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Why Immigrants Are Necessary To New Business Startups

In a prior post I raised the issue of the declining number of new entrepreneurs in the U.S. It seems we are producing fewer new businesses each year.

But now, let’s dig a little deeper and look at who in the entrepreneurial community is responsible for this continuing decline.

To do this we need to go back to the Kauffman Index of Entrepreneurial Activity and look at the data analysis of Robert Fairlie at the University of California, Santa Cruz.

Although entrepreneurship overall has been declining in recent years, here is an interesting finding presented by Dr. Fairlie:

“Immigrants were nearly twice as likely to start businesses each month as were the native-born in 2013.”

Here is a chart depicting the rate of new businesses created by each of these two groups of entrepreneurs:

 

Immigrant entrepreneurs

 

We’ve known for a long time that Immigrants play an important role in America’s economy, especially in the scientific and tech areas, primarily because the U.S. is not producing enough properly educated engineers and scientists.

Immigrants are successfully filling that gap.

Now, attention is being called to the disparity in the rate of business creation between native-born entrepreneurs and immigrant entrepreneurs.

Although this disparity has been in effect for some time, it has become much more pronounced over the past decade.

What is more disturbing is what I pointed out in my last post—that 25% of America’s long-term unemployed were leaving the workforce—simply “giving up.”

That is a lot of people who apparently no longer want to look for work… or start a business.

When considering that many American workers are “giving up,” and at the same time are starting fewer new businesses… it would appear that we will have to rely more and more on immigrants to start the businesses that will grow our economy.

So, who are these “immigrants?” I don’t claim to know, other than that they come from all nations around the world.

I think it is more important to know what they do—something like this:
 
(email subscribers watch video on my blog)

 

So, here is my take-away from this information:

  • Small businesses really are the backbone of the American economy… and I expect that is true of economies all over the world.
  • Native-born Americans are starting businesses at a lower rate than they were in 1996 (see above chart).
  • Immigrants are starting businesses at a rate far greater than native-born Americans (see above chart and the “Did You Know” column on the right).
  • It seems obvious to me that an influx of entrepreneurial immigrants is extremely important to the continued growth of new business startups—and the economy of the U.S.

What’s your take on this bit of comparative information—do you believe that immigrants have a key role in new business startups… and essentially in the American economy?

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U.S. Entrepreneurial Activity for 2013

The Kauffman Index of Entrepreneurial Activity was recently released for the year 2013.

The Kauffman Index is the ONLY document created that presents information on ALL new businesses that were started as full-time businesses in the U.S. by people between the ages of 20 and 64.

This latest report presents some interesting trends in the entrepreneurial world for 2013.

Consider some of the highlights:

  • The annual rate of business creation declined from a peak of 6,780,000 in 2010, to 5,712,000 for 2013—over a one million drop in new businesses.
  • This drop in the rate of business creation was primarily due to a drop in entrepreneurial activity by men—although there was also a slight decrease in the rate of business creation by women in 2013.
  • The rate of business creation among immigrants was twice that of business creation by U.S. native-born.
  • Business creation among all age groups declined in 2013—except the age group 45 to 54, which actually increased.
  • Veterans created fewer businesses in 2013, continuing an 18 year decline in business creation by veterans.
  • The highest rate of entrepreneurial activity was in the construction industry, with the service industry coming in second.

You can download your own copy of the Kauffman report here.

The two most interesting findings in this most recent Kauffman report are that entrepreneurial activity is falling off, and that there has been no appreciable change in the rate of business activity by women over the past 18 years.

I suppose the overall drop in new business creation can be substantially attributed to fewer unemployed people trying to start a business out of necessity in 2013, than was the case in prior years when unemployment was higher.

It is likely that many unemployed people have found jobs in the improving job market, rather than trying to learn how to start and run a successful small business.

With respect to women entrepreneurs; there has been a flurry of network news lately about the rapid increase in women entrepreneurs starting new businesses.

Unfortunately, the Kauffman report does not bear this out—at least for 2013. We’ll have to wait and see what the year 2014 has to say.

Other than that, it looks like 2013 pretty much followed historical activities by creating about 6 million new full-time businesses during the year. (Remember, the Kauffman Index excludes business creation by those under age 20, and over age 64.)

So, what happened to most of those businesses—there are not six million more businesses today than there were a year ago?

Or are there? Watch for my next article where I will discuss the “Reality of Business Creation and Failure in the U.S.”

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Sales Don’t Pay the Bills

I wasn’t going to write about cash flow again for a while, but I recently received an email taking me to task for saying in a prior article that “Sales do not pay bills—cash does.” The writer’s point being, that if you don’t have any sales, you won’t have any cash.

And, of course, that’s true—up to a point. Continue reading Sales Don’t Pay the Bills

The Famous Finger of Success

The ever-present foam finger may not mean success for every team at every game, but it certainly has meant success for the creator.

Foam Hand

Back in 1977, Ceral Fauss, a high school shop teacher, designed and cut out the first finger from poster board after being inspired at his school’s pep rally for an upcoming game. His shop students saw the design and made their own versions of the “finger” and waved them at the game.

Their team lost and the “fingers” were trashed—the fingers were a big failure.

One year later, Ceral Fauss was still not giving up. He spent 3 weeks cutting 400 Finger-hands out of masonite, then took them to the “Cotton Bowl” game.

Fauss spent the night sleeping in his car outside the stadium, and then arranged with the head of novelty sales at the stadium to allow him to sell his “Finger-hands.”

He sold out in 30 minutes.

Now encouraged, Fauss tried several different materials—masonite fingers could do real damage in a brawl—and finally ended up with the polyurethane foam Finger. It was cheap, light and couldn’t be used as a weapon.

In 1979, Fauss had 5,000 foam Fingers made and took them to the “Sugar Bowl.” Again he quickly sold out.

The rest, as they say, is history. Fauss copyrighted a number of different designs, quit his teaching job, and formed a new company, Spirit Industries.

Today Fauss employs 40 full-time people, plus another 35 seasonal, and Spirit Industries also licenses nine other U.S. companies to make the famous Foam Finger.

Failure, sacrifice, investment, and entrepreneurial spirit—all the events and attributes that mark the true entrepreneur.

What is your story—have you ever had a failure in your entrepreneurial pursuits? Have you had to make sacrifices to achieve your goals?

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Maybe We Can Reindustrialize America!

This past summer I wrote a post titled, “Reindustrialization of America?” where I said that America had lost its ability to manufacture most things as efficiently as off-shore manufacturers.

I also pointed out that America’s education system no longer trained “manufacturing” engineers, or even encouraged young people to think about how to “build” things (other than their own portfolios).

Now, I recently watched an interview that Brian Williams of NBC did with Tim Cook, CEO of Apple, where Cook said they were trying to bring one of their product lines back to America to be assembled.

When Williams asked about the higher cost of manufacturing in the U.S., Cook said it wasn’t a matter of cost as much as it was the scarcity of people who knew how to manufacture things in America.

The men and women who made America the greatest industrialized nation in the world are all gone—and no one is being trained to take their place.

However—There Could Be A Solution!

Back in the days of “industrial” America, General Motors had a 5-year work-study degree program to develop their own engineering talent pool. After graduation over two-thirds of the graduates took full-time jobs with General Motors. This was one of the contributing factors to GM’s success at the time.

Ford Motor Company had a similar program for training tradesmen, i.e., machinists, die-makers, tooling experts, etc.

Many other programs supporting industrialized America were also active throughout the country.

All of that is gone now—along with the industrial might of the U.S.

So . . . . Here’s an Idea!

Why don’t the movers and shakers of today’s high-tech America start their own “Silicon University” to train not only the engineers who design products, but more specifically, the manufacturing engineers who actually create the factories, processes, and tools to build those products in the United States?

I wonder how many other companies in the U.S. would build some—or all—of their products in the U.S. if the capability was here today instead of offshore?

What does everyone think—could America once again become an industrial leader in the world if we just set our collective minds to it?

Reindustrialization of America?

I’ve been reading and hearing a lot lately about how we should be bringing manufacturing of high-tech products back to America.

Might be a good idea—if anyone can correct the reason it left in the first place.

Ostensibly, America de-industrialized because we were going to become the world’s leader in information technology and didn’t need to build hard goods … plus, other people could build things more efficiently (and less costly) than we could—or can.

So now … do we even have the technical capabilities in America to build the modern facilities, equipment, and production processes required to manufacture high-tech products?

We no longer produce the engineers necessary to support industrialization in the U.S. Even places like Silicon Valley now rely heavily on foreign-born nationals, or outsourcing, for technical development work.

Creativity and innovation in America has dropped continuously since 1990, and continues to drop. (Yes, it can be measured, and I will write about that in a future post.)

For instance: What really great achievement has anyone in the U.S. provided in the last few decades? Even President Obama, in a recent speech, lamented the fact that no one is building “Golden Gate bridges” any more.

Could America even do that today?

Here’s what I mean—let’s compare the Empire State building to the One World Trade Center building:

  • The Empire State building has 102 floors.
  • The One World Trade Center building has 104 floors.
  • The Empire State building is 1,250 ft high (roof top).
  • The One World Trade Center building is 1,368 ft. high (roof top).
  • The construction drawings for the Empire State building were completed in 2 weeks.
  • Designs for the One World Trade Center building took several years before construction actually started.
  • It took just 419 days to construct the Empire State building—from start of construction to opening ceremonies.
  • The One World Trade Center building had it’s first concrete pour in November, 2006, and completion is estimated to be in late 2013—7 YEARS.
  • The Empire State building cost $372.8 Million (2012 dollars) to build.
  • The One World Trade Center building is now estimated to cost $3.8 Billion (as of Jan. 2012—final cost will likely be more).

One thing to remember: The Empire State building was started in 1930 when there were no computers, no cell phones, no twitter, no facebook, no TV, no texting, and on and on.

The building was constructed on the strength of engineering minds that were not distracted by all the so-called technological “improvements” of today.

Are there any people around now who could pull off the accomplishments of the folks who built the Empire State building…or the Golden Gate bridge…or the Interstate Highway System, or……..?

Obviously not.

In our haste to de-industrialize, America has destroyed not only its manufacturing infrastructure, but several generations of people who could operate the manufacturing industrial complex.

If America wants to reindustrialize, we will have to bring foreign talent onto our shores along with the factories.

What do you think? How can America reindustrialize? Or can we?

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