When Businesses Re-Think Value Using A Subjectivist Approach, Many Beneficial Consequences Follow.

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When businesses take the time and analytical effort to think about value and to define it from the customer’s perspective, they will realize the opportunity to re-shape their business models and manage their business in new ways.

Here is a quote from a respected business source, highly ranked on the Google search page:

What’s the purpose of your business? Some would define it as profitability, cash flow, security, or freedom. The purpose of a business is to serve the values of you as the owner. Its purpose is value creation for the owner.

And, in a 2020 post, respected consultancy McKinsey demanded a clear definition of value and then failed to give it.

Particularly at this time of reflection on the virtues and vices of capitalism, we believe it’s critical that managers and board directors have a clear understanding of what value creation means. For today’s value-minded executives, creating value cannot be limited to simply maximizing today’s share price. Rather, the evidence points to a better objective: maximizing a company’s value to its shareholders, now and in the future.

These quotes are a tiny slice of what’s out there: multiple definitions or approximations or circumlocutions for value.

Value is not a thing. It can’t be created or maximized. Value is a personal feeling of satisfaction experienced by an individual, in their own mind. It’s positive, because it occurs when an experience is preferable to an alternative or to an expectation or to what went before. It can be expressed or communicated by the individual, but it can’t be measured.

The purpose of a business is not “value creation for the owner” but the facilitation of value for the customer. That word facilitation is important. When a customer senses value potential – the possibility that a consumption experience might be satisfying and fulfilling to them – they may seize it. They buy, they use. They create value. There is no value without consumption. Value is in the customer’s domain. They are the ones who discover new values; they are the ones who innovate, because without them there is no innovation. Innovation is an experience of the customer.

The business is the facilitator for the customer.  This role is a major change for many businesses compared to the way they currently think about themselves. There are numerous significant implications.

Businesses and customers co-navigate the uncertain seas of value.

In their recently published paper, Subjective Value In Entrepreneurship, Professors Per Bylund and Mark Packard point to the value uncertainty that both consumers and businesses experience. Consumers know what problems they are trying to solve or what dissatisfactions they are trying to overcome, but they can’t know whether the business’s offering is going to deliver the satisfaction they are looking for. Will this suit make the right impression in the office? Will this spaghetti and meatballs remind me of the time I spent in Rome? Will this car deliver 35 mpg even though I use it mostly just to ferry the kids back and forth to school? Consumers can never be sure that they’ll have the experience they want.

It’s the same for businesses. It’s impossible to know how the consumer will feel, and impossible to know whether the specific combination of features and benefits and website design and advertising and customer service will precisely meet one customer’s requirements, and to know how much different the next customer’s requirements will be.

The customer and the business are both searching for the perfect intersection of wants and solutions. Neither one of them can know exactly where that intersection lies. This makes them equal partners in value in a way that businesses have not typically treated customers in the past. Value is created by customers; businesses facilitate. Innovation is actualized by customers; businesses bring it to market. Discovery of new uses and applications is the task of the customers; businesses observe and adapt.

Businesses must grant customers a new co-equal role.

A business or brand is just one part of a value facilitation network.

When the consumer experiences value, it’s experienced within a consumption experience system. Tide laundry detergent is consumed as a combination of chemicals designed to get clothes white and bright and smelling nice. It’s used in a washing machine, of which there are numerous brands and types and sizes the world over, connected to all kinds of water systems with many kinds of water (hard, soft, mineral, etc.). It’s used on all kinds of fabrics, at many different temperatures and altitudes. It may be used in conjunction with other additives such as bleach or fabric softener. The washed clothes may be to wear at school or on the sports field, or to the office or to a party. They may be worn in all kinds of weather. The washing detergent is bought on a trip to the supermarket along with other groceries, and must be transported from the store to the laundry room.

The consumer has a system. They have a lot of household chores and they allocate them to certain times of the day or week and they have certain ways of completing those chores. They experience value within this system. They orchestrate all of their providers to make the system work for them.

It’s important for value facilitation for businesses to see themselves as a node and a set of connections within a value facilitation network – a value net. What is the best way to fit in to make the consumers’ system work best for them, on their terms? How do different consumers’ systems vary? How does that affect the business’s “fit”? How can a business fit more consumer systems? How can a business earn greater significance in a consumer’s system by helping them orchestrate, or by helping them with multiple jobs rather than one?

Business is a responder rather than an initiator.

A major change in business mindset is called for when value is redefined as subjective, and as a consumer experience. Our traditional mythology of business is as the proactive initiator of relationships with customers, the discoverer of new techniques, the innovator, the advertiser pushing new solutions to a grateful crowd of takers. The “great men and women” theory of business as led by extraordinary visionaries fits this mold of thinking. The Steve Jobs attitude of “people don’t know what they want until I design it for them and present it” is similarly reflective of the accepted imagery that business leads and people follow.

In reality, business is the follower, or at least the responder. The demand for innovation and better service and better experiences comes from consumers. They are the ones who cultivate the realization that not everything works as well as it should, that the levels of service that are offered are not good enough, that experiences could be better. They send out signals to this effect via what we call dissatisfaction or unease with the status quo.

The effective businesses are those that respond best to these signals, the ones with the best antennae and with the best interpretation of signals that may be coded in a different language than businesses are used to. These businesses are especially tightly coupled to their customers. They are skillful in exercising empathy, and in imagining experiences from the consumer’s perspective. They exhibit better understanding.

The consumer signals indicate there is potential for new value. The task of business is to see this potential and fashion a responsive offer that can trigger its realization. It’s a humble approach to business, an assembly of experiments to see if they can get to the right response, rather than a magisterial strategy or business plan for success.

Here’s a simple example. A recent Ford F150 truck re-design features an interior with a flat surface work “desk” for using a laptop, and an exterior power supply for plugging in all kinds of electrical equipment (the ad shows a DJ hauling and plugging in his gear). Did Ford independently initiate these ideas? No. They responded in an agile way to the practices of truck owners, some of whom spend hours a day working in their cabs, including computer work, and some of whom are entrepreneurial DJ’s hauling their gear to where the gigs are and asserting their independence from other people’s power sources. The consumer acts, the business responds. That’s the new subjective value generation method.

Subjective value thinking puts business in a different place in society.

When the purpose of business is to facilitate valued experiences for customers, to help them achieve betterment in their lives, and to find meaning and purpose in the successful pursuit of that betterment, we can view businesses in a new light. We can discard the cynical expectations of exploitation of unsuspecting customers instilled in us by our Marxism-tinged educators, and embrace the understanding of businesspeople devoted to the betterment of customers, and thereby the betterment of society. Businesses are sustained by the entrepreneurial ethic of serving others in order to help themselves. This ethic is the foundation of economic society, and subjective value thinking highlights it in the most appropriate way.

Quantum Economics, Potential, And The 4V’s Business Model.

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To get your head around quantum mechanics, it’s necessary to be able to think about a space that’s between reality (called spacetime in the language of the science) and imagination, something that doesn’t exist. This half-way house, this in-between, is not unreal. But it can’t be observed or verified. Some of its inhabitants will become real and verifiable and some won’t, never to be observed at all. A way to think about this in-between is as potential. Potential is sometimes realized, and sometimes it isn’t.

In her book Understanding Our Unseen Reality, Ruth E. Kastner explains how potential can be realized in quantumland. It takes the form of a transactional process, in which a quantum object that she calls an emitter sends out an offer wave. Under certain conditions, another quantum object, which she calls an absorber, can receive the offer wave and send a confirmation wave in return. If the confirmation is a mirror image of the offer, the two objects have formed an incipient transaction. If there is only one offer and only one matching confirmation that is an exact mirror image, the incipient transaction becomes actualized and real. It becomes, in Kastner’s words, “A brick’, an observable, verifiable event in spacetime. (pp 48-53)

I am quite sure I have oversimplified quantum theory. However, it’s in the good cause of making an analogy that is useful for real-world practicing entrepreneurs and businesses.

Austrian economics is quantum economics. Quantum mechanics is the study of behavior and properties and interactions of the smallest units of energy in the universe.  One of its revelations is that “the rules are different” at this scale. The rules of classical physics do not apply. Austrian economics is the study of the smallest unit of energy in the economic system, the individual. The term that is used in economic science is methodological individualism: the study of the behaviors and properties and interactions of individual people and how they propagate into processes like value creation, and economic growth, and into structures like firms. (Here’s a white paper that explains in detail.)

An example of an emergent process is the Austrian Business Model, a framework for profit-making operations for businesses. The essence of the Austrian Business Model, the engine if you will, is the core value generation process we call 4V’s. The 4V’s represent a rolling, recursive, repeating value process for firms to successfully bring new innovation to the market. The 4V’s are Value Potential, Value Facilitation, Value Capture, and Value Agility.

In quadrant V1, Value Potential, is in quantumland. It’s not yet real, but it can be. Think of it as the space where the consumer is sending out offer waves, just like a quantum object. These offer waves are a little hard to process. The consumer expresses dissatisfaction, or unease with the current state of their consumption experience. Things could be better. The wine could be more to their taste, or it could be less expensive. They like the room afforded by their SUV but they’re a bit unsure whether they can put up with the mpg levels. They like going to restaurants but it might be nicer if the restaurant came to them. Maybe they feel they’re not getting all the possible benefits that they could from the internet. Or Netflix. Why is zoom so hard to use? Why does my bank treat me with such disdain? Why can’t I eat as much chocolate as I would like? Why is healthcare so expensive? I’d like to earn a degree, but I’m not sure if it’s worth the 4-year commitment or the money. Why is the CFA exam so hard? Why is dentistry so painful? Is my dog enjoying its food? I hate having acne. I have a headache. Sometimes, I feel a bit lonely.

Consumer sentiments such as these are offer waves. They’re the signal that precedes an incipient transaction. If they are important enough to the individual, and if they’re important to enough individuals, they represent value potential. For example, unease about the time commitment and cost of acquiring a traditional 4 year degree could be an offer wave that, when absorbed and confirmed, becomes educational innovation, the formation of online for-profit degree courses, and ultimately Coursera and Masterclass. Concern about the palatability of dogfood could become The Farmer’s Dog, or A Pup Above or one of many more entrepreneurial initiatives. Feeling lonely sparks the $3 billion online dating industry, or Meetup.

None of these businesses are real in their pre-existence as consumer unease. They are potential. Every firm, every business unit, every industry, every innovation begins as a quantum object we call consumer dissatisfaction. Every firm needs to begin with a stash of value potential. Every firm needs to be able to exercise empathy to detect the signals, understand the feelings of the emitters, the dissatisfied consumers, and translate them into commercial possibilities. These firms need the creative imagination and the resourcefulness to devise and run multiple probes into these possibilities, a portfolio of experiments in activating potential. Some will work in generating a confirmation signal that the consumer determines is the mirror image to their unease. Many experiments won’t work. The process is probabilistic. It might be possible to improve the probabilities in your firm’s favor by running more experiments or becoming better at absorbing offer waves. Or it might not.

Whatever the case, identifying and accumulating value potential is a necessary capability of every successful firm. Without it, there is no success. It requires deep, intimate understanding of the consumers, and a commitment to interpreting their offer waves. It requires the humility to know that it’s hard to perfect the process, and that there will be a lot of misinterpretations and errors.

 

 

Value Is A Process – the Essence Of Entrepreneurship.

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This article is a summation of arguments made in a recent academic publication in Small Business Economics Journal, entitled “Subjective Value and Entrepreneurship” by Drs. Per L. Bylund and Mark D. Packard.

 

What is the value of a pizza?

If you asked a standard economist, they might—thinking themself quite clever—ask in return, “well, what would you pay for one?” Now, that’s a fine response as far as it goes. But in neoclassical economic theory, that’s not as far as they seem to think.

Standard economists will readily admit that value is subjective, but what they mean by that is not what subjectivists mean by it. See, in philosophy of science, social science divides down strict lines of ‘objectivism’ and ‘subjectivism.’ The objectivist—also realist or positivist (these are distinct terms, but align in the objectivist paradigm)—sees the social world as comprising real things, objective phenomena that are more-or-less stable and causally deterministic and, thus able to be studied as such. In other words, social reality is in principle no different from physical reality, and we can study it the same way. Yes, it’s true that there’s tons of noise and randomness when studying social phenomena, which require statistical methods to find causal relationships, but the same is true of certain natural sciences too, such as climate science (not exactly a ringing endorsement in many libertarian circles).

Applying objectivist philosophy to the value concept, the assumption is that value is real and objective. A pizza has value—it’s there in the pizza. But what’s interesting about this value—which has been defined as ‘marginal utility’ since 1871—is that it’s different for everyone. Utility, of course, is usefulness—how much benefit I would get from the pizza. But utility is different for everyone—we have different tastes, dietary needs, and so forth. What this means is the objectivist economist—which is most of them—understands value as objective but idiosyncratic. ‘Idiosyncratic’ is synonymous with ‘subjective’ if you’re an objectivist.

But philosophical subjectivism, as the Austrian School espouses, sees the social realm very differently. There is no “social reality,” strictly speaking. A job, a marriage, a personality, a reputation—these don’t really exist. ‘Reality’ references the physical realm—what the natural sciences study. The company Google is just a concept—a figment of our imagination. There are real people that ‘belong’ to the Google organization; there are physical structures that comprise Google’s offices (the Googleplex); Google even creates some physical products. But the organization ‘Google’ is just a concept that Sergey Brin and Larry Page conjured and was granted ‘legal status’ (which is just getting another imaginary organization’s imaginary stamp of approval), which solidified the concept ‘Google’ as a ‘legal entity’ into the minds of people that is—for most intents and purposes—for us as if Google were a real ‘thing’. Lots of social constructions are like that: marriages, job titles, fictional characters like Harry Potter, etc. Many more are flimsier: relationships, reputations, scientific knowledge, etc. These have little or no institutional status, and so evolve with the whims of society. Studying social phenomena from this subjectivist perspective, then entails understanding what people think about those phenomena, how they understand them and why.

Value, from a philosophically subjectivist viewpoint, is very different from the objectivist concept of value as objective, idiosyncratic usefulness. Instead, subjective value occurs in the mind.

There are two key aspects of a subjective value concept, which we can distinguish by the form of word (i.e. part of speech) that it takes. As a verb, value (i.e. to value) is a prediction of or reflection on a benefit (depending on the context of the valuing). To say “I value the pizza” means either ‘I expect to benefit from the pizza’ or ‘after eating the pizza, I recognize benefit gained from it.’ As a noun, value is a conscious experience of benefit. This means that there is no value until it’s been experienced. When you understand the experiential nature of value, then we can’t equate predictions of value (value as a verb) with real value (value as a noun).

So when we ask, again, what is the value of a pizza, the right retort, from a subjectivist perspective is not “what would you pay for one,” but “how much benefit did you experience from it?”

To show how and why this matters, consider an example. Let’s say you’re hungry and are in the mood for pizza, enough so that you’re willing to pay up to $20 for one. So you ordered a pizza from Bylund Pizzeria around the corner for $10, who makes the pizza at a cost of $5. You have it delivered and leave $2 for tip, bringing your total outlay to $12.

In the traditional economic analysis, the example stops here. You have all the information that you need to calculate total economic value created. Economists estimate value as willingness-to-pay or WTP—how much you were willing to spend to satisfy your want, $20 in this case. The price P ($10+2) and cost C ($5) are the other two relevant factors. Total economic value creation is calculated as WTP-C, the total new consumer value minus the cost in resources and labor to produce it: $20 – $5 = $15.

But the subjectivist framework doesn’t stop here. Again, value hasn’t emerged yet, since it hasn’t yet been experienced. So let’s keep going. You sit down to the table, open up the pizza box and find a beautiful pizza with a fat cockroach crawling on top of it. You slam the box shut and run it outside to the nearest dumpster.

So let’s redo our economic value analysis now. Value isn’t WTP, it’s the benefit experienced. What was the total value achieved from the pizza? Zero. Probably even negative—you could say that you experienced harm rather than benefit, both in the trauma of the fright and in the fact that now dinner is going to be late. Let’s plug in zero: $0 – $5 = -$5. In other words, economic value was destroyed in the transaction—$5 of resource were expended for absolutely no benefit.

Life is an endless value journey—action and experience are continuous from birth to death. This journey is a learning process. What valuation should we assign goods, services, and activities? How should we prioritize our activities and expenditures to maximize our value experiences and well-being?

The principle of diminishing marginal utility—that consumption of a second unit of a good is not as valuable as the first—is widely known and accepted. But what’s not widely admitted, although we know it intuitively, is that the needs that we must satisfy to maximize well-being are dynamic. We keep getting hungry over and over again. One might break an arm, birth a child, pick up a new hobby, or start a new diet—changes that alter the things we value most. Similarly, changes are going on around us that have similar effects—changes in the weather, new innovations, pandemics, and politics.

Value is a process—one that we’re not just constantly engaged in but also constantly monitoring and learning from. It is in this process—in advancing it forward—that we find the essence of entrepreneurship.

How To Think Like A Successful Entrepreneur.

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Successful entrepreneurs think about their business in value terms, and they recognize that they do not themselves determine the value of their offering — the consumer of the final good does.

Entrepreneurship is about treading new ground. It is about taking a step no one has taken before, at least not in that same way or in the same place. So it should not be surprising that much of the scholarly literature on entrepreneurship, since Richard Cantillon in the early 1700s, has focused on entrepreneurship as uncertainty-bearing.

Although “bearing uncertainty” might be what entrepreneurs do in the economy from a theorist’s point of view, it is not — and should not be — the rationale for starting a business. After all, uncertainty means the outcome is unknown, which in turn means it could end up ugly. In other words, uncertainty is a cost — it is a burden on the entrepreneur’s shoulders. Entrepreneurs are right to attempt to avoid the uncertainty.

The fact is that theorists have it both right and wrong. Yes, entrepreneurs bear uncertainty because they are the ones getting the reward as profit and also the ones suffering the loss if things do not work out. But that uncertainty-bearing characterizes entrepreneurship does not make it the point of being an entrepreneur. Rather, it is a “necessary evil.”

What Successful Entrepreneurs Understand

Successful entrepreneurs, both in the past and present, understand the actual meaning of uncertainty. Those who already experienced success have often learned it the hard way, through experience. Those who are more likely than others to become successful have understood it in the abstract or have the right gut feeling. Regardless of which it is, past or present, they understand that uncertainty is “worth it.”

What this means is that they don’t focus on uncertainty, but accept it. Entrepreneurs choose to bear uncertainty much like someone putting in the hard work — perhaps 10,000 hours’ worth — knows that hard practice is the means to achieve success. How to endure those endless hours of seemingly never-ending tedious work? Eyes on the prize.

Successful entrepreneurs recognize the prize and what it takes to get there. They realize that the only way their business can convince customers to buy from them and to beat the competition is to provide value. To the extent they are not simply lucky, successful entrepreneurs rely on a value-dominant logic: they place the end value of their efforts first, and direct their efforts to maximize value.

There are three key components to the value-dominant logic that help you apply it in your business:

  1. Value is the entrepreneur’s super power.

Entrepreneurs bear uncertainty because it is the only way of doing something different, something new, and to bring about value greater than everybody else has. After all, doing what someone else is already doing is not a way to set yourself apart. It is also not a way of being truly successful. To be successful, you need to develop your super power: to figure out, focus on and deliver real value.

  1. Value is subjective.

It sounds strange, but it is true: Value is subjective. This does not mean value can be anything or that it is relative or that there is no such thing as real value. It just means value is in the eyes of the beholder. The important lesson here is that you, the entrepreneur, do not determine what value is. Your job is to figure out how what you offer can be of value to others. That is what you should be focusing on, not on what you think would make your offering “better.”

  1. The consumer is the ultimate valuer.

Any entrepreneur, whether in B2C or B2B, should recognize that, ultimately, the consumer is king. Or, as scholars put it, the consumer is sovereign. If you are selling directly to consumers, it is obvious enough. You cannot place a sale unless consumers value your offering. But even in B2B you cannot stay in business long unless what you contribute to the economy is of value to the final consumer. Even if your customers like what you are doing, unless the consumer of the final good likes it you’re not going to sustain profitability.

Another way of adopting the value-dominant logic is to adopt the “4 Vs” model developed by Hunter Hastings of the Economics 4 Business podcast. He summarizes these points for thinking like a successful entrepreneur using four value statements: Value potential, understanding and assessing potential consumer subjective value; Value facilitation, making it possible for them to consume; Value capture, how much the firm realizes of the value facilitated by a value ecosystem that the customer orchestrates; and Value agility, how well does the firm respond to changing consumer-preferences and competitive propositions and how well does the firm sustain a continuous delivery of innovation to the consumer.

The point is not the terminology or model, but the lesson: that value should come first. And when you place value first, and recognize that it is subjective and for the consumer, the burden of uncertainty becomes bearable. It is but a means for attaining the end. It is costly for sure, but it is a necessary cost in order to pioneer production and break new ground.

Importantly, the burden of uncertainty is justifiable because it makes it possible for you to bring about value. This point is key to being successful.

Fighting Poverty With Entrepreneurship.

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My father, the late Reverend Gilbert H. Caldwell, Jr. was a Civil Rights Movement “foot soldier” who knew and marched with Dr. Martin Luther King, Jr. As a child of the “Movement,” I paid close attention to Dr. King’s strategic approach to transforming the United States. Most people are not aware that the official name of the march where he delivered his famous “I Have a Dream” speech was the “March on Washington for Jobs and Freedom.” In this historic speech, he states that it is tragic that some people live “on an island of poverty in the midst of a vast ocean of material prosperity.” Dr. King knew that racial equality would only be sustainable if residents of poor communities had jobs that enabled them to pay their monthly bills. I am convinced that if he were alive today, Dr.King would say that the economic stability of communities is the foundation of the social well-being of countries.

No country has sufficient funds to fight poverty in perpetuity. Current “top-down” poverty reduction programs providing a “safety net” have had little success reducing systemic poverty. The current safety net programs trap families in a net of economic instability that is difficult to untangle. It is time for a “people up” poverty reduction program designed to provide a “safety trampoline” that bounces people up from poverty to the middle class. Poverty reduction strategies must be based on the belief that if you give someone a fish you can feed them for a day. However, if you help them start a fishing business you can feed a community for a generation.

The United Nations made “Ending poverty in all its forms” its number one Sustainable Development Goal because the inability of people throughout the world to feed, house, clothe and educate their families is a“cancer” on society that can be cured if innovative new approaches are implemented at the community level.  The Grameen Bank microfinance program, created by the 2006 Nobel Peace Prize winner Mohammed Yunis, is an example of a successful innovative program that works very well in certain circumstances. Unfortunately, the community development bank approach has limited applicability in many locations. One of the most successful ways to reduce poverty in the Group of Twenty (G20) countries is to implement a place-based program called “Entrepreneur Zones” or “EZones.”

Specific words can be a powerful tool in generating support for a community revitalization program. The term “Entrepreneur” refers to a specific person committed to utilizing novel approaches to creating value. The term “Zone” is a specific location with clear boundaries. Historically, poverty reduction programs have been disconnected “social support” programs that exist as long as there is political support and government funding. The EZones are a“social investment” program designed to help entrepreneurs create jobs and generate greater income and tax revenue. One of the key components of the program is the provision of quality job training and placement for residents. By investing in EZones with public funding, private investment, grant funds, and tax credits, economically challenged communities can generate the revenue and jobs needed to reduce local poverty in a sustainable way (without the need for long-term government funding).

One of the best examples of an Entrepreneur Zone was the Greenwood Section of Tulsa, Oklahoma. Plessy v. Ferguson was a landmark Supreme Court decision in 1896 that upheld the constitutionality of racial segregation in the US. Black communities survived this racist ruling by developing, what we would consider today as, segregated EZones that succeeded economically because of thriving black-owned small businesses. These neighborhoods fought against discrimination by developing healthy communities rooted in entrepreneurship. The wealthiest of these communities was the Greenwood Section of Tulsa. This community was so strong economically that it was nicknamed “Black Wall Street.” White supremacists and the local government were so jealous of the economic success of this community that on June 1, 1921they bombed it by plane and attacked it by foot. Tragically, more than 300 people were killed and 200 businesses destroyed simply because the black community was living the “American Dream” of entrepreneurial success.

One positive lesson that we can learn from this embarrassing American history is that when economically challenged communities are given the opportunity to develop entrepreneurial businesses they can flourish and transform poor communities into middle-class communities. Government leaders committed to implementing sustainable solutions to chronic poverty should establish EZones in economically challenged communities around the world. Businesses in these locations should receive public funding, regulation relief, investment fueled by tax credits, grants, and entrepreneurship training. In addition, qualified nonprofit organizations should provide poverty-informed job training and placement programs helping the long-term unemployed find jobs. Government programs providing housing, education, and health services should be aligned and leveraged to provide more comprehensive and effective support to residents of the EZone community. By creating Entrepreneur Zones in economically challenged communities, we can move the world closer to Dr.King’s “Dream” of a society where all people live in an “ocean” of financial stability and social well-being.

 

This article by Dr. Dale G. Caldwell was first published at groupofnations.com

DR. DALE G. CALDWELL IS THE CREATOR OF THE ENTREPRENEUR ZONE PROGRAM AND A PROFESSOR AND EXECUTIVE DIRECTOR OF THE FAIRLEIGH DICKINSON UNIVERSITY ROTHMAN INSTITUTE OF INNOVATION AND ENTREPRENEURSHIP. HE IS THE FOUNDER OF THE DALE CALDWELL FOUNDATION (DALECALDWELL.ORG).

Empowerment Through Entrepreneurship.

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[postintro]There are many reasons to elevate entrepreneurship as the institutionally-approved and institutionally-accelerated pathway to economic success for everyone. Community flourishing through self-help is one of them. I’m supporting the team behind Entrepreneur Zones, focused efforts for enhanced performance of small businesses in targeted locations in economically under-performing geographies  [/postintro]

2020 witnessed small businesses across the country struggling to adapt and survive during the government-imposed pandemic lockdowns. And while some were able to pivot their services and business model to serve an increasingly digital market, many were forced to shut down for good, leaving thousands jobless.

The closure of these businesses is one of this year’s biggest tragedies. The economic impact of these closures will continue to be felt for many years to come. If we have collectively learned anything this year, it’s that America relies on small business entrepreneurship to flourish and prosper. 

Entrepreneurship is empowerment

Nowhere is the empowering potential of small business entrepreneurship more prominent than in our small-town Main Streets and local communities. Even through the pandemic, we’ve seen small businesses all across the country step up and change the way they operate in order to help their communities. Via a quick search around the internet, you can find dozens of examples of small businesses doing their part: from local pharmacies doing Covid testing to distilleries manufacturing hand sanitizer and restaurants providing free meals.

These entrepreneurs and workers were faced with an existential crisis like they’ve never seen before. Their response? Do good for the community. There’s something about small businesses that is just so inspiring.

Ultimately, entrepreneurship is the backbone of these communities, and provides both residents and the local economy the opportunity to grow as these businesses grow. What’s more, entrepreneurship is not just for the rich, it is for everyone. Building a business from the ground up is no small feat, but it is something that’s achievable by anyone, regardless of background. Through entrepreneurship, people can pull themselves up and bring new economic value to their communities and to themselves.

The potential of Entrepreneur Zones

Heading into 2021, we need to place a renewed focus on encouraging entrepreneurship in our small towns and cities. The key to this could be Entrepreneur Zones –  targeted areas within economically-distressed communities where new entrepreneurship-focused initiatives can help local business get their start, and help those that have already started to thrive. Policy initiatives can include relaxed regulations, tax incentives to encourage investors, focused education and training, and the kinds of mentoring and interconnection that help businesses integrate into larger value-creation ecosystems. 

Dale G. Caldwell of Fairleigh Dickinson University’s Rothman Institute of Innovation and Entrepreneurship notes, “To accelerate small business employment, government could provide entrepreneur grants and issue small business bonds through the Small Business Administration specifically for the businesses in federally approved entrepreneur zones. These programs would not be a burden on taxpayers and potentially lead to an injection of billions of dollars into businesses…that desperately need a lifeline to survive.”

As more than 11 million people look for new opportunities, these small businesses could help provide the jobs needed to both keep food on the table for struggling families and spur economic growth at the national level. 

Further, many in the growing pool of unemployed Americans are skilled workers who have been through the training and education for their jobs. The talent is there, what is needed is the capital to invest in these businesses.

The future lies in small businesses

We’re dealing with a once-in-a-lifetime crisis, and we need to work to establish apolitical policies that support our nation’s small businesses. Nearly 50% of America’s GDP output and nearly 50% of all American workers are employed by small businesses. It’s time that we began to recognize and reciprocate the values and utility that small businesses provide to this country.

And it’s not just local, it’s global. For example, Scott Livengood of Arizona State University is part of a team offering Education For Humanity – a program of education, and entrepreneurial skill training for conflict-displaced refugees in countries like Uganda and Lebanon. Entrepreneurship provides a pathway out of not only America’s distressed inner cities, but out of distressed environments of all kinds, all over the world. Over the past half-century, we’ve seen that entrepreneurial and educational expansion into underdeveloped regions and markets is one of the best ways to raise people out of poverty and equip them with the skills and resources they need to prosper.

Across the world, we see just how important creating avenues for entrepreneurship is to keeping economics vibrant and resilient. In 2021, one of our top economic priorities should be to create more of these avenues.