Andy Grove Misfires: Challenging His Argument About Job Creation

Andy Grove takes Thomas Friedman, a columnist for  the New York Times  to task in Grove’s recent Business Week article “How America Creates Jobs”.   Andy Grove argues that Friedman is wrong in claiming in his column that “if Washington wants to create jobs it should back startups”.  Grove states that startups are wonderful things, but cannot increase tech employment by themselves. He argues that it is the expansion stage of a company that creates job growth.  Only when a company starts moving to mass production, building good supply chains and gaining good market traction does employment increase.

Andy Grove is a titan of Silicon Valley, but he seems off the mark here.  In his assertion, companies need expansion to create jobs, and that’s true.  However, Friedman’s point is that governmental policy should focus on encouraging formation of startups. “we need to create a big bushel of new companies – fast”. I emphatically agree with Friedman.  It’s important to  support the need for startup friendly policies from local, state and federal levels. Big companies (whether recipients of bailout funds or not) do not create the majority of new jobs in the U.S.

A  recent Kauffman Foundation study found virtually all new jobs created in the US economy between 1980 and 2005 were by companies less than 5 years old.  Outsourcing and globalization have made even the leading traditional US based corporations neutral job creators.  The expanding large corporation uses off-shore labor and supply chains while serving large international markets.  Globalization seems a necessary evolution for the corporate citizen.  If we are going to revitalize the US economy we need the innovation of new companies–not just in technology development,  but also innovation in employee attraction/development, production partnerships and market strategies.

High-I.Q. risk-takers are the spark for innovation and entrepreneurship.  Northern California has been seen as a beacon of light, drawing these innovators from around the world into the US and particularly Silicon Valley.  To incubate these  risk-takers, we have assembled an organic concoction of risk oriented capital, successful role models, mentoring advisors and a rich pool of talent, the likes of which has not been duplicated (yet).  Not everyone can be a founding entrepreneur – ready to risk failure, passionate about changing the world and equipped to build a startup team to execute. However many mid-career, industry experienced folks will build value in companies as the startup matures. And as a few of these startups achieve really large success, they contribute to the job growth engine we need.

Let’s not put governors on the growth engine that can drive our economic recovery.  Instead keep reasonable tax policies that encourage risk-taking by entrepreneurs and encourage the formation of risk capital to fund them.  Provide rational immigration policies for education pursuits and knowledge worker retention.

The treasure trove of intellectual property held locked up in universities (especially public ones) needs to be set free in the market of innovation. Policy makers are trying to address a myriad of issues confronting them today and would do well to think as physicians–first, do no harm.  Health care, immigration reform, tax policy, Social Security financing, education–all are in need of fresh thinking.

Let’s build new businesses to innovate and inspire.  Turbocharging the job growth engine that has driven the US economy until now is a proven approach.  Bailouts, increased taxes on innovation and risk capital, sending immigrant knowledge workers home is not the path to follow.

As we say in the South “that dog won’t hunt!”

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