Why will America succeed?
I call the reason “the baseball culture of America”. In baseball, the very best hitters fail 70% of the time. The worst players succeed 20% of the time. Even though the best players may have failed at their last at bat, when their turn to hit comes again, they step up to the plate and once again look for success.
If we examine the personal histories of most entrepreneurs who have gone on to great success and wealth, most have failed repeatedly before striking success. It is so common, in fact, that in the last decade a new term has evolved: “fail forward”. Like the baseball player who struck out the last time at bat, the entrepreneur gets up, dusts themselves off and moves to the next venture. Like the hitter who will make some adjustments in his swing, the entrepreneur will learn from their mistakes and change their business plan accordingly.
Consider the pandemic. In an average year, there are about 600,000 businesses that fail and close. During the COVID-19 crisis, that number increased by a third, to approximately 800,000.[1] New business startups during 2019 numbered 3.5 million, but during the pandemic, the number exploded to 4.4 million, an increase of about 900,000![2] For every business failure, there was more than one new start up! Some were new entrepreneurs striking out for the first time, but there were also those who made adjustments to their swing and stepped up to bat once more.
The United States was the only developed country in the world that saw that many new businesses open during the pandemic. While many of these infant businesses are only one self-employed individual, a good number are businesses that will hire employees. Consider the state of Washington, for example; in January of 2021 there were over 8,000 new startups in the state, a new record, and of those over 6,000 plan to hire employees.[3]
There is no doubt that there have been businesses that thrived during the pandemic and others that worried about survival. According to a CBS poll in February, there were about 9 million business owners who worried about their business’s survival.[4]
Put that against some 5 million businesses which took the PPP loans in the first round. Without the stimulus from that initial package, many of these businesses might well have died. Forced closures meant many businesses had no revenues for months. Without the PPP they would have closed.
My guess is the second $1.9 trillion stimulus will prove over time to stimulate sales. The $1,400 checks that went to most Americans will for the most part be spent. There will be the multiplier effect: “the butcher pays the baker pays the candlestick maker”. The CBS poll was taken in February. Not only was the stimulus bill moving slowly through congress, but there were extreme weather conditions all across the country.
According to Statista, that number of 9 million seems to have shrunk by nearly 50% as just 15% of small businesses were concerned with earnings trends in March. 42% of small businesses had job openings in March; 22% were planning to increase employment. Fully 20% of small businesses were planning capital expenditures.[5] That sounds pretty optimistic to me.
With no additional stimulus, it seems that the economy is coming back after the pandemic. With the infrastructure and American Family Plan proposals on the table for congress to consider, the potential economic stimulus seems considerable. And like the baseball hitters, businesses are stepping up to the plate to look for another hit.
What is even more amazing to me is that many of these new businesses will probably begin because someone had insight into making a better product or setting up a service that improves quality of life. That is most impressive to me.
The naysayers can look at the number of strike outs and say that business has been tough. But I believe the winners in the investment market are going to be those who look at how often the business makes an adjustment and comes roaring back. That is the American baseball culture, and in my opinion a culture not found in many other countries of the world.
That is why I believe America will succeed. That is why I want my clients’ portfolios invested in the right American businesses.
[1] “Covid-19’s Toll on US Business? 200,000 Extra Closures in Pandemic’s First Year”, Wall Street Journal, April 16, 2021.
[2] “Startups Boom In the United States During COVID-19”, Diankov and Zhang, Petersen Institute for International Economics research, Reuters, February 17, 2021.
[3] “Thousands More PPP Loans Approved for Washington Businesses”, Puget Sound Business Journal, March 10, 2021.
[4] “9 Million US Small Businesses Fear They Won’t Survive Pandemic”, February 10, 2021, CBS News.
[5] “Monthly US Small Business Optimism Outlook March 2021”, Statistica.com, April 15, 2021
