The Hidden Entrepreneur

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Hidden behind all the headlines, perhaps as a result of the job losses in traditional industries, there has been an amazing transformation in the American workforce as more Americans than ever before start their own businesses.

Public policy has not kept pace. It needs to address the new landscape of American business, or we risk squandering one of the great opportunities of our generation.

In 2005, the Census Bureau found there were 20.4 million sole-proprietor businesses, an increase of 4.4 percent over the prior year, a growth rate four times faster than traditional businesses in the same period.

On average, 2356 Americans started a new business every day that year, according to the Census Bureau report released earlier this summer.

What do 20 million employees mean in the context of the U.S. workforce? To put that number into perspective, it is roughly one-third greater than the total membership of all labor unions in the U.S., according to the most recent Bureau of Labor statistics.

The growth of the "lone wolf" entrepreneur, as the U.S. Census Bureau calls these individuals, is a huge development with no signs of slowing down. Since 1997, sole-proprietor businesses have grown at a rate three times faster than their traditional counterparts.

These businesses span a wide range of occupations and industries. Some entrepreneurs work part-time in home-based businesses. Others moonlight and keep their day jobs. Others work construction and in skilled trades. Others are starting high-tech ventures. Some of these entrepreneurs will go on to hire employees.

For all this diversity, these individuals are united by a strange contradiction. A generation ago, many of them might have found a home in corporate America. They would have welcomed the elaborate set of regulations and worker protections that had been created to address the realities of relatively large, static enterprises. Benefits and retirement, such as the now vanishing pension, were tied to holding down a life-long job. Employment rules became increasingly complex, but HR departments grew to manage them, and they worked — not always to everyone's satisfaction, but in general they did what they were supposed to do.

Yet now, as business owners and entrepreneurs, our lone wolves find themselves hobbled by many of the very same regulations that were created to help employees of large corporations a generation ago. Instead of cheering regulation, lone wolves bemoan red tape.

Technology has had a positive impact on business creation in this country. The most innovative small businesses harness that technology for their benefit. Whether you run a nail salon (a sector that showed 18% growth from 2004 to 2005) a high-tech Web search portal (a sector up 41% from 2004 to 2005), affordable software and access to the Internet have changed the way you can run your business.

Sales and marketing tools once available only to big corporations are now within the reach of anyone. The real impact this is having on productivity and creativity is beginning to be felt by all, as early indicators like the rate of new solo business creation show.

Unfortunately, however, our public policy has not kept pace. Today's debate on public policy ignores this new entrepreneurial class. Instead, public policy aims to recapture the past. One proposal after another seeks to create "incentives" for businesses to "retain" jobs in the U.S. or to "create" jobs in industries hard hit by global competition.

This misses the point. Instead of looking to the past for security, our public policy should seek to foster the new entrepreneurs and do everything it can to smooth the way for them to grow and succeed.

Public policy prescriptions are not obvious, in part, because the debate doesn't even consider this new sector. Individuals are creating their own safety nets for what increasingly appears to be inevitable periods of unemployment in even the most successful careers.

Entrepreneurial activity is not for everyone. We will always need a safety net for those who risk starting their own businesses. Yet, for many, current public policy does not address their most pressing concerns and, worse yet, gets in the way of their efforts to help themselves.

About the Author

Since 2001, Morris Panner has been CEO of OpenAir, an online service for 35,000 consultants and service providers that has seen revenues grow for 27 consecutive quarters. Panner was previously an attorney for the U.S. Department of Justice in Washington, D.C., and spent a year fighting narco-terrorism at the U.S. Embassy in Bogotá, Columbia. Before that, he was a federal prosecutor in New York City, an M&A attorney, and a banker at Lazard Frères & Co.
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