Acumen Fund founder Jacqueline Novogratz is on the 19 December Forbes cover. The lead article, which I highly recommend, is titled “Innovation Saves the World: The Social Entrepreneurs Making an Impact.”

As usual, the magazine offers as its last page a collection of “Thoughts,” in this instance “Thoughts on Philanthropy.”

I was utterly taken by the pair below:

“Too few millionaires who aspire to win fame as philanthropists begin at home, among their own workers. To grind employees and then donate a million dollars to perpetuate his name is not a particularly laudable record for any man to live or to leave behind him.”—B.C. Forbes/1917

“Many people … give extensively of their time and talents to help others. Gifts of this kind often prove to be far more valuable than money. A struggling child, befriended and nurtured by a caring mentor, receives a gift whose value far exceeds what can be bestowed by a check.”—Warren Buffett

In a blog post titled “Business Book(s) of the Year,” Tom named George Whalin’s Retail Superstars as his #1 for 2009. Why? Tom says, “I think Whalin’s message is perfect for 2009. We will, over the long haul, rebound from our colossal economic and unemployment mess on the backs of our entrepreneurs. The big guys may re-stock their payrolls a bit, but the generals, GE and GM, ain’t the answer. And among the entrepreneurs, only a few, statistically, will be from Silicon Valley. To be sure, the best of the sexy entrepreneurs spawn whole new industries, but the blocking and tackling when it comes to jobs and productivity will come from Sevierville TN and Fairfield and Hartville OH and Frankenmuth MI and a hundred hundred other towns and small cities whose names, mostly, you haven’t heard of.”
Tom goes on to mention that a great companion book to Whalin’s is Small Giants: Companies that Choose to be Great Instead of Big by Bo Burlingham.

In response, one of our frequent commenters, who goes by the name of Zorro, posted:

Tom seems determined to have the US become a second rate power. The companies covered in Small Giants include a deli, a record company, a beer company, and a company that makes those things that go “beep-beep” when a truck backs up. The Retail Superstars covers nothing but retail stores. Somehow this is going to transform our economy—if it does, it will make it look exactly like it did from 2001–2008. Meanwhile, China has just turned on the world’s fastest train route. We make great sandwiches, beer, and back up alarms—the Chinese put in place the world’s fastest commuter train.

Bo Burlingham then weighed in:

Well, Zorro, I have to wonder if you actually read Retail Superstars, or Small Giants, for that matter. George Whalin made absolutely no claim that the companies he was writing about were going to “transform the economy,” nor did I make any such claim about the Small Giants. That wasn’t the point of either book, and that mentality has nothing to do with why Tom liked them. My point was that bigness and greatness have nothing to do with one another. George’s point was that the greatest retailers (judged by the standards of their industry, which are the only ones that matter) are actually the independents. You may think that such companies are unimportant, but the U.S. economy would collapse without them. Are you aware, for example, that 50% of the US workforce works in companies with 20 to 500 employees? That’s where all the innovation is coming from as well. Why? Because big companies are bad at it. That’s why they buy small innovative businesses. That segment of the economy is essentially America’s R&D lab. Among other things, they are coming up with the innovations that are going to utterly transform the world of manufacturing in the next 10 years and deprive China of its cheap labor advantage—because the labor component will become far less important than the ability to develop effective business systems and management, which is an area in which the Chinese stink. And where do you think the major manufacturing industries of today—the innovations that have created our world—have come from? Did you miss the 1980s and 1990s? I do worry about the future of that kind of entrepreneurship in this country, but the big threat comes not from China and India, but from our own protectionists, big unions, and government over-regulation. (See Sarbanes-Oxley, and then ask yourself why there were no IPOs in 2008, and how that stymied the development of the manufacturing powerhouses you apparently believe are important to our future.) As for the Retail Superstars and the Small Giants, they have a different role to play that is every bit as important as “making things.” (And BTW, the back-up alarm/emergency light company you deride makes a lot of things, and it’s the world leader in what it makes.) Those companies are the heart and soul, not just of our economy, but of our society. They are community leaders in thousands of cities and towns around the United States. Their practices shape the communities we live in, the values we live by, and the quality of the lives we lead. Yes, they are anathema to big labor, because they aren’t unionized. That’s why big labor is pushing card checks. Then again, their working standards and efficiency far exceed that of the unionized giants, whose lunches they regularly eat.

We tend to think of the jobs economy in terms of jobs lost at the likes of GM and jobs added at the likes of Google. And thinking in such a manner is misleading, and downright dangerous.

The fact is that the American economy in particular is an economy of churn—always adding and subtracting jobs at an incredible rate. Forbes (16 November) presents some stunning statistics:

Between September 2008 and September 2009 we lost about 6 million jobs. That’s a crushing blow no matter how you look at it. But if you think that the likes of propping up staggering giants such as GM is the answer, think again.

Question: How do you (we!) arrive at a loss of 6 million jobs?

We added—yes, I said ADDED—51 million jobs.
And we lost 57 million jobs.

That is, bizarre as it may seem, in the space of a year there was a churn of over ONE HUNDRED MILLION jobs. (Micro-tizing the math, we didn’t “lose a job”—on average, we created 8 jobs and lost 9 jobs for a net of minus 1—and repeated that musical chairs drill enough times to end up 6 million in the hole.)

And this is how it always goes, though typically, thank God, the pluses exceed the minuses.

While the above offers not a smidgeon of relief to jobless Jane or Joe next door, there is long-term good news imbedded in Joseph Schumpeter put it. Put simply, we “do” churn, painful though the constant dislocations may be, better than anybody else—i.e., our labor markets are the least sticky outside the likes of India or China. I lived with astoundingly productive mega-churn for over three decades in Silicon Valley. It isn’t pretty—but over the long haul it works, and works a helluva lot better than government-based bets on particular big companies.

There is a four-letter word for depending on big companies and incentives aimed at big companies to pull our irons out of the fire. Namely … dumb.

(NB: I apparently coined the term “Brand You.” And my pal and our Cool Friend Dan Pink gave us “Free Agent Nation.” Never have these ideas been of such profound importance. The issue of Forbes cited above refers to a 2006 Government Accountability Office study that estimates that, hold onto your hat, 30 percent of all U.S. workers are free-lancers or part-timers who are not pocketed into any of the Bureau of Labor Statistics worker stats categories. Unreported annual income from the “informal” economy may be as high as $2.3 TRILLION.)