Investing in jobs

I have been reading blogs for a few years now and one post just started me thinking. In the blog post titled Recycling Capital at A VC, by Fred (Wilson of Union Square Ventures), talks about investing in startups at the very beginning. These investors differ from most venture capitalist investors and are usually referred to as early stage investors or angles and usually provide the seed money to create the first iteration of the product.

In the article, Fred describes the American system of investing in startups as the “envy of the world” and I’d bet that’s true. But I’d also bet that it’s pretty limited to computer-based companies like Facebook and Goggle. Right now there doesn’t seem to be a big investment process for hardware.

Most of the companies the investors are funding are developing software and those companies don’t hire large numbers of people to build and ship a product. What this means is that while the investors may make a nice return on the investment and the small core group of programmers may make a nice living, the number of people involved is quite small. The group is also limited to a small number of people with a limited skill set.

Nearly everyone these days gets some programming training in either high school or college and still only a small number of that group end up programming so there is some “self selection” going on that limits the number of people who will end up with jobs in those computer based businesses.

While this is still a good thing since the rest of us benefit from the new capabilities in many ways, it does limit the number of job created directly by those businesses. While the social media now being developed may give us lots of indirect benefits that end up helping our working lives, they won’t create jobs at the rate we need today.

What steps can we take to help develop new or expand existing companies that will directly employ the number of people coming into the work force in future? If we accept the evidence of history, only a few people will continue to move into the software development business leaving a huge number of workers floundering for real jobs.

Where are the investors in business that will eventually employ the large numbers of workers that will end up creating the vast number of jobs we need? No one seriously expects us to find enough jobs to put just the people left unemployed by the recession in “cottage” industries. And that’s what a lot of the new employment is, small business that only have a few workers.

The economic engine of the modern world was not lots of small business owners, it was industrialization. The vast majority of people who ended up in the middle class did so because they were specialized workers in a large industry.