Eureka Times Standard

Forbes, 4-H, and the budding entrepreneur

By Gregg Foster

Sunday, June 4, 2006

An interesting article in the March issue of Forbes Magazine highlights the recent work of Professors Eric Hurst and Annamaria Lusardi regarding the importance of capital in creating new businesses. They challenge the contention that limited access to capital constrains would-be business owners, that it takes money to make money. They contend that “people who have a compelling reason or drive to start a business will do so.”

This is, of course, a controversial notion that counters much conventional wisdom in economic development. Much of our nation's economic development policy and programming over the past thirty years has focused on developing mechanisms to deliver capital to entrepreneurs and small business owners. This public policy was premised upon the notion that more capital will lead to more small business.

Who is right and who is wrong? I am sure that you could fill entire conferences with economists and advocates from both sides of the issue debating the merits and offering evidence to support their positions. My own experience is that a “capital first” approach with an underlying philosophy that public finance of small business is an entitlement often badly serves both the business owner and the financing agency. As Hurst notes in the Forbes article, money does not create the successful business owner, other factors such as skills, talent, good ideas, and culture do. For RREDC, this is why we so often rely upon the local Small Business Development Center to analyze business plans and entrepreneurs to help us assess their potential for success before we entertain their financing requests. We often find that a skill gap in business management is the reason for business failures.

Hurst does not advocate eliminating current programs. In fact, he states that the “combination of public and private-sector policies seems to be working -- on average.” However, he notes that, if anything, “we should find those people with good ideas who aren't being served by the system,” not just throw more money at existing programs.

So, why is 4-H in the title of this column? Isn't that just a program where you learn about animals? Our family is just completing our second year of participation in the Ferndale 4-H (though I was an active member of the Miranda 4-H back in the late Jurassic). I'm a big fan of this program because it teaches our children many of the basic skills that will make them successful in life, whether as entrepreneurs or not.

In our case, my 11-year old son Riley is in his second year of raising dairy goats and his first year raising a pig. In these projects he has learned the responsibility of keeping a schedule (regularly feeding, cleaning and exercising). He is learning the basics of finance (he's borrowed from the bank of mom and dad and settles accounts at the end of the year). He's starting to understand how to maximize profits by improving his product and keeping expenses low. He markets his product by showing his animals and developing information to educate buyers on their quality. In addition, 4-H is teaching goal setting, leadership, public speaking, recordkeeping, and many other skills that he'll be able to use to succeed whether or not he chooses to be an entrepreneur. In short, he is learning that the harder he works, the greater his reward. He's having a great time too!

4-H is about much more than raising animals and I encourage all parents to check out the program. More information can be found at http://cehumboldt.ucdavis.edu/4-H_Program or by calling 445-7351. I would also like to encourage all residents to come and show their support of the 4-H youth at both the Redwood Acres and Humboldt County Fairs. And, if you attend one of the livestock or vegetable auctions, don't forget to wave to the auctioneer. It's the polite thing to do.

Gregg Foster is Executive Director of RREDC and President of the North Coast Small Business Resource Center. He is also the Treasurer of the Humboldt County Dairy Doe Replacement Project. Entrepreneurs needing assistance can contact the Small Business Development Center at www.northcoastsbdc.org or 445-9720.