everyone deserves a level playing field to do so. It’s a basic right, just like our rights to speech and worship. We can unleash everyone’s right to start by enacting better policies for entrepreneurs, sharing stories about the power of new businesses to transform lives, and giving citizens ways to drive change.
To fulfill that right for everyone, however, we must shift our thinking. Entrepreneurship is not a solitary endeavor, but a community sport. And every community–whether big or small, urban or rural, rich or poor–can play that sport. Entrepreneurship is not just about tech startups. Every new business–whether started in a garage, atop a kitchen table, or on a street corner–has the potential to improve lives, add value to a community, and grow jobs.
America’s communities must stop being tempted by the “allure of big” and instead focus on what they already have in their ecosystems. Connect diverse talent. Equalize access to essential res like capital and knowledge. Tear down barriers. Foster collaboration across silos. And make better policies at federal, state, and local levels–Right to Start’s Field Guide for Policymakers provides a valuable reference manual. For example, one policy change that would make a massive impact, yet require zero new spending, is to reallocate just 5% of what governments now spend to boost incumbent large corporations to new small businesses in the areas of economic development, workforce training, and procurement.
Everyone matters in entrepreneurship. You don’t even have to start a business yourself. You can build connections by introducing friends starting or growing businesses who might benefit from knowing each other. You can remove barriers by telling your elected officials to make entrepreneurs a priority. You can help by simply giving new local businesses a try. If you like a new business, tell your friends. Spread the word about entrepreneurs you love.
We regrow America’s economy by unleashing our entrepreneurial energy. And we start wherever we are. Connect people, break barriers, and homegrown businesses will rise.