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Free-Markets 101: Politicians Need a Good Education About Running a Business

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There are not enough politicians who know what it takes to run a business. Many argue that government would improve if it was run more like a business.

Having been an entrepreneur and business owner, I know firsthand the blessings and challenges that come with owning a business. And having been a resident scholar and political candidate, I also know how little well-educated people in academia and government know about the “ins and outs” of running a business.

If we can whittle away at this lack of understanding, perhaps we can form the foundation for public policy informed by a realistic understanding of what it takes to succeed in business and create jobs.

Even in the absence of overbearing regulation, government-fueled uncertainty, and other state-sponsored obstacles, small business owners have plenty of barriers to success with which to contend. Government regulators seriously underestimate how hard it can be for small businesses to jump through seemingly simple regulatory hoops, file all their forms, and track all the required information. On any given day, business owners may need to monitor sales pipelines, conversion rates, market trends, and dozens of other industry-specific metrics that directly impact their ability to meet payroll in the near term, and the general solvency of their business overall.

If policymakers could recognize the sometimes-overwhelming amount of information and data that must be monitored to maintain a successful business in the 21st century, perhaps they may begin to understand how “just another couple of forms to file” can become the figurative straw that breaks the camel’s back.

Small business owners that hope to stay in business for any length of time must also keep track of their competition. This can include a “SWOT” analysis (strengths, weaknesses, opportunities, & threats) to identify how they can differentiate themselves and thrive versus the competition. It can also include more informal tracking of processes needed to remain efficient and keep employees happy, while producing strong products.

Business owners and entrepreneurs must also monitor risk, which l varies widely based on industry, company age, and location. Of note for policymakers, businesses are always focused on attracting and retaining talented employees, maintaining production (including the sourcing of parts often from multiple upstream providers), ensuring cash flow is positive and financing available, while monitoring legal issues related to intellectual property, employee safety and consumer liability.

I raise these issues because I believe there is genuine ignorance on the part of too many lawmakers with respect to just how much goes into running and growing a successful business.  But if we can tie a direct line between this lack of understanding and the unwillingness of many politicians to consider the needs of small businesses during policy formation, perhaps we can change things.

What’s really needed is a free, widely available curriculum on what goes into running a business. And I’m not talking about high-level summaries, but rather addressing issues like fiscal literacy, startup administration (e.g. entity structures, access to capital, measuring demand, etc.), understanding underwriting (e.g. the costs of borrowing vs. ceding equity), and other specific issues aspiring business owners will need to know.

Policymakers should incorporate these lessons into our K-12 curriculum (or preferably into an expanded K-14 curriculum in partnership with community colleges and technical/trade schools), giving students the option to attain a degree or certificates of proficiency. This would prepare students to either succeed on day one in an existing business or to start their own businesses with confidence.

Encouraging Americans to start and grow businesses isn’t merely a means to some political end. It is the foundation on which we will continue to thrive as a nation. The strength of our American system, and the continuation of programs like Social Security and Medicare, rely on continued robust economic growth. The solvency of our government is based on our ongoing ability to increase both national and personal wealth. The innovation and entrepreneurship spurred on by small businesses are vital ingredients for our future success as a nation.

Fortunately, this really is a case where the government can largely “get out of the way” to free up the genius and work ethic of the American people, who have proven to all doubters for more than two centuries that when given the opportunity, we will achieve greatness. It is time for us to ensure that our rising generations are equipped to fill the large shoes of those that came before them, and I have no doubt that they can and will.

Damon Dunn is a fellow in Business and Economics at the Pacific Research Institute and writes the regular “Free Markets 101” column for “Right by the Bay”.  He is a successful real estate developer, investor and businessman, former collegiate and pro football player, and was a Hoover Institution fellow from 2011-13.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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