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Let’s Go Invent Tomorrow

 

Very recently, Jason Faberman, a senior economist with the Federal Reserve Bank of Chicago, said: “It’s the new guys, not necessarily the small guys, that generate growth. The focus for policymakers shouldn’t be on small business job growth, but on new business formation.”

As noted by Faberman, young, creative, and innovative start-ups and entrepreneurs are the economic engine for job creation and growth in the United States, not the more traditional industry, brick and mortar establishments. Younger and smaller companies, those that employ 19 people or less, account for 90% of all businesses in the United States. These younger and smaller companies create jobs at almost twice the rate of larger companies.

According to research performed and published by the Kauffman Foundation, Tech Starts: High-Technology Business Formation and Job Creation in the United States, smaller and younger high-tech and information and communications technology companies tend to grow more rapidly in early years than other early stage small businesses. In addition, high-tech and information and communications technology companies result in net job creation in early and middle years compared other sectors where there is net job destruction during the early and middle years.

The research referenced by Jason Faberman and the research performed by the Kauffman Foundation reveals an irrefutable truth. Impactful job creation is a function of new business formation and more precisely, new business formation in highly innovation dependent sectors.

One metric for measuring entrepreneurial activity is the business creation rate, a metric of the new business formations per 1,000 workers. In 2011, Mississippi ranked fifth worst in business creation rate according the Small Business Administration in a report entitled The Small Business Economy, 2012: A Report to the President.

A viable measure of innovation in a particular state is how many science, technology, engineering, and mathematics (STEM) professionals are employed compared to the entire population. According to Bloomberg.com, in 2013, Mississippi was the 50th most innovative state in the United States with the second lowest percentage of STEM professionals as a percentage of total state population.

So, there is a positive correlation between the rate of net job creation and business creation in the high-tech and information and communication technology space; but, Mississippi ranks fifth worst in business creation according to the Small Business Association and second worst in innovation according to Bloomberg.com. This begs the question, why?

There are a whole host of reasons why we continue to lag behind in significant financial, economic, and social metrics. However, with respect to the business creation rate in technology sector, I believe our most significant obstacle is education.

We must add entrepreneurial skills to our academic curricula from preschool through high school. While enabling children with entrepreneurial skills has tremendous value itself, teaching children entrepreneurial skills creates value across an even broader spectrum.

A report by the D.C. Children and Youth Investment Corporation found that, in addition to those organizational skills and management skills developed through an entrepreneurial curriculum, entrepreneurship education had other positive outcomes: improved academic performance, improved school attendance, increased problem-solving and decision-making abilities, improved money management skills, improved public speaking skills, better job readiness, and enhanced psychological development. These positive outcomes were proportionately higher with children from disadvantaged backgrounds. Can you imagine the multiplier affect that crafting an early age entrepreneurial curriculum could have in Mississippi?

We must improve STEM education and it must start early. A recent study revealed that United States pre-college students lag well behind students in other countries in international tests in mathematics and science. To further magnify this problem, according to a report by the Joint Economic Committee Chairman’s Staff, Senator Bob Casey Chairman, the supply of STEM talent is not keeping up with the demand. In the United States, with each passing year we have fewer and fewer students pursuing STEM degrees. We need to improve STEM education at the K-12 level in order to create a pipeline of STEM ready postsecondary students. Mississippi must provide more classes and lab opportunities for all of its students in the areas of mathematics and science.

Our universities must continue and improve upon providing opportunities for students to participate in the commercialization of ideas. More and more colleges and universities are developing curricula around entrepreneurial activity. The millennial generation is demanding this and for Mississippi to remain competitive from a talent retention perspective, Mississippi colleges and universities must increase the opportunities for students to participate in the commercialization of ideas. It is utterly impossible for students to learn the skills associated with commercializing ideas 17th century education-style sitting behind a desk in a classroom discussing what is written in a textbook.

We need a more sophisticated network of mentors. We must demonstrate to young Mississippians that you can be successful in Mississippi. We do not need to invest in fundamentally altering education at each level by providing entrepreneurial opportunities only to watch our own homegrown talent leave the State. In order to induce our talent to remain in Mississippi, we must show students that Mississippians have been successful commercializing high-tech and scalable ideas and these successful Mississippians must pay it forward.

We need to develop an accelerator program that is focused on social innovation. Pick any major social metric, whether it is health related or income and poverty related, and you will find Mississippi at the bottom of the list. This normalized state must be reversed and it can be through social entrepreneurship and social innovation. We must incentivize, incubate, and accelerate ideas that address real social needs while at the same time yields a profit for investors. These two concepts are not mutually exclusive and are the basis of a very real paradigm shift.

As with any market, there will be those that survive and those that fail; but there is no denying the tremendous amount of value in entrepreneurship and business churning over the long term. We lag well behind many of our competitors when it comes to an evolved entrepreneurial ecosystem. This process, fundamentally, begins and ends with education.

“Let’s go invent tomorrow instead of worrying about what happened yesterday.” – Steve Jobs

 

 

Matthew McLaughlin

Matthew McLaughlin

Matthew McLaughlin is a partner with the law firm of Balch & Bingham LLP in Jackson, MS where he enjoys helping his clients tell their stories. You can follow Matthew on Twitter at @jxnmclaughlin or follow his blog buildingpurpose.com.
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