The worst mistake ever: running economic development like a business

“I’m a smart guy (or gal). I can figure this out.” I heard this all summer as we recruited for the Executive Director of the Maine Center for Entrepreneurial Development. We’re seeing it now in the appointees to President-elect Trump’s cabinet. We’ve seen it for years in economic development, especially the appointment of successful entrepreneurs or venture capitalists to run incubators and other entrepreneurial support programs. The assumption that many people make is that being good in business is the same as being good in government.

I argue that business acumen is necessary, but not sufficient for economic development. The skills sets required to get anything done in government are in fact extremely different from business; Phillip Joyce’s recent commentary in Governing lists the ways:

• In government, we need to be accountable to the public interest. There is no equivalent in business.
• Private sector focuses on profitability, while government is about the achievement of specific outcomes.
• Compromise is fundamental to success in the public sector.
• Government must constantly confront competing values; efficiency isn’t the only one.
• Government has a short time horizon, usually two years (due to the election cycle).
• Government actions take place in public, with scrutiny from the press and the public.

To this list, I would add that the operations of economic development organizations also require a firm grasp of macroeconomics, fiscal and tax policy. Specialized entities like incubators and accelerators also have a well-defined set of best practices. While there is always room for innovation, there is no excuse for starting from scratch, recreating the wheel or whatever metaphor you like. And the lessons learned in a single business or startup may not extend to a broad range of startups.

So, if you want to get something done in a public sector setting, I recommend getting someone with experience in both the public and private sectors. Been there, done that, got the tee shirt.

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