‘America Sucks at Small Business’
Introduction:
This week, we meet Dan Carmody, who has gained an unusual perspective on what it takes to build a business in the United States. Dan has started and built his own businesses. He’s run community development organizations that have worked to support the growth of other local businesses. And until January, he was CEO of the Eastern Market in Detroit, which is one of the last great public markets in the country and has seen a remarkable number of businesses start, thrive, and even go national. On top of that, he’s also traveled to other countries to see how they support small enterprises. His conclusion? We’re doing it wrong. This may seem jarring given the story we like to tell ourselves about the American Dream, but as Dan explains, there are some things we could learn from other countries.
— Loren Feldman
Guests:
Dan Carmody is the former CEO of Detroit’s Eastern Market.
Producer:
Jess Thoubboron is founder of Blank Word.
Full Episode Transcript:
Loren Feldman:
Welcome Dan, our special guest today. It’s great to have you here. I’ve really been looking forward to this conversation because you’ve had the opportunity to see what it takes to build a business from a whole slew of perspectives. I think the first of those perspectives, if I’m correct, came when you opened a bar not long after leaving school. If I’m right, can you tell us how that came to happen?
Dan Carmody:
Yeah, I graduated from the University of Illinois with a degree in city planning in 1977, and after a couple of years of writing federal grants and doing zoning administration, I didn’t think that there was a long-term future for me in local planning offices. I didn’t find it particularly compelling, and it corresponded with coming into $18,000 when a neighbor lady died and left me half of her estate. She was someone for whom I mowed the grass and shoveled the sidewalks in the wintertime. And among the other things they gave me to do in Rock Island, Illinois, I was sort of made the point person of downtown revitalization, which kind of matched, at that time, the value that they put on downtown, because I was the lowest staff member available. [Laughter]
And when you think about it, downtown development the last 40 years, most cities are very consumed by that topic. But things were humming in 1977 in Rock Island. There was the home of International Harvester. They made all the red tractors at the Farmall plant that employed about, I believe, 10,000 UAW workers at its peak—pretty big for a town of 40,000. And so, downtown was desolate. Real estate values were low, and my brother and I took half of the $18,000 and put down half on a building, and I bought it on contract and set about renovating it.
First, we were going to be real estate developers, but two people backed out, so we decided we’d become bar owners. And it was a great success. We ended up building six bars in about an eight-year period. Five of the six did quite well. The last one didn’t. I think the lesson learned is when you think you got it all figured out, maybe there’s always new lessons that can be learned.
Loren Feldman:
Did you have any experience working in a restaurant or a bar or dealing with food?
Dan Carmody:
I did. I worked at a liquor store that had a bar for six months where I learned everything not to do, including some very shady practices with regard to how they treated customers of color. But that was my experience. I brought on a partner who I’d gone to college with who was experienced in the kitchens of pubs and taverns, and we needed that experience on the food side.
Loren Feldman:
What did you take from it as a lesson? Why did it work to the extent that it did work?
Dan Carmody:
You know, I kind of did enough research as someone who—you know, one of the pivotal moments in my life was being an exchange student in Manchester, England, in my junior year in college. And it’s there where I learned that beer was a much broader category than it was in America in 1977. So we had a number of innovations that resonated with people. I think it was just a clever and creative approach to entertain people. You know, the art of hospitality. I think we were really good at it.
The six bars we built, they’re all in different towns. We always had the largest selection of imported or specialty beers. We also love music, and we didn’t have a jukebox—we actually did. Our first bar had a jukebox, but after two weeks, one customer came in and got pretty drunked up and played the same song 10 times over. So we called the jukebox company the next day and said, “Please remove your jukebox.” And we spun discs, spun vinyl behind a bar, just like the hip joints do these days.
The building was actually on a pedestrian mall, which was all the rage in downtown revitalization in the ‘70s, and the construction of it took three years, and that killed most of the retail that was remaining at that time. And so it was very quiet, and we actually saw a use of it as a special event space and started doing outdoor concerts that proved to be very, very successful. And we were early social media proponents. We, for a couple years, had a very robust Friday happy hour business, and I would get out my Minolta camera that I got as a graduation present from college, and they’d take pictures of people and race to the store and have those slides developed. And the next week, we’d put them in a Kodak carousel projector and show people those images from the last week. And people have come back to see just how beautiful and vivacious they were the previous week.
Loren Feldman:
That’s the social media you’re referring to. An early Instagram.
Dan Carmody:
That’s right. And so, not quite as broad a distribution, but it worked. So, we learned a lot. The six places differed slightly, five of them were in tired rust belt towns along the Mississippi River, three in Iowa, two in Illinois. And then the sixth one was in a college town, Iowa City, Iowa. And we were a little bit older by that point. I think it was the wrong bar at the wrong time. It didn’t quite master the quarter beer night, and we had a very large place. And it was a time when live music in particular was being just killed by disco, and so it just didn’t work.
So that forced a retrenchment. We sold off a couple of bars. We were also guys that, my brother and I were two guys, when we’d get $50,000 in the bank, we’d start thinking about our next bar. We loved building them as much as we did running them.
Loren Feldman:
And so you were stretched thin all the time.
Dan Carmody:
All the time. So, we didn’t know that if you had bad experience with unemployment insurance, and if you crossed a threshold with 50 full-time equivalents in the state of Illinois, at that time, your rate went from 1.8 to 5.4 in one quarter. That was a rude awakening. But we had a bar that was our biggest grossing bar. I could have kept it. We had an inquiry to sell it from a guy who led development for a guy named Norman Brinker, who is the gentleman who started both Chili’s and Pizza Hut. And he had had a heart attack in his mid-30s or 40s and wanted to return to his hometown and kind of slow down a little bit.
And so after thinking about whether I wanted to be his partner or his banker, I decided that, with three small children under the age of five at home, if I wanted to preserve my marriage, it might be a good idea to think about a different line of work. And we sold him the bar on contract, and it ended up very good for him and very good for us.
Loren Feldman:
But he didn’t turn it into the next Chili’s, I guess.
Dan Carmody:
No, but we were doing remarkable business in this town, and he was able to take our remarkable business and double its sales in three years. I didn’t think that was possible, but he’s a great operator, a better operator than we were, actually. Of those six bars, one burned to the ground when the building next door caught fire.
One, the one in Iowa City, Iowa, was mercifully put out. It had been a bar that failed four times. It was a big old laundry that was turned into student housing. So that was like a mercy killing for anybody else trying to make an investment. And then the other four still exist, pretty much as we built them, obviously different owners over time. But I think we built some nice places that people appreciated.
Loren Feldman:
So what did you do after that?
Dan Carmody:
So that IH plant I talked about earlier had closed, leaving Rock Island, Illinois, with about a 40-percent drop in assessed values of its real estate and just devastating the community. And so the local forces had started an economic development nonprofit to help rebuild the town, and it wasn’t very effective. And the larger private sector guys kind of had a business association. They decided to merge their efforts, and they looked for a new executive director. And I thought, given my planning background and given a small business background, that I might be a good fit. And so, really, for the last—let’s see, 17 plus 17 plus two is 36 years—I have run nonprofit community development organizations of one type or another.
Loren Feldman:
Tell me what you did with the one in Rock Island. How did you address that situation after the IH plant closed?
Dan Carmody:
So in Rock Island, I learned a little bit about everything. We got into some industrial development. We got into general commercial development. We had a major expansion when a local foundation gave us money to do housing in older neighborhoods. And all the while, my main focus is really on downtown revitalization. And so, I wrote an award-winning strategic plan, honored by the International Downtown Association, pioneered, really, downtown housing in the Quad Cities. Rock Island is part of a metropolitan area, along with Moline, Illinois, and Bettendorf, Iowa, and Davenport, Iowa. Its total population is about 400,000 to 500,000.
We created an arts and entertainment district. We attracted river boat casino number three in the United States, and we were able to leverage that and had about 10 additional nightclubs and restaurants located in our downtown, building off the base that I had helped establish with our first bar. And we became known as The District. And for a long time, it wasn’t in the Quad Cities, “Where are you going?” It was, “What time are you leaving?” Because everybody was going to Rock Island.
And so it enjoyed a lot of success, developed my own professional reputation. I’ve had a consulting firm working on small Main Street communities since 1996. And then I also became a participant in something called the International Downtown Association and became a board member there, and got to go to England to the first global city center conference, where it was ironic that Americans were mostly the theorists, because we had screwed up our downtowns more than any other country in the world. And so we had to dig deeper to figure out what to do next. Things like business improvement districts, tools of how communities can move their city centers forward, were the result of how bad they got in the ’70s and ’80s.
Loren Feldman:
Were you aware at that time that, in the words you just used, that Americans had screwed up their downtowns more than pretty much anyone else?
Dan Carmody:
Well, pretty much. I had spent time in Manchester. I hadn’t yet quite had the privilege of traveling internationally as much as I did, but I sat at this conference in Coventry, England, and I couldn’t help but understand this. Why is it that we’re leading the conversations when their downtowns are so much better than ours? Because they haven’t sunk quite as low.
And you know, that gets into how our cities are built, our reliance on the automobile for transportation, a whole number of issues. But we built a system that favors large enterprise over small and medium enterprise. And there’s a lot more vitality because there are a lot more successful small and medium businesses in those European communities.
Loren Feldman:
I do want to get to more of that. What did that experience teach you about helping other owners build their businesses? I mean, it’s one thing to do it yourself. It’s another thing to coach or cajole or do whatever it takes to encourage that kind of economic development. I’m curious what you took from that experience in Rock Island.
Dan Carmody:
First of all, I think having done it myself and having a bittersweet ending—somewhat successful but a little bit of a, “What if?,” at the end—gave me great empathy for the issues that small businesses face. I must say, one of my most enjoyable moments in looking back, almost a bit of ecstasy, is there is a business in downtown Rock Island called Circa 21 Dinner Theater that predated the opening of our bar by about five years. It opened in the early 70s. It was a former vaudeville house turned into a porn theater, then resurrected as a dinner theater. And when the IH plant closed, they lost 20 percent of their business overnight.
Anyway, what I want to say is, the fact that they’re still open today—the original owner is still alive. He’s fairly old, but his son is doing a really good job doing the day-to-day stuff—they should be in a small business Hall of Fame to keep a dinner theater going in a town like Rock Island, Illinois, just because of its size. One of my first things I had to do was help that dinner theater refinance itself. They’d done major renovations to the building, paid down like a $400,000 mortgage to $125,000, and the board chair happened to be the president of the bank that upheld the mortgage.
And so I went to see him early on, and I said, “Gee, it’d really be great to be able to refinance Circuit 21. It’s an important part of downtown.” And he looked at me dead eye and said, “That’s not going to happen, at least not with this bank. It’s not going to happen.” And I said, “Well, what’s the issue?” And this guy stammered a little bit, and he looked at me and said, “Do you know what they do with the season ticket sales?” And I thought for a minute, and from my bar days, I remembered that when you’re at a loss for words, sometimes it’s just best to mirror the the manner of the person that’s asking the question. So I stammered back at him. I said, “No, what?!” And he said, “He pays bills with it!” And then I realized the divide here, and I went straight up and said, “Do you mean to tell me he doesn’t put it in escrow?!” And he said, “No!”
So I left that meeting knowing, sure, when I took the job, I thought more of my time would be explaining to local government officials what it took to succeed as a small business. But I realized that large corporate folk oftentimes have no idea what it takes to survive as small businesses too. And so, we got to refinance with a different bank, and he’s still there to this day. And all those bankers that he worked with in 1980 were all eventually put out of business by the great merger wave of the ’80s and ’90s. Who would have thought that he’d still be there and they wouldn’t in 1986 or ’88?
Loren Feldman:
Tell us about the Eastern Market. What makes it special?
Dan Carmody:
Well, the Eastern Market is a bit of an outlier in America. It goes back to 1891 and even in its worst days—which I think we’re in the ’90s, I think it actually started to come back a little bit—it was still, on a Saturday morning, one of the coolest places to be in America. It’s a hybrid. It has wholesale function for Michigan farmers. It’s a retail public market that, until we got there, it was all about plants and flowers and fruits and vegetables. And it is truly one of the most wonderful urban neighborhoods in the city. The Saturday market, I call it, is one of the highest expressions of joyful urban chaos I’ve ever seen in this country. And it’s a food district as well as a public market.
The market itself has five major buildings that comprise about 155,000 square feet. This is all pop-up markets. When you think about public markets in the United States, a lot of people might think of Pike Place, Reading Terminal Market, Cleveland’s West Side Market, which are some great market halls that have permanent vendors. Our markets are all transient, and we’ve always had a wholesale market that operates midnight to 5 a.m. during the Michigan growing season.
Back in the 1890s, we were monopolists in the wholesale distribution of fruits and vegetables, but by the 1950s, after every national grocer and most regional grocers had opened up their own regional distribution centers, the wholesale market was a fraction of its former self. But we still had 35-40 farmers who would come midnight to 5 a.m., sell their product without benefit of modern innovations like docks and refrigeration. And then the Saturday market was a year-round market for Detroit residents and those from the area that wanted the freshest available fruits and vegetables.
And so that’s where we started from in 2007. There’d been some heroic work before I got there. The city of Detroit, which still owns the market, administered and ran the market up until 2007. And it’s no knock on the Department of Recreation. It was the agency overseeing the market. It’s just that they had 150 parks, six golf courses, and two marinas, in addition to a public market and a budget that was dwindling quickly. And so the market just wasn’t getting the attention it needed. For 10 years, there were about five different studies looking at the benefit of putting it under the management of a dedicated nonprofit. The city had previously done that with its zoo and with its Detroit Institute of Art, one of America’s most serious art museums, and so it just took a long time.
My predecessor didn’t want to run the thing. She was really interested in leading the effort to privatize and then finding someone who was more qualified to run a public market than she was. She did exemplary work. So, fast forward, over my 17-year stewardship, we repositioned all of the major market buildings, except for one. So something like $20 million went into shed renovations. Many of these sheds hadn’t had capital improvements in decades of any significance. We expanded the market to include seasonal markets on Tuesday and Sunday. We broadened the market’s products: not just fruits and vegetables, plants, and flowers, but prepared food and value-added food products. We built a a very intense ecosystem to support small makers of food. The market is surrounded by about 125 mostly small businesses. There are a couple that have grown significantly. But those are mostly food businesses, small distributors, small value-added food makers, and small processors.
Loren Feldman:
When you say “surrounded by,” you’re saying that they’re not officially on the land of the Eastern Market, but they’re there because they’re part of the ecosystem?
Dan Carmody:
Yeah, they’re in the district or the neighborhood. They’re independent of the city’s public market.
Loren Feldman:
Got it.
Dan Carmody:
And so that’s a legacy that every older American city had, but nearly all of those food districts have been decimated by the success of urban real estate. As those areas have gentrified, food couldn’t afford to stay. And so there’s a huge advantage to small businesses being clustered together: the peer mentoring that happens, the borrowing of equipment when something breaks down. The list of benefits from clustering are significant. And so when those local food districts around the country, starting with probably the Meatpacking District in New York, those businesses didn’t relocate in one place, they scattered to the wind, and they lost that benefit of clustering.
In my time in Detroit, when I started, Chicago’s Fulton Market area and Washington, D.C.’s Union Market neighborhood were very much like Eastern Market. But today, those two areas are very unlike Eastern Market. Union Market still has some two- and three-story food warehouse processing businesses, but they’re rapidly being replaced by 10-story, mixed-use, mostly residential buildings. And the West Loop, where Fulton Market is in Chicago, has become the tech hub at the loop in the city of Chicago. It’s where McDonald’s moved its international headquarters to be able to attract more youthful talent than it could at a suburban Chicago site. It’s the place where Google and Microsoft and others have their regional tech centers.
And so, Detroit’s Eastern Market, we’re still here, largely because of failure in commercial real estate. From about the 1960s on to about 2015 is when the tide shifted. And so one of the things I’m proud of is that Detroit has a lot of vacant land, so we don’t need, necessarily—we can afford to keep one area for food production and processing, because we have enough vacant space for all those tech businesses or auto-related.
There’s about 25 acres of vacant land near Eastern Market that we worked very closely with the city to get that rezoned, creating a special district called MKT, short for Market District zoning, and then set about trying to acquire land, which is a long-term project. We bought 108 parcels. The city owns hundreds of parcels, and there’s still about 60 parcels to go to have site control, but what we want to do is make sure we have room to keep about a million square feet of new food business over time.
Some of the 85 businesses have gotten quite large. We have one company, Wolverine Packing Company, that employs about 700 people. They would have moved out of the city, but we found them the last available site towards this expansion area, which is east and northeast of the historic market core and neighborhood. And they were able to build a second fresh burger processing line. They have the capability, each week, to produce up to 16 million fresh hamburger patties for national distribution to people like Five Guys and Outback Steakhouse.
Another company, EW Grobbel—they’ve been making corned beef in Detroit, by the way, since the 1870s—they have a contract to supply all of Sam’s Club and Walmart’s corned beef for the St Patrick’s Day season, and actually put a second shift on that works from the first of September to the first of March, and put into cold storage 350, last year, semi loads of corned beef that are distributed between basically the 15th of February and the first of March for the St Patrick’s Day surge of corned beef consumption in the United States.
That demonstrated something that’s really important to Detroit. When it comes to food distribution, to a national footprint, Chicago is usually the default. People default to Chicago because it’s perceived as being in the center of the country. But Walmart did a logistics analysis for global and found that global is just fine, because when you adjust for population, Detroit can get to the whole country about as effectively as Chicago.
So again, it also shows that when you have a specialty product, you can produce in a 40,000- or 60,000-square-foot building enough product to supply a very large market. And so in an urban setting, you’re not going to find meat-packing plants like you used to. You’re not going to find the large facilities that need 500,000 square feet. It just doesn’t fit in, at least in the core of a city. And so our sweet spot is trying to find those companies that have a specialty product for sale to a regional audience, or those that have a particular niche product that could be available to a national.
The historic district has a number of old buildings, and with food safety modernization standards, those staying as food is not likely. So we needed to figure out a way to incubate and accelerate small businesses in cost-controlled space that we develop and own as a public market authority, while creating an opportunity for them to stay in the neighborhood and when they get to significant employment. The City of Detroit was keen to learn that the food sector has the highest percentage of entry-level, living wage jobs. It doesn’t require a high school diploma. So if you’ve got a workforce with limited skills, a healthy food sector is a great on-ramp where people can get to work and develop as they go.
Loren Feldman:
What kind of relationship did you have with those companies? Were you kind of sitting back and waiting to see what would bloom? Or were you actively looking for companies to service particular needs and then nurturing them? How did you approach that?
Dan Carmody:
Twofold: One is with the bigger established companies, because we have such a shortage of sites, we did no outward recruiting. We actually have missed one opportunity to expand one of our companies because we couldn’t find a suitable site in the time that they needed. So, with the burger maker, I worked closely with them as they expressed this desire to double. They have a 40,000-square-foot production facility. They needed to add a second one. I have a very deep relationship with them, and they came to me, and together we went to the city. And we worked with the city to get a site for them.
But with regard to small businesses, what we began to see as we operated the public markets is, public markets are really a wonderful institution for incubating small business. And I would say that one of the best things about Eastern Market, going back to 1891, is that wave after wave of immigrants and refugees have used that market as a way to gain entry into the American economic system. It’s a low bar to entry—a $50, $100 daily rental fee where you can sell your product. And our Saturday market attracts upwards of 40,000 people at our busiest times. So people are getting exposure. They’re getting real-time feedback from customers about whether they like their product or not, so they can tweak their recipe. They’re also learning from people on either side of them. The peer mentoring that I talked about with clustering businesses is even more acute in a public market.
But we also learned early on that providing the selling space wasn’t enough. Michigan has a pretty generous cottage food law where people could make food in their home kitchens. But realistically, the limits to that, in terms of the dollar sales specified in that legislation, those people really shouldn’t be selling in our market. Because to make the amount of product you should make to pay our fees, you would be beyond the limits imposed by the state. So a neighborhood farmers market would be a place for those people to start.
And so we began looking for ways to help address the issue of low-cost production space. In 2015, we opened our first shared-use kitchen. People can rent that kitchen for between $25 and $35 an hour. They don’t have to build their own kitchen. That kitchen has a steady flow of 18 to 20 businesses that work out of it, and we saw people grow and outgrow that kitchen and go off and build their own, buy their own space or expand. We’ve had a couple of wonderful success stories. A lady of Eastern European descent—Michigan has a significant beet production, mostly sugar beets, but some beets you can eat. And she does pickled beets, and does about $8 million a year in sales, and half of that is in Eastern European countries.
And so we began to try to expand our outreach, trying to provide consulting for those thinking about a food idea, whether they should get into it. So we wasted a lot of staff time on a one-on-one basis, as people learned that, “Whoa, that’s way more work than I thought. Maybe I shouldn’t do this.” We’ve tried to build an ecosystem that can kind of weed out people and to give them a flavor early on about what kind of commitment is required to succeed in a food business.
And so the programming, as well as the shared-use, low-cost kitchen space is really important. But we also didn’t stop there. We actually have built, so far, two, and have plans to build two more, what we would call accelerators. And that’s where someone’s off and going. They’ve got $100,000 or $200,000 a year in sales. How do you grow it to a million dollars? And as the neighborhood was being gentrified, the small, chunky buildings that people used to be able to buy for $75,000, where someone in that position might have been able to swing that, they’re now $750,000 or $800,000.
And so we started building cost-controlled space for acceleration of businesses and building suites 3,000- to 5,000-square-feet in size. And the market rate for rental rates in the neighborhood is somewhere between $18 to $20 right now. We start people out at $8, and they go up $1 a year. So we get people up to about $15 so they’re hardened a little bit for the real world when they’re done in the accelerator space, but we’ve kept five of those suites very busy, and we have funding to build two additional accelerators—one for farmers who want to mill organically grown grain crops in Michigan: wheat, rye, barley, and spelt; and one dedicated to meat entrepreneurs who can then share the cost of having on-site USDA inspection with having four or five under one roof rather than just one.
Loren Feldman:
How often did you have your heart broken by a business that you thought was going to make it and didn’t?
Dan Carmody:
Oh, I’d say two to three times a year on average.
Loren Feldman:
And were there common themes in those?
Dan Carmody:
Sometimes. We had a wonderful pie maker that moved into our accelerator, and she did really well. She was kind of not unlike my situation. She had two kids, and then she had three kids, and then a large corporate entity offered her a job as a small business development person in one of their neighborhoods. And it was a six-figure salary with less hours. So her business went from growing to—it didn’t go out of business, but she just does it mostly for holidays. Now, we had another specialty sausage company that made some of the best sausages, specialty niche sausages. It just wasn’t enough to support the two owners, and so they sold that sausage company to a larger food company and took jobs with that larger food company.
So those are sometimes defeats, but they’re conceivably victories for the people and the lives they’re leading. We’ve had, obviously, some businesses just go out with a bit of disaster, but mostly it’s aging and not having a successor is a big issue in the market. We have probably lost half a dozen businesses to people who just decided to take advantage of the real estate boom and sell their building. They were able to have a retirement opportunity that they might not have had otherwise. I think the word is bittersweet more than bitter, about most of those businesses that we’ve lost over the years. But the total number of businesses has increased gradually over the realm of the nonprofit paying more attention to the neighborhood. And that’s, I think, as good as you can get, because small businesses are going to open, and some of them aren’t going to make it.
Loren Feldman:
I had the good fortune to be with a group that you gave a tour of the Eastern Market to, I don’t know, eight or 10 years ago. You might remember the date because you had just gotten back from taking a sabbatical in Greece. And that’s one of the other perspectives that I wanted to talk about, which is, you have an unusual view of small businesses around the world.
Correct me, if I’ve got this wrong, but if I recall correctly, you told us on that tour that America sucks at small business, based on what you’ve seen elsewhere.
Dan Carmody:
I think that’s generally still true.
Loren Feldman:
Tell me what you’re referring to.
Dan Carmody:
You know, we talk a lot about how small business is the job engine, but the numbers just don’t stack up. So the first data point I tripped over in Greece was visiting their public market in the heart of Athens. And the Athens metropolitan area population is about four and a half million people, which is almost identical to the metropolitan population of Detroit. Now, our farmers market would probably constitute kind of a large produce house by Greek standards, but if you took all the produce houses in Detroit, you might get to 30. That’s 300 versus 30, in terms of distributing fruits and vegetables to grocery stores and other commercial establishments. So, why is that?
Well, first of all, I think, antitrust issues. There are two companies, US Foods and Sodexo, that, together, have 80-percent market share of what’s called broadline distribution: distribution to bars, restaurants, hotels, motels, prisons, schools. I am proud to say that the antitrust regulators declined to permit the merger of US Foods and Sodexo when they proposed that a few years ago. So having two companies with 80-percent market share is slightly better than having one company with 80 percent.
So that was my first data point. I saw another set of data points around the number of small and medium enterprises per thousand people. And in the Mediterranean countries, particularly Spain, Italy, and Greece, they’re roughly in the 60 to 70 range. We’re 19th in the world at just under 20 per thousand.
And then I tried to think about: What is it that drives that when we still have what I would call this story we tell ourselves that small businesses are really important to the American dream? And I think I’ve identified four factors. I think this antitrust is something that we’ve gotten away from. There’s a fascinating story in the Atlantic called “The Great Grocery Squeeze” by Stacy Mitchell. Under Reagan, the U.S. federal government didn’t eliminate it, it just failed to enforce something called the Robinson-Patman Act, which was adopted in the ’30s in response to A&P groceries getting a price differential based simply on a larger order. And between 1952 and 1964, mostly Republican years, 81 formal complaints were filed that kept big grocers from getting favorable deals over smaller grocers.
Loren Feldman:
This became an issue in the fall, if I recall, when the Biden administration was still in place. This is about whether big stores can get a discount for buying in bulk, correct?
Dan Carmody:
Right, correct. And so the law was still on the books, so I didn’t see that story. Perhaps the Biden administration was trying to enforce that, something that hadn’t been done since the 1980s. But in 1980, half of Americans bought their groceries at independent groceries. There were still a lot of small groceries being successful in urban neighborhoods and rural places—places today we call food deserts—because large grocers don’t have to set up shop in those places. They can require that the customers come to them. So anyway, that’s just one example of, I think, the antitrust issues. I think, compared to Greece, the availability of venture capital for medium-sized companies to become large companies, and for large companies to be giant companies, and for giant companies to be behemoths, I think that’s generally more available in the United States.
Loren Feldman:
And you’re saying that as a negative, in terms of business development?
Dan Carmody:
No, not negative, but it just allows scaling that other—
Loren Feldman:
That eliminates small businesses.
Dan Carmody:
Yeah, and I think that plays into what we value as a country, and that’s price and convenience over relationships, or perhaps sometimes even local flavor. So, you can in Greece, if there’s 300 food distributors, it’s because every fifth person has a restaurant, and they would get killed by their uncle or nephew or cousin who had a food distribution business if they made book with a large national distributor.
Americans buy in bulk at the household level, compared to places around the world where people buy for the next day. And so when you can create a bulk item that’s way more inexpensive, you’re going to perhaps favor that over a loaf of bread, versus a case of bread. I also think that one of the telling signs, to me, as I experience market associations in North America and Europe and the rest of the world, is that there’s just a lot more healthy public markets in Europe and Asia and South America than there are in the United States and Canada.
And what markets do, as we talked a little bit earlier, it’s a low barrier to entry. People can get in the food economy with a public market, but they can’t if there isn’t one. They get that immediate benefit of getting customer feedback. They get that immediate support from the mentors around them. And I just think that that has a side effect of reducing the number of viable small businesses. But also, once people get big, then they try to write the rules of the road through Congress to help them ensure their continued success—sometimes at the expense of new small businesses, making the barrier to entry more difficult.
Loren Feldman:
So I think you said you retired from the market on January 1.
Dan Carmody:
Yes, sir.
Loren Feldman:
You took some time to relax and recharge, perhaps. What are you planning to do next?
Dan Carmody:
Well, that hasn’t emerged yet. I do like the idea—there’s this essay I read called “The Four Phases of Retirement,” and the first phase is the vacation phase. I can’t remember what the other three phases are, but in this sense—and this is the most wisdom I’ve had about something in a long time—to me, the term vacation is to vacate your mind. And so all of those everyday things I had to worry about as administrator of Eastern Market are gone, and I want to create the space for something to fill my brain. I’m not sure what it is yet, but first you have to create the space.
So I’ve been doing, I think, a pretty good job of that. I took a vacation from social media, from doom-scrolling in the middle of the night. I’m doing more reading of bigger things and doing things like fasting and trying to really pay attention to the spiritual side as I fill the void that I’ve had. I will be spending a month in Europe. I will be visiting 14 markets. I will be continuing my consulting work to help other markets around the globe, mostly in the United States.
Loren Feldman:
Dan, I knew I would get some fresh perspectives on things that I haven’t heard from others. Thank you so much for taking the time.
Dan Carmody:
I hope it was enjoyable. I had a good time.
Loren Feldman:
Absolutely, I really appreciate it. My thanks to Dan Carmody. Dan, good luck with your vacation, your vacating your mind and otherwise, and I’d love to keep in touch and hear what you do end up doing.
Dan Carmody:
Yeah, let’s have a follow-up conversation in the fall.
Loren Feldman:
That sounds great. Thank you very much.
