I was at my seven year old granddaughter’s house when I saw her play this little harp. I know nothing about harps. I’ve never met anyone whose played the harp, except for my granddaughter.
It seemed so unique and innovative to see a little girl play a miniature harp that fit her body.
I automatically assumed the harp was probably made in some foreign country. It didn’t seem American to me. It looked so efficient and, how do I say this, foreign made.
When I got home I looked up harp makers on Wikipedia, and found that an American company in Indiana had out competed the Pakistanis and Taiwanese in crafting high quality, inexpensive miniature harps like my granddaughter’s.
The key words here are “out competed.” It seems like America may be getting some of its mojo back when it comes to innovation and efficient manufacturing.
It looks like we’re starting to reclaim our entrepreneurial identity, but it’s taken about twenty years to do so.
Twenty Years And Three Phases
Since 1990 we have gone through three distinct business phases. Only one of the three produces legitimate new wealth.
1. The Banker’s Phase.
In the 1990’s stocks stopped growing as they once did. So, bankers looked for creative ways to support financial strategies in order to increase investor returns. Schemes such as sub- prime lending, private equity, derivatives, and hedge funds came into vogue.
Banks lent heavily to these ventures. In the beginning returns looked good. But over time, they became bloated with debt. In actuality, no new wealth was being created during this period, only more and more debt.
Loans were being issued, but payments on those loans started defaulting. In 2008 the system caved under the inability to pay loans back. The financial system collapsed.
2. The Regulator’s Phase.
Deregulation has had a relatively long history. With the election of Ronald Reagan in 1980 deregulating the policies that had ordered the economy since the Great Depression were being changed. Key legislation like the Glass Steagall Act of 1933 was repealed in 1999.
This created a bonanza for lenders. Commercial banks and investment banks became one in the same. This caused a conflict of interest in the banking system, which led to over leveraging. It finally “broke the bank” in 2008 when the financial system collapsed.
When banks ran out of money, regulators from the Secretary of the Treasury to the Chairman of Federal Reserve Bank to the Chairman of the FDIC (Federal Deposit Insurance Company) went into action.
They saved the banking system by ensuring liquidity, but put restraints on what banks had to do to function responsibly.
Congress was also active in regulating business. The Sarbanes-Oxley Act of 2002, brought on by accounting cover ups by Enron Corporation, caused the cost of publicly traded companies with revenues under $100m to balloon to 2.5% of revenues. This caused the unintended consequence of prohibiting new companies from going public in order to raise capital for growth.
Needless to say the regulators saved us from the excesses of the bankers and from the accounting fraud of companies like Enron. However, that wasn’t the answer to the issue of economic growth. That wouldn’t happen until Americans learned how to compete again – that’s where my granddaughter’s harp comes in.
Phase 3. The Entrepreneur’s Phase.
Americans have finally realized that banking and regulation do not lie at the heart of the true economy. Entrepreneurial aggressiveness does.
And it seems the entrepreneur’s business phase is finally starting to fire up again. I call this the real economy. Americans are never better than when they are innovating and growing new businesses.
A prime example of this can be seen with William Rees Harps. Housed in Rising Sun Indiana this company has learned how to “out compete.” They have gone up against developing nations in producing a quality harp at an affordable price.
William Rees has also created a new way to look at the harp. The little harp was renamed. It’s now the Harpsichord or Harpsichord Harp. Weighing only four and a half pounds, it now has multiple uses. Not only is it a concert orchestra musical instrument, but is now used in rock bands.
My granddaughter now has options: she can be a rock star or a concert harpist or both, or none. The innovators have opened up many paths for my granddaughter. She has choices. As a result life can be more interesting and diverse for her.
If indeed the entrepreneurial economy in America has returned, you can count on three things happening: one, many more new jobs will be created; two, we’ll all become a little bit wealthier; and three, we’re going to have a lot more fun, because we’ll be creating and making new things. We’re good at that.