Inevitable Change – Part 3

As originally featured in SustainableIndustries.com by BetterWorld President Matthew Bauer. A three part series: Reading the tea leaves, accepting the inevitable and bringing focus to the most promising sector of our economy. _Part One discussed how we got to where we are. Part Two focused on Trends and Facts helping support the shift to a small business-focused economy, Part Three now pulls it all together and discusses concrete solutions for moving forward into the new Access Economy.
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All too often we are just looking at the issues in silos and not seeing the opportunity for truly shifting our economy, society and our species’ detrimental and growing impact on the earth’s biosphere. Taking a page from the wisdom of E.O. Wilson, his book, Conscilience, touches brilliantly on a new approach – managing strategy and policy across multiple silos of specialty at the same time. 

As both large companies and governments are shrinking their employee rolls, it seems as though the facts and trends we discussed in the second part of this series, combined with a huge focus on strengthening, teaching and supporting smaller, independent, innovative businesses, will reap the greatest payoff  (in cost-benefit terms) and a national economic discussion well overdue for consideration.

So what can we do, right now to support this shift?

Here are some ideas: New Capital and Formation Options for Small/Startup Businesses On April 5, 2012, President Obama signed the Jumpstart Our Business Startups (JOBS) Act into law.  This bipartisan legislation fulfills the President’s call from last fall to reduce regulatory burdens that prevent many small and young businesses from raising capital – specifically by allowing crowdfunding, expanding mini-public offerings, and creating an “IPO On-Ramp” consistent with important investor protections.

Interestingly, I have read a number of articles pushing fear around this and other proposed instruments making their way through Congress and the SEC as being risky. If I want to invest in my neighbor’s business via one of these new or expanded mechanisms, is that more “risky” than investing in the stock market, which is run now run largely by automated hedge fund algorithms? Michael Shuman, co-founder of Business Alliance for Local Living Economies (BALLE) and Post Carbon Institute fellow says the critics have it “180 degrees backward.” Shuman acknowledges that the bill is imperfect, but says:

“Jim Hightower says this bill is about’deregulating Wall Street.' In fact, the bill spells the end of Wall Street as we know it. It allows the 99 percent of us who are not wealthy (‘unaccredited investors’) to put our money in the local businesses we love, by removing what were once impossibly difficult and expensive legal barriers. Those barriers had been so high, so misconstructed, so poorly targeted against small business and small investors, that they resulted in almost none of our long-term savings – now totalling $30 trillion – going into the local half of our economy. The JOBS Act ends this monopoly for good.”

Kudos to Steve Case and others for spearheading Startup America Partnership, this innovative and impactive public/private partnership is based on a simple premise: young companies that grow, also create jobs. This is exactly the type of ecosystem that we need to spur our most valuable people and companies to start and grow new companies.

Direct Public Offerings (DPOs) are a little known but mature instrument for raising capital for small to medium-sized companies. Think IPO, but on a smaller scale and investors do not have to be accredited. Most states have them and they are SEC sanctioned – the range is roughly $500K to $5M. The question is, why aren’t more companies using DPOs to raise capital? Watch for this one to explode in the coming years. Google “DPO” and your state or call our friends at Cutting Edge Capital in Oakland to find out what the options are in your state. ****

Here comes the Access Economy
Look no further than the just-issued Fast Company World’s Most Innovative Companies List 2012 to get one great view into the future economy. The companies and organizations here represent connectivity (Facebook, Twitter), sustainability (SolarCity), huge innovation within traditional industries (HBO, Tesla, NFL, SNHU, Square). From Amazon to Square, disintermediation and reduction of friction are the clarion call. New pathways of connecting and learning, and regardless of where you fall on the Occupy Movement, a truly global movement was created in weeks and months, without a defined leader, without a rich backer and without a particular political agenda. These are all products of our Internet Age, our new Biosphere Consciousness (thank you Jeremy Rifkin for the term). Almost every one of the organizations listed was a small startup at some point – the pathway for starting and creating these companies is now much smoother and the pathway to glory simpler. The next decade is going to be extremely interesting.

Location Based Work is a Dinosaur Awaiting Extinction
“…the madness of American transportation leads to only one conclusion: no solution of the transportation puzzle is possible until work and home are put back together.” – Kirkpatrick Sale, Human Scale, 1980

There are huge inefficiencies in how we work – if one were to objectively look at the road miles, time in transit, airline miles and redundant/idle commercial building space currently expended in getting to and from the office, the amount of carbon and cost to business is simply staggering. As it occurred, the transition from industry and manufacturing to our services-based economy did not have the benefit of a mature broadband network that reaches over 85 percent of the households now in our country, wireless and wireless data services that cover even more and business models springing up every day that favor remote work versus the old “factory” mentality.

The number one contributor to carbon and environmental emissions in the U.S. is squarely rooted in how we work. Work-related activity creates over 90 percent of the carbon emissions and pollution in the U.S., with buildings and transportation accounting for almost 75 percent of the total. Roughly 3 percent of the U.S. workforce telecommutes a majority of the time today, but if that number was 50 percent of those who can, we would cut our carbon emissions by 50 percent while saving 453 million barrels of oil and significantly cutting the 2.1 billion hours we waste in traffic jams every year. Essentially, it would be the equivalent of taking 15 million cars off the road.

Change how your organization works today – start from a standpoint of removing location (if you are not retail, restaurant, library, etc.) and then work your way backwards. We will all work this way someday soon, the sooner you start, the sooner you will realize lower costs, higher employee satisfaction, higher productivity and less environmental impact.  For more information, check out our BetterWork Resource Page.
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Banking Regulation Changes & Move the Money**
Small businesses did not cause the economic meltdown of the past few years, but they are paying a heavy price under the threat of downgraded loans from regulators – which is the excuse many banks now use.  We need to get capital to small businesses, both startup and existing, and all you hear is that banks are afraid of the regulator bogeyman coming in to downgrade any business loan that is not the color of diamonds. Whomever the genius is behind this dynamic please refer to the cause of our recent downturn: securitized real estate investments and greed – all centered around Wall Street, not Main Street.

Also, let’s change the access to capital rules. We need to get away from the asset-based lending rules and start angling towards a more realistic structure based on novel ideas such as track record and profitability, and wake up to the fact that we are now a service economy. This change is only inevitable as we continuously shift towards a services-based economy and as real estate becomes less important for non-storefront businesses.
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Buy Local, Be Local**
_Personal_: Buy local, be local – COMMIT NOW to shifting 10 percent of your purchasing as a business, non-profit and/or personally to local independent businesses, this creates more jobs, increased community wealth and, well, it’s a lot more fun to shop or eat at a place that’s not run by the global machinery. By localizing our manufacturing and food resources, the impacts are far and wide – huge economic growth and mitigation of the environmental impact of food and manufacturing miles. Seek out the _Buy Local_ network in your community, and get involved, sign your business up as a member/supporter and start to hear the sucking sound of community wealth dissipate. For more information on all fronts local, check out http://www.LivingEconomies.org, which is the Business Alliance for Local Living Economies (BALLE).
_Policy_: City governments need to get their political and common sense heads on straight, point your budgets and spending at local firms – just do it! If you can’t find a suitable local option, then farm it out or legislate this. This is probably the largest shift a community can make towards keeping dollars circulating in the community.
_Public/Community Banking_:  Cities should move their money to a municipal bank (check out this recent piece in the WSJ), which will keep more money in the community and fund projects others in the community can then follow. Remember the multiplier affect…this one should be a no brainer.
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The End**
There’s nothing stopping us now and there is too much momentum to turn back. Let’s make this the point, the juncture where we decide to increase wealth in our communities, to truly tap and expand our entrepreneurial hard wiring, and to increase ownership of business in communities all across the country. It will take effort at all local levels, and in state and federal public/private partnership, but the examples are growing and catalyzing. As a society, we spend so much time railing at the politicians and those in “power,” when in truth the field is ready for transformation. Whether starting a business, focusing on buying local, or transforming your workplace, the conditions have never been more ripe than now. The keys to the Access Economy are well within our reach, we need to start taking these pathways and creating a new manifestation of the global economy, one where the money, power and ownership are distributed via interconnected, intelligent virtual and physical communities.

For centuries, the decisions made by the few with the money and the power dictate the priorities of their government and the stories in the media, and they determine the lives and opportunities of their citizens. There is now something bigger. The people of the world see each other and can protect each other. It’s turning the system upside down and it changes everything. Massive change and transformation is underway, our Biosphere Consciousness is forming. Seize the moment and get on board!