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Do It Yourself Economy

The DIY Economy means to harness the skills and talent in our local communities, rather than depend on attracting the mythical factory.

…those old-fashioned, well-paid common factory jobs, powered by a steam engine or an assembly line—they’re not coming back. — Seth Godin

CAMEO White Paper: Download Do-It-Yourself Economic Growth: How Communities Can Cultivate Their Talent and Thrive. Read it. Use it as a resource. Share it.

CAMEO Testimony: Download our testimony – DO-IT-YOURSELF ECONOMIES STRATEGY FOR JOB CREATION AND ECONOMIC GROWTH IN CALIFORNIA, presented to the Assembly Committee on Jobs, Economic Development and the Economy.

We Are In A New Economy

The labor market is changing.  The nature of work is changing.  What is a job in this new economy? Who will create the jobs of the future?  What do these changes mean for policy and economic developers today and in the future?

Contrary to popular belief and a disproportionate amount of attention, the foundation of the new economy is not going to be the 1% of the businesses that have the potential for high growth.  Consider those companies as the skyscrapers.  These businesses give shape to an economy much as a skyscraper provides a unique character to a cityscape.  As most buildings in a city do not have dozens of floors, 99% of businesses will not grow to employ thousands, 88% of those won’t grow past five employees.

The foundation of a stable, sustainable, new economy will be a strong infrastructure of many small, locally-owned, diverse businesses. These very small businesses create all the jobs.

What we mean by the DIY Economy is to harness the skills and talent in our local communities, rather than depend on attracting the mythical factory .  Growing local businesses offers great opportunities to create wealth.  CAMEO is committed to advocating for the DIY infrastructure. It ensures that the locally grown businesses that are the lifeblood of our communities and a stable, sustainable 21st century economy will thrive.

A shift is needed to move from old methods that may have worked for a different economy to a new innovative, creative and flexible method that will work for today’s economy – a method that is based on creating jobs, one based on a “Do-It-Yourself economy.”

 The D-I-Y economy is a natural extension to the growing D-I-Y and maker movement. But instead of remodeling your own home or creating your own solar powered radio, the D-I-Y economy is “about driving economic development at the local level, with local leadership, guided by a more robust and sustainable vision.”


Five C’s of the Do-It-Yourself (DIY) Economy

Five different components make up the D-I-Y ecosystem, the five ‘C’s:  Coaching/training, Capital, Connections, Community, and Culture. When the pieces are in place, local economies can foster independents and micro-business owners and create a sustainable, self-reliant, and thriving local economy. (Thanks to Dell Gines at the Federal Reserve of Kansas City for this framework.)

COACHING: Business technical assistance for microbusinesses and gazelles (high growth potential businesses) ensure success. Business assistance is the first step in the capital access process and the first step to success for locally grown small and microbusinesses.  Think solid business plan, robust cash flow statements, marketing plan.  A business has to have its proverbial ducks in a row in order to be creditworthy, and then they can apply for a loan and grow.  The Aspen Institute FIELD studies show that businesses that receive assistance have an 80 percent success rate as compared with the 50 percent to 80 percent mortality rate for small businesses overall that the Small Business Administration (SBA) cites. On average, they create two jobs in addition to their own over a three-to-five year period.

CAPITAL: Despite their crucial role in the economy, only 0.10% of potential microbusiness borrowers are being served in California.  Many polls find that small business owners believe the availability of credit is a problem.  Larger banks are making fewer loans under $250,000, because they can do the same amount of work and earn more money with larger loans.  Alternative lending sources, e.g. community development financial institutions (CDFIs) and community banks, are a good source of capital for small businesses.  CDFIs are non-bank, non-profit lending organizations and credit unions that support business development and provide personal business loans in local communities that are usually underserved by traditional banks.  Small loans mean a lot. A research paper – How Much Does Credit Matter for Small Business Success in the United States? – compared similar potential borrowers except for whether they received a loan or not. Applicants who receive a loan are 54% more likely to survive and increase their sales by an average of 41%.

CONNECTIONS to Markets:  A business can have a great idea, a great plan, and money to implement the plan, but without clients or customers, there is no business.  In order to thrive and grow, small businesses need connections to market opportunities. Examples of approaches that economic developers can take to increase connections to markets for their businesses include:

  • Support for online platforms that provide direct links to customers and break down barriers to entry and/or provide marketplaces for goods and services;
  • Implementation of local procurement programs;
  • Use ‘economic gardening’ to connect local businesses with market research and business opportunities; and/or
  • Inventory local needs and resources to determine the innate market strengths of the local economy and determine what’s missing to help it grow.

CLIMATE:  It’s a misconception that small businesses are anti-government. However, most often large corporations exert more influence in the policy arena than small businesses, often resulting in government regulations and policies that favor larger businesses over smaller ones. Of course small businesses are interested in a strong infrastructure, (e.g. good roads, reliable broadband), the ability to compete with the large businesses, and increasing the demand for their products. However, a positive regulatory approach that promotes the DIY Economy would benefit small businesses of all sizes.  The approach means investing and supporting self-employment and the entrepreneurial ecosystem that we’ve been talking about in the rest of the series, i.e. coaching, capital, and connections.

CULTURE: The final ‘C’ is the culture of entrepreneurship, something for which California is known. We have lots of entrepreneurial energy in this state at all levels, and not only in the high technology sector. We re-invented the roach coach into an entire food truck culture/phenomenon/$1 billion business. When we refer to entrepreneurs, we refer to all entrepreneurs – from the tamales lady to the soap maker to the local grocery store owner to the veterinarian to the app developer to the medical device inventor.

Other Resources

Report: Civic Economics new report – Amazon and Empty Storefronts – looks at two broad classes of impact: Fiscal (relating to public revenue) and Land Use (relating to development patterns at the local level).

New DIY Guide: BALLE has a new field guide, The Future of Health is Local that gives health care providers actionable tools and examples on how to align the non-clinical assets of their organizations – such as procurement, employment, and investment – with local economic development strategies to improve human health and revitalize local communities.

Great DIY Video: Economic Development & Financing Corporation (EDFC) offers investors an opportunity to shift their money from Wall Street to “Main Street” with the first Direct Public Offering of its kind in the state of California. Invest in the Mendocino Wool Mill project. For more information on this form of financing, contact another CAMEO member, Cutting Edge Capital.