The Importance of Family-Owned Businesses

Organic-Food-Expensive-Cancer-Joel-Salatin-Polyface-Farms From my article on the importance of family-owned businesses:

In full disclosure, there is also a selfish motivation: if we want our children to raise their families near us, we need to provide them with some income opportunities so they don’t have to chase jobs all over the country. –Joel Salatin

Two of my boys are in the midst of reading Laura Ingalls Wilder’s Farmer Boy and Little House in the Big Woods. The older boy, who is always trying to minimize work and maximize play, has commented several times that farm kids must sweat a lot since they are engaged in so much physical labor. The younger boy sees the similarities our family shares with Wilder’s families. Since he is homeschooled, he spends all day working with his siblings and parents just like Almanzo in Farmer Boy.

We’ve talked a lot in our household about the value of owning your own business.  Although we don’t have a brick and mortar business, we try to discuss entrepreneurship on a regular basis with the children. We want them to understand the risks and rewards associated with building your own business.We have them ask questions of local business owners to help them assess what is required to build and maintain a business.

Although many businesses fail, we let our boys know that if they succeed they will have built an income stream that can care for their needs into their old age and then be passed on to their children. We also let them know that if they share the risk of building the business with their siblings, they will have lifelong business partners. In full disclosure, there is also a selfish motivation: if we want our children to raise their families near us, we need to provide them with some income opportunities so they don’t have to chase jobs all over the country.

In the Sept. 18, 2010 issue of The Economist magazine, Professor Joachim Schwass noted that “beyond the public company, private partnership, and the state-controlled company, the other big survivor is the family-owned business. Often forgotten and underestimated yet big GDP and employment contributors, family companies are driven by a very different type of reward: handing over a healthy, performing, and sustainable business to the children. The vast majority would not dream of an IPO.”

In fact, according to a 2003 study by Astrachan and Shanker, family firms comprise 80 to 90 percent of all business enterprises in North America. In other words, most of the wealth in the U.S. is held in family businesses. The authors find that independent family-owned businesses contribute 64 percent of the GDP or $5,907 billion ($5+ trillion) and employ 62 percent of the U.S. workforce. (Unfortunately, family firm data are very limited; this 2003 study of U.S.-owned family businesses in the Family Business Review was the most current data that could be found.)

If you walk back in history 100 years, most people grew up in the family business: the farm. With the family intact and everyone having a valued role in the family’s survival, society and the economy prospered as a result of the farm. Children learned how to provide necessities like food and shelter. They also learned what was most important to society’s advancement: how to take care of their own family instead of looking to someone else to assume their responsibilities.

Virginia farmer and self-described libertarian Joel Salatin is one of the most prolific activists in favor of the renaissance of the family farm as part of the solution to reversing America’s social decline. Salatin skillfully addresses how parents can foster passion for the family business in their children.

For example, a 2012 lecture by Salatin at Grinnell College, “Working With Your Kids So They Will Want to Work With You,” is based on the premise that most family farms lose continuity because of the lack of rewarding economic, as well as emotional, relationships between parents and children. With his suggestions about ways to cultivate the persistence and innovation needed to make kids love working with mom and dad as well addressing ways to structure and scale the farm to make room for future generations, he provides much-needed advice, by example, of how to build a sustainable family business.

The solution to the rebirth of declining agricultural and mill towns is what initially built these towns: families with strong economic ties to their community. Parents and children need to have a stake in their communities in the short and long run if the community is to be viable. That “stake in the community” is not just a property tax bill which pays for the town school, but perhaps a business that provides for the family’s economic needs as well as provides a valuable service to the community.

The Economist Magazine Surprisingly Discusses Merits of Marriage–Hat Tip to Oklahoma

Wendy's iPhone Pics Jan 2013 075

It is true that marriage is on the decline. With the divorce rate approaching the 60% mark and married couples having less than two children, it is pretty clear that The Economist’s title “The Fraying Knot” rings true.  However, The Economist, which is skeptical of all things traditional, goes on to present robust evidence that the institution of marriage creates stable family structure.

Even Democrats like Bill Clinton and Daniel Patrick Moynahan (Democrat Senator from NY) have pushed for programs that promote marriage.  In 1965, Moynahan proposed emergency federal intervention in the establishment of a stable Negro family structure; he justified the intervention by the high out-of-wedlock birthrate among blacks.  The 1996 Welfare Reform Act that Bill Clinton signed into law called marriage “an essential institution of a successful society which promotes the interests of children.

One type of program that The Economist (January 12th through 18th issue, p. 27-28) seems to laud for its results is that of the Oklahoma Marriage Initiative (OMI) which helps couples recognize the benefits to marriage.  OMI, started in 1999, has served 315,000 people and is the largest and longest running initiative of its kind.

Many churches sponsor initiatives like OMI but are unable to reach their target audience because they don’t attend church.  OMI is able to reach beyond the church-going population into those demographic clusters that most need its help.  More cities and communities need these type of initiatives to dig deep into the community.  As The Economist recognizes:

you don’t see the same pattern of long unmarried relationships you see in Scandinavia, France or Britain…in the United States, marriage is how we do stable families (Andrew Cherlin, sociologist at Johns Hopkins University).

In closing, here is some food for thought… if marriage creates stable families in America, does it also follow that a stable family structure throughout America’s past helped make the U.S. the wealthiest country in the world?  And, would it also follow that because marriage is on the decline today, the U.S. is approaching federal budget insolvency ?  Get married and stay married–it works.

Fixing Japan’s Demographic Disaster

Japan - Kyoto

Recently I’ve been trying to catch-up on the backlog of The Economist magazines that have been accumulating on my bedside table. As I perused the magazines, I came across this article titled “Land of Wasted Talent.” The article starts off simple enough:

Unlike an earthquake, a demographic disaster does not strike without warning. Japan’s population of 127m is predicted to fall to 90m by 2050. As recently as 1990, working-age Japanese outnumbered children and the elderly by seven to three. By 2050 the ratio will be one to one. As Japan grows old and feeble, where will its companies find dynamic, energetic workers?

But then things get weird. The obvious answer to me was — have more children . . . right? Well, no.  The answer, according to The Economist, is to throw more women into the workforce. Huh, say what?

I’m sorry, but where is the connection between having more women working and fixing Japan’s demographic disaster? The lack of internal logic like this article is one reason why I have a backlog of Economist magazines.

Frankly, the magazine’s quality of writing seems to be going downhill in pursuit of ideological purity (of a general leftist slant, it is a British magazine afterall). As such, I feel less compelled to read it on a regular basis. And if I see more anti-family articles like this one, maybe I’ll save myself a few bucks and cancel it altogether.