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Harvard's Karen Mills: Small Businesses Feeling Cautious(Audio) · Bloomberg Intelligence

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  Speaker 1: This is a Bloomberg Business Flash for on Bloomberg World Headquarters.
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  Speaker 1: I'm Charlie Pellett. That dal the SMP NAZDAK all declined today,
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  Speaker 1: I'm Charlie Pellett, and that's a Bloomberg Business Flash. You're
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  Speaker 1: listening to Taking Stock with Kathleen Haymox on Bloomberg Radio.
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  Speaker 1: You know, the big themes in global markets right now
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  Speaker 1: is concerned about the health of the global economy. Stocks,
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  Speaker 1: lower bonds rallying around the world. In the United States,
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  Speaker 1: of course, we're worried about jobs, and one of the
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  Speaker 1: big jobs creator is the host of small businesses across
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  Speaker 1: this country. We're very happy to welcome back now someone
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  Speaker 1: who can take the temperature of the small business economy
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  Speaker 1: for us. Karen Mills, Senior Fellow at the Harvard Business School.
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  Speaker 1: She's also importantly former Small Business Administrator. Welcome back. Thank you.
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  Speaker 1: I'm so glad to be bad. It's great to have
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  Speaker 1: you back. It's always so interesting to know what you're
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  Speaker 1: doing at Harvard. But let's just start with all your
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  Speaker 1: contacts in the small business community, all the work you do.
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  Speaker 1: What is your feeling. I know it's a lot. It's
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  Speaker 1: it's so diverse, right, it's it's a mosaic. But if
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  Speaker 1: you had to say, you know, the temperature of the barometer,
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  Speaker 1: how does it look right now? The temperature small business
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  Speaker 1: is actually not great. And if you go back to
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  Speaker 1: last week and the jobs number, this is a pretty
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  Speaker 1: good indication. The road out of the recession was so
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  Speaker 1: umpy for small business owners, and just when we thought
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  Speaker 1: they were getting their feedback under them, they we keep
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  Speaker 1: getting these bumps in the economy. So what they tell
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  Speaker 1: me is, you know, I'm just anxious about sales. I'm
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  Speaker 1: just not sure I want to buy that next piece
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  Speaker 1: of equipment. It's unclear what's going to happen in the country,
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  Speaker 1: in the marketplace. So I'm not sure small business is
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  Speaker 1: really ready for an optimistic view. I think they're anxious.
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  Speaker 1: Let's make these anxious. Well, you know, the economy has changed,
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  Speaker 1: and it's really been changing for I don't know twenty
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  Speaker 1: thirty years, depending on which economists you asked, but productivity
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  Speaker 1: has slowed, the average wages haven't increased, the consumers don't
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  Speaker 1: have the money, and small businesses really didn't feel the
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  Speaker 1: brunt of this because we had these bubbles, we had
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  Speaker 1: consumer debt, we had mortgage debt. All of a sudden,
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  Speaker 1: they get hit and incredibly hard in the recession, and
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  Speaker 1: in fact, small business suffered more than any other segment
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  Speaker 1: because they're so credit dependent. In the bank shut down
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  Speaker 1: and then coming out of the recovery, big banks recovered well,
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  Speaker 1: big companies recovered well, Wall Street recovered well. In small
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  Speaker 1: business really took a very, very long time to get
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  Speaker 1: back on their feet. So now they're feeling cautious and
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  Speaker 1: also nobody really knows where the jobs are going to
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  Speaker 1: come from in the future, so they recognize that. And
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  Speaker 1: I think that's part of this underlying anxiety that we
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  Speaker 1: continue to see in um, in the whole US economy.
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  Speaker 1: Nobody knows when it is realistic to be really optimistic. Well,
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  Speaker 1: and I think it's sometimes seat feeds on itself. Uh,
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  Speaker 1: maybe you hire somebody, but then somebody else doesn't. You
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  Speaker 1: see other people aren't, so you get concerned if this
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  Speaker 1: is going to affect you. The Federal Reserve, you know,
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  Speaker 1: a couple of three months ago, he might have pot,
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  Speaker 1: well there, how's it? Why about you asking you? Oh,
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  Speaker 1: they're going to raise rates next week here, and what's
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  Speaker 1: that going to do to small businesses? Now it looks
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  Speaker 1: like June's not gonna happen. July may not happen in September,
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  Speaker 1: maybe even the first time they even think about raising rates.
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  Speaker 1: Is that good for small businesses? Jenny Allen came to
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  Speaker 1: Harvard right at the end of May and she's she
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  Speaker 1: was just terrific. She won the Radcliffe Medal and um,
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  Speaker 1: you know, it's kind of felt at that moment as
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  Speaker 1: everybody thought, well, we're on track to raise the rates now,
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  Speaker 1: clearly not so much, And I think that's the right answer,
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  Speaker 1: because we've got so much uncertainty, uh, in the European market.
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  Speaker 1: We don't have anything strong from the small business owner's
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  Speaker 1: perspective except for gas prices. Gas prices and oil being down.
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  Speaker 1: Maybe a negative to the stock market, but it's a
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  Speaker 1: positive to consumers and put some more money in their pocket.
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  Speaker 1: So what what What are you focused on in your
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  Speaker 1: in your programs, in your work with small business as
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  Speaker 1: right now at Harvard? What have you been doing and
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  Speaker 1: where do you want to go next with it? What
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  Speaker 1: needs to be done? Well, We're doing two things um
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  Speaker 1: right now in my work at Harvard. The first is
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  Speaker 1: that I've been focused on access to capital for a
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  Speaker 1: long time. I ran the SBA loan program and that
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  Speaker 1: was really important to bring us out of this credit crisis.
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  Speaker 1: Then it turns out that small dollar loans were still
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  Speaker 1: a problem, and so we we took a look at
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  Speaker 1: these new online lenders. Small doll loans just want to stop.
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  Speaker 1: In other words, if I don't, if I don't need
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  Speaker 1: enough money for the bank to want to bother with
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  Speaker 1: me or even a small bank, I fall through the cracks.
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  Speaker 1: Fifty dollars is the amount that about of the small
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  Speaker 1: businesses want to borrow, and it's an amount that a
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  Speaker 1: bank really can't make any money lending. So enter the
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  Speaker 1: new online lenders who don't have bricks and mortar, and
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  Speaker 1: they have done some real innovation. You've got to give
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  Speaker 1: people a lot of credit. There's a customer service aspect
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  Speaker 1: to this that a small business owner really appreciates. You
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  Speaker 1: can get your loan right away, you can get an
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  Speaker 1: answer in days or minutes or hours, and you can
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  Speaker 1: get your money quickly. The issue is how much you're
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  Speaker 1: going to pay for it and is it the right
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  Speaker 1: loan for you. So we're doing a lot of work
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  Speaker 1: um with the market players, with existing banks seeing if
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  Speaker 1: they can innovate and catch up, and with regulators to
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  Speaker 1: make sure that bad actors don't take over and wreck
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  Speaker 1: this pretty good innovation that's come to the market. Whoever
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  Speaker 1: gets in the White House in a few months or
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  Speaker 1: what is the number one thing they should or could
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  Speaker 1: do for small businesses? Karen Well, small business is clearly
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  Speaker 1: a key to the economy. And I was talking this
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  Speaker 1: morning at an entrepreneurial company in Brooklyn about how when
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  Speaker 1: I came in the White House, it was really actually
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  Speaker 1: hard to convince people that small businesses should even be
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  Speaker 1: at the table in the economic discussions. Now people have
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  Speaker 1: figured this out. But there are two kinds of small businesses,
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  Speaker 1: and you've got to pay attention to both. You've got
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  Speaker 1: to help the entrepreneurs who are going to innovate and
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  Speaker 1: drive our productivity and drive our sort of future growth
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  Speaker 1: and create the next Amazons and Googles, and separately, you've
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  Speaker 1: gotta pay attention to small business owners. So this just
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  Speaker 1: has to be one of the first things you think
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  Speaker 1: about in economic strategy rather than what's going to go
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  Speaker 1: on for big business. Well, thank you so very much.
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  Speaker 1: It's great to have you back here. In Mills, Senior
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  Speaker 1: fellow at the Harvard Business School, former head of the
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  Speaker 1: Small Business Administration the s b A. Thanks for joining
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  Speaker 1: me today. I'm taking stock pim Fox leave back with
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  Speaker 1: me on Monday. Thanks to Reggie Brazil, our technical director,
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  Speaker 1: Sam Linga, our producer. I'm Kathleen Hayes. This is Bloomberg
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