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Category: Entrepreneurship

Hundreds of Thousands Of Lives Disrupted Needlessly Because of Lack of Evidence Based Government

Image: civilserviceworld.com

Thirty five days ago the GOP held control of both houses of Congress and the Presidency and yet an ill-advised policy based on ignorance was allowed to hold 800,000 federal works hostage.  How did this happen?  Majority Leader McConnell, Leader Schumer,  Speaker Ryan and Minority Leader Pelosi all agreed just before Christmas to extend a spending bill for a few weeks enabling the federal government to keep running while discussions were pursued on a Border Wall. POTUS went along with this plan and told Majority Leader McConnell he would sign the extension bill.  Yet, that evening POTUS started listening to commentators from his far right base – changed his mind and demanded funding of $5.7 billion for a wall or he would as he said a week earlier ‘take pride in shutting down the government’.  The Border Wall idea has no solid evidence to support that it would work to stem the tide of drugs of which 90 % come through ports of entry, drug leaders and gangs who fly over the border.  PBS sent a reporter to the border near Nogales, Arizona to gather real data on what was actually happening at the border.  He found that people on the border did not want a huge wall except for sections of see-through barriers in cities, yet wanted more border police, more access roads and surveillance technology. Speaker Pelosi made an excellent point in her press conference today, after POTUS caved when it was obvious the shutdown was causing real harm to many Americans, plus federal workers and their families.  She declared, ‘we support more border security measures, that are evidence based,’

Her focus on evidence based policy was music to our ears.  When was the last time during this GOP administration have we heard that policy would be ‘evidence based’ (with real facts not made up ‘alternative facts’)? The EPA has moved quickly to shift policy making processes to not use scientific based reports or data in making policy decisions. Immigration policy is based on scapegoating of Muslims, Mexicans, and Central Americans instead of the facts.  The facts are that new businesses are twice as likely to be started by immigrants, that when the Mexican economy thrived cross border immigration fell dramatically and that majority of immigrants fill jobs that most American workers don’t want to do.  Canada has looked at their trend of an aging population and declining workforce.  To build the size and skills of their labor force for the future they are welcoming immigrants – we should be doing the same thing. Our population is aging quickly, so without an immigrant influx of entrepreneurs and workforce we will be faced with a stagnant economy looking much like Japan’s.

The effectiveness of modern medicine was revolutionized when evidenced based medical practices and research was implemented as a standard clinical practice in the 1960s.  Businesses today use Big Data analysis, models, forecasting and innovate new products based on data, research and analysis before making investments. The dramatic increase in our standard of living is based on innovative processes in universities, businesses and financial services all insisting on ‘getting the data’ first before making proposals or investments.

We should accept nothing less than evidence based government. We are behind by 20 years on combating the effects of scientifically proven climate change. Our future will depend on making intelligent decisions based on evidence to implement sound policies and investments to ensure the existence of humanity.

Building Economic Independence Can End Hopelessness

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us, on Thursdays we spotlight in more depth Solutions to issues we have identified. Fridays we focus on how to build the Common Good. Please right click on images to see them larger in a separate tab. Click on the Index Topic Name at the beginning of each post to see more posts on that topic on PC or Laptop.)

Image: operationhope.org

The greatest threat to a civil society are people without hope.  They are angry, feel the system is rigged and look for scapegoats as the cause of their poor economic standing. This group left out of the economic mainstreams is located in rural regions where globalizations has taken jobs, and in inner cities where companies have fled to the suburbs. These people that John Hope Bryant calls, The Invisible Class, are off the economic grid, and largely left out of the political mainstream as well except when they demonstrate on the streets when a policy has gone too far.

Economic independence is crucial if we have an economy that works for the 99 % not just the 1 %. To build economic opportunities our governmental policies and programs must ensure a level playing field for all people and support a high quality education for all income levels.

It is about building our society for the common good. It means enabling building enterprises, non-profits and organizations that serve people. Our policies should be about enabling the ability of people to build. We need to rethink our framing of labor from a cost to an asset which it always was. Capital means in the Latin root ‘knowledge in the head’ derived from the capital end of a column at the top in a building.  Poverty is not about money so much as a dearth of relationships and know how to build the skills toward a productive life, where money is a indicator of success.

Somehow the early accountants working for middle age Venetian families invented double entry accounting systems with debits and credits called assets money, land and equipment while labor was labeled an expense. Labor is viewed as an expense to this day because the owner-entrepreneur has to pay employees to work.  Workers have had the ‘cost’ yoke around their necks ever since.  Yet, are employees really a cost?  The staff are the ones doing the work, creating the product or service and solving the problems – money does not create the product or service only people do. CEOs are often heard to say that employees ‘are our key asset’ but then treats them like second class citizens in making policies in the company, gaining a fair share of the profits or enjoying job hours flexibility. Today, Wall Street applauds wages being stagnant for the 80 % while profits go up and wealth accumulates for The Elite.

We need to change our perspective about people and their labor. How do we build an economy that works for all? One way is to focus on enabling, The Invisible Class with economic independence.  Bryant points out that most of these people have credit scores at 550 or below, so they can’t get jobs, buy automobiles, or purchase a home.  In short they can’t participate in the economic mainstream. Bryant’s Operation Hope program teaches those in poverty how to increase their credit scores, start businesses and strategies for accumulating wealth.  By bringing them into the economic mainstream they can begin to feel more confident about their lives and the future. Operation Hope has partnered with Bank of the West who invited Bryant to locate Operation Hope offices inside their branches. Bank of the West in a far reaching vision understands educating prospective customers on the good use of credit and finance will make them better customers and likely to come back for additional services.

We need to learn from programs like Operation Hope, understand its key elements and see how to implement its tenets and power on a major scale like the Marshall Plan if we are to make a dent in the level of poverty in the Heartland or cities.  The only way we are going to increase the size of our economy in a fundamental way is to empower millions of workers who are out of the economic mainstream.  We have more companies going bankrupt then new businesses being started for the first time since WWII. It  is time to recognize we have people who are assets with innovative skills to can build an economy that works for all.

Visa Program For Immigrant Entrepreneurs Ended

 

Photo: wsj.com

Last year in July, the GOP administration announced their intent to end any special visa handling for immigrants who startup companies in the US.  If the entrepreneur met certain criteria for funds raised in the US and sponsor financing they were allowed into the US for a period of 30 months.  However, the entrepreneur visa could be revoked at any time.  President Obama just before he left office in January, 2017 setup the special visa program for immigrant entrepreneurs to jump start more companies and create more jobs. Last Friday, May 25, Homeland Security announced that it was planning on ending the program after winning a court battle with venture capitalists who were seeking to have the program launched.  Let’s step back and look at the jobs and startup issue in context.

Do we need more startups in the US?  Yes, there are actually more companies dying right now then startups and small companies.  While, we hear about the Googles and Facebooks, there are many thousands of startups (usually 10 times more) that fail and other small businesses.  Actually the rate of businesses dying has increased dramatically such that more small businesses are going out of business than ones being created.

Do we need more jobs?  Yes, while the unemployment rate is at an all-time low, there is another 11 million people who want to work but can’t and have quit looking for work so they are not counted in the unemployment statistics.  About, 70 % of all new jobs are created by small businesses not large corporations – who are generally still reducing their workforces.

Do we need more entrepreneurs?  Yes, but in the Heartland region of the US. The West Coast, Austin, and Boston, New York areas receive most the venture capital funding for startups. Jumpstarting entrepreneurs and new businesses in the Heartland where we need new job development is crucial to getting the region moving again economically.  US local entrepreneurs should receive federal help, venture, university and non-profit assistance in getting businesses started as we have recommended in our Heartland Development Center initiative blog.

Are immigrant entrepreneurs key to growing our economy?  Yes, immigrants are increasingly the ones starting new businesses versus native born founders.

Sources: U.S. Census Bureau, Kerr & Kerr, Harvard Business Review – 9/26/16

Immigrants make up a disproportionate amount of the entrepreneur base, experts believe their passion and dedication to building new businesses is strong and drive to make the American Dream come true.

Next steps:

The GOP Administration believes if immigrant entrepreneurs are to be given special visa status that Congress needs to pass a law that specifies how the program works, the number of founders to be admitted and how they are to be selected.  We understand the present program for immigrant entrepreneurs is vague and established by executive order.  However, President Obama was intent on giving special status to those who could start new businesses quickly and create more job opportunities for workers.  Our recommendation is that Congress should be passing a law in regard to immigrant entrepreneurs as part of funding Heartland Development Centers and use the special visa to bring immigrant entrepreneurs to the Heartland where they are most needed after investing and providing entrepreneur support for native born founders. One way to gain acceptance, is to have the immigrant entrepreneur sponsored by a startup co-founder native born person in the region, then have them work together as a team.

Immigrants Live In Fear Of Mass Deportations, Yet Are Key Contributors To Growing Our Economy

(Editor Note: this is the second of a series reviewing the new GOP administration policies and programs.)

The View:

Immigrants are in constant fear of being deported when they hear of the policy plans for the new GOP administration and cabinet appointees talking about ‘rounding them up like FDR did with the Japanese’ or registering all Muslims.  Yet, immigrants while being 15 % of the work force are 25 % of the entrepreneurs.  Business formation is the number one employment engine in our economy.  Foreign born labor participation far outstrips that of native workers. Plus, Latino immigrants are driving demand for homes and contribute to paying the mortgage. When mass deportations were implemented between 2005 and 2013, foreclosures hurt the local Latino communities harder than other communities.  Researchers Jacob Rugh and Matthew Hall found that 75 % of 1.2 million Latino households had mixed legal status residents.  They would pool financial resources to afford the mortgage, so when an illegal resident was deported the family often lost their home.  The Action: we need to enact programs the ensure that there is an opportunity for them to continue to build businesses in many sectors of our economy, keep families together, speed legal entry for immigrants, develop a path toward legal status for those here and deportation for convicted felons.  Let’s ensure that all US residents have an opportunity to work hard to achieve the American Dream.

The Story:

Recently, the NY Times interviewed a young immigrant entrepreneur who said, “A lot of (professional) people are successful here in the (New York) city, it is because there are immigrants to fill the roles that let them use their time to advance their careers,” Ms. Elizabeth Vilchis said. “If we take that away, the whole thing crashes.” Ms. Vilchis, is an entrepreneur running a food delivery service that caters mostly to New York City professionals who can’t take time to eat away from their desk.

One immigrant entrepreneur said, after the November election that he was “hoarding resources and cash, because I don’t know what happens next.”  Many immigrants have started construction, cleaning services, and restaurant businesses, now they are talking with accountants about the implications of selling their businesses to take profits and be ready to leave at any time.

Thousands of other immigrants are entrepreneurs throughout the US.  Professors Sari Pekkala Kerr from MIT, and William Kerr at the Harvard Business School, found that while immigrants make up 15 % of the labor force they are 25 % of the entrepreneurs in the US. They are inventive too, accounting for 25 % of all patent applications. Immigrants making a growing contribution to the US economy as noted in this chart from the Kerr’s report (right click to enlarge the image in another tab):

immigrant-entrepreneurs-in-us-12-10-16

With new business formation at an all-time low, and business closings surpassing new business formations for the first time 2 years ago – immigrant entrepreneurship is of even greater importance.

Immigrants have a key role to play in our economy, for example in housing.  Last week, Jacob Rugh and Matthew Hall published in the Journal of Sociology the results of their research into the mass deportation of immigrants between 2005 and 2013. About 85 % of those deported were working Latin American men.  They found in predominantly Latino communities the deportation activity by the Immigration and Customs Enforcement agency increased the foreclosure rate significantly and hurt the overall housing market worse than in other communities during the Great Recession. Prior to the deportation activity the foreclosure rates were similar to non-Latino communities. They found legal and illegal residents were pooling resources to meet the financial needs of their household.  Three quarters of 1.2 million households had at least one undocumented immigrant living in a household of legal residents.  The researchers noted that deportation can increase foreclosure rates in the same way that divorce, or unemployment do in other groups.  Even worse, deportation will likely have the effect of hindering the assimilation of immigrants into American society.  Mr. Rugh noted that from a self-interest perspective, the Latino community is a big part of the future housing market, so people should be interested in fostering the growth of buyers for their homes.

Foreign born workers have a higher labor participation rate than native born workers in our economy as this chart from the Bureau of Labor Statistics indicates (right click to enlarge the image in another tab):

foreign-born-labor-participation-higher-than-native-us-12-2-16

Immigrants are crucial to the success of our economy.  We should not be damaging the entrepreneurial engine fueling much of our economic and employment growth. Yet, the new GOP administration seems bent on dramatically reducing the immigrant contribution to the US economy. Cabinet appointees have called for deporting illegal immigrants and the illegal immigrant parents of legal children. The cabinet appointee for Homeland Security has called for ‘some type of registration system for all Muslims’ in this country, which seems like a scheme to track Muslims or as he proposed, “the FDR program of rounding up Japanese nationals is a good model’.

Beyond the civil rights violations of Muslims and many groups singled out by this administration there will be a catastrophic effect on our economy when policies of fear, intimidation and monitoring are implemented.

We need to stand firm for the rights of immigrants and all US residents to ensure there is an opportunity to work hard toward achieving the American Dream.

The Action:

  1. Enact programs that help our economy grow with the help of immigrants for agriculture, hospitality, domestic services, construction, delivery, information technology and other sectors.
  2. Keep families together where there are mixed illegal and legal residents in the home.
  3. Enact legislation that provides a path for becoming a legal resident that requires hard work, commitment, dedication for years of service.
  4. Build programs in immigrant countries to reduce their interest in illegally coming to the US.
  5. Speed legal entry programs, make it easier for immigrants to come to this country for work or family needs.
  6. Focus deportation programs only on those with felony convictions, or terrorists.
  7. Prevent any program of registration or monitoring by religion, race or ethnicity from ever being enacted.

(Editor Note: References for this article are in the Research tab under Immigrant Contributions)

 

Entrepreneurship Can Tip the Inequality Scale

Wikipedia_scale_of_justice_2.svg

The View:

We focus on changes in laws, representatives and programs to create change and re-balance the scales back even for the rest of us. Yet, sometimes there is an entrepreneurship opportunity to even things up.  One entrepreneur, Brad Katsuyama, CEO founded IEX, a private stock exchange is making trading more equitable.  His firm offers a service that inserts a short pause for all traders to at the same time seeing the latest bid/ask price.  This approach puts all investors on an equal playing field when it comes to trading stocks – whereas today, flash traders with special links to the NY Stock Exchange and NASDAQ can get ahead of regular investors like you and me. These high frequency traders can make thousands and sometimes millions of dollars in a blink of an eye.  The exchanges and flash trading firms are fighting the SEC application by IEX to be a fully regulated exchange and thus compete with the major exchanges. Surprise! The IEX application was just approved today after much lobbying by investor groups, pensioners and New York Times editorial.  Let the SEC know that you support the IEX approval at the link in the Action section of this post as Wall Street is planning to appeal the decision.

The Story:

Flash trading provides the Elite the best price, for either selling or buying ahead of the rest of us.  Michael Lewis in his 2014 book, Flash Boys: The Wall Street Revolt, outlines in depth how flash trading –  dark pool flash exchanges (off premise from the NYSE and NASDAQ) now execute about 60% of all trades. The hedge funds, wealthy investors and major pension funds looking for an edge over the average investor (who does not have access to these flash trading systems) establish the rules of a public stock market in their own favor.  However, companies like IEX challenge this unfair system of trading. The trading Elite can’t have this insurgent firm changing the rules of the game so they are fighting to keep their advantage.

This flash trading system is dangerous to trading as well, on May 6, 2010 the markets crashed precipitously for 38 minutes while some shares were forced down to pennies a share with instant losses in the trillions of dollars.  A 2015 Department of Justice investigation found that while flash trading may not have started the crash, it was driven down hard by high frequency traders.

The SEC is chartered with ensuring the efficient operation of the markets and fairness for all traders (even small investors) to display bid/ask prices.  Exchanges have offered services to provide traders with real time pricing information – readily available to all.  However, high frequency traders (HFT)  operate private exchanges off the public exchange floors. HFT traders float small orders as signals to other HFT traders that there is a big order waiting, to execute a deal not available to the small or non HFT trader. By executing these ‘hidden’ trades HFT traders were able to skirt SEC regulations on open fair market trading published in 2005.

IEX was founded four years ago, as a private exchange to prove that a ‘speed bump’ to pause HFT would make the market fairer for all yet executing trades efficiently. Last year, IEX applied to the SEC to be a national regulated market.  Their application was supported by some major market players like T Price Rowe, the Texas Teachers Association, California Teachers Association, Franklin Templeton and others. The IEX application posed a threat to the established partnership of HFTs and the NYSE, NASDAQ and the fees that the exchanges receive.

The Elite still want the playing field tipped their way:

Allowing IEX to become an exchange would create additional complexity in a marketplace that is already criticized — rightly — as too complex,” said Bill Harts, President, Modern Markets Initiative, that represents HFTs.  They say it is inefficient – for them!  What about the rest of the trading community!

Today’s SEC decision is a win by tipping the scales back toward fairness and equity. We can’t let our guard down.

IEX is a good example for us to learn from: entrepreneurship in inequitable situations where there is a good opportunity for both making money and balancing the scales can challenge Wall Street.   Eric Ries, Silicon Valley entrepreneur and author of The Lean Startup, has proposed a Long Term Stock Exchange where the long term perspective is the focus, not short term IPO stock flipping or quarterly earnings results used as hammers by Wall Street on CEOs.  Maybe Eric would consider adding employee partnership as a principle, as he notes that management would like to see employees take a long term perspective. One idea is we recruit CEOs and founders who have a progressive corporate perspective.  Where it is not feasible to create for-profit firms then social entrepreneurship can offer great results as well.

The Action:

  1. Let the SEC know that you support the IEX application and open fair markets, write a comment on their regulations
  1. Join or follow Progressive Business Owners at their FB site.

Update:  Other Entrepreneurial Initiatives – Inequality

Startup Helps Teachers Afford Homes Landed founded in 2015, by Stanford grads Alex Lofton and Jonathan Asmis to help all types of home buyers, by bringing together investors who want to help out and potential home buyers. They plan to operate throughout California, though for the last five months they have focused their efforts on SF Bay Area school districts and teachers.

 

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