I like small biz, I really do

My TJ column today followed a common theme on this blog – namely, the difference between small business owners and ‘entrepreneurs’. To some this is a semantic quibble, but if government policy is meant to create ‘entrepreneurs’ that are looking to grow neat ideas into national and even international businesses, it is vitally important to clearly differentiate the two. Read the column for my thoughts.

I have long said that one of the best ways to create entrepreneurs is to attract a few large, highly innovative multinational firms. When I put this forward before, it was hotly debated but I remained convinced that entrepeneurs are not born, they are incubated. Incubated in university research activities and incubated in large, inovative companies. As I said before, when you look at the bios of most successful entrepreneurs (certainly not all) there is almost always a stint at a large firm. They go in, they learn stuff and they get frustrated, leave and start their own business. Think Nortel. In New Brunswick, think Aliant. A good chunk of NB’s successful entrepreneurs did a stint there.

Now if you want to foster more barber shops, consulting firms, caulking contractors, corner stories, pet grooming companies, niche retailers, etc., keep on fostering ‘small business’.

But that, in my opinion, is another debate. I don’t even want to go there. Specifically, are more walmarts and less mom and pops better or worse for an economy. There are studies that show Walmart has driven down the cost of retail goods compared to mom and pops.

But you can debate that ad nauseum. That is not my point.

I am talking about the difference between mom and pops and entrepreneurs.

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0 Responses to I like small biz, I really do

  1. richard says:

    I have worked at several large universities in the US and Canada. The universities that put a premium on science research had spin-off companies in nearby reearch parks. Some of these companies went on to become global players in their markets, generating large number of high-paying jobs in the process.

    Too often, the public and university administrators see universities as training institutions and not much more. I think that universities can and should be incubators of novel industries. If I was Premier Graham, I would tell the UNB president to dump a good chunk of the graduate programs in arts, economics, the ‘soft’ sciences (polysci, sociology, etc – Let STU and Mt A pick up these areas) and move resources into sciences (value added natural resource products, energy science / engineering are a couple of areas). With declining enrollment, UNB is starting to cut some of these programs; I’d do exactly the opposite.

    If UNB refuses to play ball, and contines down its foolish ‘comphrensive’ path, then I’d either offer resources to U de M to develop these programs, or I’d try to get rid of the current UNB president and replace him with someone with more sense.

  2. Anonymous says:

    Disappointed in your perspective. I expected a deeper understanding of how the economy works.

  3. mikel says:

    Entrepreneurship is a lot like art. There is no hard and fast rule that says ‘do this and you will get X’. People and environments are different all over. For export, as we’ve discussed, a person would simply have to be crazy to start in New Brunswick. The only people that would are those with strong links in their communities, because there simply is no market.

    There are markets for the local entrepreneurs, and here again you are wrong. Take for example the guy who moved back home to Moncton and started building staircases for developers. Developers found it cheaper and better to deal with him, and he’s grown. He may never make staircases for the international market but so what?

    The guy who started pizza delight or pizza twice is every bit as entrepreneurial as, well, anybody.

    But to FOSTER their growth is something else. I agree with the part about ‘incubation’, sort of. The point is that most people avoid small business because it is HUGELY complicated. Virtually anybody in business will tell you that the biggest pain in the ass is labour. And as soon as you want to produce something, along comes so much work doing the paperwork, marketing, bookeeeping, that suddenly you are no longer doing what it is you love that got you into small business in the first place.

    To attack the aliant idea, part of that was part of the problem, you had a bunch of guys with the ‘connections’ to continuously feed off the government.

    As for universities, thats a HUGE subject itself. Waterloo is considered a big success story, but a good percentage of the tech startups came about just by the fluke of a couple of guys inventing (or stealing) the blackberry.

    And currently, you can see the fallout. Our governments have been ponying up more and more dough in order to keep these places profitable. A building was built with the specific intention of being an ‘incubator building’ for new startups, and after sitting half empty for a year and a half is now occupied by an established company.

    In the sciences I can speak from some experience, it is VERY difficult to find a profitable research company. In Moncton they got private financing but also government money for cancer research because they got some exposure, however, the odds of that research turning into a viable cancer treatment are VERY slim.

    There is no magic bullet to entrepreneurship, however, there are some things we KNOW. For example, to again bring up a provincial television station, thats an almost guaranteed ‘incubator’ for the arts, which is growing rapidly. However, thats held back by Rogers and other nationals who don’t want more competition, let alone subsidized ones. But how much does it cost to produce a show? A popular online show is done for $200 an episode.

    That’s just an example of an incubator model-the incubator is actually the ‘market’, a market that currently doesn’t exist.

    I’ve never seen any research that shows that entrepreneurs are any more likely to come out of large companies than small ones-or no ones. How many entrepreneurs have come out of Irving?

  4. richard says:

    ” a person would simply have to be crazy to start in New Brunswick”

    That exactly why NB has to use energy as bait to attract some big players, while using universities in some of those same areas to create critical masses of expertise. There are plenty of examples of spin-off companies from large outfits and universities to show that this approach can work. If you look around the midwestern US for example, you can find several examples of job-generating research companies that got their start in uni labs. If it was up to me, I would find companies and research projects that drew upon NB’s natural resources.

    And as far as ‘flukes’ are concerned – those aren’t flukes, they’re inventions. Yes, it is difficult to determine which inventions will go and which ones won’t, but that is what a good research univeristy is for. Too bad that is something NB does not have.

  5. nbt says:

    Running, growing or starting a small business in New Brunswick means dealing with obstacles everyday – it is part of the small business landscape of the province.

    Some obstacles are beyond the entrepreneur’s control, like inequitable taxation and government intervention (picking winners with your profits via high small biz taxes), however most are not.

    For the government, it should be all about grooming the best business landscape and small biz plan so that NB startups can not only become viable, but profitable as well.

  6. mikel says:

    I agree with Richard and David, low energy rates can be a real carrot. I suspect that’s part of the reason UPM packed it in. However, although this is just a guess, you can see who has clout in NB when the Irvings made the claim about ‘moving to quebec’. The ‘picking winners’ only really applies with those who are already winners. I suspect Irving will find a way where the ‘industry’ failed. Mostly because its clear the government doesn’t want ‘the industry’, but it always appeases Irving.

    High taxes isn’t ‘picking winners’ if everybody pays the same taxes, and small biz taxes aren’t much different than other provinces, so that’s just silly. There are lots of places with high taxes, in many cases that’s GOOD for business because high taxes typically means good health care and good infrastructure. Picking winners is when a specific company gets a ‘favour’ from government over others. And thats specious arguing to say that by not having low taxes one is ‘picking winners’. NOBODY describes corporate welfare like that.

    My point about RIM was that it WAS a fluke. In other words-its unpredictable, and how do you plan for unpredictability? You can’t. There was no way of knowing that invention x would hit such and such a market when there was no competition and become an economic phenomenon. You can make it easier though, obstacles aren’t the issue, anybody who has ever been in business knows its ALL about overcoming obstacles. At universities though you have to look at royalties. U of W was the first to seriously axe their royalty rates. However, the amount of bureaucracy is still EXTREMELY high, the difference is that the university won’t even LOOK at you if you want a job and aren’t bringing your own funding. Which of course is problematic itself, it means only industry research gets done. Take a look out of the story never even mentioned in Canada from Great Britain about how food additives have been positively linked to behavioural problems in kids. Nobody in canada is even looking at stuff like that-everything is cancer (which is also a problem since you have no reason to deal with the environmental causes).

    So when you CAN”T make predictions about entrepreneurship, you CAN at least make predictions about things that have outside value anyway. You CAN”T have lots of technological invenentions when you barely have educational infrastructure.

    See Richard’s comments above about the university situation, although I tend to disagree that just because a university ‘specializes’ that it has more innovative impact. I’d suggest the reverse is true, again, the University of Waterloo is one of the most recognized in the country, and if anything they are adding MORE departments and think tanks virtually every year. It didn’t have much in the way of health, so it started a pseudo medical school.

    A university CAN be entreprenerial, and perhaps that helps set the stage. How many think tanks or new departments does it have? Any university worth its salt would have started its own medical school DECADES ago and then went to the government for more funding. ANd again, we can talk about STU setting up journalism at a time when journalists are being axed all over the country. CBC can only hire so many.

    It MAY make a difference when all the chains on the ladder make a big deal about entreprenial skills. But its flimsy evidence, Waterloo invests a LOT in entreprenial sectors, but has little to show for it.

    We’ve had the conversation about energy before, but again, Manitoba subsidizes its energy production (sort of) and has some of the lowest rates, yet its new startup and expansion is almost as bad as New Brunswick.

    However, subsidized energy rates have value outside of that kind of economic development. That’s one way of ‘sharing costs’, and of course wealthy people don’t like that because less of the budget goes to energy. So when you have market prices, which ALWAYS means ‘higher prices’, then those in the lower end and middle incomes suffer. And that is generally where a lot of entrepreneurial talent comes from. When you are just trying to get by there is far less time and inclination to take risks-which is the basic definition of an entrepreneur.

  7. sleeves says:

    Entrepreneurism is contagious. Entrepreneurs are a driven, motivated, visionary bunch. They’re focused and stubborn and ruthless and passionate, and that kind of attitude is infectious, not to mention inspiring. Maybe being raised by a pair of them gave me the ability to recognize and respect these qualities in others. By your definition, my entrepreneurial spirit was wholly incubated.

    Growing up the way I did had a lasting impact on me, and it’s served me well over the years. I know that failure is a badge of honour. Showing you’ve failed is showing you were confident enough to try. We need to put a bit more faith in enterpreneurs and their seemingly radical ideas. I’d love to see our own Silicon Valley right here in Atlantic Canada!

  8. Anonymous says:

    Excellent article David.

    To optimize the possibility for entrepreneurs to succeed, we need a balanced support environment. Entrepreneurs will come from all the areas mentioned on this post. Some are born naturals, eager to sieze opportunities. Some will break off from larger businesses. Occasionally, one will come from the university community.

    A weakness at the moment is we do not have a balanced support mechanism. Most of our federal resources are slanted towards universities and very little is available for oher sources of entrepreneurs. There have been billions invested in CFIA, NSERC, NCE, etc. for university research and innovation but very little for alternative sources. Even ACOA’s AIF which is designed for business is dominated by university projects.

    I am not against university research but we should not invest everything there. If NB is truly interested in encouraging entrepreneurs, we need support mechanisms and funding to support non-university sources of entrepreneurs.