I think she’s right. > http://www.sramanamitra.com/2014/12/23/this-is-how-to-create-wealth-for-the-middle-class/ > > <http://www.sramanamitra.com/2014/12/23/this-is-how-to-create-wealth-for-the-middle-class/> > > This Is How to Create Wealth for the Middle Class > > Posted on Tuesday, Dec 23rd 2014 > > The world is becoming a more unequal place everyday. The concentration of > wealth at the tip of the economic pyramid is increasing. > > The Economist recently did a piece > <http://www.economist.com/blogs/graphicdetail/2014/11/daily-chart-2> on the > subject: > > A NEW paper <http://gabriel-zucman.eu/files/SaezZucman2014.pdf> by Emmanuel > Saez of the University of California, Berkeley, and Gabriel Zucman of the > London School of Economics suggests that, in America at least, inequality in > wealth is approaching record levels. The authors examine the share of total > wealth held by the bottom 90% of families relative to those at the very top. > In the late 1920s the bottom 90% held just 16% of America’s > wealth—considerably less than that held by the top 0.1%, which controlled a > quarter of total wealth just before the crash of 1929. From the beginning of > the Depression until well after the end of the second world war, the middle > class’s share of total wealth rose steadily, thanks to collapsing wealth > among richer households, broader equity ownership, middle-class income growth > and rising rates of home-ownership. From the early 1980s, however, these > trends have reversed. The top 0.1% (consisting of 160,000 families worth $73m > on average) hold 22% of America’s wealth, just shy of the 1929 peak—and > almost the same share as the bottom 90% of the population. > > > On the other side of the spectrum, the fortunes of the wealthy have grown, > especially at the very top. The 16,000 families making up the richest 0.01%, > with an average net worth of $371m, now control 11.2% of total wealth—back to > the 1916 share, which is the highest on record. > > There has been research on Fortune At The Bottom of the Pyramid, C. K. > Prahlad’s acclaimed thesis. > > A Nobel Prize has been awarded to Muhammad Yunus for his pioneering work in > Micro Finance focusing on this segment. > > And yet, a domain that calls for the maximum diligent thought today gets very > little attention: how do you activate middle class wealth creation? > > In my 2013 book The Other 99% (Entrepreneurs): Fortune In The Middle Of The > Pyramid > <http://www.amazon.com/The-Other-99-Entrepreneurs-Entrepreneur-ebook/dp/B00FBQRXKI/>, > I wrote: > > So what is the solution? Can the ideals of democracy and capitalism be > combined to establish a more robust, stable system? > > I believe so. Here’s how. > > We need to use the fundamental principle of capitalism — the creation of > value that people are willing to pay for — and apply it to the middle of the > pyramid on a global scale. In other words, we need large numbers of > entrepreneurs who are willing and able to build products and offer services > that address demand from certain specific segments of customers. We need to > teach them how to build businesses that can become sustainable — profitable — > and create jobs. We need to also teach them to grow by applying the same > kinds of methodology and discipline that, traditionally, a venture-funded > company may use. > > Everybody talks about the role small businesses play in growing economies and > creating jobs. However, as it stands, in America alone, 600,000 businesses > die in the vine every year. This colossal infant entrepreneur mortality is a > product of colossal levels of ignorance about how to build and sustain > businesses. > > I have studied some of the reasons behind this mortality. > > One reason is that entrepreneurs have been fed a myth that entrepreneurship > equals venture capital. The media, business schools, incubators — every part > of the eco-system that is supposed to teach good business practices — > reinforces this myth. > > The reality is that over 99% of entrepreneurs who go out to seek financing > get rejected. > > There are two primary reasons behind this phenomenon. One, most business > opportunities seeking venture capital are too small, and too slow growth to > fit the venture model. The second, entrepreneurs often go to VCs too soon, > without doing adequate homework. > > There is actually a method to the madness of entrepreneurship. And while the > ‘character traits’ that support entrepreneurship — courage, tolerance for > risk, resilience, persistence —?cannot be taught, the method of building > businesses can and should be taught. > > In fact, it should be taught not just at elite institutions, but at every > level of society, en masse. > > If we can democratize the education and incubation of entrepreneurs on a > global scale, I believe that it would not only check the infant entrepreneur > mortality, it would create a much more stable economic system. > > Why? Because this middle of the pyramid — large numbers of small and medium > businesses — is outside the reach of the speculators. If they produce > something of value that their customers want, they can build stable > businesses. They may not grow 300% a year. They may never become billion > dollar enterprises. > > That’s okay. > > Too much energy in the business world today is being spent on high-growth > businesses that go after very large business opportunities. All of the > startup incubation eco-system of the world focuses on the venture-fundable > businesses only. As a result, less than 1% of the world’s entrepreneurs are > able to access high caliber incubation support. > > My thesis is that the other 99% entrepreneurs hold the key to Capitalism 2.0: > a system of distributed, democratic capitalism > <http://www.sramanamitra.com/2010/10/12/capitalism-2-0-distributed-democratic-capitalism/>. > Still focused on creating value, generating wealth, creating jobs, but not > so focused on speculation. > > Mercantile capitalism has hit its limits. Democratic, distributed capitalism > will allow the pendulum to swing back and hand power back to the value > creators. > > The good news is that in this era of high bandwidth connectivity, most parts > of the world can access online learning, and use online channels to build > businesses. Let’s say, we digitally teach and incubate millions of online > businesses over the next few decades. > > We teach them fundamentals like Entrepreneurship = Customers + Revenues. > Financing is optional. Exit is optional. > > From Africa, to Indonesia, to Colombia to Maine, generations of entrepreneurs > proliferate. They all are given the opportunity to access certain methodology > and knowledge. > > What do you think will happen? > > Infant entrepreneur mortality will drop. Larger number of entrepreneurs will > learn how to grow their businesses. An entrepreneur who would have otherwise > done $1 million a year, with proper support, will perhaps do $5 million a > year. > > And quite possibly, larger numbers of entrepreneurs would qualify for venture > capital because they would not go too soon to seek capital. They would go > only when they are ready, when their ideas are validated, when investors are > likely to invest in them. > > A more robust pipeline of fundable businesses will develop. These, then, can > attract capital and grow faster. > > The only way to increase middle class wealth is to teach more people how to > become successful entrepreneurs. > > Not necessarily billionaire entrepreneurs. > > Not even $100 million entrepreneurs. > > We need more people who can build $1 million, $5 million, $10 million, $20 > million businesses. > > There is also an obsession with exits in the entrepreneurship universe. This > is counter-productive. In 2013, 70,713 ventures received angel financing > (Source: Center for Venture Research, UNH > <https://paulcollege.unh.edu/sites/paulcollege.unh.edu/files/2013%20Analysis%20Report%20FINAL.pdf>). > However, the number of companies that get venture financing has remained ore > or less steady over the years at about 1000. Presumably, over 70k > entrepreneurs and their investors aspire to substantial exits down the line. > However, the market cannot sustain that many exits. > > Instead of a large percentage of these 70k ventures becoming infant mortality > statistics, I would like to see them focus on building value by generating > customers, revenues, and profits, so that even if they don’t get follow-on > venture financing, they can still survive as robust businesses. > > They also need to think through other models of investor compensation like > dividends, because the exit-focused investing is likely not going to pay off. > However, if you build a $5 million or $10 million business that yields 20% > profit, you can offer investors dividends on an ongoing basis to make it > worth their while. > > The problem I see with the way capitalism is evolving is that the market is > full of gamblers. Entrepreneurs and investors see Facebook acquiring WhatsApp > for $19 billion, and think they can also buy a lottery ticket. > > Whatever happened to the value creators? > > To create fortune in the middle of the pyramid, we need to get back to > basics: producers create value, consumers pay to access value. > > We cannot let speculators hijack the system.
-- -- Centroids: The Center of the Radical Centrist Community <[email protected]> Google Group: http://groups.google.com/group/RadicalCentrism Radical Centrism website and blog: http://RadicalCentrism.org --- You received this message because you are subscribed to the Google Groups "Centroids: The Center of the Radical Centrist Community" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. For more options, visit https://groups.google.com/d/optout.
