Nine out of ten businesses owned by trapeze artists are not in this survey

Back when I was in college, there was a group advocating burning rock albums. A major investigative journalist wrote a story on their motivation (I think he either wrote for Rolling Stone or Playboy, the latter of which, yes, I really did read for the articles. Despite having competed on my college track team and the U.S. judo team, worked as a programmer and played rugby, I am actually not a lesbian, a fact which frequently surprises people. But I digress. Even more than usual.)

One question that I remember was how the group came about their figure of 80% of out-of-wedlock babies were conceived by listening to rock music. The founder said they had heard this figure cited by an evangelist during a revival in their town. The reporter followed up with the question,

“So, do you have any data to support your album burning other than the traveling evangelist poll?”

There were many things wrong with this study, the first of which being, I suspect, that it didn’t exist. Beyond that, there is the sampling issue. Is 80% a high number? Perhaps it is the music listened to by women of child-bearing age, the Big Band, Lawrence Welk fans being primarily post-menopausal and thus not at-risk of pregnancy on either side of wedlock.

A causal relationship is at least implied, otherwise what was the whole burning point? To test this hypothesis, I turned on Blinded by the Light by Bruce Springsteen at full volume. Two unmarried daughters of child-bearing age were in the house, as was my husband.

No pregnancies ensued. Said husband remained downstairs building a robot with the world’s most spoiled twelve-year-old, although he did come up momentarily to ask if I minded if he turned down the music.

One daughter announced she was going to the apartment of the other daughter because, and I quote,
“No offense, but you people are boring.”

Which brings me to my tangentially related point… Lately I have been trying to come to the source of the frequently stated “facts” that

A. Small businesses produce the jobs that lead the economy out of a recession

B. Most jobs are created by start-ups

C. What small businesses really need are credit and counseling. Business plans always feature in there big.

I have no idea whether A and B are true or not. I rather suspect A is in part because there are way more small businesses than any other type. It goes back to the Traveling Evangelist Poll (whether it existed or not). If there are way more people working in small businesses then a 10% increase in them is going to be more than a 10% increase in the fewer number of people who work for large business.

As far as C, I am a bit confused. Vivek Wadhwa, who is a pretty interesting writer on this topic, had this article on Tech Crunch on July 10, with which I agree completely. The title is “You’re no Steve Jobs” and his main point is that the problem with many start-ups is that no one wants to buy their crap. He said it way more nicely than that, though.

Years ago, I used to spend some time on a forum for small businesses. One of the reasons I quit was because in the start-up section, no one ever said,

“What? Are you crazy?”

Instead, there were always supportive comments like,
“Live your dream, baby! I’m sure your business making hand-knit sweaters for turtles will make millions by next summer.”

These people are always saying that if they only had the money, they could have this amazingly amazing life but that the big bad banks would just not lend them the money to go out and buy a building to turn into a turtle sweater making factory.

The very odd thing, odder even than the turtle sweaters, is that the same week I read an article with which I mostly disagreed by the same Vivek Wadhwa ! (No, I am not stalking him, it was coincidence. I swear.)

In the Business Week article he says that what keeps Americans from starting companies is lack of knowledge, lack of financing and fear of failure.

Well, those aren’t 100% contradictory … they don’t start because of lack of knowledge and financing but they DO fail after they start because no one buys their products. (Maybe some of that fear of failure is realism.)

Having been in business 25 years and never once been part of a survey (hey, I’m WORKING here!) I was curious as to the source of these figures.

Being a good academic, Wadhwa did provide references, and the first was to a study of 549 entrepeneurs in high-growth industries.

I don’t doubt that one might find for this specific group that access to capital is a big barrier. To a small company becoming a big company in a short period of time, the capital to buy a building, working capital to meet a growing payroll, all are important.

What percentage of jobs are those, though? I don’t know but I don’t think it is a lot. Google and Yahoo both have offices in Santa Monica. Geocities had its headquarters a few blocks from where I’m sitting. Even in our relatively tech sector of the world, the number of “high-growth” employees are dwarfed by those working at the restaurants, hotels, liquor stores, car dealers, movie and TV industry.

In other areas where I work frequently, like North Dakota, and Washington, D.C., the proportion of “high growth” industry personnel is even smaller.

What about the “more jobs are created by start-ups”? I looked into that, too. There was a really interesting study by the Kauffman Foundation that pointed out that start-ups can ONLY create jobs. Their definition of a start-up is a business that started this year.

Jobs created = Jobs This Year – Jobs Last Year

Since the second part for a start-up is zero, it can ONLY add to the number of jobs.

Existing companies may hire ten people (cool for the ten people hired) but have 15 who retired, were laid off, fired or had a heart attack due to having sex while listening to rock music. Even though ten people were hired, the company has a net loss of five jobs.

I am not convinced, though, that the answer to economic malaise is to have a massive number of start-ups as many of them (like turtle-sweater lady) may be negative on the job-creation number by the next year.

Where do they get this idea that what small businesses really need is credit, so the government should give the banks more money to lend?

I went to Google, the source of all knowledge, and typed in “Small Business Survey.” The first several that came up were places like the North Texas Small Business Development Center, Citibank and the Huffington Post Survey on the Credit Crunch.

The latter asks :
“Small business owners: have you applied for business credit? Was it approved, or turned down? Have you not applied because you didn’t think you’d have a chance?”

I’m just sayin’ that perhaps organizations whose main function is to give credit, help you obtain credit and polls asking you if you have applied for credit might be a bit biased in the proportion of those reporting credit is an issue compared to say, the general population of small businesses.

On Monday, the world’s most spoiled 12-year-old is starting trapeze school.

Supporting the Economy
Supporting the Economy

I don’t think what the Trapeze School (which is a small business, not vulnerable to out-sourcing) needed was a line of credit or a business plan. From their perspective, what they needed was to swipe my credit card.

I have some more thoughts on representativeness (or lack thereof) in surveys but the world’s most spoiled twelve-year-old is asking to be tucked into bed and my husband is suggesting that perhaps The Rolling Stones would be better than Bruce Springsteen.

I doubt it. We already have a fifteen-year gap between the oldest child and the youngest. A few years ago, I thought I might be pregnant again (we DID go to a Rolling Stones concert around that time). He was very cool about it until we got the results that said I wasn’t pregnant and then he exclaimed,


So… I punched him.

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  1. When I think of a “small business”, I think of the grocery store that my great-grandmother started at the turn of the last century, of my favorite local delicatessen that was started by the current owner’s grandparents or of the thousands of independently owned restaurant, software houses, machine shops and the like.

    I guess, technically, a “start-up” is any business that recently began operations. However, to me, the conotation is more of a recently founded business that is seeking to become an entrepreneurial venture, i.e. get Angel & then rounds of VC or other investment or debt financing, and spectularly grow or spectactularly fail.

    I very much agree with your sentiments expressed in this and earlier posts: small businesses do not need credit to grow. They need cashflow, which means paying customers. If they do need credit, it’s to smooth out rough patches or low-points in their revenue stream. I doubt very much that any cash-flow-aware business owner is going to use credit to higher new employees, without business in hand creating that need.

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