This weekend I wrote about the problems of being an entrepreneur in our Muddle Through Economy. I would like to follow that up with two brief (but somewhat controversial) essays on two aspects of starting up small businesses. The first, by Vivek Wadhwa, points out that start-ups account for all of the net new jobs, and is a summary of a paper from the Kaufman Foundation. (You can read the 12 page paper at http://www.kauffman.org/uploadedFiles/firm_formation_importance_of_startups.pdf)
The second is by my friend William C. Dunkelberg, the Chief Economist of the National Federation of Independent Business. He asks a very simple question: Why is thrift getting such a bad name? And if we take the potential savings from “the rich,” where will the savings come from to invest in start-ups?
Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at the School of Information at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University.
The both make for thought-provoking reading, and offer some challenges to the conventional wisdom, which is what Outside the Box is supposed to do.
Your doing his part by creating start-ups analyst,
GaveKal released a new book last year called Our Brave New World and it has been the subject of several Thoughts From the Frontline letters. Steven Vannelli, of Gavekal, offers us another look at platform companies and argues that research and development (R&D), or intellectual property, is much more important that capital expenditures, or manufacturing ability. He then shows several examples of US companies that have increased R&D compared to capital expenditures.
Platform companies have realized that to be competitive in the new global marketplace they must lead innovation. In 2004 the US spent $250 Billion on R&D while China only spent $20 Billion. The US is moving production capacity around the world and GaveKal argues that the important thing to watch is R&D and that is why this piece was picked for Outside the Box.