“Never let a good crisis go to waste”– Anonymous
There are plenty of studies and books examining how rates of innovation and small-to-medium sized business (SMB) creation have plummeted in the US over the past several decades. Regardless of whether you take them at face value, and what the causes of the declines may be, the US and other countries are going to have a cavernous hole where SMBs used to be.
The coronavirus seems to have infected and warped our sense of time, leaving us in a liminal place. It’s difficult to delineate where “here” is and when “there” will arrive. Regardless of when the chronological murk clears, it may be useful to ask: how can we prepare for “there” in a way that will help the SMB ecosystem so that it comes out more robust than it was before?
I have many friends working at startups in the Bay Area, and I myself work at one that’s pivoted to help SMBs access the Paycheck Protection Program. So the question hits close to WFH.
The pandemic will desiccate SMBs, but it also creates opportunities. For example:
- Swaths of the world just got a taste in entrepreneurship; ranging from re-tooling machines into ventilators to boosting robotics and drones innovations. They just experienced, firsthand, the very real “why” behind why any society needs to build robustly.
- Many jobs have been lost and are not coming back. This means a portion of the workforce will (1) be forced to re-skill and (2) switch industries and potentially cross-pollinate ideas.
- Many people are (1) experiencing self-directed, virtual education at home, and/or (2) watching their kids learn virtually. The result is a world that is much more amenable to virtual education and skill development.
- Regulation had been slow to change. Now Congress and state politicians have been forced to acknowledge the necessity of removing regulatory drag. Like how telemedicine regulation has advanced more in the prior weeks than in the previous years.
How can we best feed these opportunities so that our SMB ecosystem doesn’t just survive but gains from this downturn?
New Policy Norms = Part of Our New Normal
Our policy norms have been puréed in a food processor. As a simple example, consider how discussions of UBI, for most Americans, were far outside the Overton Window prior to February.
Below are some of the most interesting tools I’ve come across for stimulating the SMB ecosystem, which could form the basis of our new view of “normal” policy:
- WPA – Many paths out of our current circumstances seem like they may need a new New Deal. Much of the country’s digital infrastructure is woefully out-of-date. E.g., the SBA’s digital infrastructure was nowhere near capable of doling out PPP loans. Let’s subsidize coding and similar boot camps that feed into jobs updating national, state and municipal digital infrastructure that’s woefully out-of-date. On the other side of this, we’d have a much more technologically literate workforce, poised to fill the tech skills gap.
- Matching Investments – One of the contributors to Israel’s thriving SMB environment is Yozma, a program through which the government matches VC investments and offers tax incentives for foreign VC money. And Singapore has similar government matching. These programs seem to work well by supercharging private market incentives.
- Social Safety Net – We’ll need to correct for the risk-aversion that younger generations will have after experiencing the Great Recession and/or COVID-19. One way is through stronger social safety nets. This could take the form of universal basic income or nationalized healthcare. Sweden’s nationalized healthcare system, for example, is a likely contributor to the country’s high entrepreneurship rates.
- A tragically large number of people have found themselves relying on social safety nets like unemployment and $1,200 living expense checks. This means a large number of voters are experiencing the white swan reasons that it’s wise to have safety nets. And such measures can be seen as investments. For a perfect example of why, just look at the J.K. Rowling Effect: give a single mother a safety net, and she won’t shift her citizenship for tax purposes when she later experiences outlying success.
- Student Debt – The unprecedented student debt situation in the US is an obvious source of risk-aversion, and expanding debt forgiveness is an increasingly acceptable political topic. One option to promote entrepreneurship is to expand loan forgiveness programs to include SMB founders that, say, employ 5+ people for more than two years.
- Immigration – Immigration could easily fill its own post or book. TL;DR: immigrants create SMBs at higher rates than native populations. We should be opening our borders much more to skilled immigrants.
What are your thoughts on how we can mend our SMB ecosystem to be stronger than before COVID-19?