Business owners say their biggest problem is the “society of rules” in which they operate

by Ryan Streeter on June 21, 2015. Follow Ryan on Twitter.

I was perusing the latest NFIB survey of small businesses (PDF) in America and was struck by the following two charts.

Regulation has spiked dramatically since 2008 as the #1 concern in the following collection of problems facing business owners.

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It’s interesting to note that insurance concerns, which spiked in the early aughts, began falling in 2005 before the debate over Obamacare began.

In the following list, taxes have assumed their place at the top, displaced by sales only because of the Great Recession. What’s also interesting is the generally inverse relationship between sales and labor quality. The latter has displaced the former recently as a concern, which matches the “skills mismatch” problem we hear so much about these days.

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The fastest-growing tech, media, and communications metro areas in the U.S.

by Ryan Streeter on June 21, 2015. Follow Ryan on Twitter.

Our knowledge economy is driven significantly by companies built on the use, sale, and distribution of information. These are largely tech, media, and communications companies. Where are they adding jobs the fastest?

The top two metro areas are San Jose and San Francisco. No surprise there. What about the rest?

Some of the most rapid growth in information, however, is taking place not in the older established tech hotbeds but in the lower-cost metropolitan areas of the Sun Belt. Five of our top 10 ranked metropolitan areas are located in the belt that stretches from the Atlantic coast to Arizona, led by No. 3 Austin-Round Rock, Texas, where information employment has risen 30.8% since 2009 to 25,800 positions.

That’s from the latest ranking by Joel Kotkin and Michael Shires. Here are the top 20 largest metro areas in the U.S.:

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California is Brazil, Texas is Canada

by Ryan Streeter on June 12, 2015. Follow Ryan on Twitter.

In terms of the size of their economies, that is.

Mark Perry at AEI has just produced one of those cool maps (see below) showing which country’s economy most closely approximates which U.S. state. He writes:

Overall, the US produced 22.5% of world GDP in 2014, with only about 4.6% of the world’s population. Three of America’s states (California, Texas and New York) – as separate countries – would rank in the world’s top 14 largest economies. And one of those states – California – produced more than $2 trillion in economic output in 2014 – and the other two (Texas and New York) produced more than $1.6 trillion and $1.4 trillion of GDP in 2014 respectively.

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“While technology is young people’s oxygen, risk may be their carbon monoxide”

by Ryan Streeter on June 10, 2015. Follow Ryan on Twitter.

The Boomers are a startup-happy bunch — over the past decade, the portion of founders in their 50s and 60s has increased, according to Kauffman data. By contrast, the portion of 20- and 30-year-old entrepreneurs has declined. In 1996, young people launched 35 percent of startups. By 2014, it was 18 percent.

That’s from the best recent article I’ve seen in awhile on the multiple factors that seem to be affecting the decline in new, young companies in America. The generational issue is only one of several.

Here are a couple of other important data points:

Given that existing American companies opened roughly 50 percent more branches in 2011 than they did in 1978, the challenge for startups is clear. Back then, 80 percent of “new establishments” were startups; the rest were new locations of existing businesses, according to data from the Federal Reserve Bank of Cleveland. Today, that number is down to 60 percent…

[T]ech companies today achieve market-cap milestones — $500 million, $1 billion, $5 billion — three times faster than they did 15 years ago. Almost as soon as they are invented, major categories are dominated by what Play Bigger calls “category kings,” which own 70 percent or more of the market share…

Size isn’t the only problem; longevity plays a role as well. The share of companies ages 16 or older has increased by about 50 percent since the late ‘70s, according to Brookings…

[B]etween 2005 and 2014 the size of seed investments made by VCs stayed flat. The size of C, D, and E rounds, by contrast, roughly doubled. The number of small seed rounds has recently dropped, according to PitchBook, with investments below $500,000 declining 61 percent between the first quarter of 2013 and the fourth quarter of 2014.

War on the young: the sharing economy edition

by Ryan Streeter on June 9, 2015. Follow Ryan on Twitter.

This essay in Washington Monthly by Monica Potts weaves together a number of interesting and important threads in the ongoing story about how the world has changed for millennials compared to their forbears. She writes:

Many Millennials—including me—are no longer working full-time jobs but are instead making do with the gig economy, part of the contingent job market that is comprising a bigger and bigger share of the labor force. By some estimates, contract employment made up fully half of the jobs added after the recession, and contract workers are currently 40 percent of the labor force…

Marriage—and the two incomes it provides—could stabilize life for many Millennials, but the irony is that most young people say they want to wait to get their finances in order before they get married…Many women…fear being overly dependent on a husband’s money. We learned, perhaps too well, the lessons of previous generations of women, some of whom, struggling to balance home and work, scaled back jobs and relied on their husband’s earnings only to be left financially devastated by divorce. In addition, many of the young men in this generation barely earn enough to support themselves, let alone a wife and children…

Without a marriage and children, there’s less pressure to settle down and buy a home, and Millennials are delaying that, too. Even the oldest Millennials aren’t buying homes at the ages previous generations did. They’re the biggest driver of the decline in homeownership, and the wealth of households headed by someone under the age of thirty-five is down 41 percent from where it was for the same type of households in 1995.

Texas is a nice place to live: the Vox edition

by Ryan Streeter on June 8, 2015. Follow Ryan on Twitter.

The Texas population growth story underscores the fact that the state is, broadly speaking, a pretty nice place to live.

Its infrastructure is not decaying. Indeed, despite lower taxes the major roads in Texas are far nicer than those in the northeast. The airports are functional. Dallas and Houston are both building out their rail transit systems. African-American and Latino kids do better in school in Texas than they do in the average state. The University of Texas is an extremely well-regarded public university. And if a coastal liberal starts rolling his eyes at the idea of Texas being a nice place to live, just ask him about Austin — a city that is very much subjected to the same conservative governance as the rest of the state.

That’s left-of-center writer Matt Yglesias presenting his readers with a “don’t write off Rick Perry just yet” piece, based on his view that Perry has the best story to tell of any of the GOP 2016 contenders.

“Opportunity cities” dominate the new best-cities rankings

by Ryan Streeter on June 5, 2015. Follow Ryan on Twitter.

The 2015 “Best Cities for Jobs” is out and has some interesting findings:

[T]here’s been a striking reversal of fortune in the greater Washington, D.C., area, while the greater New York area has also fallen off the pace. In the years after the crash, soaring federal spending pushed Washington-Arlington-Alexandria to as high as fifth on our annual list of the best cities for jobs; this year it’s a meager 47th, with job growth of 1.5% in 2014, following meager 0.2% growth in 2013, while Northern Virginia (50th) and Silver Spring-Frederick-Rockville (64th) also lost ground, dropping, respectively, five and 15 places.

“Opportunity cities,” the authors argue, continue to dominate because they combine attractive job opportunities with affordability.

The combination of lower prices and strong job opportunities are what earns them our label of “opportunity cities.” The Bay Area may attract many of the best and brightest, but it is too expensive for most. Despite the current boom, the area’s population growth has been quite modest — San Jose has had an average population growth rate of 1.5% over the past four years. In contrast, seven of our top 10 metro areas, including third place Dallas-Plano-Irving, Texas, and No. 4 Austin, Texas, are also in the top 10 in terms of population growth since 2000. If prices and costs are reasonable, people will go to places where work is most abundant.

Here are the rankings for the top 20 largest cities:

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Entrepreneurship drops among the young and women, grows among older Americans

by Ryan Streeter on June 1, 2015. Follow Ryan on Twitter.

Women launching businesses fell to 36.8 percent of new entrepreneurs compared to 43.7 percent in 1996, and close to the two-decade low of 36.3 percent in 2008…New entrepreneurs, aged 20 to 34 years old, fell to 24.7 percent in 2014, compared to 34.3 percent in 1996, according to Kaufman. New entrepreneurs ages 35 to 44 years old were 22.9 percent compared to 27.4 percent in 1996.

And yet startup activity has increased this year for the first time since 2010. Why?

Older workers, aged 55 to 64 years old, comprised 25.8 percent of new entrepreneurs in 2014 compared to 14.8 percent in 1996.

There are other factors driving the increase as well, some of which are positive such as rising minority entrepreneurship, but the way the demographic lines have crossed (if you were charting this on a graph) for older and younger entrepreneurs is further troubling evidence of the War on the Young that we seem determined to compound rather than address. The stark downward slide among women entrepreneurs is also discouraging. Not that having more older entrepreneurs is bad, but this is a class more likely to consist of a significant portion of lifestyle entrepreneurs who have the savings and some cushion to branch out while a debt-strapped younger generation of would-be entrepreneurs face more daunting prospects in an increasingly regulated and rule-bound society that places greater burdens on effort and imagination.

The data above is from the Kauffman Foundation, reported on here.

New technology, “gray spaces,” and the struggle between freedom and regulation

by Ryan Streeter on May 27, 2015. Follow Ryan on Twitter.

One of the most interesting frontiers of public policy development, in my view, is the relationship between new technology and government regulation. While politicians often inspire yawns when they talk of “regulatory reform,” the problems that regulations create for new inventions are becoming more complex and promise to create more high-profile fights in coming years between investors and entrepreneurs, on the one hand, and government regulators on the other.

These fights are and will be important because they focus our attention on the nature of liberty in a civil society itself.  As technology ecosystems grow more sophisticated, the question of whether and how existing regulatory regimes apply to this or that new product or service raises deeper questions about who has the authority to define a product or service and its relationship to the state.

Is Uber a taxi company and Airbnb a hotel service? Many regulators want to say yes. You and I, as users of these services, say no. We use Uber precisely because it is NOT a taxi company. Its unregulated company rules governing safety and service quality are good enough for us. If taxi companies worked more like Uber, we would probably use them more. But for that to happen, the rules would have to change. And if they change, it won’t be because the rule-writers had a flash of insight about how to make taxi companies work better. It will be because of the external pressure applied by a new invention and its users.

Obviously, things get more complicated when we turn our attention to self-driving cars, drones, and medical diagnostic apps on your iPhone. But even in these cases, the knee-jerk assumption that authority over definitions must begin in government offices needs to be tested in every case. More choices, better quality, and yes, even high safety standards, may result by starting the other way around.

An important aspect of this debate is the role that technology entrepreneurs can play in shaping the regulatory environment around them. That’s where “gray spaces” come in:

[Y Combinator president Sam Altman] encourages the startups he advises to seek out those gray spaces where the law is not yet clear or could be improved with the pressure of new technology. “A competitive advantage of most startups is a clever regulatory strategy,” says Altman, who is planning Y Combinator’s first workshop on the topic this summer.

One common criticism of government regulation is that it’s grown so over-burdensome that the “gray spaces” where inventors have traditionally operated are vanishing. Particularly in areas where government involvement is heavy—such as healthcare or energy—there’s a concern that small companies can no longer get a start due to constrictive regulations.

“Bureaucracy overtakes things with no benefit to safety plenty of the time,” says Altman.

That’s from a recent Wired article that worth reading in its entirety. One thing that makes this all the more interesting is the geography of regulation and the ability of capital and inventors to pack up and move elsewhere.

[Altman] remains optimistic that there’s room for startups to build technology that helps laws evolve. For a number of the companies he’s worked with at Y Combinator this has meant seeking out the countries with a legal framework that allows them to gather the data they need to gain regulatory approval internationally. “It’s sort of cool that there are a range of different regulatory environments and people can make decisions about where they want to go,” says Altman. “If I was developing a drone company I’d go to New Zealand. If I was developing a medical device company I’d go to Europe.”

Sunbelt cities defy trends in urban population growth…again

by Ryan Streeter on May 21, 2015. Follow Ryan on Twitter.

The new Census numbers on metropolitan population growth are out. The Texas growth story continues:

Half of the 10 cities with the largest population gains between 2013 and 2014 were in Texas — Houston, Austin, San Antonio, Dallas and Fort Worth. Each added more than 18,000 people. The Lone Star State also had six of the top 13 fastest-growing cities by percentage — San Marcos, Georgetown, Frisco, Conroe, McKinney and New Braunfels.

And even though the latest numbers show a slowdown nationwide in city growth compared to suburban growth, that’s not true everywhere:

[T]he South and West—especially the nation’s Sunbelt—is a little different: Just 21 of the 37 largest cities in the South and West saw slower population growth…U.S. cities that are growing faster are primarily in the Sunbelt: Austin, Atlanta and Forth Worth, for example, saw population growth pick up.