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The State of Small Business 1996

Inc.'s editor-in-chief offers some comments and an overview of the 1996 special issue, The State of Small Business.

Great CEOs are great simplifiers. Take Ken Iverson of Nucor Corp., a steelmaker: "My most crucial role," Iverson once told me, "is maintaining simplicity. When I see two or more people gathering at the coffeemaker, I know they're making this business more complex than it needs to be." The same holds true for the economy. This year too many folks who create the agenda for national debate about economic issues have been spending too much time at the proverbial coffeemaker. So we wanted our State of Small Business issue to address some of the most basic questions that persist about life in the new economy in general and in the new small-business economy in particular.

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Why Are These People Smiling?
Concern about downsizing is hardly new. But the tenor of the discussion changed early this year when companies continued to shed workers even as they reported record profits. More recently, we've reached a state of virtual hysteria about the subject of economic anxiety. But even before the blizzard of stories about economic uncertainty, we were perplexed that no one was asking American workers themselves how they were feeling on the job. So we teamed up with the Gallup Organization, one of the world's leaders in public-opinion research, to do just that. The results of the first Inc./Gallup "Americans at Work" survey contradict much of what is being put forth by both policymakers and journalists. The accompanying essay, "The Happiest Workers in the World" ([Article link]), written by editor Jeffrey L. Seglin, offers the most persuasive explanation I've read about the apparent disparity between our personal sense of economic well-being on the one hand and our feelings of unease about the economy -- and the society as a whole, for that matter -- on the other. Seglin is an editor at large at Inc. When he wasn't reporting and writing our cover story, he was editing everything else that appears in this issue. Research support for Seglin's article was provided by reporter Jerry Useem.

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Peter's Principles
Thanks to the explosion of the Internet and its associated entrepreneurial opportunities, a torrid initial-public-offering market, and consistently high levels of start-up activity and small-company job generation, entrepreneurism is "hot" these days. It's hardly surprising then that according to conventional wisdom, the United States always reigns supreme when it comes to this particular brand of free-market capitalism. In "'Flashes of Genius" ([Article link]), our interview with Peter F. Drucker, Drucker issues a strong warning about our inflated sense of entrepreneurial superiority. Keep in mind that this is the same man who issued a comparable warning about our inflated sense of managerial superiority several decades ago. We didn't heed that warning, and the Japanese ate our lunch.

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The Truth About Failures
Of all the misunderstandings that persist about entrepreneurial companies, none is more widespread than the belief that the failure rate among fast-growth companies is astronomically high. Because very little convincing research has been done on the subject, we did some of our own. We tracked down the companies on our 1985 Inc. 500 list of fast-growing privately held businesses to see how they had fared over the past decade. If the members of that class are a representative sample, failure rates for high-growth companies not only aren't as high as most people think, they are dramatically lower than the failure rates for "stable small businesses." Senior editor Martha E. Mangelsdorf is responsible for "The Startling Truth About Growth Companies" ([Article link]).

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Picture This
When it comes to the macroeconomic workings of the entrepreneurial world, senior writer John Case continues to be one of this country's most insightful observers. The author of three books on business and the economy, including Open-Book Management (HarperBusiness, 1995), Case reported and wrote the five illustrated guides to the new economy in this issue. In those two-page snapshots of the entrepreneurial economy, he highlights such crucial areas as job generation ([Article link]) and geographical hot spots ([Article link]). Case's efforts were supported by research done by Mary Furash, who wrote "The State of One Small Family Business" ([Article link]).

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Tech Wars
In Inc. and our quarterly, Inc. Technology, we've dramatically expanded our coverage of technology as a management tool, but we thought this special issue offered an opportunity to pose a larger question: How has affordable technology changed the age-old battle between our nation's largest companies and its most entrepreneurial? Who better to explore this issue than David H. Freedman, the editor of Inc. Technology? Research for Freedman's article was provided by reporter Sarah Schafer. To find out who's winning the technology battle, turn to "Through the Looking Glass" ([Article link]).

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When Bureaucrats Kill Business
An all-out war of a different sort is being waged daily on the economic-development front. As regions, states, and cities compete ruthlessly for business expansions and relocations, the toll on the nation's overall competitive fitness is still largely misunderstood. Our report, "The New Civil War" ([Article link]), was prepared by one of the country's most seasoned economic-battlefield correspondents and a frequent Inc. contributor, Los Angelesñbased David Friedman.

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E-mail your comments to, call us at 800-238-1756, or fax us at 617-248-8090.

Last updated: May 15, 1996

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