One entrepreneur's "good" is another's "bad"

Filed in archive Bootstrapping Trends on June 14, 2010

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I may just not be paying attention, but I haven't seen all the indicators that Scott Shane is talking about when he talks about mass media claiming that the recession has been good for entrepreneurs. His latest post disputes that purported point, which just serves to illustrate that in small business, it all depends on your perspective.

One can generally expect self-employment numbers to skyrocket during times of economic trouble as people lose their jobs and find it impossible to get re-hired elsewhere. The easiest thing to do in that situation, if you have some skills that are applicable outside the standard corporate environment, is to hang out your own single. It's an opportunity for people who would otherwise never have made the leap from security to uncertainty, and a stop-gap for many others to pick up a few bucks during the lean time between jobs.

Shane crunches the numbers to illustrate that while this has, in fact, happened again during this most recent recession, in fact overall numbers of the self-employed are down... 7.5 percent from 2007 to 2009. In other words, while the number of people starting their own businesses did increase as the recession churned along, even more gave up working for themselves, indicating a tremendous failure rate.

Shane uses this to question whether the recession has been good for entrepreneurs, as his bete noir Robert Reich recently claimed. But I think neither of them are really looking at how the recession has been for entrepreneurs... they're looking at how it's been for the economy driven by small businesses. In that equation, more small businesses is good; they're creating jobs and demand, a healthy economic environment. In that debate, I think it's hard to dispute Shane's point: you only have to look at the overall health of the system to see what the state of small business must be.

On the other hand, as an entrepreneur, I think that actually is good for entrepreneurs on the individual level. From where I am sitting, that's less competition, fewer amateurs cluttering up my market, more big opportunities with fewer bidders. Other small business owners are getting discouraged and getting out of the game? More for me!

I'm not saying I want that to flow to it's logical conclusion, where the economy implodes, but I'm saying that simply looking at the numbers of the self-employed doesn't tell you much about their environment, and people that are doing so may not understand that environment very well in the first place. I like to have a healthy economy to operate my business in, just like the next guy, but if that next guy is a competitor and pulls in his shingle, that's a win for me, not a loss. Their bad is my good.