We’re wrapping up our Power of Small Series this week. This post might just be my most controversial to date. I’m sticking to my values and what I believe about the world. I couldn’t wait any longer to do a post on this topic. Part of what held me back from addressing this topic is that it’s complicated. I can’t get into everything in 1 post. This isn’t a perfect post so I invite you to dialogue in the comments to go deeper into this issue. I promise to respond to each and every comment. So after your done watching, please comment and let me know how you agree, disagree, or would like to learn more.
We started our social enterprise as a coffee shop because we know that coffee is a great way to change the world. After oil, coffee is the 2nd most widely traded commodity. Your cup of coffee touches people all over the world. There are 23 million coffee farmers who live on less than $1 per day. That doesn’t even include migrant workers and those who work with importing, exporting, roasting, and brewing. Improvements in the coffee industry impact countless families and the communities in which they live. Coffee is global.
At the same time, we wanted to make an impact locally. Partially inspired by veins within the Occupy Movement, we believe that there’s more power in acting locally. For example, if you wanted to protest an oil spill, there’s more power in protesting at your local BP rather than going to BP Headquarters. We like protest rallies with signs, but we’re really into acting locally to transform your surrounding neighborhood. So, even before our coffee shop opened, we’ve been seeking to help the neighborhood around our coffee shop become more sustainable – both environmentally and socially – and to help the people within the neighborhood work together across socioeconomic boundaries.
This path has lead us to learn from some great groups like Neighborhood Economics, the Business Alliance for Local Living Economies (BALLE), the Institute for Local Self Reliance (ILSR, we HIGHLY recommend their podcast “Building Local Power”), Local First Chicago, and more. We’ve also read some great books on this topic. Two favorites come from Michael Shuman: The Small-Mart Revolution and The Local Economy Solution.
We’ve come to believe this controversial statement:
“After reducing consumption of oil and drinking sustainable coffee, localism is the best way to change the world.”
Uber lost billions of dollars in 2016. Why is everyone trying to be the next Uber? What’s so great about scaling so large that it takes billions of dollars to run your business, regardless of your business’ revenue?
Amazon is returning to piecework like in the beginning stages of industrialization. We learned 100+ years ago that people can’t thrive when they are being paid by the piece rather than a stable salary with benefits like healthcare and retirement savings. Plus, it’s scary just how much Amazon controls… If you do anything online, you probably noticed an outage in February. The internet was pretty much broken because Amazon went down. Why are we putting so much faith in 1 big company, especially when they are treating their workers like crap?
But wait, there’s more. Spending money locally matters. 14 jobs are created for every $10 million in consumer spending at Amazon. 57 jobs are created for the same amount spent locally.
Three quarters of “economic development” dollars directly subsidize large corporations, leaving local, independent businesses behind. Yet, up to 90 percent of net new jobs in the U.S. are created by locally-owned businesses. That’s your tax dollars not creating jobs but instead subsidizing large corporations and padding CEO’s wallets.
There are so many more things I could mention about what’s wrong with the system. Scaling big isn’t always better than staying small. There are some things that don’t scale. There are some efficiencies of staying small.
Time to get optimistic and take action
Let’s build a picture of why localism is the future and why it changes the world. As a mission-driven entrepreneur, I’m hoping to convince you of the benefits of making your business deeply rooted in your local economy and encouraging others to do the same.
Michael Shuman lists 8 trends that are giving local businesses a competitive edge over larger scale ones. (I’m paraphrasing this list since it takes up page 67-90 in his book.)
- Production Efficiency – a smaller, localized producer is more equipped to be flexible and create just-in-time appropriate products rather than mass-productive of products that sit in warehouses for long lengths of time.
- Distribution Efficiency – for some large-scale companies, the cost to ship their product is greater than the cost of the actual product (especially with food). Power is another good example. Whenever this is the case, it’s better to link local producers of that product with local customers and make distribution more efficient… Especially when #3 kicks in.
- Rising Energy Prices – It’s not hard to imagine that when the price of oil is high, the balance tips in the favor of local businesses who require less fuel and shipping.
- Personalized services – I found these statistics interesting:
“In 1960 U.S. consumers spent four of every ten “personal consumption” dollars on services, and the rest on goods. In 1980, 48 percent of our consumer dollars when to services; in 1990, 55 percent; and in 2003, 59 percent.”
More and more people don’t want stuff, they want experiences. They’ll buy a day at the spa or a fancy dinner before more new clothes to add to an already crowded wardrobe. Experiences are typically local. Even when an “experience” means travel, the tourists want the local, personal services instead of the typical souvenirs.
5. Growing Irrelevance of Location – The way this works in favor of local businesses is that we can attract the best talent to us. Plus, communities can be competitive on a global scale by being smarter, not larger. Think of Austin, TX and Portland, OR. These are relatively small cities that have become known by and attractive to people around the world because they are smart with their local culture.
6. Workforce effectiveness – the high turnover in large companies costs them lots of time and money. The personal ties made within local companies creates loyalty between employee and employer that increases retention and satisfaction – and ultimately saves time and money and makes the local business more competitive.
7. Public policy changes – The subsidization of large businesses is one of the dirty little secrets of globalization. As subsidies are exposed, citizens are repulsed. Plus, government officials, especially on a city level, have to deal with budget deficits. Something must give. I like how Michael concludes, “How many Americans, if genuinely given the choice, really would want to pay higher taxes to continue feeding all the [large companies’] piggies?”
8. Decline of the Dollar – When the dollar loses value, import costs go up. It will be more cost effective to produce our own stuff than import it from other places.
All of this might seem overwhelming – either for good or bad. Let’s get practical.
Here are 3 action steps you can take:
Step #1: Decide the business size that’s best for you and your personal health. Then, figure out how to make it economically sustainable. Don’t buy into the business myth of bigger is better. Determine what’s better for you and stick with it.
Step #2: Buy local for your business. Build relationships with local companies and buy their goods and services first and foremost. Chances are you’ll save money – local companies can be highly competitive and you can deter shipping costs since it’s coming from close by. You also get the added benefit of getting to know fellow entrepreneurs that might be in different industries but are in your same geographic area. We started a business association (South Loop Business Exchange) highly targeted in on our neighborhood because we believe in the power of this Step so much.
Step #3: Use your local-flavor to make your business more unique and specialized to your geographic area. Services are easy to make local businesses because they often need to be delivered face-to-face with real human contact. If you are a massage therapist, you’re in luck because no one is ever going to get a good back rub over the Internet. But even if you have a product-based business, there are many chances to localize. If you sell food, you can source local, add local favorites to the menu, etc. Arts & crafts products lend themselves to local-flavor since they are already unique works. With a little creativity, you can probably find a way to do this with any product. Bottom line: as a small, local business, you get the chance to really personalize and localize your business in ways multinational companies never will.
Don’t be fooled. Uber tries to look local in the sense that the drivers are people who live nearby (although, the few times I’ve used Uber, my drivers in Chicago have been from the suburbs). Amazon tries to look local by having same-day delivery. Even Walmart is trying to emphasize local produce (I think, I haven’t actually been there in years). Don’t be seduced by the business world cheering, “Bigger, better. Better, bigger.”
Be who you are and never sacrifice your local community. You need them as much as they need you. Together, you can change your city and the world.