Todd Khozein is the Founder and Co-CEO of impact and innovation company SecondMuse.
The economy has long been the United State’s claim to fame. Its decades of growth has fueled the notion that America is a unique land of opportunity where anyone can achieve his or her dream. So I was struck by the pronounced sense of mistrust entrepreneurs expressed in a recent study my company worked on, which suggests to me that these enduring optimists and drivers of U.S. innovation and growth no longer have faith in the fairness of the economic system.
In partnership with Ipsos, my company conducted a study titled “State of Entrepreneurship in the U.S.” We surveyed more than 200 entrepreneurs from a range of backgrounds and geographic locations during July and August — a time when we were in the middle of the pandemic and facing related economic crises and an outcry against systemic police brutality.
Our survey tracked with a broader trend marking a loss of faith in leaders and institutions. This year’s Edelman Trust Barometer, for example, found shrinking global trust in government, business, nonprofits and media. And Pew Research Center data from 2018 showed that trust in the U.S. government was near historic lows.
Still, I fixated on the strong language respondents to our survey chose from a menu of options to describe the U.S. economy: We found that more than a quarter chose the word “racist,” and nearly a third selected the word “corrupt.” Notably, just 14% described the U.S. economic system as “fair.”
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I was also struck that entrepreneurs were the ones making these grim assessments. The economy and the state of innovation, in general, depends so much on their natural optimism and idealism. And yet, my company’s study results scream that entrepreneurs just don’t believe the system is fair. I believe this bodes poorly for the future of the U.S. economy, which depends so much on their belief in it. After all, why start a business if the economic system in which it operates is unfair?
Encouragingly, it also signals to me a yearning for a restart and recognition that the converging crises of this moment offer a unique opportunity to fix a broken system. Based on what I learned from the results, there are three actions I recommend both private and public sector leaders take to begin restoring trust:
Support entrepreneurs from historically marginalized communities.
One of the key themes to come through in the study is a strong desire among entrepreneurs for the U.S. economy to work better for historically marginalized groups. Fifty-nine percent of those polled said racial equity was their top concern, and nearly 70% of respondents agreed that more needs to be done to make the system more inclusive. Furthermore, NPR reported that the pandemic has exacerbated economic inequality in the U.S.
This creates an environment that makes it more difficult to be an entrepreneur, particularly for African Americans, Hispanics, immigrants and the nonwealthy. Notably, the majority of respondents to our study, 68%, were white.
This clearly signals a moment of opportunity for the various institutions involved in supporting entrepreneurs, from legislative bodies to banks and community organizations. Each entity has the opportunity to consider which groups might not be receiving enough support and to make amends — not only for the sake of the entrepreneurs they might have unintentionally left behind but also for the state of innovation in the U.S.
Support entrepreneurs in Middle America.
My company’s survey also learned that 67% of entrepreneurs polled believe that living in certain geographic areas is a barrier to entrepreneurship. This aligns with reporting from PricewaterhouseCoopers and CB Insights (registration required), which found that in the first quarter of 2018, the top five regions that received the most venture capital funding were located in California, New York and New England.
I’ve observed the same trend too: The middle of the country is ripe with innovation. And yet, entrepreneurs there are often overlooked by tech companies and venture capitalists, who tend to focus resources on big cities like New York and San Francisco. They’re overlooked by local leaders, too, who I’ve found often favor outdated economic development models. Rather than supporting local entrepreneurs, many vie for outside corporations to come to town with jobs.
I believe this is wrong-headed thinking and misses a massive opportunity for economic growth and for local leaders to restore the trust of entrepreneurs. But before entrepreneurs in these cities can believe that the system will work for them, their local leaders must demonstrate that they believe in their local citizens. They can do this by turning to local businesses for the city’s purchasing needs and by creating legislation and programs designed to support them.
Provide access to resources at the local level.
The early days of the pandemic cast a glaring spotlight on some of the more serious downsides to our current global economy. Consumers struggled to access face masks, hand sanitizers and other products that were held up in global supply chains.
Our company’s study drove home the idea that entrepreneurs, perhaps influenced by recent events, also favor local resources and support. Forty-six percent of those polled said they already acquire resources locally, compared to just 7% who acquire their resources from China. A 2015 Ewing Marion Kauffman Foundation research-backed guide for local governments interested in promoting entrepreneurship noted that “local connections are far more important to entrepreneurs’ success than are national or global contacts.”
I believe this is right. Businesses live and die based on everyday decisions: who to hire, who to consult, who to sell to, who to source from. Every one of these decisions can benefit from strong local relationships. Businesses, investors, philanthropists and corporations are all in a position to help strengthen these local networks by buying from, investing in, partnering with and simply seeing the promise and potential in the entrepreneurs in their own backyards.