The biggest problem in the US economy today is the death of entrepreneurialism.
The number of self-employed Americans is at an all time low. It is not coincidence that this record was set at the same time that the number of Americans receiving Government entitlements is at an all time high. A cultural shift has occurred in this country. And it is resulting in more businesses closing than being opened.
You would not know this based on the financial media's reporting, which continues to spin the narrative that we are in some kind of entrepreneurial renaissance, largely based on the fact that a handful of start-ups are valued at ridiculously high valuations due to the VC bubble.
Most of those businesses are gimmicks. And their founders represent the 0.00001% of entrepreneurs who happened to luck out more than anything else. A little known fact is that 75% of all venture-backed firms (firms that raise at least $1 million) don’t even return investors’ capital (meaning the money is gone forever).
What America needs right now, is for people to start their own businesses. Not mobile apps, social media websites, and other pipe dreams they hope to sell for millions of Dollars to Wall Street, but businesses that have a chance of actually producing cash flow so they (the entrepreneurs) can make a living.
That’s how the US used to be.
During the last 200 years, the reason the American dream was so appealing for people was because there was a relatively decent chance of it turning out. This was back when the dream consisted of getting a job that covered your cost of living (hopefully and then some), raising a family, and working hard for most of your life to better yourself and your loved ones.
That used to be a dream: having a good life, making good money, and raising a family.
The American dream has since become perverted into the equivalent of hoping to pick a winning economic lottery ticket: hoping that you somehow will become one of the lucky 0.00001% who strike it big and make millions upon millions of Dollars.
American Idol, social media apps, Reality TV, Hollywood, Youtube Sensations, etc… they’re all cut of the same cloth: promoting economic lottery tickets that have a less than one millionth of a percent chance of working out.
Moreover, the myth is in fact two-fold: 1) that winning the economic lottery is ordinary and 2) that those who “win,” actually “win” something of value.
If you look closely at the people who do “win” in these situations, they are almost all miserable wretches. Look at the divorce rate, substance abuse, and criminal records of the “winners.” That’s not happiness… it’s being a broken human being who has too much money (and usually ends up losing most of it).
Starting a pizzeria, opening a hair salon, becoming a welder… those random examples have a far greater likelihood of actually working out than any of the above examples of getting super rich through popularity or haphazard chance. Yes, you’ll work incredibly hard… but that was actually the norm for society going back for centuries.
This notion is not to be snickered at. Capitalism is a bottomless well of potential wealth and prosperity. I’m talking about real capitalism. DEMOCRATIC capitalism. Capitalism that allows for any individual to improve his or her lot in life via hard work; not the corrupt, crony capitalist monstrosity of a system that exists today in the US.
Sandwiches have been around over 100 years, but people are still opening sandwich shops that find ways of creating jobs. Frozen yogurt has been around for decades… but the guy who started Sweet Frog did so in 2009 and has since opened over 200 locations. Cars have been around since early 1900s but people are still creating new technologies that improve them.
Again, the biggest problem in the US is the below chart. Until we fix it…and a wave of entrepreneurs start creating businesses that are viable, the US will continue to be in a recessionary “recovery” that is frankly DEPRESSING.
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Best Regards
Graham Summers
Chief Market Strategist
Phoenix Capital Research