While COVID wrecks the economy, US entrepreneurship and new ventures are hopeful green sprouts
Lee Iacocca, the maverick savior of Chrysler, car salesman extraordinaire and the person who led the restoration and celebration of the Statue of Liberty, once said: “In times of great stress or adversity, it’s always best to keep busy, to plow your anger and your energy into something positive.” His words may seem like an inadequate salve to the now 36 million people who have filed for unemployment in the U.S., 3 million just added to the rolls this week. But there is an important nugget in this aphorism about the resilience of people and the American economy in times of crisis.
The COVID-19 crisis which the world is struggling through now has created an economic tsunami that is wiping out trade arrangements, collapsing supply chains, suspending manufacturing lines, impaling demand across nearly every commodity sector other than PPE gear. Dine-in restaurants are closed — practically everywhere. Truck drivers, janitors and gardeners, clerks at law firms (some lawyers, too), rural health care workers even amid this health crisis, a staggering share of the retail sector employee base — all out of work. Fed Chairman Jay Powell said this past week that 40 percent of households with less than $40,000 in annual income are now out of work; many above that threshold also are unemployed. Despite boosting unemployment insurance, sending $1,200 a person to those in lower-income bands and a bit extra for each child, the truth is that many Americans are on the edge of financial disaster.
In a recent interview I did with former Secretary of State Madeleine Albright about her book, “Hell and Other Destinations,” she recounted how her family was bunkered down in London during the bombing raids of World War II. She said the most valuable asset she saw in people in their darkest hour was resilience, the ability to power through the grime and muck of the time until they reached the other side. She said most people can’t affect the big picture, can’t stop the bombs or cure the virus — but they can be strong, and innovate to make their way through.
During a recent worker crisis, not from a pandemic nor even the Great Recession of 2008 but during a government shutdown, two sisters — Nikkie Howard and Jaqi Wright — needed income, somehow. So, they founded “The Furlough Cheesecake,” which sells cakes online. Great cheesecake, which they say may not look perfect when it reaches the buyer by mail, may have a crack through the cake — but the taste will make up for any blemishes. The popular “Furlough Sisters” and their entrepreneurial success in a moment of crisis have been highlighted in many media outlets. But what is interesting is that the example of their taking steps to bring in extra income or displace the shock of being laid off or furloughed is not unusual in the U.S.
The domain and digital registry firm GoDaddy recently launched a study with the University of Iowa and Arizona State University about the surge they were seeing in the country in new businesses (what they call “ventures”) online. They could see the URL domain registrations, the building-out of digital marketing platforms and other digital tools added to active sites — each of which was attached to a new venture, which often was a business, a service project or nonprofit, or some idea. The term “small business” doesn’t really capture the zest and urgency they were seeing in these ventures, often the quick growth and the rich innovations they were observing in the digital space. Sometimes these ventures, particularly the business ones, were designed to supplement someone’s core income — which is what we’ve seen in a lot of the emergent gig economy. Sometimes these ventures scaled rapidly and became generators of income for many multiples of people employed or having a share.
The study reveals complex layers of what is unfolding and is available online. There is an interactive digital site that shows that ventures are happening throughout the nation — blue states, red states, rural and urban, high-income level and low, across all ethnic groups, students and retirees, and with women venturers equally on par with men. What really caught my eye was finding that during the 2008-2009 Great Recession those counties that most quickly recovered from the recession also had the greatest number of ventures.
The GoDaddy study, called “Venture Forward,” found during the year of the study, household income grew on average by $1,700, and that adding one highly active venture per 100 people in a county increased that overall number by another 19 percent. Those who know how averaging works realize that is actually quite substantial for a large number of those venture-embracing households. In a given community, adding one new venture per 100 people increases that household extra income level to $2,031.00. It is not surprising that the study found that cities have a higher percentage of foreign-born population and have more ventures. The Kauffman Foundation and entrepreneurship expert Robert Litan long have pointed out the connection between migrants into the U.S., who often are willing to take greater economic and creative risks than incumbent citizens, and the rate of new start-ups in the U.S. Smart mayors, governors and economic planners would be wise to focus on what measures enhance the incidence of new ventures.
To do an unscientific but powerful anecdotal review (that seems to work nowadays in some quarters), I crowdsourced to those with whom I’m linked on Facebook, Twitter and LinkedIn to see whether folks who were under stress were plowing their frustrations, as Lee Iacocca said to do, into something creative and into new “ventures.”
The answer has been overwhelming; here are a few of the many stories I have received. One I really like was sent to me by Washington College archaeologist Bill Schindler, whom many will know as the co-star of the National Geographic series “The Great Human Race.” At the start of the COVID-19 crisis, Bill and his daughter, Brianna, would bake about 80 loaves of sourdough bread a week out of Washington College’s Eastern Shore Food Lab to donate to the elderly and families in need. Brianna, 16 years old, learned to bake and used this time to start her own sourdough bread company called Rise and, over the past six weeks, it has become incredibly successful, according to the elder Schindler.
Schindler wrote to me: “COVID was responsible for making this happen in several ways — first, the work in the food lab provided her the experience; second, distance learning in high school allowed her to be at home and to take advantage of her time between studies; and third, Brianna realized she wanted to help nourish people at a time when they needed to keep their immune systems as healthy as possible.”
Joe Colangelo started BoxCar app, a parking app for commuters heading into New York City, but since NO ONE is going into NYC these days, they changed their model overnight and have partnered with local suppliers to run a contactless grocery service online and to connect folks to drive-in movies.
Scott Budden of Orchard Point Oysters used to do very little public-facing retail and distributed his oysters through restaurants such as Le Diplomate and The Jefferson hotel in Washington. When COVID-19 hit, they instantly created a customer-facing website and a 100 percent direct-to-consumer, cold-shipping platform. Budden says it started slowly but has exploded, with more than 3,000 orders per week.
To help kids have a great birthday, Joe Mellin created a venture called Remote Fun — and just mentioning it on my Facebook page has resulted in business for him among friends who want to give their 5-year-old children something special. Joshua Brockner, well-known for great events at the World Economic Forum in Davos such as getting Goldman Sachs CEO David Solomon to DJ a party for Cloudflare, has launched Analytic Events and is doing large-scale events around the world, most recently hosting a hugely attended Online March for Masks. In Detroit, another bakery that was planning to open until COVID-19 hit — the Cornwall Bakery founded by Freeman and Megan Gunnell — created a booming online business in creating “graduation celebration boxes.”
I have so many more examples — from arts ventures, to 3-D printing businesses, to new online-based consulting gigs. These examples of new-venture creation don’t fix the aggregate of massive economic loss in the country. But we do know that ventures help with resiliency, they help their communities recover more quickly and, perhaps most importantly, they empower people, inspire others and generate hope alongside some income.
Steve Clemons is editor at large of The Hill. Clemons will serve as master of ceremonies of The Hill’s “National Virtual Summit on Advancing the American Economy” on Thursday, May 21, featuring Secretary of the Treasury Steven Mnuchin and many others. Register here. Follow him on Twitter @scclemons.