It's time for Kentucky to Think Small and Go Big. That's "small" as in new innovation-driven companies and "big" as in a bold initiative to create a high-energy entrepreneurial economy in the state.
Why the expanded focus on new small entrepreneurial companies? Because that's where most of the jobs — particularly the good-paying ones — are going to come from.
New York Times columnist Tom Friedman, quoting from a Kauffman Foundation report, notes that "Between 1980 and 2005, virtually all net new jobs were created by firms that were 5 years old or less." And a recent report in Bloomberg BusinessWeek noted that 140 million entrepreneurs around the world expect to add at least five new jobs over the next five years."
Despite important progress, Kentucky's overall economic growth trajectory, particularly as it relates to personal income, has at best been relatively flat for over 40 years. Kentucky's inability to keep pace with the accelerating forces of high-speed innovation, globalization, entrepreneurship and education are at the root of our relatively weak competitive position.
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Historically Kentucky, like most other states, had an economy that was shaped by large "foundation" industries, factories and companies. But now and in the future the forces fueling good-paying jobs and wealth creation will be hundreds if not thousands of new, innovation-driven companies.
Having a rich mix of entrepreneurial-driven jobs is also critical to help balance out the major globalization and productivity trends in manufacturing occurring in the U.S. and elsewhere.
One recent report in The Atlantic stated that in the decade that ended in 2009 factories in this country lost jobs so fast that "they erased almost all of the gains of the previous 70 years."
The DNA of entrepreneurial enterprises is fundamentally different from the firms of the past. They are often started and populated by young people who grew up online and in a time of relentless innovation and an emphasis on creative thinking. These companies tend to be less bureaucratic, are more flexible, born of the competitive rules of today and comfortable with disruptive innovation. They are built not around inexpensive labor but by imaginative, creative talent. They are driven by highly skilled people with a passion to create breakthrough products and services that change the world.
Friedman writes, "In the past, workers with average skills, doing an average job, could earn an average lifestyle. Being average just won't earn you what it used to. It can't when so many more employers have so much more access to so much more above average cheap foreign labor, cheap robotics, cheap software, cheap automation and cheap genius."
This isn't an either-or situation.
It doesn't mean disregarding more traditional development strategies or diminish the importance of solid incremental progress. What it does mean is fundamentally realigning our economic development investment strategy to where a considerably larger focus is on creating and growing innovation-driven enterprises.
In other words, investing a much larger portion of our resources in the high-risk, high-return part of our development portfolio. Going big first and foremost involves ambitious ideas that derive their power not from how much they cost but from their unique ability to inspire innovation, imagination, transformational change.
Nothing short of major and comprehensive effort centered around high-value innovation, talent development and entrepreneurship will enable Kentucky to reach the "escape velocity" necessary to achieve the kind of exponential economic growth it needs to bring sustained prosperity to the commonwealth.