Why Fortune 5000 companies are generating almost all the wealth

In the previous entry, Startup As a Commodity I wrote

In 2014, 803 US Venture Capital firms spent 48 billion dollars investment, played games with a mere 0.03% of US GDP 

I discovered the scholarly paper from 2013  Startup Businesses and the Growth of Real State Gross Product from  Sacramento based Pacific Research Institute (for the readers outside US, Sacramento is the capital of California). The author is Benjamin Zycher, Ph.D  Here is his main conclusion

Dr. Zycher 

 A two-stage econometric model estimated with a database of 49 states over the period 1977-2010 yields the following central empirical findings: An increase in the number of startup firms does not affect state gross product or its growth rate, but an increase in net job creation

This is a puzzling conclusion. Startups are great for job creation. But these are not  always the steady jobs that bring betterness, Yet startups contribution to the Gross Product is negligible.

Re-inventing older Fortune 5000 companies to operate at maximum potential, this is the real source of GDP increase, Large companies becoming entrepreneurial themselves are the real source of wealth creation.

 From Focus on breakthrough products to heal Europe and US economies

In a memorable lucid and prophetic  blog, titled Entrepreneurs, not the government, will save Europe’s economy, Dries Buytaert the co-founder and CTO of Acquia, a Drupal shop and  in Europe writes:

Dries Buytaert, $0 speaking fee

 If Steve Jobs was adopted by a Belgian family rather than an American family, it’s extremely possible he may have ended up working in a bank instead of co-founding Apple.

Why? Because starting a company and growing it is hard no matter where you are, but the difficulty is magnified in Europe, where people are divided by geography, regulation, language and cultural prejudice.

What Europe should do?

Focus on creating large companies. Between 1975 to today, Europe which has double the population of US, produced 2 companies in the top 500 worldwide, while US has produced 26 such companies. This means creating EUR 25 billions companies, not only EUR 1 billion companies, the predominant maximum in Europe

Level the playing field. Compared to US, the entire Europe is Balkanized  "European work regulations can shackle the growth of startups. Taxes are high, it’s hard to acquire a European company, severance packages can be outrageous and it’s extremely difficult to fire someone... It only gets worse when you attempt to operate in multiple European countries"

Change our  (European) culture.

" The biggest thing entrepreneurs need is the belief that it can be done, that it’s worth taking the risk and putting in the hard work. Having the right culture unlocks the passion and dedication necessary to succeed."

 I would say also a change in the American pop mindset, who believes that startups will create hundreds of IBMs worldwide. It is much easier to promote inside entrepreneurship in a large corporation. It also requires a different CEO's skill: driving a transatlantic is not as easy as driving a Fiat 500.