WEBVTT - Harvard's Karen Mills: Small Businesses Feeling Cautious(Audio)

0:00:03.200 --> 0:00:06.560
<v Speaker 1>Global business news twenty four hours a day at Bloomberg

0:00:06.640 --> 0:00:09.719
<v Speaker 1>dot com, the radio plus mobile LAPP and on your radio.

0:00:09.960 --> 0:00:14.200
<v Speaker 1>This is a Bloomberg Business Flash for on Bloomberg World Headquarters.

0:00:14.320 --> 0:00:18.240
<v Speaker 1>I'm Charlie Pellett. That dal the SMP NAZDAK all declined today,

0:00:18.400 --> 0:00:21.119
<v Speaker 1>SMP five hundred index down the most in three weeks,

0:00:21.200 --> 0:00:24.640
<v Speaker 1>dropping nine tenths of one percent. So the smpns the

0:00:24.640 --> 0:00:28.520
<v Speaker 1>week at two thousand ninety six, down nineteen points today down,

0:00:28.520 --> 0:00:31.560
<v Speaker 1>Industrials down a hundred nineteen points, ending the week at

0:00:31.600 --> 0:00:34.640
<v Speaker 1>seventeen thousand, eight hundred sixty five. A dropped there of

0:00:34.760 --> 0:00:37.120
<v Speaker 1>seven tens of one percent, and as a stack down

0:00:37.200 --> 0:00:40.840
<v Speaker 1>sixty four, a drop of one point three percent. Gold

0:00:40.920 --> 0:00:43.640
<v Speaker 1>up four sixty the ounce to twelve seventy seven. Again,

0:00:43.680 --> 0:00:46.199
<v Speaker 1>there are four tenths of one percent, the tenure up

0:00:46.200 --> 0:00:50.080
<v Speaker 1>thirteen thirty seconds, the yield one point six four percent.

0:00:50.479 --> 0:00:55.520
<v Speaker 1>I'm Charlie Pellett, and that's a Bloomberg Business Flash. You're

0:00:55.560 --> 0:00:59.920
<v Speaker 1>listening to Taking Stock with Kathleen Haymox on Bloomberg Radio.

0:01:00.440 --> 0:01:02.279
<v Speaker 1>You know, the big themes in global markets right now

0:01:02.360 --> 0:01:05.880
<v Speaker 1>is concerned about the health of the global economy. Stocks,

0:01:05.880 --> 0:01:09.360
<v Speaker 1>lower bonds rallying around the world. In the United States,

0:01:09.400 --> 0:01:11.880
<v Speaker 1>of course, we're worried about jobs, and one of the

0:01:11.880 --> 0:01:16.160
<v Speaker 1>big jobs creator is the host of small businesses across

0:01:16.200 --> 0:01:19.240
<v Speaker 1>this country. We're very happy to welcome back now someone

0:01:19.280 --> 0:01:22.360
<v Speaker 1>who can take the temperature of the small business economy

0:01:22.360 --> 0:01:25.520
<v Speaker 1>for us. Karen Mills, Senior Fellow at the Harvard Business School.

0:01:25.600 --> 0:01:31.119
<v Speaker 1>She's also importantly former Small Business Administrator. Welcome back. Thank you.

0:01:31.160 --> 0:01:32.840
<v Speaker 1>I'm so glad to be bad. It's great to have

0:01:32.880 --> 0:01:34.759
<v Speaker 1>you back. It's always so interesting to know what you're

0:01:34.760 --> 0:01:36.800
<v Speaker 1>doing at Harvard. But let's just start with all your

0:01:36.800 --> 0:01:39.160
<v Speaker 1>contacts in the small business community, all the work you do.

0:01:39.280 --> 0:01:40.959
<v Speaker 1>What is your feeling. I know it's a lot. It's

0:01:41.120 --> 0:01:43.480
<v Speaker 1>it's so diverse, right, it's it's a mosaic. But if

0:01:43.480 --> 0:01:46.000
<v Speaker 1>you had to say, you know, the temperature of the barometer,

0:01:46.040 --> 0:01:49.040
<v Speaker 1>how does it look right now? The temperature small business

0:01:49.120 --> 0:01:52.720
<v Speaker 1>is actually not great. And if you go back to

0:01:52.960 --> 0:01:55.480
<v Speaker 1>last week and the jobs number, this is a pretty

0:01:55.480 --> 0:01:59.520
<v Speaker 1>good indication. The road out of the recession was so

0:02:00.040 --> 0:02:03.240
<v Speaker 1>umpy for small business owners, and just when we thought

0:02:03.240 --> 0:02:06.200
<v Speaker 1>they were getting their feedback under them, they we keep

0:02:06.280 --> 0:02:09.040
<v Speaker 1>getting these bumps in the economy. So what they tell

0:02:09.080 --> 0:02:13.880
<v Speaker 1>me is, you know, I'm just anxious about sales. I'm

0:02:13.919 --> 0:02:17.400
<v Speaker 1>just not sure I want to buy that next piece

0:02:17.400 --> 0:02:21.919
<v Speaker 1>of equipment. It's unclear what's going to happen in the country,

0:02:21.960 --> 0:02:26.880
<v Speaker 1>in the marketplace. So I'm not sure small business is

0:02:26.960 --> 0:02:31.320
<v Speaker 1>really ready for an optimistic view. I think they're anxious.

0:02:31.760 --> 0:02:35.720
<v Speaker 1>Let's make these anxious. Well, you know, the economy has changed,

0:02:36.040 --> 0:02:39.560
<v Speaker 1>and it's really been changing for I don't know twenty

0:02:39.600 --> 0:02:43.480
<v Speaker 1>thirty years, depending on which economists you asked, but productivity

0:02:43.520 --> 0:02:47.960
<v Speaker 1>has slowed, the average wages haven't increased, the consumers don't

0:02:48.000 --> 0:02:52.840
<v Speaker 1>have the money, and small businesses really didn't feel the

0:02:52.880 --> 0:02:55.240
<v Speaker 1>brunt of this because we had these bubbles, we had

0:02:55.280 --> 0:02:58.560
<v Speaker 1>consumer debt, we had mortgage debt. All of a sudden,

0:02:58.600 --> 0:03:02.520
<v Speaker 1>they get hit and incredibly hard in the recession, and

0:03:02.560 --> 0:03:05.520
<v Speaker 1>in fact, small business suffered more than any other segment

0:03:05.639 --> 0:03:08.919
<v Speaker 1>because they're so credit dependent. In the bank shut down

0:03:09.720 --> 0:03:14.359
<v Speaker 1>and then coming out of the recovery, big banks recovered well,

0:03:14.560 --> 0:03:18.000
<v Speaker 1>big companies recovered well, Wall Street recovered well. In small

0:03:18.000 --> 0:03:21.839
<v Speaker 1>business really took a very, very long time to get

0:03:21.880 --> 0:03:25.320
<v Speaker 1>back on their feet. So now they're feeling cautious and

0:03:25.400 --> 0:03:28.720
<v Speaker 1>also nobody really knows where the jobs are going to

0:03:28.800 --> 0:03:32.680
<v Speaker 1>come from in the future, so they recognize that. And

0:03:32.720 --> 0:03:35.640
<v Speaker 1>I think that's part of this underlying anxiety that we

0:03:35.680 --> 0:03:41.600
<v Speaker 1>continue to see in um, in the whole US economy.

0:03:41.680 --> 0:03:47.520
<v Speaker 1>Nobody knows when it is realistic to be really optimistic. Well,

0:03:47.560 --> 0:03:50.720
<v Speaker 1>and I think it's sometimes seat feeds on itself. Uh,

0:03:51.080 --> 0:03:53.560
<v Speaker 1>maybe you hire somebody, but then somebody else doesn't. You

0:03:53.560 --> 0:03:55.280
<v Speaker 1>see other people aren't, so you get concerned if this

0:03:55.320 --> 0:03:58.240
<v Speaker 1>is going to affect you. The Federal Reserve, you know,

0:03:58.520 --> 0:04:00.200
<v Speaker 1>a couple of three months ago, he might have pot,

0:04:00.240 --> 0:04:02.400
<v Speaker 1>well there, how's it? Why about you asking you? Oh,

0:04:02.440 --> 0:04:04.160
<v Speaker 1>they're going to raise rates next week here, and what's

0:04:04.160 --> 0:04:06.040
<v Speaker 1>that going to do to small businesses? Now it looks

0:04:06.080 --> 0:04:08.800
<v Speaker 1>like June's not gonna happen. July may not happen in September,

0:04:08.840 --> 0:04:11.360
<v Speaker 1>maybe even the first time they even think about raising rates.

0:04:11.520 --> 0:04:14.960
<v Speaker 1>Is that good for small businesses? Jenny Allen came to

0:04:15.120 --> 0:04:18.919
<v Speaker 1>Harvard right at the end of May and she's she

0:04:19.120 --> 0:04:23.560
<v Speaker 1>was just terrific. She won the Radcliffe Medal and um,

0:04:23.600 --> 0:04:25.839
<v Speaker 1>you know, it's kind of felt at that moment as

0:04:25.880 --> 0:04:29.560
<v Speaker 1>everybody thought, well, we're on track to raise the rates now,

0:04:30.000 --> 0:04:33.000
<v Speaker 1>clearly not so much, And I think that's the right answer,

0:04:33.080 --> 0:04:37.760
<v Speaker 1>because we've got so much uncertainty, uh, in the European market.

0:04:38.160 --> 0:04:41.760
<v Speaker 1>We don't have anything strong from the small business owner's

0:04:41.880 --> 0:04:46.640
<v Speaker 1>perspective except for gas prices. Gas prices and oil being down.

0:04:47.000 --> 0:04:50.520
<v Speaker 1>Maybe a negative to the stock market, but it's a

0:04:50.640 --> 0:04:53.640
<v Speaker 1>positive to consumers and put some more money in their pocket.

0:04:54.000 --> 0:04:56.520
<v Speaker 1>So what what What are you focused on in your

0:04:56.720 --> 0:04:59.800
<v Speaker 1>in your programs, in your work with small business as

0:05:00.080 --> 0:05:03.360
<v Speaker 1>right now at Harvard? What have you been doing and

0:05:03.400 --> 0:05:05.040
<v Speaker 1>where do you want to go next with it? What

0:05:05.160 --> 0:05:08.560
<v Speaker 1>needs to be done? Well, We're doing two things um

0:05:08.680 --> 0:05:11.320
<v Speaker 1>right now in my work at Harvard. The first is

0:05:11.360 --> 0:05:14.320
<v Speaker 1>that I've been focused on access to capital for a

0:05:14.360 --> 0:05:17.160
<v Speaker 1>long time. I ran the SBA loan program and that

0:05:17.279 --> 0:05:21.320
<v Speaker 1>was really important to bring us out of this credit crisis.

0:05:22.200 --> 0:05:26.000
<v Speaker 1>Then it turns out that small dollar loans were still

0:05:26.000 --> 0:05:29.680
<v Speaker 1>a problem, and so we we took a look at

0:05:29.720 --> 0:05:32.560
<v Speaker 1>these new online lenders. Small doll loans just want to stop.

0:05:32.600 --> 0:05:34.440
<v Speaker 1>In other words, if I don't, if I don't need

0:05:34.560 --> 0:05:36.240
<v Speaker 1>enough money for the bank to want to bother with

0:05:36.279 --> 0:05:38.600
<v Speaker 1>me or even a small bank, I fall through the cracks.

0:05:39.160 --> 0:05:43.240
<v Speaker 1>Fifty dollars is the amount that about of the small

0:05:43.279 --> 0:05:46.440
<v Speaker 1>businesses want to borrow, and it's an amount that a

0:05:46.480 --> 0:05:50.719
<v Speaker 1>bank really can't make any money lending. So enter the

0:05:50.800 --> 0:05:54.080
<v Speaker 1>new online lenders who don't have bricks and mortar, and

0:05:54.200 --> 0:05:57.360
<v Speaker 1>they have done some real innovation. You've got to give

0:05:57.400 --> 0:06:01.040
<v Speaker 1>people a lot of credit. There's a customer service aspect

0:06:01.080 --> 0:06:04.080
<v Speaker 1>to this that a small business owner really appreciates. You

0:06:04.120 --> 0:06:07.080
<v Speaker 1>can get your loan right away, you can get an

0:06:07.160 --> 0:06:10.240
<v Speaker 1>answer in days or minutes or hours, and you can

0:06:10.279 --> 0:06:13.560
<v Speaker 1>get your money quickly. The issue is how much you're

0:06:13.560 --> 0:06:15.160
<v Speaker 1>going to pay for it and is it the right

0:06:15.200 --> 0:06:17.200
<v Speaker 1>loan for you. So we're doing a lot of work

0:06:17.520 --> 0:06:22.080
<v Speaker 1>um with the market players, with existing banks seeing if

0:06:22.080 --> 0:06:25.039
<v Speaker 1>they can innovate and catch up, and with regulators to

0:06:25.080 --> 0:06:27.480
<v Speaker 1>make sure that bad actors don't take over and wreck

0:06:27.640 --> 0:06:31.159
<v Speaker 1>this pretty good innovation that's come to the market. Whoever

0:06:31.160 --> 0:06:33.080
<v Speaker 1>gets in the White House in a few months or

0:06:33.080 --> 0:06:34.960
<v Speaker 1>what is the number one thing they should or could

0:06:34.960 --> 0:06:38.600
<v Speaker 1>do for small businesses? Karen Well, small business is clearly

0:06:38.640 --> 0:06:41.520
<v Speaker 1>a key to the economy. And I was talking this

0:06:41.600 --> 0:06:46.400
<v Speaker 1>morning at an entrepreneurial company in Brooklyn about how when

0:06:46.440 --> 0:06:48.240
<v Speaker 1>I came in the White House, it was really actually

0:06:48.279 --> 0:06:51.560
<v Speaker 1>hard to convince people that small businesses should even be

0:06:51.600 --> 0:06:55.039
<v Speaker 1>at the table in the economic discussions. Now people have

0:06:55.120 --> 0:06:58.080
<v Speaker 1>figured this out. But there are two kinds of small businesses,

0:06:58.120 --> 0:07:00.360
<v Speaker 1>and you've got to pay attention to both. You've got

0:07:00.360 --> 0:07:03.840
<v Speaker 1>to help the entrepreneurs who are going to innovate and

0:07:03.960 --> 0:07:07.360
<v Speaker 1>drive our productivity and drive our sort of future growth

0:07:07.400 --> 0:07:11.360
<v Speaker 1>and create the next Amazons and Googles, and separately, you've

0:07:11.360 --> 0:07:15.560
<v Speaker 1>gotta pay attention to small business owners. So this just

0:07:15.640 --> 0:07:18.720
<v Speaker 1>has to be one of the first things you think

0:07:18.720 --> 0:07:22.560
<v Speaker 1>about in economic strategy rather than what's going to go

0:07:22.600 --> 0:07:25.360
<v Speaker 1>on for big business. Well, thank you so very much.

0:07:25.360 --> 0:07:27.720
<v Speaker 1>It's great to have you back here. In Mills, Senior

0:07:27.760 --> 0:07:29.720
<v Speaker 1>fellow at the Harvard Business School, former head of the

0:07:29.760 --> 0:07:33.840
<v Speaker 1>Small Business Administration the s b A. Thanks for joining

0:07:33.840 --> 0:07:36.680
<v Speaker 1>me today. I'm taking stock pim Fox leave back with

0:07:36.720 --> 0:07:39.400
<v Speaker 1>me on Monday. Thanks to Reggie Brazil, our technical director,

0:07:39.480 --> 0:07:42.640
<v Speaker 1>Sam Linga, our producer. I'm Kathleen Hayes. This is Bloomberg

0:07:42.760 --> 0:07:47.640
<v Speaker 1>Radio coming up Bloomberg Law brought to you you by Deutch

0:07:47.720 --> 0:07:50.720
<v Speaker 1>Jakins PC. If you feel you've been unlawfully terminated, you

0:07:50.760 --> 0:07:52.720
<v Speaker 1>owe it to yourself to call the law firm of

0:07:52.760 --> 0:07:55.840
<v Speaker 1>Deutch Jakins Now for a free phone consultation, call eight

0:07:55.880 --> 0:07:57.080
<v Speaker 1>hundred nine eight Z