The State of Small Business 1997

One of Inc.'s executive editors presents some thoughts and comments about the current state of small business.

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Editor's Notebook

The best way to introduce the stories in this issue is to tell three more--three brief anecdotes from the past 12 months of small-business life. Together, they suggest what the new economy has come to and how its creators do their work

FIRST STORY
Twenty-seven universities and research groups band together to do something about the dearth of statistical information on entrepreneurial activity in the United States. The coalition, called the Entrepreneurial Research Consortium (ERC), begins with a simple question: How widespread is entrepreneurial life? That is, what percentage of American households include someone who has started, tried to start, or helped fund a small business? The ERC conducts a nationwide survey to find out.

The anticipated answer is 10%, according to ERC coordinator Paul Reynolds, a professor at Babson College, in Wellesley, Mass., though some guesses are as high as 25%. What percentage does the survey find? Thirty-seven percent. More than one out of every three American households is involved in entrepreneurship.

Reynolds and his colleagues are stunned. "New and small businesses," he says, "are a far more integral part of American life than anyone anticipated."

SECOND STORY
The planet's most powerful corporate and political leaders gather in the alpine resort town of Davos, Switzerland, for the annual World Economic Forum. Inc. writer Jerry Useem is there and later describes a dark-suited conclave of the international establishment, every continent represented. In the past, the talk might have celebrated Europe's once-envied welfare states or Japan's then-ascendant top-down economy or the third world's claimed headway toward a Marxist Shangri-la. But this year things have changed.

In one session, Israeli Prime Minister Benjamin Netanyahu extols his country's "thousand high-tech start-ups." In another, Secretary-General of the United Nations Kofi Annan, a Ghanaian, hails not socialism but "market forces." And in the corridors, everybody talks about 20-year-old German computer entrepreneur Lars Windhorst, already a self-made millionaire, who now aims to build Vietnam's first sky- scraper. Chancellor Helmut Kohl calls Windhorst the risk-taking role model for all young Germans.

Among those present are Nelson Mandela, Yasser Arafat, Newt Gingrich, and Jack Welch. But the one attendee everyone seems to search out, to want to connect with, to try to touch is Bill Gates. "What we need is a few Bill Gateses in Europe," says one conference participant, a recent cochairman of a giant Swiss-Swedish industrial concern. "We need to glorify entrepreneurship."

THIRD STORY
Longtime Inc. contributor David Birch boards a plane in New York for a trip to Europe. Taking the seat beside him is a young man--clean-cut, well-mannered, earnest. It turns out that the young man is from Utah and is making connections en route to Poland.

What takes you to Warsaw? asks the inquisitive Birch.

Well, says the young man, have you heard of the Shelby Cobra? It's a famous old aluminum-bodied sports car, very beautiful, first made in Britain in the 1960s. They're mostly made out of fiberglass now, and they're extremely expensive. But my dad has an original, and he loves it. Everybody does. And my brother and I got to thinking about how much people would love those cars if we made them the way they used to be, out of aluminum again. How maybe we could start a company and do it.

The young man goes on: So we asked ourselves, Who in the world can make things out of aluminum? Who's skilled at molding aluminum bodies? People who make airplanes, that's who. Then we wondered, Now where is there an airplane factory that doesn't have enough to do? And we realized, Aha, the people who made MIGs must not have anything to do anymore. The Cold War's over, Russia's out of money, the Eastern bloc isn't building fighter jets, right? And where are the people who made MIGs? We found out they're in Poland. So we faxed the factory, and I went. Turned my dad's Cobra into a thousand pounds of car parts and spent three hours clearing customs. At the factory, the Poles reverse-engineered the design from the measurements of my dad's car, and in four months they had made a mold. They were brilliant. Six months after we contacted them, they were making cars. Ours cost one-tenth as much to build as the fiberglass replicas, and ours are aluminum. Ten times better. The factory in Poland is now the largest private enterprise in town.

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