David Kluskiewicz

Stock market indices have been a staple of business news for decades. They summarize countless economic factors into single data points, ones that command almost as much attention as the weather forecast. They generate enough conversation to keep millions of investors engaged, whether they understand the underlying factors or not. Now that generations have renewed interest in the economy from following the big indices (NYSE, AMEX, NASDAQ), I think it’s time that we begin observing small indices (yet to be formed) too. They’re more interesting and they often have a much bigger impact on our lives.

There are two reasons to index small, local markets. First, they would give us a better idea of how our local communities’ economies work. Do we help new businesses grow? Which ones thrive here? Which ones prosper? Second, they would help increase investments in local communities. Typically, only angel investors and venture capitalists can tolerate risks associated with early stage companies. But if that risk is spread out, just as it is with a 401k, those early stage investments become far more accessible, providing more capital and a chance for smaller investors to enjoy a big reward. Local investment is particularly valuable because those companies are likely to become your clients, employers and neighbors. The localization of investment provides an excellent opportunity to become involved with the economy that will have the greatest impact on your wealth and quality of life.

State tech councils fostering innovation and bootstrapping early stage businesses are beginning to collect all the information needed to create small indices – maybe even exchanges. This kind of local investment could open the doors to a real innovation economy.