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Minority Business Success

Stanford University Press

Contents

Preface...........................................................................ixAcknowledgments...................................................................xiii1 Minority Business Success Is a National Priority................................12 To Succeed Is to Survive, Prosper, and Grow to Scale............................193 Government Must Refocus on Inclusion............................................504 Corporations Should Refocus on Development, Not Procurement.....................865 Support Organizations Should Refocus on Core Mission............................1126 Minority Business Success Requires Leadership and Direction.....................134Notes.............................................................................165Index.............................................................................171

Chapter One

EXECUTIVE SUMMARY

History repeats itself. Problems go unattended for years until the nation is forced to deal with a crisis. The launch of Sputnik shocked us out of our complacency about America's leadership in space. The publication of Rachel Carson's book Silent Spring made us aware that we had been poisoning and plundering our environment. The meltdown of the credit system revealed the underregulated banking system to be catastrophically overleveraged. What had been invisible to the public eye suddenly became visible.

The nation is on the brink of another crisis. Minorities are destined to become the major population group in the coming de cades, but they have not been allowed to make their proportional contribution to the U.S. economy. Today we need their contribution, not only to speed economic recovery but also to boost the nation's output of goods and ser vices to preserve our position in the increasingly competitive global marketplace.

Globalization has increased the importance of national competitive advantage. Wealth flows out of lackluster economies into the coffers of nations that do a better job of value creation. Understanding this, all industrialized countries—except, it seems, the United States—have a National Industrial Strategy that plans what must be produced domestically, which industries are strategically and economically important, and which policies and infrastructure must be in place to create, attract, annex, or retain the high-profit, high-growth industries.

A U.S. National Industrial Strategy would acknowledge the importance of minorities to America's economic future. When minorities become the majority of the workforce, the supply chains, and the entrepreneurial economy—as they must—their success in creating wealth will determine the fortunes of the nation and everybody within it.

To date, the odds have been stacked against minority economic success. We once denied minorities access to ballot boxes, lunch counters, and drinking fountains. Now we deny them access to good educational opportunities, capital, and all but token business opportunities. Minorities do not contribute to the U.S. economy in proportion to their representation in the U.S. population because they cannot. The motive to own successful businesses is strong enough, but many barriers remain intact.

This situation needs to change. The business case for minority inclusion is compelling. It has obvious implications for public policy, corporate outsourcing practices, and support organization efforts. But there has been little progress during the last two de cades, even though the minority population has grown dramatically. We are using approaches designed for a different era and are not producing the results the country needs. We need to refocus those efforts. This book suggests an alternative paradigm that will create a different future for minorities in the U.S. economy.

MINORITY BUSINESS SUCCESS IS A NATIONAL PRIORITY

We have a national problem, but we lack a national strategy that is adequate to deal with it.

The national problem is the steady decline of national competitive advantage in the face of increasingly fierce competition from rival economies in Asia and Europe.

We saw symptoms of the problem emerge shortly after the new millennium began, in the form of rising unemployment, erosion of the value of the dollar against other currencies such as the euro, the export of somewhere between 25 million and 40 million U.S. jobs overseas, the increase in the balance of payments deficit into the trillion-dollar range, and the demise of U.S. prestige abroad. The country has been hamstrung by an outdated ideology that opposes planning and regulation—despite the obvious fact that we are operating in a global marketplace in which rival countries plan a concerted effort to take over lucrative U.S. industries and U.S. global market share.

It is time to rethink what is in the public interest. The so-called "free-market system" has created perverse incentives for business leaders to "take the money and run." Propounding the myth that markets are self-regulating, opportunists mastered tactics to drive up short-term stock prices and apparent profitability, and they rewarded themselves with handsome bonuses for doing so. Their freedom to skirt market regulation was abetted by politicians who were beholden to them because of the country's election-financing policies—an arrangement that misaligns self-interest and the public interest. But the system they created and exploited was simply not sustainable, as evidenced by its sudden collapse.

After those in power did, indeed, take the money and run, the taxpayer was left to pay the tab for restoring the vitality of the economy. But, as this book will point out, we cannot restore the economy and national competitive advantage without paying special attention to changing demographics and to the adequacy of the nation's human capital to compete effectively in the global economy. We urgently need a National Industrial Strategy that sustains the key industries of today and fledges the growth industries of tomorrow. The strategy needs to be inclusive, forward-thinking, and impactful in the short run—and sustainable in the long run.

We will see that a National Industrial Strategy involves identifying the industries we want to keep within the U.S. economy, ensuring adequate workforces to staff them, fostering the development of industry clusters and infrastructure to enhance their viability, and promoting the development of American-based value chains to ensure that they remain globally competitive. The free-market system of the past decade will not preserve or promote national competitive advantage; we need a well-thought-out plan for recovery and progress, a plan that is not distorted by lobbyists sacrificing the common good to favor special interests. As a nation, we will have to realign public policy, corporate strategy, and nongovernmental support in order to embark on a trajectory that holds more promise for our economic futures.

But before we propose a comprehensive solution, we need to understand the context of the problem facing the U.S. economy. Most importantly, we need to understand the magnitude of the demographic...