We are in the middle of a great labor migration.
Artificial intelligence was responsible for the elimination of 55,000 jobs in 2025, according to consulting firm Challenger, Gray & Christmas. This trend will only accelerate as computer learning matures.
About 20 percent of the global workforce will be displaced by AI by 2030, according to the Journal of Future Studies. The word “displace” is important. It suggests that the nature of employment will change, not that those jobs will disappear. Doomsayers who fear employment extinction will only be right in specific instances like entry-level coding positions, but the general workforce will most certainly have to adapt to this emergent tool, much like when we first got access to the internet.
Encouraging Entrepreneurship
Due to these circumstances, people will be more willing than ever to accept the risk of starting new businesses, and their need for both mentorship and access to capital will be key to their success. This could be incredibly good for the consumer, as it would naturally pull us away from the consolidation trend we have seen for the past several decades. It would also improve things like customer service and product variety.
The vast majority of businesses are started by people who are aspirational and mostly middle class. They have a dream, and either the courage, or hubris (or preferably both) to take a chance on a better life. This has always been the foundational basis of the American Dream and we need to encourage and help them.
One Entrepreneur’s Story
For more than 30 years, I have observed so many people attempting to make a business out of something for which they have an affinity. An example is a small condiment company I know named Half A Pond. It started as a backyard garden hot sauce experiment, then graduated to farmers markets before expanding online, where things pleasantly exploded because the products were unexpectedly promoted by celebrity chef and all-around-great-guy Andrew Gruel.
The proprietor of Half A Pond is an intelligent man, but not an experienced founder of businesses. He knows how to make his product extremely well in small batches and wanted a better life for his family. What he did not know was how to get information on licensing, keep books and records, pay FICA taxes, raise capital, scale, recognize fair terms with banks, and a million other things — many of which could be fatal to a company in its infancy. What he had going for him was that he was smart enough to know what he did not know and was shameless about asking for help. His business is clearly a winner, but getting to this point is the result of many long days and sleepless nights spent solving problems he didn’t anticipate.
Many business owners fail to make that important step and lose their entities due to otherwise preventable issues. It is imperative for federal, state, and local governments to step in and partner with the private sector to create what would eventually become a mutually beneficial system that nurtures these infant companies.
Mentoring Entrepreneurs
How do we do this? One approach is to create an incentive system that encourages pro bono counseling from investment banks or wealth management firms (especially the “too big to fail” banks who were themselves beneficiaries of government largesse), accountancies, and business law firms. Many lawyers, accountants, and financial advisors would leap at the chance to meet entrepreneurs at a time they might secure a meaningful long-term relationship. Assisting at the community level would also be a fantastic way for these professionals to build brand close to home.
If incentives do not create voluntary engagement, it would be relatively easy to require banks who participate in federal, state, and municipal debt offerings to be willing participants in mentorship and lending programs as a term of other government engagements.
There are other “carrot and stick” methods that would be equally effective. The point is that there are already enough advisors in most communities to be incredibly helpful, they just need incentives.
Access to Capital
The other area that is critical to the success of a new venture is access to capital. Banks are reluctant to commit loans to brand new entities. While there are many good reasons for this, the fact remains that the single biggest barrier to success for an emerging growth business is funding.
There are many different ways to remedy this, but an obvious one would be to compel private equity (PE) funds that benefit from carried-interest tax benefits to reserve a percentage of their funds for a debt/equity pool that benefits start-ups. Relative to the size of the private market economy, the percentages would not have to be huge to be incredibly meaningful. The Small Business Administration could process the grants/loans in partnership with local lenders.
It’s estimated that the total carried-interest funds PE funds benefit from is $98 billion. Even 5 percent of that pumped back into startups would be transformational and many of the small businesses benefitting would eventually become prospects for the private equity firms.
We badly need new business. Small business is a major source of innovation, employment, and wealth creation. We already have the tools needed to effectively foster their success on a big scale. With a little teamwork, we can create that environment with a limited amount of mostly unobjectionable legislation that ends up benefitting all of us. This is where the middle-class comeback begins.
