(this is from a speech I gave to the Atlantik-Brücke German-American Young Leaders conference last week)
We’re here to answer the question … Is the American economy on thin ice?
The answer, of course, is YES. America is on thin ice. And we all know why:
- population is getting older
- there’s have a huge decline in engineers
- There is much more increased world-wide competition – especially from East and Southeast Asia
- A massive real estate bubble
- And America is a debtor nation with big, big debts … and it is really easy to get into debt but really hard to get out of debt. Like my mother used to say … it is very easy to make fish soup out of an aquarium. But it is very hard to make an aquarium out of fish soup …
So … America is on thin ice. No doubt about it.
But … but … at least there is some ice. It’s thin, but if we are verrrry careful, we can slowly walk from one end of the ice rink to the other.
By contrast, that Western European ice rink has melted into a full-fledge community swimming pool. It is tragic, but countries like France, Germany, Italy, Benulux have all the same problems as the United States (older population, decline in engineers, increased competition, big debts) … but only worse. The population problem there is so much worse and the promised benefits are so much higher, that … that unlike most community swimming pools, it is the elderly people and not the kids that are making the water warmer.
So instead of dwelling on the negatives of America being on thin ice … I’m a positive person. I’m going to spend my time today talking about the positives … and I will give you my perspectives, albeit my incredibly biased perspectives, as an entrepreneur in Silicon Valley.
First is population … while America is an aging population, it is actually the least aging of the G10. the U.S. is the only major economic power with a fertility rate able to replace aging workings – about 2.0 kids per woman. As of today, 21% of the population is under 16 years old. And while that might not be high in a historical sense, in today’s world it bodes well for the future.
The second is the immigration melting pot. While America has become much more closed since 9/11, it is still less xenophobic than most countries in Europe or Asia. That’s a huge asset. I have a friend who was born in France and spent his first 25 years there. But he was never treated as “French” because his parents are from Tunisia. He’s lived in Silicon Valley for the past 7 years and he told me that people now see him not as French … or Tunisian … but as an American. And his kids will be utterly American.
But though population and immigration are helpful, entrepreneurship is America’s saving grace.
Unlike some countries where people dream of being a government employee, Americans dream of being an entrepreneur. It used to be that people dreamed of becoming a rock star … but today, even the rock starts want to be entrepreneurs:
50 Cent, P-Diddy, Russell Simmons, LL Cool J and others have all started successful businesses.
Today’s rock stars don’t sing songs, they write software. They are Bill Gates, Sergey Brin, Larry Page, Pierre Omidyar, Steve Jobs, Jerry Yang, and Jeff Bezos. And they take risk.
The word “entrepreneur” is actually a French word … but it is now as American as McDonald’s, Levi’s, Microsoft, and Coca-Cola.
The number one reason for the growth in the American economy over the last 20 years is small businesses. Small businesses now account for two-thirds of the private sector jobs, they employ more than half of all workers, and account for more than half the output of the economy. No other mature economy can boast that kind of economic diversity. And white males are actually the minority of small business founders.
Why is this?
One word: failure.
Americans like to fail.
That’s right, Americans love and embrace failure. It is a badge of honor. And Americans love giving people second, third, fourth, fifth, even six chances. Even some of the most successful Presidents, like Harry Truman and the current president, were basically failures until about age 40.
Americans like to fail because we like to take risks. And if you want to take a risk … and if you have a good idea, a business model, and passion … there are thousands of venture capital firms and individual investors that will back you.
I know from personal experience. Right after my 26th birthday, three venture capital firms invested 9 million dollars in my company. No strings attached. We came to an agreement, they got x% of the company, and they wired 9 million dollars into our account.
And this is not rare.
this happens every day in Silicon Valley. Billions of dollars are invested in crazy ideas every year. And most of the companies fail. But a few of them become Google, eBay, Cisco, Genetech, Apple, Yahoo …
There is more venture capital deployed in Silicon Valley than in the rest of the world combined.
And when you embrace risk … you’re essentially embracing innovation. And American
policies are conducive to risk taking. It is easy to fire someone, so you can take a risk, or a chance, on hiring someone. So more people with varied backgrounds are given a shot at employment. It is easy to go into bankruptcy. And the united States has a culture that embraces risk.
Take two ambitious young people – one of them is a McKinsey associate in Paris and the other is a McKinsey associate in San Francisco. Now McKinsey is one of the top consulting firms in the would and if you have a long career there, your expected payout is very high. But what happens if these associates come upon a great business idea. Well … the associate in Paris will likely never leave. Because if he starts a company and it fails, he is going to have a very tough time finding a comparable job because of the stigma of failure. If person in San Francisco started a company, by contrast, she can always get her job back at McKinsey if she fails.
To sum up … America is on thin ice. And it is very, very thin. But American small businesses are constructing a bridge to over the ice … and there might be the potential to go from one side of the ice rink to the other without actually walking on it.
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