Why Don’t We Fix the Economy?

dollar signs

AKZOphoto on Flickr

I want to fix the economy. Me. Leo Godin, dude who’s never invested or run a business. And I want you to help. You see, fundamentally changing our global economy isn’t that complicated. Mass decentralization would spread wealth and pull reams of people into the middle class. In fact, if we bought everything that can reasonably be bought from small businesses from actual small businesses, the world would go through an economic revolution.

What’s the problem?

What’s the problem with the current global economy, at least from an American’s perspective? Most of the capital and power reside in the hands of relatively few people. I call this the corporatization of the world. Our daily lives depend more and more on impersonal corporations.

Now, don’t get me wrong. Corporations are not inherently evil. Much good comes from them. I work at Intel, which I believe to be a responsible corporation. We produce something no one else could. In fact, until the past few years, even we couldn’t produce enough chips to completely satisfy consumers.

So, the problem isn’t the existence of corporations. Rather, it is the dependence on corporations for all our necessities. Think about it. Who produces the bread you eat? Who owns the farms where our milk and beans come from? Who makes our clothing? Owns our gas stations? Controls our health care?

This isn’t a condemnation on anyone, but a reality we must face. It’s damn near impossible to buy clothing from small businesses, yet local manufacturers are in far better positions to make the shirts I need than Abercrombie & Fitch or Wrangler.

Think about it. For those of you who live in New England, who makes the best clothing for the climates you face? L.L. Bean, right? Why is that? Because company founder Leon Leonwood Bean was a hunter and fisherman living in Maine. He knew what you needed, because he had the same need.

Why can’t those of us in Phoenix have an L.L. Bean? Or better yet, an E. Bashas? Who knows better what Arizonan’s need than Arizonans? Same goes for those in Chicago or New York or Waxahachie TX.

What’s the solution?

Now imagine if every region had several small companies making clothing. How many permanent jobs would that create? Now, project that on other industries like farming or even car manufacturing. Don’t laugh until you check out Local Motors. They make an expensive car because they choose to. They could just as easily make more affordable vehicles.Local Motors

Let’s imagine for a minute what would happen if we made a major move to localized economies. What would need to happen? First, we would need more small businesses to supply consumers. That would take a lot of support and investment; particularly if we intend to separate from the global finance cabal. Not only would locals need to start businesses, locals would need to partner with businesses. We have examples of this at Gangplank in Chandler, AZ. Similar companies are starting in other parts of the country.

While places like Gangplank are a good start, we need to go further. We need to invest our money and time into starting the right businesses. We need to invest in partnerships instead of the stock market. We need to give free or cheap labor to those who are hoping to grow the economy. In other words, we need to support small businesses in whatever way makes sense.

Here are a couple ways this could work.

How do we do it?

Handshake

How business gets done - Just Jefa on Flickr

Small partnerships: Let’s say I know someone who wants to start selling amazing salsa. We’ll call this person Lucinda. Because let’s face it. Lucinda is a cool name. She’s makes the salsa that family and friends rave about. Lucinda may have great culinary skills, but needs funding and marketing help.

We could form a partnership where Lucinda concentrates on making large batches of salsa, and I pay money for equipment, licenses, web space, etc…. She could own direct sales, while I handle marketing. Am I an experienced marketer? Hell no, but I can learn. This is where the community comes in. I would work with my contacts who do understand marketing. Maybe Lucinda would seek help on how to transport large batches of salsa. It would be a community effort. And if we succeeded, we would then mentor others working on similar efforts.

My vision of this arrangement calls for Lucinda to make a salary. Maybe the first $300 in profits each week goes to her. We’d have a fund where the rest is deposited and split every quarter. Don’t worry about specific numbers, they’re not important, the concept is. The key provisions call for Lucinda to draw a paycheck, and for both of us to potentially see profits over time.

Local Crowdsourcing: The JOBS Act gives us a new way to invest. Previously, only accredited investors – rich people – were allowed to invest in private companies. Now, or rather when the bill takes effect, anyone can invest. Small businesses will be able to raise money from virtually anyone. Most coverage of the impact this could have focuses on the $100,000 to $1,000,000 range of startup funds, but I see something completely different. I see this as a tool communities can use to create bulletproof economies. Forget about the future IPOs, and instead look at the next Mom and Pop shop – the taco stand or urban gardening business.

For $10,000 someone might be able to start a company that makes awesome shirts or custom electronics for your car. If I’m allowed to invest $2000 into that, why wouldn’t I? If I know the person starting the business or if my local network trusts the person, all the better. Since I’d receive stock in the company, I could invest in a couple of these a year in the hopes that a few would pan out over a five year period.

Smallknot has a model implementing something similar today. They use a barter system kind of like Kickstarter that focuses on repayment and even profits through services. One restaurant they are funding, gives cooking lessons and special events for investors. This is a great way to get community involvement.

Let’s get started!

What I’m talking about here isn’t complex, but it is hard. It requires effort, risk-taking and trust. It demands community involvement in the local economy. It takes most of us out of our comfort zone. But, if we follow through, we might reap rewards beyond our wildest dreams. Who’s ready to start? I am.

Know anyone who makes good shirts?

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