Small Businesses Positioned For Post Recession Economy - InformationWeek

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5/27/2009
02:45 PM
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Small Businesses Positioned For Post Recession Economy

Echoing the bMighty mantra, Wired's Chris Anderson declares that the new economy emerging from the meltdown favors small over large.

Echoing the bMighty mantra, Wired's Chris Anderson declares that the new economy emerging from the meltdown favors small over large.Some months ago, bMighty editor-in-chief Fred Paul declared:

"At bMighty.com, we hold the following truth to be self-evident: That today's technology has radically shifted the competitive landscape, giving smaller, more nimble organizations a profound advantage."

In other words, Small Is The New Large.

Over the ensuing months, others embraced the mantra of small, from Steve Ballmer of Microsoft to Paul B. Brown of The New York Times. And now, Wired editor-in-chief Chris Anderson (the author of "The Long Tail" and "Free," but not the founder of the TED Conference) has squeezed onto the increasingly cozy bandwagon of boosters proclaiming the prowess of small.

Citing examples from Detroit's Big 3 to Google, Anderson contends that:

"This crisis is not just the trough of a cycle but the end of an era. We will come out not just wiser but different. What we have discovered over the past nine months are growing diseconomies of scale. Bigger firms are harder to run on cash flow alone, so they need more debt (oops!). Bigger companies have to place bigger bets but have less and less control over distribution and competition in an increasingly diverse marketplace. Those bets get riskier and the payoffs lower. And as Wall Street firms are learning, bigger companies are going to get more regulated, limiting their flexibility. The stars of finance are fleeing for smaller firms; it's the only place they can imagine getting anything interesting done.

As venture capitalist Paul Graham put it, "It turns out the rule 'large and disciplined organizations win' needs to have a qualification appended: 'at games that change slowly.' No one knew till change reached a sufficient speed."

The result is that the next new economy, the one rising from the ashes of this latest meltdown, will favor the small."

Moreover, Anderson doesn't just see small as the way out of the current recession. Rather, he sees the seeds of transformation with the recession merely the catalyst for germination:

"Involuntary entrepreneurship" is now creating tens of thousands of small businesses and a huge market of contract and freelance labor. Many will take full-time jobs again once they become available, but many others will choose not to. The crisis may have turned our economy into small pieces, loosely joined, but it will be the collective action of millions of workers hungry for change that keeps it that way."

Go to Anderson's complete post The New New Economy: More Startups, Fewer Giants, Infinite Opportunity


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