The focus on jobs during the election was woefully misguided.
The discussion reflected an industrial-era mindset, which isn't surprising since both Democratic finalists and the Republican nominee were all over 65.
Talking about creating jobs as a goal is wrong. Jobs are an effect. We should instead be focused on creating entrepreneurs.
Jobs are created by new and fast growing companies. To dispel a fallacy from the 2012 election, being rich does not make one a job creator (sorry, Mitt). Entrepreneurs create new companies. New and growing companies create jobs.
However, even in fast growing industries like tech, fewer and fewer people (jobs) are needed to build successful, valuable companies in the modern economy. Instagram sold for $1B with 13 employees ($77M/employee). Whatsapp sold for $19B with 55 employees ($345M/employee).
Software is not alone in this regard. Even in physical goods, the scale of the workforce is changing. At Tortuga, we use software and outside vendors to run much of our business.
We don't own a factory or a warehouse. Years ago, we would have needed to own, maintain, and staff both. Now, everything we need is available as a service. We pay by the piece to manufacture our luggage. For services like our warehouse, we pay only for the storage space that we use.
Jeremy and I grew Tortuga to a $1M+ run rate before hiring anyone full-time. Even now, we're a seven-figure company with only 9 team members.
Creating more value with less resources can be a good thing. But if the average size of companies is shrinking, we will need more of them. To create more companies, we need more entrepreneurs.
The Fourth Economy
The central argument of The Fourth Economy is that we are in the early days of a new, entrepreneurial economy. The previous three economies were agricultural, industrial, and informational.
The author, Ron Davison, asserts that we have historically moved from one type of economy to the next by removing the limiting factors of land, capital, and education, respectively. To unleash the fourth economy, we must remove the limiting factor of entrepreneurship.
The combination of outsourcing, contract work, and software has allowed startups to be less reliant on employees. That is great news for productivity and startups but it means that we need even more entrepreneurs to reach the same levels of employment. It is one of the reasons that entrepreneurship has become the new limit to progress.
I agree. Instead of focusing on creating jobs, let's create entrepreneurs. Each new entrepreneur is one job created. For some, that will be enough. Others will need to hire to grow their new companies.
The jobs will follow.
How to Create More Entrepreneurs
Diagnosing the problems is easier than fixing them. Education and funding are the two biggest opportunities for improvement that I see.
We all know that high schools and even most colleges are designed to produce obedient, boredom-tolerant factory workers, not entrepreneurs. Our education systems aren't just teaching the wrong skills, they're inhibiting the mindset needed for entrepreneurship.
Right now, entrepreneurs are like knowledge workers were in the late 1800s. They are largely self-made. What if entrepreneurs didn’t have to be self-made any more than engineers or doctors had to be self-taught?
One undergraduate Entrepreneurship class and an Honors program project did not make me an entrepreneur. I'm an entrepreneur because of a book on working more efficiently. That book was much cheaper than my college education.
This is why I write. To share my experiences and to try to help others with the same ambitions. This is why I'm flying all the way to Lisbon to teach a one-hour workshop on starting a physical product business. I hope other entrepreneurs will also share what they know.
While I joke about bullshit businesses, I do admire what people in the digital nomad community are doing. Even a solopreneur is creating a job, albeit for him/herself.
You can get the education you need online. However, you will have to build your own curriculum.
The most important things to do are to start then to use the internet to solve problems as you encounter them. Do not get stuck in the wantrepreneur rabbit hole of trying to learn everything before doing anything.
Find peers so that you can help each other. Learn from people a few steps ahead of you and help those a few steps behind you.
Here are a few of my favorite blogs and podcasts which are both useful to beginners and still relevant to more experienced entrepreneurs.
- Tim Ferriss: Reading his book gave Jeremy and I the confidence and reference book for starting our company
- Ok Dork: Noah is the master of getting started and has more recently been profiling successful entrepreneurs on his podcast
- Tropical MBA: Dan and Ian are laser-focused on the freedom that entrepreneurship can create
- Levels.io: Serial solopreneur and the man behind Nomad List
- Buffer and Joel: Buffer is now ~100 people but their transparency and Joel's (the CEO) has always inspired me
- Shopify Build-a-Business competition: Join the contest for extra motivation and check out the past winners for inspiration
The venture capital industry is flooding tech with cash. If you have a "big idea" that appeals to VCs, you can get funded.
I've always preferred bootstrapping or self-funding. Once your bootstrapped business is off the ground and you have two years of profitable tax returns, you'll have no problem getting a loan or a line of credit from a bank at low interest rates. Our line of credit is currently at prime + 0%.
The problem is getting to that point. You can't get to two profitable years if you don't have enough money to launch your business in the first place.
Kickstarter and Indiegogo have somewhat filled the void by offering a way for new businesses to crowdfund their first production runs. If we hadn't launched before Kickstarter was popular, we likely would have gone this route with Tortuga.
However, crowdfunding sites are getting more challenging. The bar keeps getting raised. Companies, like Bluesmart, that have already run successful campaigns and raised millions in venture capital are going back to Kickstarter to fund additional products. New, bootstrapped companies will struggle to compete and to attract donors' money. The crowdfunding platforms' interest is in maximizing the total money raised, not in helping the campaigns that most need a boost. They are okay with successful, VC-funded, well-staffed companies running campaigns. Indiegogo made Bluesmart's second campaign a "Staff Pick."
If we want more entrepreneurs and more entrepreneurship, we have to fund it. And not just through venture capital or the crowdfunding "market."
The Small Business Administration's Advantage Loans are a start because they don't have the same business history requirements as other loans.
Kiva is also moving into the US market with 0% interest, crowdfunded loans to help small business owners. One of my local spots, Temescal Brewing, used both a Kiva loan and Kickstarter to fund their brewery and bar.
The bottom line is that we need more funding for early stage businesses with little to no history. These businesses are risky. We can mitigate the risk by diversifying small investments across the widest possible range of businesses. The risk of not making these investments is far greater.
Starting a business has never been easier or cheaper. Capital is abundant. If we, as a society, are to ever fund entrepreneurship, now is the time.
We can create more entrepreneurs directly. The jobs will follow.