One of the things most concerning in the business landscape is the rise of big business and the fall of choice in America. I’m the biggest free market capitalist out there, but I don’t like the trend of the fat getting fatter and barriers to entry rising. We're inundated with chain restaurants, box retailers, and product differentiation based only on price. While conglomerates give us some advantage in terms of reach, they tend to focus on defending their market positions instead of creating value and providing customers what they want. Defense is not a great offense.
Every industry you look at is primarily dominated by one or two players. Consumer staples like diapers and razors – Kimberly Clark and P&G; Our services at home – one electric provider, 1 cable, 1 telephone, 1 gas company. Banking has become Chase or B of A. Even the next generation tech industries are now ruled by the chosen few – Oracle and Microsoft with enterprise software, Cisco with networking, Google and Facebook rule online eyeballs. America has done a great job of building scalability, consolidating industries, and homogenizing society. You can't blame Cisco for their aggressive acquisition strategy and monopolistic-like market share. But is this good for the US in the long run?
Not in my opinion. Big business creates fewer jobs than smaller companies (in aggregate), capture less of people’s talents, and reduce the workforce to merely caretakers versus innovators. I also think there is a societal cost of less worth to individuals who merely punch in and punch out. So how do we buck this trend? Not through regulation which creates artificial winners and losers (and unintended consequences). But there are ways that I see we can bring local business back.
-VCs: I gave them a hard time in an earlier post for not being innovation centers, but they have the deep pockets and smarts to level the playing field against the oligarchs. They can give new businesses scale, bring new ideas to market, and love to find “white space” opportunities that displace incumbents. Groupon (a huge payday as Google reportedly is paying $6B for them) is competing head on with NBC and Mint.com provides an alternative to high priced financial advisors.
-Keep our borders open for business: Toyota and Honda brought true value to consumers by giving quality at a better price. We should force the oligarchs to compete not only with the small businesses at home, but the big businesses abroad. Open markets force big business to remain honest and focus on consumer needs. This also opens market opportunity for small business (with the rise of the internet) in which entrepreneurs will find a niche. Four Hands has proven to be a formidable competitor against the big North Carolina boys by leveraging open markets.
-End government tax breaks: The richest companies hire the best tax firms to get them out of paying taxes. There’s a reason why Singapore is becoming a business hub – 5% corporate tax rate. Multinationals can park profits there. We need to simplify the tax code and end tax breaks. Small business is at a disadvantage in this area.
-Teach business in Schools: We need to teach students basic finance, marketing, and accounting just as we do basic science and English. Last week I heard a terrible stat – 70% of doctors ten years ago were non-employees (ie. entrepreneurs in their own private practice), now its 30%. It’s gotten so complicated to open a business now that doctors, auto repair shops, and other generally local business providers are falling to prey to becoming franchise employees. There would be no Monarch Dental or NTB if local experts were better educated in business.
-Make the patent process more accessible: I love the James Dyson story of how he tried to sell his unique designs to the large vacuum companies. They basically said no and tried to copy him. Dyson spent all of his life savings in the courts against the big guns (experienced personal bankruptcy, but eventually won). Most people don’t have the will, money or time to fight the battle that Dyson did. And let’s face it – nothing beats the suction and ball technology of a Dyson vacuum.
I like that Walmart has added more dollars to everyone's pocketbook by passing their significant cost advantages to the masses. There is certainly a place for this level of efficiency (and I'm glad walmart actually passes their cost savings to the public versus other big boys), but I don't think that should be the face of US business. Small businesses create better jobs, more choice, and a level of diversity that equals the US population. I think if small businesses get can better organized, tap into resources that create efficiencies, they will be well poised to give us the next bagless vaccum.