A Marketplace Movie
If the history of the marketplace were made into a two-hour movie, casting would be looking primarily for actors to play small business owners, because the part covering big business would only take place during the last 30 seconds. Let's take a quick look at the macro chronology on the storyboards of our movie.Antiquity: From Genesis, Chapter 1 to about 1800
Division of labor -- people specializing in a craft instead of making or harvesting everything they need -- gave birth to businesses and markets. Inter-market trade provided the opportunity for some businesses to create branches and grow larger, but small family businesses were still the face of the marketplace during this period.
Industrial But Pre-Corporate: From 1800 to 1900
Technological innovations improved production, communication and transportation, giving rise to the Industrial Revolution and some large firms, mostly in infrastructure industries, like steel, rail, petroleum, and utilities. But most people still worked for small entities.
Corporate Age: From 1900 to 1975
Major corporations existed prior to the 20th century, but relatively speaking, were rare. But in the industrialized world, the 20th century became the century of the major corporation due largely to three things that changed the face of the marketplace:
1. The birth of consumer economies in the industrialized nations. A consumer economy is created when humans can afford to buy things they want instead of only what they need. The dramatic thing about a consumer economy is that large quantities of goods and services are needed. Since small businesses weren't equipped to fill the demands of the growing consumer class, big businesses were necessary to produce and deliver those quantities.
2. Capital markets, while already in existence by 1900, became more robust and sophisticated in methods of providing funds for this new, larger species of enterprise.
3. This one only happened in America: Millions of emigrants poured across the Atlantic from Europe to man American big business factories that were popping up everywhere. And this human tide not only created the needed labor supply, but also LOTS of new consumers.
For decades every mother's son or daughter aspired to get a job at the local plant or office of one of the big companies. For most of the 20th century, millions of citizens of the industrialized world worked their entire professional careers with one of the big companies. Job security in a big business became a major professional goal. After all, the money was good and the fringe benefits were often better, including health care and pension checks for life.
During this period, small businesses didn't become irrelevant; it only seemed like it.
Entrepreneurial Century -- So Far: From 1975 to Present
Scientists generally agree that the Cretaceous Period -- and the reign of dinosaurs -- ended when a large asteroid impacted Earth 65 million years ago. In America, beginning around 1975, major corporations were hit with what must have seemed like an asteroid. What hit them were the laws of economics and the raw forces of the marketplace. These two realities manifested in the inability to continue to remain competitive and profitable while maintaining the number of employees, and associated compensation packages, that had become the expensive norm for decades.
The first wave of changes U.S. corporations found necessary to address this uncompetitive situation took the form of early retirement for millions of corporate veterans, voluntary at first, and later involuntary. In the process, there was an unfortunate diminishing of corporate brain trusts. The next wave of changes involved downsizing regardless of tenure. Industry consolidation came next, and ultimately, for an unlucky few corporations, extinction.
If you're wondering why this discussion is included in the Entrepreneurial Century part of our storyboard, where do you think all of our latter-day entrepreneurs came from? As much as anything else, many of the steps taken by major corporations in the past 25 or so years have contributed significantly to the Entrepreneurial Century. For example:
1. Out of necessity, millions of early retirees and sacked employees changed career paths by starting their own business rather than looking for another job. And the brain trust that left major corporations over the past couple of decades are now running small businesses.
2. With the illusion of corporate job security now exposed, millions of young people, unlike many of their parents and grandparents, have chosen an entrepreneurial career first.
Today there are tens of millions of small businesses in America alone, representing 98% of all businesses and employing over 60% of all employees, and the U.S. Small Business Administration says there are 800,000 new ones being formed each year. Over half of the U.S. GDP, which was $10 TRILLION in 2001, is produced by small business, as are over half of all U.S. innovations.
Small business owners, we rock!
Entrepreneurial Century: 2003 And Beyond
Every day I become more convinced that the 21st century is, and will continue to be the Century of the Entrepreneur. I know. You've heard me say this before. But I keep accumulating more evidence, and it's not just found in America.
During my recent trip to Italy, I visited with small business owners there who told me that government and major corporations, which had been the primary employers of the 20th century in that country, can no longer sustain old levels of employment. More and more, Italians are being encouraged to seek their own professional solutions. Translation: Start your own business.
I believe the next few years will see more of this attitude throughout Europe as countries like Germany, currently suffering double digit unemployment, continue to lose competitiveness around the globe due to socialistic employment practices that contribute less and less to a value proposition.
In China, I'm told that the entrepreneurial spirit is already strong, but these fellow travelers are hungry for free markets and global trade. When China fully opens its markets, global entrepreneurialism will pick up a turbo boost as hundreds of millions of Chinese small businesses gain access to the world.
Epilogue
I'm not predicting the end of major corporations. The marketplace will always need them in their important role. But I am predicting a rise in numbers and the importance of small firms around the world, not just in America.
Small business now has the technology available that allows us to compete effectively at our level without becoming big merely for its own sake. And perhaps more important, we have become conscious of our own validity in the marketplace.
Write this on a rock... The 21st century IS the Century Of The Entrepreneur.
