Entrepreneurs and American Wealth
Posted on 10/12/2017 by Robin Scheu
This week's post is written by Don Macke, Co-Founder of the Center for Rural Entrepreneurship and its Director of Entrepreneurial Communities solution area. The Center works throughout the United States and Canada supporting research, outreach, professional development, and policy work related to rural entrepreneurship. ACEDC has contracted with the Center to provide research and support in developing rural economic development strategies for Addison County.
You can read the original post here.
Entrepreneurs and American Wealth
Philanthropy and Community Building in the 21st Century
In the Center's first book, Energizing Entrepreneurs: Charting a Course for Rural Communities, the case was made that there is a powerful connection between entrepreneurs, wealth formation and charitable giving potential. I want to revisit this topic given the growing income and wealth inequality in America.
The Federal Reserve and its Survey of Consumer Finance research identifies the primary factors influencing household current net worth or wealth in America. This research confirms that age, education and occupation, and work status correlate with household wealth status nationally. The Center's work across America emboldens me to add another factor - location. It matters where you live because it can affect your opportunity to achieve both individual and community success.
Next, I want to focus on the ''work status" factor. The following graph summarizes three periods (i.e., 2007 or pre-Great Recession; 2010 or the tail of the Great Recession; and 2013 or post-Great Recession) by work status.
As this graph clearly shows, being in business correlates with higher average household net worth when compared to working for someone else, being retired or not working. The Center's 20+ years of field work and research strongly suggest that where there is an active entrepreneurial culture, those communities and their residents are doing better. There is no better story than Tupelo, Mississippi's transformation due to smart entrepreneur-focused development. You can read about it in the book, Tupelo: The Evolution of a Community by Vaughn L. Grisham. Our work also suggests certain kinds of entrepreneurial development contribute to more prosperous communities. Entrepreneurial ventures that are locally owned, focused on growing, and that sell outside of its community tend to create the kind of economy where there is more income and wealth all around.
Finding and growing these kinds of entrepreneurs creates two kinds of positive outcomes. The first outcome centers on individual success, or the creation of wealth for venture owners, investors and key employees. In addition to creating wealth and charitable giving potential, these individuals can experience wealth events when businesses are sold or go public. The second outcome centers on community success. When there is a critical mass of these kinds of entrepreneurial ventures a whole set of community impacts emerge including:
The United States is constantly undergoing economic and social transformation. These changes can be challenging and create hardship for those left behind. Many wonder if America's best years are in the past. But I have witnessed how a smart, entrepreneur-focused development strategy can stimulate economic and social renewal. For community foundations moving into the economic development space, we recommend kicking the tires on this development strategy.
As economic developers, we are committed to community prosperity for all, not just a few. At the Center, we are convinced that fostering entrepreneurs as the core development strategy creates the pathway to broadly shared and sustained community prosperity.
This broadly shared and sustainable community prosperity enables America to better address other social goals like educational attainment, quality early childhood care and
education, vibrant and healthy spaces, places and environments, affordable housing and greater economic and career opportunities. Every community is responsible for its own future and development. And every community must commit to demographic renewal, increasing economic opportunity and quality of life placemaking if it is to have a shot at greater prosperity.
Energizing your community's entrepreneurial talent is foundational to creating the kind of economy that will retain and attract human talent (contributing to demographic renewal) and quality of life placemaking. Growing rooted entrepreneurs and helping them achieve greater success will generate new wealth for them and your community.
Recent Center data analysis in rural Kansas, Chattanooga, TN and Modesto, CA (available early in 2018) all illustrate this powerful connection between entrepreneurs, wealth formation and increased charitable giving potential. Communities and foundations should consider robust, smart and long-term investments in growing their entrepreneurial talent. Conversely, those benefiting personally from successful entrepreneurial ventures should be engaged in growing community endowments supportive of all aspects of community and economic development. This is a virtuous cycle that becomes part of a community's culture or DNA providing ever greater positive impacts. In today's challenging governmental environment, philanthropy can be both the catalyst and beneficiary of this road to greater prosperity.