Opinions expressed by londonbusinessblog.com contributors are their own.
In his book, Zero to oneiconic Silicon Valley investor Peter Thiel famous argument that “Competition is for losers.” Thiel argued, “If you want to create and capture lasting value, build a monopoly.”
Given the choice, any londonbusinessblog.com should salivate at an opportunity to build a highly profitable monopoly with no real competitors. But is this a realistic goal for most entrepreneurs? And should those who can’t measure it write it off as failure and give up on their ambitions?
Competitive small businesses are less well-known than established market players and monopolies, but they are often resilient and innovative. They also empower millions of founders to achieve financial autonomy and make meaningful contributions to their communities. In fact, ‘small’ may well be the future of entrepreneurship. This is why.
Related: How Agility and Resilience Help Small and Medium Businesses Succeed
1. The quest for autonomy
Entrepreneurs are not created in Silicon Valley incubator labs. They are partially born. Many factors help predict what psychologists call “entrepreneurial intent.” For example, some people are naturally more diligent and more comfortable taking risks than others.
But the most important is a strong need for autonomy. Natural entrepreneurs have a vision and must pursue it in their own way. Carrying out someone else’s vision is not enough. In multiple surveys asking people why they decide to start their own business, “be my own boss” is usually number one.
Very few will ever have a real chance of creating a monopoly. Setting up a very large company is extremely rare – but this does not mean that they are “lost”. For natural-born founders, the first big win isn’t even in the marketplace: it’s autonomy itself.
Owning a successful and competitive small business is a more realistic and achievable path to that goal than setting up a monopoly. The “successful” part can be tricky, of course. But small businesses are remarkably resilient.
2. The amazing resilience of small
Individually, small companies are less impressive than larger monopoly-type companies. Together they form a strength. According to the Small Business Administrationsmall businesses account for more than 60% of new jobs created in the US and produce about half of US economic output.
While many of them eventually fail, the overall trend is positive. Economist Dr. Scott Shane has found that since 1977, the number of small business failures has decreased by: above 25%. Taking advantage of their agility advantage over larger companies requires constant innovation – something many small businesses embrace and excel at.
3. Small Engines of Innovation
Small businesses are a force of constant innovation. A large-scale study shows that small companies significantly outperform larger ones in terms of patent originality on a “patent per employee” basis.
Monopolies are often stymied and try to slow down innovation once they have established their dominance. As Michael Riordan argues in the Harvard Business Review“The lack of competition causes drowsiness in companies, and new technologies are patented primarily to consolidate and protect a company’s dominant market position rather than to encourage the creation of revolutionary products and services.”
This is why acquisitions – buying smaller companies that to be innovative — is such an attractive strategy for larger companies. The spirit of innovation involves risk-taking, agility, messy experimentation, and the desire to change or improve the status quo—all qualities that small businesses have in great numbers.
Related: 5 Ways Small Businesses Can Outperform Big Businesses
4. Klein bridges the goal gap
More and more people want more than just a salary. They expect their work to be goal-oriented and in line with their core values. Millennials, for example, walk much more often if a job is not aligned with their purpose.
Large, monopolistic companies face a lot of pressure: obligations to shareholders, major regulations and the interests of multiple stakeholders. In their unique focus on dominating markets, providing a rich, values-driven environment for individuals is often not a top priority.
In a small business, the distance between property and labor is much smaller. There are fewer conflicting interests to weigh up against each other. Alignment in the core values between founder and employee can go a long way in strengthening the sense of purpose of both.
Small businesses can also work more directly with their equity, giving key employees a real ownership stake. It’s no wonder that so many workers—whose opportunities have multiplied after the pandemic-induced labor shortage—are choosing jobs at small companies rather than larger companies.
5. The cycle of community impact
Because it is small, a business responds better to the needs of the local community, almost by design. A small business itself acts like a small human community: it’s closer to the famous “Dunbar’s number” of 150 – the typical number of relationships people can easily maintain.
On the other hand, monopolies are bigger, more impersonal and bureaucratic. Their concerns are further removed from those of communities. A small business has no choice but to build a good reputation within the community it serves. Otherwise, the impact can be felt very quickly on the bottom line.
Smaller companies are probably what Adam Smith had in mind when he argued, in the Theory of moral feelingsthat efficient economies arise from the quest for selfish gain, as long as it is held in check by the strong need for peer recognition and neighbor acceptance.
Thiel’s point of course remains valid – for a small number of lucky founders. But the pursuit of monopoly should not be the main goal for the majority of entrepreneurs. It is neither attainable nor necessary to achieve their life goals.
Related: 10 Ways Small Businesses Can Give Back Without Breaking the Bank
Building monopolies is exciting and can provide astronomical returns for investors. Because of this, the search for the big has led the game of entrepreneurship towards this goal. But competition isn’t just for losers. A quality small business can empower founders to achieve autonomy, find new opportunities, innovate, pursue their purpose and make meaningful contributions to their communities. After all, competition also forges winners.