Balkinization  

Wednesday, October 26, 2011

G.I. Bill--for Entepreneurship

Marvin Ammori

I want to highlight a bill recently introduced in Congress designed to promote entrepreneurship among military veterans.

The bill would enable veterans to use the educational benefits earned under the existing GI Bills to start a new business.

I like the bill for several reasons.

First, the original GI Bills meant to help veterans transition back to civilian life and to succeed as civilians, but college education is no longer the clear path to success for everyone in today's economy. The numbers are almost depressing. Nearly 14% of college graduates from 2006-2010 can't find full-time work. According to the comments posted on We Are the 99 Percent, many of the graduates who do have jobs can't make ends meet and have little job security. Those writing at Balkinization, generally law professors, have discussed not college but legal education. The writers have noted the same problems--it's expensive, many students land loans not legal jobs, and employment numbers are low (and lower than law schools suggest, as Brian Tamanaha has often noted).

Peter Thiel, former CEO of Paypal and Facebook's first outside investor, has called our education system a "bubble" and he pays (some exceptional) young people essentially to drop out of college and do something else meaningful.

Second, at the same time, entrepreneurship and new businesses tend to account for much of the nation's job growth and real economic growth. Successful new businesses benefit the tax base, the local community, and the nation generally. Other countries, notably Israel, have benefited from veterans applying the skills they learned in the military to new ventures. (See Start-Up Nation.) We can learn from them. And this bill will not just fund new businesses, it could importantly foster a culture of entrepreneurship nationally.

Third, I think veterans should be able to choose how to use their benefits. It's not an additional benefit, costing the government extra. Constraining the use of a benefit sometimes makes sense (think food stamps rather than cash, perhaps for cigarettes). But a veteran should be allowed to determine whether to risk an earned benefit on starting a new business or to risk it on a college education. It's a complex decision, involving the value of being in the job market now, and the risk aversion of the veteran. If we trust veterans with defending our country, we might trust them to make decisions about their civilian futures with benefits they have earned.

Finally, starting a business provides another kind of education, and one that people need. Americans aren't taught much about managing our money, investing, creating businesses, or marketing. We have classes on history and physics from an early age, but little on managing money or creating a business. (After having received no education in high school about managing money, we're then given credit cards and college loans.) I think a veteran can "fall back" on the skills and contacts they've learned in a failed business (which are substantial) as much as they can fall back on many college educations.

The bill imposes some risks, of course. But there are always risks; the question is whether the risk is worth the reward. Everyone agrees we can't just hand out money to every veteran business idea. And training and non-monetary support should complement the funds. And many businesses fail, and veterans should understand the risks. But the rewards seem to outweigh these risks.

The bill is called the Veterans Entrepreneurial Transition (VET) Act of 2011 and is available here. Sponsors are Jeff Fortenberry (R) and Bob Filner (D). The vision comes from a tiny group called the Patriot Enterprise Project.

Several veterans groups (and other groups) support the bill, several don't. I'm open to being convinced that the bill is a bad idea, and am curious what others think. But my initial reaction is that our government should pursue this bill.

At the least, I commend the sponsors for starting a dialogue and introducing a creative and practical bill--one designed to address many issues, to directly affect the lives of veterans, and to promote entrepreneurship across the nation.

Comments:

The word entrepreneur is too readily bandied about. Yes, we know that Steve Jobs and Bill Gates fit the definition. But not every starter of a business is truly an entrepreneur. (Query: Is a young, freshly minted lawyer who sets up a solo law office an entrepreneur?) So perhaps we need a definition that has a sense of reality to it.

Having started my law practice in 1954, I learned on the job about how a business is started. But it did not take long for me to learn the failure rate of many small businesses. While my role as a legal adviser to a client wishing to start a business was not to make business decisions and evaluations, at least in my early years of practice, for the client. I became aware of business plans, sone oral, some on the back of an envelope. Yes, we hear of the many venture capital success stories, but they are the exception, not the rule. Yes, failure can teach valuable lessons that may lead to success with a second or third try; but that's also the exception and not the rule.

With respect to the GI Bill post WW II, education had an existing track record. There were also the federal Small Business programs that did help many succeed - but many also failed, with Uncle Sam absorbing some of the financial risks. Perhaps a closer look should be taken at the Small Business programs since WW II to determine how well they have done before designing a G.I. Bill for Entrepreneurship. I imagine sharpies out there salivating at how they might benefit from such. I'm thinking of the for-profit "trade" school colleges of recent years enticing so many because of the state of the current economy. Just imagine entrepreneurship consultants open up shop with all the money that might be available with such a G.I. Bill. Maybe I should prepare a business plan for establishing such a consultancy.

Seriously, a lot more serious thought has to be given to such a proposal.
 

Hi Shag,
Good points.
I actually do think as a matter of definition and usage that a freshly minted lawyer starting his own business is an entrepreneur. And so are those who set up small shops they own etc.
But the proposal of a trade school credit is a good idea. I don't think it needs to be to the exclusion of this bill. The argument that some businesses fail is not that persuasive to me; and many people who go to trade school might also fail ... It's a question of risk and reward.
Finally, yes, the implementation question re consultants is interesting, but entrepreneurs often find formal and informal mentors based on relationships and the culture of those who have started businesses. At any rate, there could be protections to ensure veterans aren't ripped off, if that's the implication.
But these are all the points that need to be worked out. The agency implementing the law would have to work them out.
 

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