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Jo Ann Barefoot explores how to create fair and inclusive consumer financial services through innovative ideas for industry and regulators

A Bright Future for Small Business, with Karen Mills

Barefoot Innovation Podcast

A Bright Future for Small Business, with Karen Mills

Jo Ann Barefoot


This is the second time I’ve sat down with Karen Mills for a conversation on Barefoot Innovation. Karen is a Senior Fellow at both the Harvard Business School and Harvard Kennedy School (where I got to know her), and previously was the head of the US Small Business Administration. She is also probably the foremost expert, and most eloquent voice, anywhere, on using technology to strengthen small business.

We got together, on a very rainy day on the Harvard campus, shortly after Karen published her newest book, Fintech, Small Business, and the American Dream. It’s the most definitive and thought-provoking work I have seen on today’s historic opportunity to develop a vastly better financial world for small businesses. Karen believes, as do I, that we are at a transformative moment.  

Half of the people employed in the United States work for a small business. (See our recent podcast with the founders of Kabbage for more statistics on the importance of small business to the economy and society). Unfortunately, Karen reports that small business formations in the US are slowing down, with no definitive answers as to why.  What we do know, however, is that a strong flow of new businesses is vital to growth, social mobility and enabling people to achieve the American dream. 

That’s where new technology comes in. In our talk, Karen explains the financial challenges that face small business owners. These entrepreneurs often have trouble qualifying for bank loans. They especially have trouble getting small loans. And many struggle with cash flow volatility --  seasonal markets and uneven flows of revenue and expenses. Under traditional lending metrics, this makes them risky as borrowers. In reality, though, the perceived risk is a mix of actual risk that they won’t repay a loan, plus a sizable measure of risk that is arising due to lack of information about them. Studying these businesses in depth takes a lot of time, using traditional tools, which means it’s not very profitable to lend to the smaller ones, or to extend smaller loans. When you add more information to the picture -- timely, detailed, low-cost information -- it turns out that a lot of them are actually good risks. It’s just hard for them to prove it.

Adding more information, and making it readily accessible and analyzable, of course, is exactly what new technology does, for everything. Lenders can now easily gather and analyze cash flow data, as well as big data reflecting the trends in the economy and markets and even weather, that may bear on a small company’s prospects. Gather more data, run it through machine-learning risk models, and do the loan origination and servicing online, and suddenly, a lot of lending becomes profitable. Karen’s book tells this story. 

Clearly, much of this future will depend on how well the regulatory environment adapts to the technology change. Policymakers will have to allow and enable innovation, while also anticipating and preventing problems.  In our conversation, Karen shares insights on the regulatory challenges, reaching far beyond the United States -- you’ll enjoy hearing her take on the financial reforms the UK undertook, following the financial crisis, and the food for thought she offers on potential models. 

If we do get the regulations right, Karen predicts a small business utopia, where all deserving small businesses have access to credit.


More on Karen

Karen Gordon Mills served in President Obama's Cabinet as the Administrator of the U.S. Small Business Administration from 2009 until August 2013, a role in which she also served on the President’s National Economic Council. At SBA, she led a team of more than 3,000 employees and managed a loan guarantee portfolio of over $100 billion. At the height of the Great Recession, she took steps that led to record-breaking years for SBA lending and investments in growth capital. Additionally, Mills’ efforts helped small businesses create regional economic clusters, gain access to early-stage capital, boost exports, and tap into government and commercial supply chains. 

Mills is currently a Senior Fellow at both the Harvard Kennedy School and Harvard Business School, where she is part of the entrepreneurship faculty. She is a leading authority on U.S. competitiveness, entrepreneurship, and innovation. She is the author of the new book Fintech, Small Business & the American Dream, as well as a number of Harvard Business School white papers and publications. 

Mills is a venture capitalist and the Vice Chair of Envoy, an immigration services provider. She also serves in leadership roles for several policy organizations, including: Chair, Advisory Committee for the Private Capital Research Institute; Co-Chair, Bipartisan Policy Center’s Main Street Finance Task Force; Member, Council on Foreign Relations; and Director, National Bureau of Economic Research. She is a Member of the Harvard Corporation and a past Vice Chair of the Harvard Overseers.

Mills earned an AB in economics from Harvard University and an MBA from Harvard Business School, where she was a Baker Scholar. She is a recipient of the U.S. Department of the Navy’s Distinguished Public Service Award, and is a frequent guest on news outlets, including Bloomberg TV and CNBC, with recent op-ed placements in American Banker, Fortune, Forbes, The Hill, and Harvard Business Review.

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We have great episodes coming up. We recorded a fascinating talk with Ida Rademacher of the Aspen Institute alongside Jamie Kalamarides of Prudential.  We’ve also talked with Vinny Lingham, co-founder and CEO of Civic -- an identity protection and management startup. We will have a new show with Nick Cook, who heads innovation at the UK Financial Conduct Authority. We will have a show with Greta Bull, who leads C-GAP for the World Bank. And we have two special shows coming up with US regulatory agency heads...among others.

We’re into September, and that means my fall “world tour” will soon be happening. Plans are still taking shape, but I’ll be in some fascinating places. Here are some upcoming events where I’ll hope to see many of you. Remember, if you’re interested in booking me to speak to your group, contact

Upcoming Events

Meanwhile, keep innovating!

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The views and opinions expressed during the Barefoot Innovation podcast series are solely those of the individuals involved and do not necessarily represent those of Barefoot Innovation Group and its employees. Barefoot Innovation Group does not verify for accuracy the information contained in the podcast series. The primary purpose of this podcast series is to educate and inform.