"Revolution," according to Webster's, is a
complete or radical change of any kind. Our economy has flirted
with radical change. But the drop left us smarting, and craving
what's safe.
So what's safe? Previously, we equated safety with
corporations and invincibility with largeness. But it took just a
week after the terrorist attacks to expose the inherent
weakness—the high costs and low margins—in the airline
industry. And it's taken just six months to see more faltering
giants and massive layoffs.
Still, the federal government clings to its misconceptions,
counting on goliaths like IBM and Microsoft to pull America out of
its economic funk. Their message is clear, whether it's via
defending anticompetition practices or granting bailouts in tidy
sums.
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"The government is giving out huge awards for
inefficiency," says William B. Gartner, the Henry W. Simonsen
Chair in Entrepreneurship at the University of Southern
California's Marshall School of Business in Los Angeles.
"Frankly, government policies are anti-entrepreneurial across
many industries."
Despite that formidable obstacle, Gartner has faith "our
economy is going to be more, not less, entrepreneurial. The
information economy is not based on economies of scale the same
way. It's based on what's in your head, your ability to
exploit ideas and information. That will continue, and even
intensify."
The reality is, entrepreneurs have the potential to fortify the
economy as never before. "The need for innovation and new
ideas has never been greater, and the problems or challenges of a
new economy have always been met by rapid-growth firms that find
the key to what the country needs," says Howard H. Stevenson,
business professor at Harvard University in Cambridge,
Massachusetts.
Today, for example, Stevenson says, "it's unlikely to
be Eastman Kodak that delivers the best security
devices—it'll be some entrepreneur with an image
recognition product. And it'll be an entrepreneur, not Oracle,
who delivers the security of neuro-network processing."
We must rely on the passionate smaller businesses to fill gaps
in creativity, as large companies retreat, shellshocked by the
economy. "Big firms are in survival mode," says
Stevenson. "And that's not where innovation
occurs."
In fact, the war on terrorism could turn the economic tide
toward, rather than against, small businesses. "Just because
we're in a war economy doesn't mean small businesses are
dead," says Paul Saffo, director of the Institute for the
Future, a Menlo Park, California-based foundation that provides
strategic planning and forecasting services to corporations and
government agencies. "If that was the case, why has virtually
every government agency put out requests for creative ideas? The
CIA has a VC arm in Silicon Valley called Incutel, and they're
busier than ever. Everyone's going to small companies asking
questions."
Even outside the wartime realm, Saffo sees us moving into a new
era of innovation. Like microprocessors in the '80s and
communications and lasers in the '90s, he considers sensors the
opportunity of the 2000s. In this field, Saffo says, "a lot of
leading-edge work is being done by small companies."
But with this kind of wide-open innovation, as Saffo points out,
"there's lots of space for both large and small companies
to play. The assumption during the dotcom bubble was that big was
bad. That was patently idiotic at the time. But let's now not
make the opposite mistake when people say there's no space for
small companies. It's not an either/or."
Without the entrepreneurial passion, however, we may not attain
this potential. Let's put it this way: It's a new economy.
As Stevenson says, "Do you really trust GM to run
it?"
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