The Volokh Conspiracy

Mostly law professors | Sometimes contrarian | Often libertarian | Always independent


No, Black Business Ownership Didn't Increase 400% in One Year

PolitiFact has the details -- but in any event, the purported statistic was suspect on its face.


Last week, I saw a report that seemed enheartening but left me suspicious — to quote one account, "According to the Minority 2018 Small Business Trends survey, the number of black-owned small businesses in the U.S. increased by a staggering 400% in a year-over-year time period from 2017 to 2018." This statistic was picked up by a variety of sites, including conservative/libertarian sites, publications aimed at black readers, and general business sites. Last Monday, I e-mailed the publisher (Guidant Financial) to ask for details, but didn't hear back, and I was traveling with family so I put off further inquiries until today.

But PolitiFact (Kyra Haas) beat me to it; here's a quick excerpt:

In November 2017, small business financing company Guidant Financial and online credit marketplace LendingClub Corporation sent out an email survey to their clientele nationwide; they received responses from about 2,600 "current and aspiring entrepreneurs." The companies both posted general articles about the results of that survey on their websites in January without making any distinctions about race or ethnicity except that 47 percent of "aspiring entrepreneurs" surveyed were minorities.

The 400 percent increase in black-owned businesses claim, however, was not made until a subsequent graphic was published on Guidant's website on Aug. 8.

It was not clear from the released results how the companies came up with the 400 percent jump. The percentage of African-American respondents who owned businesses was not published, nor was that figure from last year.

The survey sample was not random, the response was voluntary, and the margin of error was not made public….

PolitiFact contacted Guidant about the claim in the graphic on Aug. 21. Two days later, a new version of the graphic was posted, this time without any mention of a 400 percent increase.

"We have found that the 400% statistic is being misrepresented in its context and therefore we have decided to pull that statistic from our info graph," public relations consultant for Guidant Stacia Kirby said in an email….

There's thus no real reason to think that the 400% increase claim is correct — and ample reason, regardless of your politics, to doubt it, simply because 5-fold increases in this kind of number in one year are just so wildly improbable. Even if you think President Trump's economic plan is stupendous, or, if you prefer, President Obama's economic plan is stupendous and is just bearing fruit, a change like this doesn't happen in one year.

Recall that the claim wasn't even about a 5-fold increase in new business formation, or, if you prefer, a 4-fold increase in new business formation misleadingly reported as a 400% increase — the claim was about such an increase in the total number of black-owned businesses. Even rates of change don't generally increase so sharply; but the total amount of pretty much anything almost never increases that way in a large economy (setting obvious exceptions such as the amount of newly developed technological goods, or the number of people in some subcategory of a group that itself sharply increased as a result of a sudden burst of immigration).

More specifically, the Census Bureau reported that "The number of black or African American-owned firms grew 34.5 percent between 2007 and 2012 — from 1.9 million to 2.6 million in 2012." That's a healthy growth, a 6% yearly increase. Is it really likely that the number grew 400% instead in one year? Or assuming that the number held more or less constant from 2012 to 2016, that it grew by 10 million in one year after that? (The total black population in the U.S. is about 43 million, and only a small percentage of any ethnic group owns businesses.)

So whenever you hear a claim such as that one, your Spidey sense should start tingling. It's not just that it's good to be true, it's too big to be true.