I love California. I have lived here for four years now and love the fact that I can wear flip flops in January. However, I will admit California has its problems. Let me be clear, this clip is not talking about California but, having started a business in this state, it isn’t that far off.
This is a huge problem when it comes to growing an economy. When my wife and I started our business it felt like playing Russian Roulette. Which form was going to take so long to fill out that we wouldn’t be able to open? What regulation were we going to miss that would close us down just after we opened? It was a nightmare. Proof that California has taken things too far is the fact that many businesses have decided to leave the state in recent years to open in places like Texas.
If you listen to the full episode from Planet Money you will hear about something called the Doing Business survey by the World Bank. This is basically a list of all the countries in the world based on how hard it is to do business. The good news is that the U.S. is number seven. The bad news is the story doesn’t end there.
The survey also breaks down information into several different categories. When it comes to the ability to start a business, the U.S. is number 46, dealing with construction permits, 41 and when it comes to getting electricity we are 61st. What numbers pull us back towards the top? When it comes to getting credit we are the second best in the entire world and we are number four at resolving insolvency. So basically we are really good at giving you money and then letting you walk away when you lose it.
Those are actually really good qualities. It goes right along with the whole “fail early, fail often” mantra of today’s entrepreneurs. The problem appears to be how hard it is to use that money.
Now I absolutely do not agree with President Reagan who said, “government is the problem.” Government regulation is very important, however, it needs to be smart, well run regulation. We have created a world where all of the onus is on the individual or the business to figure out whatever byzantine rules the government comes up with. The government needs to take some of the responsibility for asking the question, how does one actually apply these rules in the real world, before they pass a law.
These things have real world consequences. Not just in how fast an economy grows, but in individual lives. The podcast ends with the dramatic story of the Arab Spring, which was started by a merchant in Tunisia who was so fed up with the police interfering with his business that he set himself on fire. We are no where near that in the United States, but we are absolutely at the point where a lot of potential entrepreneurs will just throw up their hands and say, this isn’t worth the trouble.