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Small business: intense, personal, crucial to SA's future


Government needs to get out of the way so small business can do its job and help steer SA away from its economic troubles, says Richard Blandy.

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In addition to being a Professor of Economics, I used to run a small research business in the School of Social Sciences at Flinders University. It was called the National Institute of Labour Studies Incorporated. It had its own board and was financially responsible for its own survival. It survived like that for more than 30 years, before being restructured by the university.

Many years later, I ran my own, tiny, consultancy business, AustralAsia*Economics Pty Ltd, with a partner in Canberra. We earned enough for both of us to keep body and soul together for over a decade. AA*E was voluntarily closed last year.

These businesses had to recover their costs or go to the wall. They were part of the mustard-cutting, real world inhabited by the mass of Australian small businesses.

An economist can learn a lot about economics from trying to make such tiny businesses keep their heads above water. Even better, one gets to understand what it feels like in the small business world.

The first feeling one notices is the uncertainty and insecurity. In the textbooks, businesses take straightforward, logical decisions on the basis of known facts. But in the real world, one does not generally know the facts that matter until after the event – if then. Everything seems to be “maybes”.

As the famous economist Maynard Keynes wrote of the real world of business: “If we speak frankly, we have to admit that our basis of knowledge for estimating the yield 10 years’ hence of a railway, a copper mine, a textile factory … amounts to little and sometimes to nothing: or even five years’ hence.”

Or even three months’ hence.

The things that really matter in this circumstance, when one is mostly flying blind, are the state of one’s confidence, how strongly one wants to do whatever it is that one is doing, and how long one can survive losing money until the bailiffs are sent in.

Keynes again: “If human nature felt no temptation to take a chance, no satisfaction (profit apart) in constructing a factory, a railway, a mine or a farm, there might not be much investment merely as a result of cold calculation.”

Right on, Maynard! What comes as a real surprise after the pallid, profit-maximising representations of business behaviour in the textbooks, is the emotional intensity of small business.

Small businesses are extraordinarily people-oriented. One’s fellow workers take on razor-sharp focus, because human beings’ actions really matter in small businesses. There is a convivial spirit of sharing that encompasses not only the whole group’s triumphs and disasters, but each other’s personal joys and sorrows, as well. Above all, there is a deep sense of satisfaction in meeting the bottom line by doing something well, together.

Small business people work incredibly hard. No small business can afford slackers, and everybody knows it. The textbooks say that businesses try to maximise profits. I suppose that they do, in a way, but, most of the time, they haven’t the faintest clue which particular actions might achieve this admirable objective. Like a fisherman, one casts bread upon the waters as cunningly as possible and hopes that the fish will bite.

Profit, to a small business, is what one has to make to be allowed to keep on playing. It is a survival test, like meeting the payroll. With a lucky streak, who knows, one might break into the ranks of the Murdochs and Packers of this world – but that slender prospect is not what drives small businesses on. What drives them on is their belief in the value of what they are doing.

The idea that greed motivates business is widely popular, especially among those whose incomes depend on other people supporting them through taxation. It would, indeed, be remarkably easy to succeed in business if all that were necessary were to be greedy. The truth is the reverse: greed is as destructive of business success as it is in life generally.

The successful are those who do it better, or who are luckier, and who are atavistic and frugal, rather than greedy.

The people who work at Solstice Media, publishers of InDaily, for example, form a classic small business. They operate out of a small, modest, group of offices on two, glass-fronted floors in Cinema Place, just off Rundle Street East. There are only six journalists and a small number of other staff, who put together InDaily’s electronic wizardry. In addition, there are contributors like me and others in contact with the team by email, Google and mobile phone.

They believe in what they are doing – presenting informative, in-depth, and readable stories about South Australia, not only for South Australians, but for a national and international readership. Readership is substantial and growing at a fast clip. Not bad for a tiny mob that does not charge for its product and that allows me to be highly critical of the South Australian Government’s economic policy.

One senses a mood in the South Australian small business community of giving up on the South Australian Government. The feeling is that the only way out of our present economic hole is if all the people in all the little enterprises can be let off the Government leash.

The State Government must get out of the way of South Australia’s small businesses. The Government has had its turn and has proven conclusively that, for all its airs, the emperor has no clothes. All the emperor has is power. It is time we gave him less of that so that he stops putting lead in our saddlebags with excessive regulations, taxes and charges.

As South Australia faces its economic Dunkirk, our small business boats are a large part of what we have left to get us off the beach.

Richard Blandy is an Adjunct Professor of Economics in the Business School at the University of South Australia.

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