The 'New American Economy'

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Attachment A: Some New Economy Sources

[1] Cote, Marcel. 'New yardsticks for a new economy', CA Magazine. 130(5): 100. 1997 Jun/Jul.

A close look at business publication rankings of North America's biggest companies will reveal clear evidence that corporations with a strong foundation in the new economy are replacing and pushing downward those firms that have stuck stubbornly to their industrial roots. Industrial enterprises that fail to follow the examples set by successful firms are slipping in the business rankings. Technology plays a huge role in firing the engine of the new economy, and will continue to do so. The new economy presents new challenges for chartered accountants.

Spring is the season for sun, flowers, warm weather and, of course, business publication rankings of the biggest companies around. Look closely at these lists and you'll see clear evidence that corporations with a strong foundation in the new economy are replacing and pushing downward those firms that have stuck stubbornly to their industrial roots.

American Can is an excellent example. In the early 1980s, the company was a traditional manufacturing concern specializing in containers. Though the company enjoyed $3 billion in sales, the prospects for future growth were modest, owing to the product and the market. Then Gerald Tsai, a former Wall Street star, took the helm. American Can began to acquire financial institutions and to divest itself of its manufacturing activities. In the late 1980s, it changed its name to Primerica and in 1993 merged with what is now Travelers Group, headed by Sandy Weill.

Today, with $21.3 billion (US) in revenue, Travelers is the 40th-largest company in the US by revenue and arguably one of that country's leading financial institutions. One dollar of American Can shares in 1984 is now worth more than $14 in Travelers Group shares. Quite a profitable journey.

Success stories like Travelers' are not uncommon. Seagram, a turn-of-the-century distillery business, has invested heavily in Hollywood productions. The pattern is being repeated again by two giants of the industrial age, General Electric and Westinghouse. Westinghouse has divested itself of most of its electrical equipment manufacturing business to focus on television. General Electric's main business today is not manufacturing, but financing. Indeed, General Electric Credit generates more than half the company's profits. (When Eaton's filed for bankruptcy protection in March, GE stepped in to take over the account from Canadian bankers.) In Canada, migrations from traditional businesses to the new economy are a little harder to find. Montreal-based Imasco has diversified from cigarette manufacturing to pharmacies and financial services.

Industrial enterprises that fail to follow the examples set by these firms are slipping in the business rankings. The exhibit lists the top North American corporations by market capitalization. Intel and Microsoft are two rising firms in the new economy that should, within a few years, rank first and second on the list. Intel, founded in the early 60s, manufactures the semiconductor chips that lie at the heart of any desktop computing system. Microsoft, barely 20 years old, sells coded information. General Motors and Ford, which specialize in moving people and things instead of information, have tumbled dramatically.

Technology plays a huge role in firing the engine of the new economy, and will continue to do so. The ability to handle and transfer information is improving at a dizzying speed. In the past 25 years, computer processing speeds have doubled every 18 months. Information processing has become inexpensive as a result and is in the hands of workers everywhere. Even so, we're still at the beginning. In the next 10 years, processing capacity should increase by a factor of 100.

Improvements in information transfer are just as impressive. According to the "law of the telecosm" set out by George Gilder in 1993, information transfer capabilities triple every year. A single optical fibre, as small as a hair, will eventually be able to carry 25 thousand billion bits per second (25 x 10'5), or 1 billion pages of this magazine! The Internet is still in its infancy. Ten years from now, the network will be as different as today's computers are from those of the 80s.

Enterprises that know how to harness information whether they be financial institutions, fibre optic manufacturers or publishers - will be tomorrow's leaders.

The new economy, of course, presents new challenges for the CA profession. In its April issue, CAmagazine reported on the difficulties of measuring knowledge-based assets. In 20 years, knowledge will be the greatest wealth of most enterprises. Measuring that wealth will be an essential yardstick of their success. If the profession is to remain relevant, it must find a credible way of doing this.

[2] Anon., 'Greenspan's Bet on the New Economy', Business Week. (3535): 84. 1997 Jul 14.

Federal Reserve Chairman Alan Greenspan has dealt a severe blow to the intellectual underpinnings of the Phillips Curve, which essentially sees an ironclad trade-off between economic growth and inflation. In challenging conventional wisdom, Greenspan is betting that America has more leeway to grow faster and generate more jobs, profits, and wealth without igniting inflation. Greenspan believes that a radical change in the economy increases the speed limit beyond which prices accelerate. Most of the Federal Open Market Committee, many economists, and almost all bond-market professionals question Greenspan's position.

[3] Anon., 'What lies ahead', Training & Development. 50(1): 75-79. 1996 Jan.

Thirteen opinion leaders predict what will help or hinder workers' performance in the future. According to Warren Bennis of the University of South Carolina, the major problem facing the training profession now that will continue for the foreseeable future is the disconnect between the top leaders and the other 99% of the population. Anthony P. Carnevale of the Committee for Economic Development believes that the way forward in the new economy requires greater investments in human capital and social capital. Author Riane Eisler believes that as automation is taking over more and more mental and physical tasks, the role of education will be greater than ever. Chellis Glendinning, author and psychologist, foresees increased alienation for the American worker. Ann M. Morrison of the New Leaders Institute feels that workers at many levels will increasingly rely on the Internet and the World Wide Web for information.

What will future workers face as they try to do their jobs and deal with new demands on their time and skills? How will they find the information they need? What will their frustrations and challenges be? How will they deal with the growing complexity of work? What will they need to learn and how will the they learn it? What roles will technology play? What else is around the bend? Some top thinkers in a wide range of fields offer their predictions.


THE MAJOR problem facing us now that will continue for the foreseeable future is the "disconnect" between the top leaders (experts, professionals, and leaders--about 1 percent) and the other 39 percent of the population. This is what drives people wild with frustration: a feeling of being exploited and played upon like a pack of fools.

This disconnect is what was behind the 1992 U.S. presidential election as well. This parlous state of affairs will continue, alas, throughout the rest of this century. And it is not confined only to the United States, but is happening or will happen to the rest of the industrialized democracies.

Bennis, a faculty member at the University of South Carolina, is the author of On Becoming a Leader and the coauthor, with Joan Goldsmith, of Learning To Lead.


THE AMERICAN economic future is brightening. After a long competitive struggle, American businesses are back on the top. A 1995 World Economic Forum report that compares economic data from 39 countries and surveys almost 4,000 CEOs ranks American business as the most competitive in the world for the second year in a row.

Yet American workers are becoming increasingly anxious, as downsizing continues even in the best of times, and in the most profitable companies a consistent 600,000 layoffs take place per year.

Employees know that the old implicit bargain in which workers exchanged loyalty for job security is on the wane. And successful careers are now defined by the ability to sustain a career by sustaining and enhancing skills in a particular occupation, rather than by staying with a particular employer. Those workers who stay in their occupation now earn 25 percent more than those who stay with their employer. Leaving an occupation reduces earnings 25 percent more than losing a job with a particular employer.

A growing share of American workers, currently 19.8 percent of the workforce, or more than 24 million workers, have arrangements other than the traditional ongoing relationship with a particular employer. Moreover, only 14 percent of these "continent" employees would prefer an ongoing employment relationship with a particular employer.

The decline in corporate paternalism and the growing diversity of individualized careers create a disconnect between the emerging economy and the traditional institutions that prepare us for work, sustain us during our working lives, and provide for retirement. Our health care, pension, and training systems need to be more accessible to nontraditional workers and more portable for us all.

The new economy also brings a new and bittersweet structure of job opportunities. We are losing high-school-educated, highly paid blue-collar jobs, but we are creating the more highly skilled occupations in both manufacturing and services. The irony is that even the more highly skilled and highly paid jobs in services--where most new jobs are coming from--don't pay as much as the blue-collar jobs we are losing.

Men, especially high-school-educated blue-collar men, are not doing as well as they once did. The proportion of men whose earnings are increasing has fallen from three-quarters to two-thirds. And the proportion of those with strong job security has fallen from two-thirds to half. Men are losing their traditional place in the economy, and with it, their place in the family and community--in some cases with disastrous consequences.

Women are doing better, with the growth of service occupations and the growth in managerial, technical, and professional openings in manufacturing. But women are doing better mostly by working harder. More than 80 percent of female increases in earnings and job security come from a doubling in the number of hours worked among women.

Those who do best in the new economy are those with education beyond high school, combined with occupational or professional education. These same people have greater access to training on the job and technology, which increases their earning power. Those who get employer training earn 30 percent more than those who don't. Those who combine post-secondary education with occupational majors or who go on to graduate specialization in managerial, professional, or technical occupations do best.

For instance, even the recent high-school graduate who ends up with a managerial, professional, or technical job will do better than a liberal-arts college graduate who doesn't. Those who have solid academic and occupational preparation have better access to training on the job and technology at work, which further increase their earnings advantage by 30 percent and 25 percent, respectively.

The way forward in the new economy requires greater investments in our human capital and social capital--an acknowledged set of mutual commitments to share the risks and rewards from change, and the promotion of equal opportunity in the change process.

Carnevale is vice-president and director of human resources studies at the Committee for Economic Development and the author of several books, including The American Mosaic and America and the New Economy.


Now, AS automation is taking over more and more rote physical and mental tasks, the role of education--of training and retraining--will be greater than ever before.

Computer literacy and the ability to utilize other new technologies will be indispensable for an increasing number of jobs. But not only will training be needed to equip workers to utilize new technologies; education for new ways of functioning in both the workplace and society at large will also be indispensable.

Because of the information overload brought by computerized information-delivery systems, learning pattern-recognition skills will be extremely important not only in worker training and retraining, but in education in general. Indeed, one of the challenges for education will be to help people develop new ways of evaluating information, rather than, as in the old-style education, merely memorizing discrete bits of "knowledge."

Developing ways of dealing with the depersonalization created by automation will also be an important challenge for education. In fact, this will be one of our major challenges in an age when television, automated receptionists, interactive computers, and other technologies increasingly take the place of face-to-face and even voice-to-voice human contacts.

How are we to build mutually beneficial and empathic (or partnership) human relations in our age of the widening gap between haves and have-nots? Similarly, how are we to help those who are disadvantaged, be it physically or economically, learn technological skills so that we do not further widen this gap? In short, how are we to reshape education for the future to balance the teaching of technological skills with the teaching of humanistic values, so that we can moue to a society of democratic partnership rather than technocratic domination?

Whether we find answers to these questions will largely depend on whether education focuses on the development of a unique human capacity; our enormous capacity for both personal and social creativity--for finding solutions not only for our day-to-day personal and work challenges, but for the great systemic challenges that face our world.

Eisler is author of The Chalice and the Blade: Our History, Our Future, and Sacred Pleasure: Sex, Myth, and the Politics of the Body.


I LIVE IN A VILLAGE in northern New Mexico where maybe half the villagers have telephones and I reckon there is one computer in town. The people here work, if they work at all, as chili farmers, artisans, high-school teachers, janitors, McDonald's cooks, and burglars to support heroin addictions.

From the stark perspective of this desert community--and from my awareness of life and work in other "undeveloped" communities both in this country and elsewhere--I sense an ever-wrenching gap between the employed workforce within industrial and post-industrial society--and the folks who reside outside it.

How does this predicament affect American corporate workers? It provides the context for their lives, the spiritual fluid, if you will, pouring over and through every soul in the contemporary world. And an explosively volatile context it is.

Today's world is fast dividing between those who are coming to reside exclusively within corporate-technological reality and to rely completely on technologies to work, eat, communicate, and think--and those who still hold memory of humanity living sustainably on the earth and yet, by the unrelenting encroachment of the technological world, are catapulted into poverty and disease.

For the American worker, I foresee--amid the usual earnest enthusiasm, inventiveness, and disorientation--increased alienation.

Glendinning, a psychologist, is the author of My Name Is Chellis and I'm in Recovery From Western Civilization and the Pulitizer Prize-nominated When Technology Wounds: The Human Consequences of Progress.


THERE IS AN inexorable formula driving the future of work. It is 1/2 X 2 X 3, or the pressure on organizations to use half as many people, paid twice as well, to produce three times as much.

Those who want to stay in the first half will soon realize that if they don't stay ahead of the game they will quickly join the other half, the ones outside the organization. These outsiders, in their turn, will realize that a sellable skill is the first essential in attracting clients or customers when nice, secure, and undemanding jobs are no longer available.

The result will be a huge expansion in individualized learning, as both sets of people begin to understand that their careers and their futures are now totally in their own hands and can no longer be left to the personnel and training functions of organizations. By a happy coincidence, this pressure on individuals to manage their own learning comes at a time when the technology offers them every facility to do just that, with information, tutoring, and networks of kindred spirits on call wherever one happens to be.

The good news will be an explosion of personal learning. The bad news may be that this explosion will be concentrated in a minority, that it will lead to an increasingly self-centered society, and that we shall see a world where the gap between the learners and the unlearned grows even bigger. That must not be allowed to happen, for who wants to be rich in a desert?

Handy is the author of several books, including The Age of Unreason.


THE AMOUNT AND complexity of information-needed-to-perform will continue to increase as we accelerate into the Information Age. This will precipitate the need for workers to access job-relevant information in a more timely manner.

Amount, complexity, and timeliness of he information will turn our attention to cost-effective ways to deliver information at the workplace in the form of sophisticated job aids, electronic performance-support systems, and other mechanisms that are NOT training, in the conventional sense of the word.

In order to achieve the above, our attention will be focused on analytical processes that can derive the needed information out of study of the desired job performance--"performance-based" information.

Training will not focus on learning, in the sense that information is stored in the memory of humans, but will emphasize how to access and use information when it is needed.

Harless heads the Harless Performance Guild.


THE CURRENT metaphor for working in the office is the filing cabinet and desktop. The desktop, however, is over.

In the future the metaphor for work organizations will not come from work, but from games. This is not to say that work will be fun and frivolous, but that the metaphor that will be imported into the workplace of the future will be invented and polished by "gamers." For instance, gamers are figuring out how to have a game in which 25 people have equal access and still are open to a 26th player who drops by. That's a formula for a workplace of the future that is not even in the vocabulary of the desktop.

The moral: Follow the fun.

Kelly is executive editor of Wired magazine.


CERTAINLY WORKERS at many levels will increasingly rely on the Internet and the Web for information. Downloading data bases into selected programs, for example, will help many workers customize analyses for use in their own projects and ongoing work. Interactive learning will also be increasingly possible with electronic advancements.

Existing sources of information, however, will still be in demand for decades to come--books and magazines, video, classroom instruction, and so forth--because people are familiar with them and reluctant to give them up.

Simulations will become much more prevalent as a learning tool. These skill-oriented learning sources complement the knowledge-based sources and tools that dominate the electronic arena. Workers will continue to need skills to be good team members or coaches, to help resolve conflicts, to build trust and collaboration, and so forth, if they are to be effective workers. Simulations and other learning tools geared to small teams of workers will proliferate, and they will be flexible to accommodate workers who are at the same site or 10 time zones away from their colleagues.

Technology will expand the range of learning options for workers, but personal contact will continue to be a key part of workers' learning and information sharing. Many workers will still demand on-site instructors/tutors and classmates for at least some learning, because they need human contact. Organizations that try to rely too heavily on workers learning in isolation using computers are likely to confront justified resistance.

Technology doesn't replace personal contact. Technology can facilitate the contact workers need in order to feel like part of an organization and its mission and to perform most effectively.

Morrison is president of the New Leaders Institute and the author of Breaking the Glass Ceiling and The New Leaders.


THE INTERNET will have 1 billion users [by the year 2000. Digital illiteracy will be as common as smallpox by the year 2020.

Negroponte is director of the Media Lab at the Massachusetts Institute of Technology.


TECHNOLOGY has made new demands on both employers and employees. Workers, willing to upgrade their skills continually, can prosper in technologically advanced workplaces. Employers who realize that most elements of business can be replicated--machines, processes, raw materials--and, therefore, are investing in a skilled, flexible workforce able to take advantage of new technology, are enjoying an enduring competitive advantage. Those businesses and workers who do not recognize these new demands will be left behind.

Reich is the U.S. Secretary of Labor.


MOST PEOPLE resist change. And quite sensible people resist change when it comes in the form of computer software. The reason for this is simple enough. Most computer software is obtuse, confusing, and highly fragile. When it comes to training software, the situation is worse. Most training software is also wrong-headed. Providing software that puts a book on a computer is not an advance in learning technology. Forcing trainees to take multiple-choice tests on a computer will not make the hearts of those trainees go pitter-patter.

Fortunately all this will change. Are airflight simulators a better way to learn to fly than practicing on the real thing? You bet they are. When you crash, no one dies. The workplace needs airflight simulator equivalents for every job so that people can learn their jobs by practicing them. Further, they need access to experts any time they want them. All this is coming in the next generation of training software. It will be fun. Employees will love it (after they get over their initial worries about it being another awful computer program).

Schank is director of the Institute for the Learning Sciences, Northwestern University.


I BELIEVE THAT THE world is now increasingly coming to recognize complexity and the inability to get things done with simple, linear causal models. The age of taking sociotechnical systems seriously is coming, and those of us who can deal with both the human and the technical factor in an integrated way will be more relevant.

But we do not yet have enough good models to help OD practitioners do a good job of analyzing and intervening in complex systems, especially since the analysis will typically be an intervention in its own right. We will need better theories of intervention that acknowledge the integration of diagnosis with intervention, and that help practitioners become perpetual diagnosticians and flexible interveners.

Schein is an emeritus professor of management with MIT's Sloan School of Management.


THE WORKERS OF tomorrow, like those of today, will continue to expect timely, credible information from their organisations. At FedEx we responded to that need several years ago with a live satellite television network, FXTV, that broadcasts daily to our employees. Today that network is busier than ever, as our managers respond to new communication challenges from our people.

We're also using the Internet and other electronic networks to provide our employees and our customers with timely information and business services like package tracking.

But such technological innovations will never replace the need for effective face-to-face, person-to-person communication. Employees still want to hear important information from their immediate manager, and I predict that this essential need for human touch will still be with us in the year 2046 and beyond.

[4] Taylor, Alex III. 'The auto industry meets the new economy.', Fortune. 130(5): 52-60; Asian 64-70; European 58-63. 1994 Sep 5.

Increasingly, automakers are turning to independent suppliers to provide such critical components as instrument panels, seats, and electronics. By assembling these parts offsite, then bolting them into the car on the assembly line, the auto companies are behaving more like personal computer makers than traditional, vertically integrated manufacturers. The retreat from vertical integration provides automakers with a windfall of opportunities to bring costs down, improve flexibility, and get quick access to new technologies. Chrysler is the industry's low-cost producer and makes the highest profit per vehicle, partly because of its new-age relationship with suppliers. All of the Big Three are selling off partsmaking operations that can be run more cheaply and better by outsiders with greater expertise, fewer distractions, and lower labor costs. Far-reaching changes are also being made at BMW's South Carolina assembly plant and at a Mercedes-Benz factory in Tuscaloosa, Alabama.

[5] Moyer, Janice. Fierheller, George. 'Managing in an information highway age.', Business Quarterly. 58(3): 73. 1994 Spring.

The new economic frontier is the knowledge economy - an economy so powerful that some 97% of all employment growth is coming from knowledge work. Providing nations with the information infrastructure to propel this knowledge work is the key concern of policy makers in America, Europe and Asia. The keystone concept in all these plans is the information highway - the computer-based, high-speed network that creates a vast new "cyberspace" of linkages for entertainment, information and communications. Information and the ability to share it is the spark the activates the new economy. Wealth today is generated primarily by the value people add to products and services through new ideas. Two elements are relied on in particular to generate the kind of collaborative work that is at the heart of the creation of new ideas in the knowledge economy: 1. a high-speed communications link and 2. a widespread network of connections.

 The new economic frontier is the knowledge economy--an economy so powerful that, according to economists such as Nuala Beck, some 97% of all employment growth is coming from knowledge work. Providing nations with the information infrastructure to propel this knowledge work is the key concern of policy makers in America, Europe and Asia. And the keystone concept in all these plans is the information highway--the computer-based, high-speed network that creates a vast new "cyberspace" of linkages entertainment, information and communications.

In the following articles, the Information Technology Association of Canada provides managers with a picture of the opportunities and challenges that will face them as the information highway is constructed. The scope of the change is as large as that faced by Canada's business leaders a century ago. Canada was created by our railroad connection; in a sense, the desire to communicate made our nation. A century later, we are being challenged again.


The need is great. Few people would doubt that we are entering a new age--an information age. Some compelling evidence exists:

* The economic value of knowledge has mushroomed. A century ago, human capital accounted for less than half of the wealth of an advanced industrial country. Today, human capital accounts for 80% of national wealth.

* Trade in knowledge is becoming the main event in international commerce, and trade in knowledge-based goods is rising some two to five times faster than in resource-based goods. By 1995, trade in information technology, aerospace equipment, electronics and chemicals--by no means the full list of knowledge-based industries--is expected to represent one-fourth of all goods traded in the world.

* Knowledge itself is snowballing. Every four or five years, the total amount of world information doubles. The sum total of all human knowledge to 1993 was only 1% of the information that will likely be available to our children in the year 2050.

* The number of brains being connected to the electronic knowledge network is expanding swiftly. In fact, networking may be too outdated a term for the flow of the rivers of information. These continuous transmissions are getting much closer to self-developing biological processes. A billion telephones are now in use, and telecommunications is a trillion-dollar industry. Data traffic comprises half of the bits flowing through the telephone network. There are close to 100 million personal computers installed on this world-wide system.


Information and the ability to share it is the spark that activates the new economy. Wealth today is generated primarily by the value people add to products and services through new ideas. We rely on two elements in particular to generate the kind of collaborative work that is at the heart of the creation of new ideas in the knowledge economy. The first requirement is a high-speed communications link, and the second is a widespread network of connections. With these in place, we will be positioned for the information highway age.

Together, the articles that follow present a new world--a global electronic commonwealth based on the sophisticated telecommunications and computing network that is emerging from the labs of the private sector and the investment of the private and public sectors. Industries are converging to be part of this dream. Cable companies, telephone operating companies, computer manufacturers, computer vendors, entertainment organizations, even electric power utilities are striving to participate in the creation of the information highway.

To sustain our national growth, Canadians, especially Canadian managers--the keepers of our organizations--need to be aware of what the future will bring. We trust that the set of articles that follow is of value in starting the awareness process, and alerting Canadians to the opportunities in the new age--the age of the information highway. (Copyright University of Western Ontario 1994)

[6] Singh, Indu B., 'Information Economy and the Next Presidency: Policy Options for the USA.', Telecommunications Policy. 12(3): 208-211. 1988 Sep.

The US economy is changing from being manufacturing-based to being information-based, a trend that will continue as the latter grows in importance through the 1990s and beyond. Therefore, the US needs a president who understands this new economy and its national and international implications. For the US, which in 1987, lost its preeminent position as the world's leading exporter for the first time, the new demands of the global market have spurred heated competition in market share, product quality, pricing, and the need for new approaches to export financing and control. A new and well-defined national strategy and its successful implementation are necessary in the face of a budget deficit, trade deficit, declining competitive strength, and a glut in the world market for certain products. The next US president must choose between military and economic objectives, along with fighting a growing protectionist attitude in Congress. He also must develop a national economy strategy that will give equal opportunity to the economically deprived.

[7] Reich, Robert B., 'Teaching to Win in the New Economy.', Technology Review. 91(6): 24-25. 1988 Aug/Sep.

The standardized methods of the American public education system cannot teach the skills required to respond to today's changing economy. In a world where billions of potential workers are ready to underbid US labor, the American competitive advantage must shift toward work whose value is based upon quality, flexibility, precision, and specialization. If managers are to produce environments in which workers can identify and solve problems, a different philosophy of education is necessary. Even though more than 86% of adults over 20 years old have completed high school, the deficiencies of the worst-prepared young Americans are beginning to affect business. One in 3 US corporations now provides basic-skills training for employees; one study predicts that industry costs for remedial education soon will reach as much as $25 billion annually. If the US is to succeed in the world economy, teachers are faced with the challenge of encouraging students to take initiative and learn to collaborate.

[8] Birch, David L. 'The New Economy: The Atomization of America', Inc.. 9(3): 21-22. 1987 Mar.

The US economy is ''atomizing'' -- breaking into pieces. A greater number of smaller businesses now do what fewer and larger companies did before. This atomization process began in the mid-1970s, and it represents a fundamental structural change in the way America does business. The causes of this change include: 1. domestic and foreign competition that forced US companies to make productivity gains and labor reductions, and 2. a shift from agriculture and manufacturing to the provision of high technology and professional services. These newer companies require less resources and fewer people. Demographic factors also contributed to the entrepreneurial boom, such as smaller families, 2-worker households, and women with better educations and stronger career drives. The effects of atomization include: 1. less personal and job security, 2. a constant need to stay current within a profession, and 3. the need of some state governments to retain their young entrepreneurs.