Thomas Campenni on small business job creation

Thomas Campenni, who claims to be a small business owner, has a humorous and contrarian take on small business job creation:

The myth, we hear from our candidates, is that as small business people we are going to add jobs to the economy, that we are the job creators. It has and continues to be my firm belief that hiring additional employees is the last thing any smart small business person wants to do. I would much rather work harder and keep that person’s salary. I would much rather spend money on technology to be more efficient. A robot or computer program never walked out or didn’t come into work. Small businesses are not Fortune 500 companies. A small business owner has no bruised ego with not having thousands of employees under him. It might sound good to say I own a company that has 10 employees but I would rather have 5 employees and have more money in my pocket. That is the only way I will ever have a raise.

My only disagreement is that I have encountered many small business owners who really do seem to be in it because they enjoy having employees to boss around, but they tended to be poorly run and unprofitable.

* * *

I am also reminded of the contention of Richard Koch, the author of the book The 80/20 Principle, that 80% of work done in a corporate environment is a waste, and the key to small business success is that by only doing the 20% important work, when you start your own business you are able to do the work of five employees of a big business all by yourself, and that’s the key to being competitive.

So if we want more jobs, then what we want are more inefficient and bureaucratic big businesses and not efficiently-run small businesses.

Comments

[TJIC]

> t has and continues to be my firm belief that hiring additional employees is the last thing any smart small business person wants to do. I would much rather work harder and keep that person’s salary.

This small business owner agrees 120%.

[Thrasymachus]

Spengler had something recently showing that small and medium sized businesses hadn't hired much for over a decade.

I think in the old days there was some status for a business, large or small to have many employees. That ended with the corporate raider era around 1980.

The current situation seems to be that businesses will only hire ideal candidates, who have the exact training and experience they want and will require no investment.

[ode]

Nations will rise and fall therefore an argument can be made it is the ultimate fate for every business to......eventually go out of business. However small businesses tend to go "belly up" at 10 times the rate of big companies. Big companies have a disadvantage in that they must spend an average of 3 times the capital to create a job, but despite this the mathematics is clear. Big companies are 3 times more efficient at creating jobs and keeping them relative to capital expenditures.

The beliefe that small businesses are a powerful engine for job creation is a delusional myth supported by ideology more than anything else.

[RandyB]

I hadn't thought about it that way before. It is my strong opinion that our economy doesn't need our population, so for half a century we've been creating jobs that don't need doing, largely in the "sticking your nose into people's business" industries like education administration, diversity advocacy, civil rights law, and pseudo-environmentalism. These are precisely the kinds of jobs that small business doesn't create.

The Obama coalition is going to fall apart very quickly when SOMEONE doesn't find their place in the non-governmental economy.

[JP]

"if we want more jobs, then what we want are more inefficient and bureaucratic big businesses and not efficiently-run small businesses"

Well heck, if all we want are "jobs" then let's expand the government. That will be EVEN MORE inefficient and bureaucratic than big business in the private sector. And that approach worked so well for Leonid Brezhnev, how could we not follow his example?

[HS: Indeed, taxes could create jobs, because then the government could spend the money to hire more government workers. Whereas if private industry kept the money, they would use it to build more factories in China and call centers in India..]

[JP]

PS oh wait, we ARE following the example of Leonid Brezhnev...

[Riso]

Many businesses are actually moving their factories back out of China because quality control there is a pink unicorn. Producing locally might cost more at a glance, but not having to send your stuff back five times because it was produced by morons does save money in the long run.
Companies have also noticed that using Indian call centers, especially for b2b is not what people want.

[Peter]

"The current situation seems to be that businesses will only hire ideal candidates, who have the exact training and experience they want and will require no investment."

It's quite possible that this situation is a reaction to labor market conditions rather than a long-term trend. High unemployment rates mean that employers get large numbers of applicants for job openings and therefore can hold out for the perfect match. They may not have this option, at least not to anything like the current extent, if unemployment falls significantly.

[Kurtosis]

this post gave me a great chuckle.

[Camlost]

Yeah, it's a good thing that all small businesses lack the ambition to tax risks in order to expand. In fact, most of the Fortune 1000 companies you see today just appeared from the sky completely intact and operational.

[The Real Vince]

It always rankles me to see two politicians try to out love small business owners (perhaps the only thing worse is pledging allegiance to Israel). A problem with small businesses is that tend to create low-paying, crappy jobs. Jobs that are not secure because small businesses tend to go under.

[JP]

"Companies have also noticed that using Indian call centers, especially for b2b is not what people want."

I dunno... talking to Sanjay is slightly less infuriating than dealing with a robot.

[JP]

"The need for all sorts of infrastructure, or even just maintainence of current infrastructure, is readily apparent in this country."

Maintenance, sure. Not clear to me that it's not being effectively maintained.

The Army COE is a gummint bureaucracy anxious to continue its own pointless existence. They are never gonna say we don't need what they do.

[Secret of NAM]

Agree with Camlost.

Just "giving people jobs" leads to poverty because (as has been shown in every case) governments are ineffective at figuring out prices or developing new products that consumers didn't know were possible. Small businesses often become large (and employ more people) because they evolve products and services that are radically new and helpful. Big businesses are small businesses that have grown up. We need many new small businesses because most will fail. The ones that don't make all the difference in our quality of life.

HS, what are some examples of govt jobs programs that employed lots of people and created new products and services that improved lives?

[ATC]

Another reason small-business owners fear hiring employees is they could end up with someone smarter or harder-working or evil who reverse-engineers the business model, quits, poaches their clients through superior talent or malicious gossip, and then puts their former employer out of business.

This is much less of a worry for large corporations.

Non-compete clauses are tough to enforce.

[DaveinHackensack]

Had a post about this a few years ago: http://thehackensack.blogspot.com/2008/12/questioning-conventional-wisdom-about.html

Most job creation is by small and mid-sized businesses (SMEs), not the smallest businesses. Politicians usually don't make this distinction.

Anecdotally, most hiring in startups seems to be by those funded with OPM (other people's money).

As far as government and job creation, why not entirely scrap the employer portion of payroll taxes and instead offer companies a dollar-for-dollar tax credit (not just a deduction) for the first $50k per employee of every employee they hire? That would encourage some hiring by profitable companies as a form of tax minimization.

[Secret of NAM]

Capitalism is experimentation.

Bloggers and academics claim that they know how to create wealth, so the businessman says, "if you're so sure, then max out your lines of credit and work a lot for a few years, and create this thing that you claim to know works." Never happens.

When thousands of people strain to produce a product or service that people like enough to pay for, most will fail badly and some will become the next big thing. This is experimentation that HS spends so much time complaining about. This is what reifies ideas that work and employs people in new ways making things people actually want.

Unfortunately, the best communicators in the country are the children of communists, and they hate the capitalist experimentation that makes otherwise poor people wealthy. The failure of communist countries never happened.

[GB]

It sort of depends on how you define "small business." The lone entrepreneur is going to be very hesitant to hire even one employee, as it creates a massive burden of paperwork. And as you said, the business owner with five employees would rather work harder and keep the money than hire a sixth employee

But "small business" can include companies with as many as 1,500 employees, if they meet certain other standards. At that level, the business owner isn't going to hesitate to hire another person if they can produce more than they cost.

[jay]

Is Applebee's a small business? Its owner said he'd have to cut hours because of O-care's mandates.

I know a lot of doctors. People usually don't think of doctors as small business owners but they are. They are telling me that they will be killed by O-care mandates and that they are cutting hours and benefits.

A cardiologist with whom I am very close told me he thinks that if we don't clean up our economic house, nearly everyone will be working two part-time jobs with no benefits.

[Just Speculating]

Talking about 2 big businesses that have eclipsed other small businesses, which can be viewed under a HBD microscope.

Amazon.com and Barnes & Noble:

Amazon was founded by a SWPL Jeff Bezos, a Princeton Graduate. I'm sure he's HBD aware. Operates his business efficiently by hiring smart employees and paying them well. Their customer service isn't too bad since most of their calls are answered with professionalism. The packaging of their books are designed to ensure minimal damage from careless couriers like UPS. They even have customers offer suggestions on how to make a better package so books don't get damaged.

The original Barnes & Noble was passed on to Lenny Riggio, an ethnic Italian Prole guy from NYC who dropped out of college. Barnes & Noble online website is tasteless and their customer base at their Bricks and Mortar stores is very prole. Most SWPLs would do business with Amazon instead of B&N when it comes to buying books because of this. Their customer service is shoddy, because it's usually some stupid prole girl/guy or NAM answering their calls, or some imbecile who don't know anything about books at their physical shops. The packaging for their books don't make much sense, a thick book gets packed in some flimsy cardboard sleeve and then it gets damaged by UPS.

Check out their websites and you will know why a high IQ SWPL puts a low IQ Prole to shame.

http://www.amazon.com/

http://www.barnesandnoble.com/

[Conquistador]

@ Just Speculating

Everything you described is true. Same goes for the now defunct Borders which was 10x worse. The one in my area was staffed by teenagers and drew in even more from the nearby high school. It started off nice but later became a rowdy mess.

[DaveinHackensack]

"@ Just Speculating

Everything you described is true."

No it isn't. I patronize both Amazon and Barnes & Noble. Barnes & Noble full of "proles"? Please. The people who work at the ones I go to are mostly humanities grads, and none of the customers strike me as "prole" (I thought one of the markers of "proles" according to Siggy was no books in the house). I went to one a couple of weeks ago to pick up the new Tom Wolfe book and kill some time before dinner. Cafe crowd was typical: some nerdy white high school kids playing chess, coached by one of their fathers; a bunch of Asian kids studying for the MCATs; older white folks reading.

Also, worth noting that one of the ways Amazon was able to undercut bricks & mortar stores so much was by not collecting state taxes.

[Just Speculating]

"The people who work at the ones I go to are mostly humanities grads, and none of the customers strike me as "prole" (I thought one of the markers of "proles" according to Siggy was no books in the house)".

There's plenty of proles patronizing Barnes & Noble. Who says proles don't like to read? NAMs also frequent their bookstores so what does this tell you. I'm not making a case that SWPLs are never found there. They generally order from Amazon because they are busy with other things, and those who are savvy with books, go to the independents that specialize in liberal subjects typical of ivory tower types. If you are a xyz community/city college student here in the NYC area, Barnes & Noble is your likely source for textbooks. Only prolish idiots attend community or local schools where they don't have their own store. In terms of their customer service, I have yet to come across a reasonable person who knows how to engage patrons in a professional or intellectual manner. I once asked a lady at the information desk where the books about Spanish history were found, and she said teasingly "well it's a big place so you would need to walk a bit and I suggest you try the Spanish language section on nth floor".

Their online store which is just as bad as their bricks and mortars is hard to navigate, where the shopping cart and the books to be purchased later are in different sections of the site.

Dave, are you discounting the fact that Jeff Bezos of Amazon, a stylish SWPL who graduated from Princeton really knows how to run a operation much smoothly than a tacky prolish guy who heads up Barnes and Noble? How does a bookstore with a painfully slow disorganized website and trademark bathroom floor tiles strike you as intelligent?

[Conquistador]

Looking at Barnes and Noble's website I'm kinda shocked at how much it rips off from Amazon. I really liked their older design.

[Conquistador]

@ Dave

I'm not hating on Barnes and Noble but it does have it's shortcomings. Not nearly as bad as Borders though. My gawd there was SWPL flight from my local Borders. Dumb kids ran the place, rowdy as hell, poor service, I even heard rumors that female patrons were being groped by the NAM kids from the local high school. They even had to put a security guard there.

[JP]

"Most SWPLs would do business with Amazon instead of B&N when it comes to buying books because of this."

No. It is pure price. Amazon is cheaper. If B&N sold at the same price as Amazon, I would buy at B&N. The price disparity is accentuated by free shipping at Amazon versus paying sales tax at B&N.

"There's plenty of proles patronizing Barnes & Noble. Who says proles don't like to read?"

Yes but they buy their crappy schlock at WalMart or CostCo.

"How does a bookstore with a painfully slow disorganized website and trademark bathroom floor tiles strike you as intelligent?"

B&N's main problem is that they HAVE to make money selling books; Amazon has found a way to make money selling other stuff besides books, and therefore they will always be able to undercut B&N on price. Which is the ONLY thing that matters (not SWPL versus prole)!

I agree with DaveinHackensack November 16, 2012 at 08:09 AM.