National leaders matter less than you think, and your leadership may matter more!

Today’s post will be a bit off of my beaten path but I’m inspired.

I went to an economic development lunch this week and heard from a panel of three business leaders in my community.  All have had their hands sharing the helm of the community (with others) for decades.  All have enough experience to know what they know and understand that they might get others mad at them for saying something controversial.

All three were willing to get up and tell other leaders in the room that we are failing and need to do better.

Unless you live in one of about twenty densely-populated counties in the country, “hot” cities (with regard to economic growth), you are losing ground to the global economy.  Further, the USA by some accounts is itself losing ground to other nations in the global economy due to educational, tax, regulatory, investment capital and other policies – entrenched attitudes being hung onto by aging leaders who are still confounded by the radical disruptions brought to us by the Electronic Information Age.

Before being too surprised at hearing this coming from me, the “old fashioned” business values I hang onto have more to do with the timeless interpersonal values which I believe always best serve us in how we conduct business, not the tools we use to conduct business with.  That’s another matter entirely.  (Or is it?)

Yet, when a Baby Boomer can get up and say to the rest of us that business and the future prosperity of the community depends on a global economic view rather than a view of our own main street, you know times have changed.

Now, the same individual also admitted that he’s great at seeing the big picture, but falls off when it comes to the specific details of what to do about it.  And isn’t it so often true that when the challenge is great and we aren’t sure what to do, we retreat even from acknowledging the big picture.  We would rather hope that we’re just in a cycle .. a phase .. soon things will settle and we’ll return to some kind of past normalcy.  Predicting the future will return to old formulas.  Certainly this time, it is not so.

Local small business ownership and, particularly, small business profitability is falling off as a precipitous rate.  The feel-good “success” stories we read and tell about are like fireflies at dusk — short-lived but lulling us into the hope that everyone else is not far behind.  I cannot tell you how many praise songs about some up-and-coming business have been turned into swan songs a year or two later, but media has moved on to the next blinky thing and selectively forgets the grandiose predictions being made about yesterday’s craze.  And that’s just talking about new ONLINE things.  It took 10 years for Yelp, which was to have taken over the online review world by now, to make a quarterly profit – barely and with no clear future.  Amazon is still far from being net-profitable in the aggregate.  LinkedIn never made money before selling out to Microsoft.Aggieville side-by-side

But what about the primary economic engine and employers in America’s 1,980 counties that are not net-producing jobs?  What about the local businesses where you buy food, other goods, and services?  Are they just humming along and making money like they always have?  Well, if you had a picture of your main commercial streets where you live from five years ago and ten years ago, how much would the storefront names match today?  How much will today’s picture match the same streetscapes in another five years?  How much wealth is being uncreated by all the failed attempts at small business ownership, forgotten already the day after they close?

This should matter to every citizen of a community because 70% of new jobs have always been created by small startups in the first five years of existence.  This is a consistent statistic that has been true for decades through many economic changes and progressions in technology.  America, and free market economies depend on small business success, which further depends on the ability to actually make good, real money doing it.  If you can’t make money, you won’t try, and in 2011, for the first time in our history, more businesses left main street than started.  That is not a good statistic, folks.  (It is probably flat to marginally higher since then, but we aren’t quite sure how that is trending ever since because our government is four years behind on reporting based on business data.)

We are in a time when price is not just a piece of the value equation in making a purchase decision.  Price, in the Electronic Information Age, has become darn near the only piece in the value equation that younger shoppers (the future-become-present economy) are paying attention to.  That has brought to bear extreme pressures focused on the cheapest possible manufacturing and development costs, which drives jobs out of the country or out of existence, replaced with automation.  Fewer and lower-paying jobs means lower incomes and less consumer spending, which is another huge driver in the economic engine.

For local community leaders, a vision is needed that attracts and supports small businesses able to create and offer great value to the consumer.  Why?  Because the only way for a town to prosper is for its local businesses to prosper.  The only way they prosper is with strong sales.  The only way they earn strong sales with profitable margins is to find ways to make compelling offers to buyers of goods and services that outcompete other towns, states, and now outcompetes even foreign countries without sacrificing too much quality (sad to put it that way).

How many local elected officials and government employees, civic and charitable organizations, and places of education or worship that knit communities together truly understand the local economics of small business profitability?  About (proportionally) as many as people in the room at lunch Monday (maybe 60 total) who asked questions in front of the group based on the challenge they heard from the front – only three.  Five percent or less?

It’s time to deal with America’s economy and it won’t be led to success from the national level despite self-aggrandizing claims of the nominees in this oddest-in-history election year.  It must be led one community at a time by local leaders willing to ask the tough questions, and then listen to the ones who have put their non-miliionaire wealth on the line trying to succeed.  Many local leaders could use to take an economics class or two and/or read a few serious books with current data to brush-up on just how the cycles of money and wealth work in an economy.

Then, we each need to stop viewing our world through the filter of what’s best, short-term, for me.  I can count on two hands, out of the hundreds of well-connected individuals I know, how many I would testify on national TV are truly, selflessly, working for the best of all concerned in their communities, even sacrificing their own best outcome if necessary.  In truth, putting your neighbor ahead of yourself was always the best way, long-term, to help yourself anyway.  We have forgotten this oldest of principles in community-building.

Jeff Koenig

(Picture credits: Riley County Historical Society & Aggieville Archives)

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