“Let’s go invent tomorrow instead of worrying about what happened yesterday.” – Steve Jobs
Recently, Jason Faberman, a senior economist with the Federal Reserve Bank of Chicago, said: “It’s the new guys, not necessarily the small guys, that generate growth. The focus for policymakers shouldn’t be on small business job growth, but on new business formation.”
As noted by Faberman, young, creative, and innovative start-ups are the economic engine for job creation in the United States — not the more traditional brick and mortar establishments. Younger and smaller companies, those that employ 19 people or less, account for 90 percent of all businesses in the United States. These companies create jobs at almost twice the rate of larger companies.
According to research performed and published by the Kauffman Foundation, high-tech and information- and communications-technology companies tend to grow more rapidly in early years than other small businesses. In addition, high-tech and information- and communications-technology companies result in positive job creation in early and middle years compared other sectors, which often show net job destruction during the early and middle years.
The research referenced by Faberman and the research performed by the Kauffman Foundation reveals an irrefutable truth: impactful job creation is a function of new business formation and, more precisely, new business formation in sectors highly dependent on innovation.
One metric for entrepreneurial activity is the business creation rate, a measurement of the new businesses started per 1,000 workers in the state. In 2011, Mississippi ranked fifth worst in business creation according the Small Business Administration.
Meanwhile, the number of science, technology, engineering, and mathematics (STEM) professionals offers a good measurement of a state’s innovative capacity. According to Bloomberg.com, in 2013, Mississippi was the 49th most innovative state in the United States with the second lowest number of STEM professionals per capita (ahead of only Arkansas.)
Given the positive correlation between a state’s overall job growth and the rate of business creation in innovative STEM sectors, it is troubling that Mississippi ranks fifth worst in business creation and second worst in innovation. This begs the question, why?
There are a whole host of reasons why we continue to lag behind in significant economic and social metrics. However, with respect to the business creation rate in technology sector, our most significant obstacle is education — not just quality, but also how and what our schools teach. Several reforms could position Mississippi’s economy to become more dynamic and innovative:
1. Mississippi must add entrepreneurial skills to our academic curricula from preschool through high school. While enabling children with entrepreneurial skills has tremendous value itself, teaching children entrepreneurial skills creates value across an even broader spectrum. A report by the D.C. Children and Youth Investment Trust Corporation found that — in addition to the organizational and management skills developed through an entrepreneurial curriculum — entrepreneurship education had other positive outcomes: improved academic performance, improved school attendance, increased problem-solving and decision-making abilities, improved money management skills, improved public speaking skills, better job readiness, and enhanced psychological development. These positive outcomes were proportionately higher with children from disadvantaged backgrounds. Imagine the multiplier effect that crafting an early age entrepreneurial curriculum could have in Mississippi.
2. Mississippi must improve STEM education and start it earlier. A recent study revealed that United States pre-college students lag well behind students in other countries on international tests in mathematics and science. To further magnify this problem, a report published by the Congressional Joint Economic Committee in 2012 found that the supply of STEM talent is not keeping up with the demand. With each passing year the United States, we have fewer and fewer students pursuing STEM degrees. We need to improve STEM education at the K-12 level in order to create a pipeline of STEM-ready postsecondary students. Mississippi must provide more classes and lab opportunities for all of its students in the areas of mathematics and science.
3. Mississippi’s universities must continue and improve upon opportunities for students to participate in the commercialization of ideas. More and more colleges and universities are developing curricula around entrepreneurial activity. The millennial generation is demanding this and for Mississippi to remain competitive from a talent retention perspective, Mississippi colleges and universities must increase the opportunities for students to participate in the commercialization of ideas. It is utterly impossible for students to learn the skills associated with commercializing ideas in the same style as the 17th century: sitting behind a desk in a classroom discussing what is written in a textbook.
4. Mississippi needs to foster a more sophisticated network of mentors. We must demonstrate to young Mississippians that you can be successful in Mississippi. We do not need to invest in fundamentally altering education at each level by providing entrepreneurial opportunities only to watch our own homegrown talent leave the state. In order to induce our talent to remain in Mississippi, we must show students that Mississippians have been successful commercializing high-tech and scalable ideas — and these successful Mississippians must pay it forward.
5. Mississippi should develop an accelerator program that is focused on social innovation. Pick any major social metric, whether it is related to health or income or poverty, and you will find Mississippi at the bottom of the national list. This normalized state must be reversed and it can be through social entrepreneurship and social innovation. We must incentivize, incubate, and accelerate ideas that address real social needs while at the same time yields a profit for investors. These two concepts are not mutually exclusive and are the basis of a very real paradigm shift.
As with any market, there will be those that survive and those that fail, but there is no denying the tremendous amount of value in entrepreneurship and business churning over the long term. We lag well behind many of our competitors when it comes to an evolved entrepreneurial ecosystem. This process begins and ends with education.