Strikes won’t help, but a little ingenuity goes a long way

In 2000, just as global markets were catching cold over the collapse of Internet-based companies, two young men decided to start an upmarket household detergents firm.  A recession wouldn’t seem to be the best time to start a business, especially in a mature industry already filled with famous brand names, but Adam Lowry and Eric Ryan were determined.

Starting with an investment from friends and family, they created Method.  Within six years, they became an international brand and earn revenues of $ 40 million annually.

"Starting a business in a recession is like vacationing in the off-season," says Ryan. "It's a little less crowded, and everything starts going on sale."

Amidst the chaos of fallen markets, lost jobs, broken companies and strikes that are supposed to magically restore the economy, it is sometimes hard to spot that people still earn a living even in times of crisis.

 Indeed, crisis can often be the very spark needed to create new opportunities.

The Hyatt hotel group first opened during the 1957 recession in the US.  Microsoft got its start in 1975, during the global recession caused by the oil crisis.  Even Thomas Edison’s famous incandescent light bulb was first launched during the six-year recession known as the Panic of 1873.  Today Edison’s company is GE, one of the largest in the world.

The current downturn is giving innovative companies in emerging markets opportunities they may not have had before.

Chinese medical devices manufacturers have produced low-tech versions of high-end products for years.  Zhongxing Medical has produced a digital x-ray device so cheap that, even though equivalent Philips and GE devices are significantly more sophisticated, it is growing rapidly.  Tata’s microscopically priced Nano motor car is on the market just as the major motor manufacturers are falling apart.

Back home companies like MTN and SABMiller are becoming global brands.

 Let’s be clear, though, none of this is easy and none of it happens overnight.  For every major success, there are countless businesses that never get very far, or fail outright.  And this is normal.

Job creation is not really about selecting one or two big companies and getting them to hire thousands of people.  Nothing so romantic.

Unemployment figures are not static.  If you’re told that 5 million people are unemployed, what is really happening is that there is permanent churn.  People lose their jobs.  New jobs are created.  Some of the people who were unemployed get these new jobs.  Only a proportion of the unemployed have never had jobs before.

There are things that governments can do to make things a little easier for small businesses: make sure that legislation and business environments don’t favour incumbents or political lackeys; make it easy for entrepreneurs to fail gracefully when they need to; reduce the amount of red-tape they have to deal with so that administration doesn’t become horribly expensive.

Monopoly practices, too, can be intolerable for business innovation and growth: whether it be underhanded commercial monopolies, state-supported and owned companies, or even the union practice of demanding sympathy strikes that span the entire economy every time they want to make a point.

The process of innovation, and the consequent job creation, is messy.  Not everyone with a driving vision has actually had a good business idea.  Often, the only way to find out is to test it.

Government’s job is to facilitate that chaos, not attempt to freeze things in place.  Make it easy for people with big ideas to get in and out of the market.  The more churn, the more chance that one of those ideas will become a big business.

President Zuma has reiterated his campaign promise of creating a million jobs a year.  Unless he also has a million business ideas a year, he best make sure that it is as easy as possible for others to experiment.