How About a Stimulus for Entrepreneurs?
By Anna Johnson on March 11th, 2009Last week Reid Hoffman, CEO and founder of LinkedIn, wrote a guest article in TechCrunch in which he laid out his recommendations for helping the U.S. get out of the recession. Since most Western nations are in recession, his tips are food for thought for us all.
Reid’s overwhelming message seems to be that the best way to fix the economy is to help entrepreneurs. After all, it’s entrepreneurs who create jobs (including their own).
To this end, Reid recommends (among other things) that the U.S. Government encourage or facilitate (it isn’t clear which) micro-lending to small businesses and match up to $100 million in stimulus funds for venture and angel investments if they create jobs and meet other qualifying criteria.
Now, my dad is an economist and I grew up with some appreciation of the complexities involved in economics. If you think of the economy as one huge, complex machine with thousands of interrelated, moving parts, you can probably see that ‘fixing’ one part of that machine is never the end of the story.
Fixing one part of the machine has ramifications for every other element of the machine, and for the machine overall. Ramifications that may not, on the whole, be optimal, depending on the desired outcome (which will be just as much a function of social policy as it will economic growth).
So while I’m intuitively attracted to the idea of having more incentives for entrepreneurs, I’m wary of ‘quick fixes’ like matching VC investments dollar for dollar.
But that aside, I do believe that, in good times and bad, entrepreneurs are the engine of any capitalist society.
So too, if a stronger economy is truly the goal, then more attention should be placed on helping entrepreneurs do what they do best: bring innovations to the world, create jobs for people, and generate wealth – not just for themselves, but for society in general.
Source: Reid Hoffman, “Stimulus 2.0: It’s The Startups, Stupid,” TechCrunch, March 4, 2009
March 11th, 2009 at 2:20 pm
Micro-lending is better than matching funds or any other subsidies. It’s like a debit card in that it operates with real money. Put the small sum into the entrepreneur’s hand, and see it contribute to real growth. If the entrepreneur fails, you’ve at least know they got a sporting chance. There are indeed people in need to whom we can give money, and there is a place for it. The universal law of giving of your wealth to the poor. Jesus recommended tithing, and that’s stood the test of time very well. My parents gave more money to Gideons than they ever gave me, and I can’t resent them for it. It’s the practice that needs to be supported and kept alive, not the finite dollars my parents might have given me. Microbanking works because its like food to the hungry: it gives life to a wholesome growth factor inside the machine we call the economy.
March 11th, 2009 at 4:20 pm
Great post Phyllis. I thinking along similar lines…
March 11th, 2009 at 7:49 pm
I agree with Phyllis as well. Micro loans work in developing countries so why not in developed ones as well. But let\\\’s extend it a bit. I know of small businesses that will go to the wall without some form of cash injection. As a consequence, more jobs will be lost. Banks are running scared and will not lend where business risk exists. So funding has to come from somewhere else.
Cash handouts to consumers, while maybe politically good, can put cash in the wrong hands. Transferring cash resources to consumers is the wrong way to go. I lived through the times when the world saw the shonky entrepeneurs setting up even more shonky companies for their own gain. Where gullible investors, who now had the cash but no expertise in recognising the shonky deal for what it was, lost their money..
It has taken almost a generation to get the cash back to where it should be. In the hands of highly reputable businesses that know how to use it to stay in business and thus provide jobs.
Lets not make the same mistakes again, please.