The Future of Small and Big Businesses are Intertwined
A company’s ethics aren’t determined by its size, but by its owners, managers, and employees.
All Americans have heard of the Boeing Company. It’s the world’s largest aircraft corporation, employing about 140,000 people in the United States.
On the other hand, very few of us have heard of Sollah Interactive in Clive, Iowa. Sollah is a “training content and technology” company with 21 employees and about $7.4 million in annual revenue.
Sollah is also one of the 32 companies in Iowa that provide goods and services to Boeing. Although Boeing employs only eight people in the Hawkeye State, the airline giant spends $1 billion annually on these vendors.
They, in turn, and the smaller companies that depend on them — sandwich shops, hair salons, grocery stores, and so forth — provide employment for an estimated 37,000 Iowans.
When politicians (of both parties, but increasingly people like Bernie Sanders and Elizabeth Warren) attack “big business” and “Wall Street,” they are claiming our economy is neatly divided between “corporate giants” and “Main Street.” And they suggest, as well, that large size firms prey on ordinary people. The “little guys,” on the other hand, are the true heart and soul of America.
Can bigger firms be cut-throat? Of course. But so can mid-size companies and little ones, too. A company’s ethics aren’t determined by its size but its owners, managers, and employees.
The Engine of the Economy: Big Business
It’s standard fare to hear politicians claim that small business is the engine of the economy. It’s just not true: A 2011 study by the Federal Reserve Bank of St. Louis showed that smaller firms do create more jobs than larger ones — for a while. “Small businesses showed higher rates of gross job creation, but they also exhibited high rates of job destruction,” wrote the study’s authors.
Why? Because many small businesses fail. The employment they initially provide doesn’t last that long.
The key thing to remember is that almost always, the most successful small and mid-size firms are tied in some ways to big companies.
Some start-ups change the world. In the past 35 years, Microsoft, Apple, Amazon, and a host of others have grown huge. But as the American Enterprise Institute’s Veronique de Rugy has noted, “It is not small businesses per se that are important for economic growth, but flexible, innovative, risk-taking businesses, which tend to start small. It is the next Apple or Amazon.com, not the next mom-and-pop store, that will create jobs and boost our economy.”
Risk-taking, vision, and excellent products help many new businesses thrive. Only a handful will ever become truly large.
What Counts as a Small Business, Anyway?
Yet descriptions can be misleading: The Small Business Administration classifies any company with 500 employees or fewer as “small.” Most of us would not consider a company with, say, 400 people on its payroll “small.”
The key thing to remember is that almost always, the most successful small and mid-size firms are tied in some ways to big companies.
This works in one of two ways. First, there are the hundreds of thousands of companies like Sollah, vendors that provide specific products and services to the nation’s largest corporations. In total, Boeing has 13,600 suppliers. They provide everything from nuts and bolts to electronic systems. And tires and windows and pens.
Second, the vendors are themselves feeders to other smaller companies. Go to your local strip mall and you will see thriving small businesses that, were it not for their areas’ mid- and large-size firms, would not exist. In all likelihood, much of the hair your local barber cuts belongs to people who work for the Boeings of the world.
Big companies also produce things based on scale. A boutique auto manufacturer might turn out a magnificent car, but its price tag will also be magnificent (or horrifying, depending on your point of view). In contrast, big car manufacturers make cars you can actually buy.
So, a Maserati might be fine for the wealthiest among us, but a Ford Fusion is, for the great majority of Americans, an attractive, safe, efficient, and affordable alternative.
Be Grateful for Both
I do not wish to paint large firms as snowflake-pure. They are owned and managed by sons and daughters of Adam. Sometimes they place shareholder value above both their employees and their customers. Sometimes corporate execs get disgustingly greedy.
That said, it’s time we quit pretending that small businesses are uniquely decent, honorable, and preferable to larger ones. We should all be fans of companies that create, directly or indirectly, jobs that compensate their employees fairly and offer opportunities for professional growth. And that also can themselves grow and expand and, in doing so, create other smaller companies.
I doubt I’ll ever visit Clive, Iowa, let alone its Sollah facility. But every time I fly on a Boeing airplane, I’ll know that in some way, Sollah played a role in it. I’m grateful for both. We all should be.
