Big Business or Small?

Let's Lose the Labels

John Koten
CEO, Mansueto Ventures LLC; Editor-in-Chief, Inc. and Fast Company magazines

There's a case to be made against small business. You might think that's an odd statement to read in a publication about entrepreneurship. You'll undoubtedly think it's even odder when you know that the guy who made it is the chief executive officer of the non-huge company that owns Inc. magazine, a publication dedicated to writing about emerging young businesses.

But I did just say it, and I'll tell you why. Obviously, there's nothing wrong with small business per se. What I don't like is the label. "Small business" is diminutive. It's belittling. It understates the vast creativity and importance of the American entrepreneurial economy. Worse, when the economy is divided into big and small, it becomes dangerously easy to dismiss or ignore the concerns of the very businesses we ought to be paying the most attention to—in everything from crafting the case studies taught in business schools to drafting important pieces of federal legislation. (If you don't believe there's a problem, talk to a successful business owner about the burdens imposed by the Sarbanes-Oxley Act, a piece of legislation enacted in response to the sins of a few very large companies.)

The Focus on Size

Large corporations get a lot of attention for a number of reasons. They pay for it, for one thing. That's what advertising and public relations are all about. Big companies also employ large armies of lobbyists to remind politicians of their vital interests. Their products are visible in the marketplace. And they receive considerable attention from academics, business journalists, and the multi-tentacle apparatus known as Wall Street.

Big companies are an important fact of life in a modern economy. And they'll be around for a long time to come. Certain activities—assembling jet airplanes, making steel, building telecommunications networks, to name a few—simply require the large-scale organization of both human and financial capital that only a big company can efficiently provide.

Small business gets a lot of attention, too. When politicians want to appeal to our populist instincts, they conjure up images of the struggling family farm or the Main Street store owners trying to compete against Wal-Mart. We're frequent patrons of restaurants, dry cleaners, flower shops, and all of the other familiar small enterprises that populate our local communities. These businesses play an important role in our economy, too, and are one of the reasons for the existence of the federal Small Business Administration in Washington.

Toward a More Complete Picture

The problem with viewing the economy at these two extremes of large and small is that it paints a far from complete picture. There are literally hundreds of thousands of other entrepreneurial companies that form the true backbone of the U.S. economy—and generate the growth, the wealth, and the new jobs that our nation will require if it is going to remain competitive in an increasingly global marketplace.

The problem with viewing the economy at these two extremes of large and small is that it paints a far from complete picture.

For more than twenty-five years, Inc. magazine has been telling the stories of companies that achieve great things without massive bureaucracy or enormous amounts of money. Consider the extraordinary achievement of Inc.'s 2004 Entrepreneur of the Year, Burt Rutan, who put a civilian into space using private funds. Or consider the tale of Ping Fu, our 2005 winner. After being deported from her native China, Ping came to the United States, earned a college degree, and eventually started a software company that helped the government map the Statue of Liberty and also bring the space shuttle safely back to Earth.

Here's something else to think about. For the past five years, the number of net new jobs created by the corporations that appear on the Fortune 500 has been stagnant. These days, big companies are laying people off almost as fast as they are hiring them. In contrast, the companies that appeared on last year's list of the 500 fastest-growing private businesses added more than 116,000 new jobs. Now who looks "small"?

Is it right to think of either Burt's or Ping's operations as small businesses? Let's throw out the old labels and expand our thinking about how our economy really works. Maybe we should divide companies into the entrepreneurial and the bureaucratic? Or even better: dumb companies (think Enron, WorldCom, etc.) and smart companies (like Burt Rutan's Scaled Composites and Ping Fu's Geomagic). Size does matter, but it's not all about revenue and lobbying might. Sometimes the only thing that really matters is the size of an entrepreneur's dream.