American (say we) love small businesses
On TPS reports, survivorship bias, and a few reasons why Americans almost universally agree that small businesses make the country better
A Pew Research Center survey scores small businesses as the institutions most widely viewed as having a positive impact on the country. That places them ahead of the military, churches, labor unions, schools, colleges, financial institutions, and big businesses. Interestingly, there is no partisan split over small businesses, either.
■ A few likely reasons leap to the forefront: First, "small business" is routinely equated with family ownership or proprietor ownership -- where the person who actually knows the work best is in charge of the company. People are perhaps naturally disposed to look favorably at family operations: The family farm, which is a small business, is celebrated with almost mythical status. But proprietor-owners may also bask in a certain glow, especially when compared with the quasi-professionalized managerial class at large companies. It's the Wright Brothers, bicycle-makers and inventors, versus Bill Lumbergh and his TPS reports.
■ There's also the understanding that small businesses are often bound to a local community much more tightly than their larger counterparts. An operation like Hot Doug's or Rosati's is a Chicago institution, and when it grows or opens up elsewhere, it's seen as a projection of local culture. But when Boeing hopscotches its headquarters from Seattle to Chicago to DC, it no longer seems to belong anywhere.
■ Accountability matters, too: A small business that burns its customers doesn't have anywhere to hide. That stands in stark contrast to bigger institutions, from business to government to churches, which can shuffle people around or play shell games with revenues to cover up dissatisfied locals in any particular jurisdiction.
■ The most important factor is probably the simplest of all. A business exists at the pleasure of its customers. If a restaurant, store, consultancy, factory, or other for-profit operation fails to satisfy the needs and wants of its clients, they hold a veto over its future. Thus the small business, more than any other type of institution, depends upon constantly making other people happy. Survivorship bias tends to clean up the reputation of small businesses generally by making the bad ones go away.
■ What we do with this knowledge is altogether something else; for all the goodwill that shines on small businesses, government filing, regulatory, and tax requirements tend to weigh disproportionately on small businesses, and those businesses face often exorbitant fees for ordinary activities that reflect their smaller purchasing power. Incentives and disincentives matter a great deal.
