Creating Jobs

I recently read an excerpt from an interview Forbes did of a guy named Jim Clifton, CEO of Gallup. I pulled it from a weekly letter I get from an economist named John Mauldin. I liked some of the points he made and thought I'd pass them along.

Jim Clifton, CEO of Gallup

When asked the question, "What obstacles do leaders have when trying to create more jobs?", he responded,

There are no real obstacles. Just wrong thinking, bad assumptions. When you build strategies and policies on wrong assumptions, the more you execute, the worse you make everything, which is what we are doing now. There are three wrong assumptions that cause all the current job creation attempts to not work.

1. Innovation is not scarce. Entrepreneurship is scarce. We are spending billions and wasting years of conversations on innovation and it isn't paying off. Great business people are more valuable and rarer than great ideas.

2. America has about six million active businesses. Ninety-nine percent of them are small businesses. An incalculably huge mistake leaders are making now is spending time, money, strategies, and especially policies for those who need 'help' getting a job. A useful way to look at any citizen is this, 'Can she herself create jobs or does she need a job created for her?' We are spending all our time on the cart and doing little or nothing on the horse. We have our assumptions and futurism that backward. 'The horse (small and medium business) stopped, so we fix the cart (jobs).' If we change all our strategies and policies to favor the job creators (small and medium businesses) the horse and cart will get moving again. We have our compassion right, but the logic is staggeringly stupid.

3. It is wrong thinking to imagine that Washington has solutions. Job creation is a city problem. There is great variation in job creation by city in the United States. San Francisco and the greater Valley keep pumping away while Detroit isn't. Austin's cart works while Albany's doesn't. Cities need to look inwardly and say, 'What can I do to create great economy energy, to bring new customers for all existing companies and start-ups?'

I think Jim may not have formulated his answer (most likely delivered verbally) as elegantly as he might have, but I think his points are mostly valid. I admit part of the reason I liked the quote is because his 'staggeringly stupid' comment made me laugh out loud. But I agree that we get our logic backward a lot of times. Fostering job growth has to include encouraging the producers of jobs, which are historically small and medium businesses according to my friend John Mauldin. Mauldin's writings over the years have led me to believe that most large businesses don't create a lot of growth or innovation. There are exceptions. But I'd like to see more encouragement for people to start their own businesses and create economic value rather than seeking jobs from large businesses, hoping that someone will drive the economic growth necessary to create and continually validate the existence of that job.

I think he's probably right about where the solutions should originate. At the local level, people and governments can have a much greater impact. It seems logical to me that many of the solutions should come at the local and possibly state level. I want to see everyone have a job that keeps them meaningfully employed, but I don't think the Federal government is going to solve that problem. I don't believe they can.

Though there are valuable policies that governments can implement that can encourage economic growth, it may be that one of the best things they can do is to stop weighing down the horse. Unfortunately, just how that should be done is not something I can answer very intelligently.