7/16 Providence & Beyond
Major Factors in the Next Economy
• The current economy is in “creative destruction:” the products and services previously developed are falling apart
• The next economy is growing around these ideas: heal the ecology, develop clean energy and cradle-to-cradle product cycles, build healthy ‘whole place’ neighborhoods/communities
• Everything is getting smaller, lighter, smarter, packed with more know how…think i-Phone…”small is beautiful”
• Design thinking will reinvigorate every segment of the economy: growing food, making things, serving people, developing knowledge
Design thinking then doing - fixing 'award winning' buildings
Relationship between design thinking and ecosystem destruction - we make things smaller, but make more of them so there's no net decrease of material use
Challenge: creative destruction 'full of ideology' - just a cyclical reinvention of the economy
Bifurcating economy where affluent follow green thinking, less affluent don't (challenged by anecdotal evidence - "they" get it)
3rd world countries "great at recycling because we need to use everything we get"
Challenge: creative destruction -
Challenge: new products/services - is that what drives the economy? Since 65, rate of mfg profit has dropped - current global situation shows overcapacity. Long trend of boom/bust - first phase is product oriented, then shifts to finance as markets are saturated. Not clear that they are cyclical. Usually based on a new place usurping markets.
Local angle - 'only thing growing and thriving is government' - if we replace factory mills with condo mills, what happens to the other housing stock?
Wood is an irreplaceable factor on the planet
• Non-compete clauses are unenforceable in California but enforceable in Massachusetts
• In the 1980s, each had a small but growing IT sector
• In California, Silicon Valley drove an unprecedented wave of innovation and economic expansion
• In Massachusetts, Rt. 128 failed to reach its potential
• An economy functions as a whole system where each element is dependent on many others for life. Elements advance based on co-evolution and co-determination
• An ecosystem includes more than just companies – also disruptors, mavens, social/civic entrepreneurs, connectors as well as the places where they congregate
• The denser and more layered the ecosystem, the richer the output
• An ecosystem-oriented development strategy is essential to economic prosperity
Hunter/gatherer societies - provocation is true of older societies - level of technology determines how we exploit environment. Technology evolving so its impact gets redefined over time
- artist comment: I'm hunting and gathering, just in a different way.
Ecosystem can't be managed or control - an ecosystem that is nourished (as opposed to a development strategy) is essential...
Add the qualifier "sustainable economic prosperity"
Ecosystem model - one of constant change. Strategy would help us develop an ecosystem economy
Choosing winners break the model, breaks feedback mechanism
Challenge: currently MA's economy working better than CA's - CA unemployment 50% higher than MA
We can't pick winners, but we can enable a process to evolve as an economic development paradigm - what has to go into the system to nourish -
Challenge: Without including people and relationships in the conversation, language sanitized and not nuanced. Is this healthy for people, this success in the IT sector a good thing?
Challenge: Was the non-compete all that important or just one of many factors?
Challenge: Stop using the word "ecosystem" - confuses holistic approach with the natural environment
1986 CA study: predicted that biotech was bad bet for local/regional economy
In RI, we need to focus on the basics, not go off on tangents
On concept of flow, US still strong maybe because of natural flow. The more we incentivize, the more we 'screw up the natural flow'
Challenge: how do we define "prosperity" - in another conversation, the basic discussion went from buildings (20 yrs ago) to quality of life (today)
Citation: google redefining progress
• Corporations in our region are not providing the number or quality of jobs that they have in the past
• Many jobs in the future will not be “jobs” but “work” where wealth is created in other forms
• Entrepreneurial traits are “randomly distributed in the population” to “at least one in six people” (David McClelland: The Need for Achievement)
• Newly-created companies have greater economic impact than relocated existing companies
• The next economy requires a new definition of entrepreneurship that recognizes various sizes (self-employed, Mom & Pop, slow- and fast-growth companies) and various types (commercial, social, civic) of endeavors as part of the economy
Extend: nurtures, enables, connects, not just 'recognizes'
Recognize that entrepreneurship should go beyond traditional econ dev thinking
Extend: development of entrepreneurial thinking and doing that extends beyond business
Teaching/expanding entrepreneurship needs it to be pushed through all our systems
- Entrepreneurship: accountability for ones life
- Motivating people to entrepreneurial action
- teachable or 'inherent trait'
- always as "one's own company" or can it be inside an existing company
Over past couple of decades, the 'safe company job' has gone away, so people become their own product - inherent entrepreneurship
Class on green entrepreneurship - now forming a cooperative - 111 startup ideas
- not about big companies, but all the little companies that support the big one
How do we look at the pace of the entrepreneurial world - can we slow it down?
- have to shrink the economy to slow the pace
- 'don't shrink the economy' but have a choice
Risks to entrepreneur are so great that we only talk about the successes
- social piece of the equation - costs of failure on families
- - failure has never been so popular
- - "within the class of people that are likely to do so"
- do people really have a choice
- - once you step into a path, choice largely becomes moot
- - - expectations are what keep people in their paths, not lack of choices
Immigrant perspective: good students 'at home' fail in the US, something in the system turns them off to education
- is it really the students that are failing?
Use of the word 'entrepreneurship' - that there's an elite club of a few creative people that innovate. People need jobs.
- need to value non-entrepreneurs
• 97.5% of start-ups are bootstrapped - they borrow small amounts of money here and there from friends, relatives and credit cards (<$100,000)
• Less than 0.03% of start-ups get venture capital and the minimal threshold investment is in the mid 7-figures (~$5,000,000)
• Innovative funding/lending options (social lending, micro-banks, “patient capital”, micro-enterprise grant funds, local currencies) are starting to fill in the gaps
• The next economy requires a capital structure that recognizes and supports a very large number of very small enterprises
System now: the more you need capital, the less you qualify and vice versa - can that change?
- how long can you self-finance
- (Robert's story about self-financed company)
- again, we only tolerate/discuss success
- we have to talk about what's normal, it can't be anecdotal
Research: Small business failure rate is under 20% -
Research: Most job creation comes from small existing companies, not start-ups - giving $ to entrepreneurs often just burns that money
- what about new business development pipeline - you need to keep adding to the beginning of the process
Challenge: new funding sources are too small and disconnected from larger economy to make a difference - $5k grants not very meaningful
Challenge: THEREFORE needs to recognize all scale of businesses
Small biz perspective: was a gradual, evolutionary experience - hard to define the stages - just keep moving forward with new ideas
Why should we care? What's the social benefit?
- define the goals
Capital is not free, but it should be patient - easy capital is almost always wasted
• Current public policy does not recognize many of the new forms that entrepreneurship is taking
• The forms include cooperative ownership, collaborative entrepreneurship, social enterprises, L3C (low profit) corporations, a cooperative of cooperatives, etc
• Newly-recognized “loose connections” are facilitating the rapid creation and dissolution of enterprises that exist for a short period to achieve a specific goal
• The next economy requires major, new public policy that recognizes these new formation and support their rapid creation and dissolution
Concern: public policy results in bureaucracy -
Concern: bureaucracy doesn't support dissolution
- is there a place for public policy?
If there are issues, people need to advocate for the change
Simplicity matters: the more complicated it gets, the more it costs
- selling stuff out of your front room is not easily made legal - requires special permits - why?
- even if everything is small, you can't escape the complexity of how big our society is
Public policy drives money, and money drives outcomes
- current stimulus has special green component - it's having a real effect now
- impediments of structure limit some activity
- - 4 people getting a mortgage together: basically impossible
- - banks thought Dirt Palace was prostitution
Much basic research is done from the public funding
- NIH for biochem, NSA/Pentagon for computer sci
Solar industry perspective: 70s solar industry 'killed by Jimmy Carter's generous handouts
Challenge: losing the human perspective