When people talk about how government can promote startups, there seems to be a fairly standard consensus: we need more economic inequality. Lower income and capital gains taxes provide more incentive to work, looser labor laws make it easier to fire non-performers, and large private wealth funds provide investment capital.
But having been through a startup myself, I think there’s much more you can do in the other direction: decreasing economic inequality. People love starting companies. You get to be your own boss, work on something you love, do something new and exciting, and get lots of attention. As Daniel Brook points out in The Trap, 28% of Americans have considered starting their own business. And yet only 7% actually do.
What holds them back? The lack of a social safety net. A friend of mine, a brilliant young technologist who’s been featured everywhere from PBS to Salon, stayed in academia and the corporate world while all of her friends were starting companies and getting rich. Why? Because she couldn’t afford to lose her health insurance. Between skyrocketing prices and preexisting condition exclusions, it’s almost impossible for anyone who isn’t in perfect health to quit their job. (I only managed because I was on a government plan.)
Anyone with children is also straight out. Startup founders tend to be quite young, in no small part because no one can afford to support a family on a startup founder’s salary. But if we had universal child care, that would be much less of an issue. Parents would be free to pursue their dreams, knowing that their children were taken care of. And universal higher education could let parents spend their savings on getting a business started, instead of their children’s tuition. Plus, it’d give many more kids the training and confidence they needed to start a company.
And those large private wealth funds that result from growing inequality? A real problem for startup founders is that they’re too large. It used to be that you could borrow a couple thousand dollars from friends and neighbors to get your business off the ground. Nowadays, they’re too busy trying to make ends meet to be able to afford anything like that. Meanwhile, those large wealth funds I mentioned are now so big they can only afford to invest in multi-million dollar chunks — much more than the average founder needs, or can even justify. And the large investments come with large amounts of scrutiny, further narrowing the recipient pool.
But imagine if the government provided a basic minimum income, like Richard Nixon once proposed. Instead of having to save up (increasingly difficult in a world in which the only way to survive is on credit card debt) or borrow money to stay afloat, you could live off the government-provided income as you got things started. Suddenly having to quit your job would no longer be such a huge leap — there’d be a real social safety net to catch you. (Not to mention if those labor laws some people want to loosen required your old job to take you back if things didn’t work out.)
Of course, there is some truth to the standard proposals. Some startup founders are encouraged by dreams of financial security, and high taxes can make that dream more elusive. And complex labor regulations can make it difficult to get new companies off the ground. But it’s not an issue of whether we should have taxes or labor laws — it’s an issue of how they’re targeted.
Estate taxes on inherited fortunes would have basically no impact on startup founders, but could go a long way to funding a social safety net. And since most startups are acquired as stock, income taxes are basically irrelevant — it’s really capital gains tax that gets applied. There’s no reason the government couldn’t apply a lower capital gains tax to startups that get acquired than they do to the shares of publicly-traded companies that large investors trade.
The same is true for labor laws: preventing large companies from firing people
at random can provide some much-needed stability to their lives, especially if they’re saving up money in the hopes of going into business themselves. But there’s no reason such laws also have to be applied to small startups, where the company is more likely to go out of business than to fire you.
Look at social democratic Europe, where these policy prescriptions have been tried. While there’s much less of a culture of entrepreneurship and only 15% of Europeans think about starting their own company, nearly all (14.7%) of them actually go ahead and do it.
The fact is, if governments really want to promote startups and the economic innovation they bring, they shouldn’t listen to the standard refrain of cut taxes and deregulate. They need to start rebuilding the social safety net, so that their citizens know that if they go out on a limb and try something risky, someone will be there to catch them if things don’t work out.
I definitely would have quit my job and started my own company long ago if I had access affordable health insurance outside work. But I’m not entirely sure that would have been a good decision. While I agree with everything you say here, it still feels like there are some subtle positive aspects of the current environment we may lose with a safety net, e.g. forcing better planning of startups by making them contingent on better life planning. I don’t imagine those are anywhere near worth the pitfalls of the current environment, but it would be good to consider them further to ease the transition.
posted by Scott Reynen
on June 9, 2008 #
hi Aaron, this is a very interesting entry! you might be interested by the debates and analyses of the idea of an universal unconditional income, there are several authors discussing it but the books “Real Freedom for All” by Philippe Van Parijs, and “Redesigning Distribution” edited by Bruce Ackerman, Anne Alstott and Van Parijs (avail. for free online), are worth reading.
posted by pierre
on June 9, 2008 #
Good post.
As an entrepreneur in Israel, having high quality government funded healthcare has certainly helped me bootstrap my current startup. My calculations would have been very different if I had to take health insurance into account.
I’m not sure though that your conclusion regarding Europeans (where almost all who consider starting a business actually do it) is necessarily correct.
Maybe in a culture where entrepreneurship isn’t as glamorous as it is in the US, those who profess that they consider starting a business are only the real die-hard born-to-be-entrepreneurs, essentially the same people who manage to overcome the hurdles in the US and do their own thing at all costs?
In a place like California (or Israel for that matter), where entrepreneurship is admired, many more people consider it, or would tell you so in a survey, even though they’re not really serious. I have friends who keep talking about starting their own business, but would probably never do it - not because they lack the wherewithal, but because they haven’t really got it in them.
Moreover, starting a company in most countries of western Europe is much harder than it is in the US. It takes financial commitment up-front, as well as going through a lot of bureaucracy. The state, while it provides the social safety net, puts serious hurdles in the would-be business owner’s way, and you could argue that these are just as bad as the lack of a safety net.
posted by Elad Kehat
on June 9, 2008 #
I think you miss the main problem: sheer time availability. See my full response here:
http://www.cincomsmalltalk.com/blog/blogView?showComments=true&printTitle=Why_so_few_do_startups&entry=3390474479
posted by James Robertson
on June 9, 2008 #
Your voice is getting stronger, Aaron. You’re doing good work.
URLS for the books Pierre mentions above:
posted by Bob Erb
on June 9, 2008 #
If you love Iceland so much why don’t you go and live there!!111eleventy!1
As a longtime professional tracker-of-startups, I note without surprise how many of mine are in Australia, Ireland and Israel now.
Scott Reynan: if US entrepreneurs are indeed motivated by fear of bankruptcy, most of them are behaving in remarkably self-defeating ways.
posted by Yatima
on June 9, 2008 #
+1, Aaron.
I’m a parent of 2, and it’s frustrating as all hell that I can’t work out a way to start a startup without putting my family at risk.
It’s fairly well established that no angel or VC investor will want to look at you until you’ve at the very least finished a prototype, more likely not until you’ve finished the product, and even more likely not until you’ve shown “traction” by attracting a decent number of users. In the meantime, that probably means a good year of going without income in order to get to that point. Who’s got the kind of money to keep a family afloat during that time?!?!?!? Some of us weren’t born with rich family or friends.
I haven’t figured a way out of this conundrum yet, but I’m damn well going to because I refuse to go my whole life working for someone else. (Most likely in order to fund this I’ll have to sell my home, and rent in a cheaper location for a while.)
But it sure is good to hear someone going against the conventional “wisdom” (aka bullshit) on this issue and telling it like it is, Aaron.
Meritocracy, my ass! The startup world is a plutocracy, pure and simple. If you don’t have someone with big bucks behind you, you’re shut out. The only people whose “merit” matters are the ones who are able to pony up the ante.
posted by DAR
on June 9, 2008 #
(A pingback for some of the discussion on hacker news.)
I have to say I strongly agree with this. The personal risks I am taking to start a company, are a little crazy, and I’ve had no shortage of people telling me so. And I know so many people who are waiting for their life to be settled and stable before they begin. This is one of the main social influences repressing our potential founders.
http://news.ycombinator.com/item?id=213181
and
http://news.ycombinator.com/item?id=213210
posted by Danielle Fong
on June 9, 2008 #
To DAR:
What makes you think the rest of us owe you a living? In life you get to make choices, and you value your family above the pursuit of a startup. That’s one possible choice. Why should the rest of us have to pay to give you infinite choices?
You might ponder TANSTAAFL.
posted by James Robertson
on June 9, 2008 #
Yes, doing a startup is hard for a family, but what about the plan where one spouse gets a corporate job, and the other starts a business?
posted by Don Marti
on June 9, 2008 #
I think one reason Europeans are less likely to consider starting their own companies is that employment conditions even in low-end jobs tend to be better here (longer holidays, higher minimum wages, etc).
posted by Sam Pablo Kuper
on June 10, 2008 #
Aaron,
How many of these policies would you support even if they had zero impact on startups? I ask because all your suggestions that are particular to startups actually involve “the standard refrain of cut taxes and deregulate”
Things that are good for everyone are good for everyone but I can’t but help notice that your more socialist suggestions are about people not like you (help families and older people, stick it to big business, etc) and your more free market suggestions apply to areas where you have local experience.
posted by Jack Diederich
on June 10, 2008 #
Is this satire? Because I really don’t see how it could be anything else, except perhaps insanity.
The problem with providing these sorts of benefits to everyone is that it removes nearly all extrinsic motivations for work. Unfortunately, I believe that you’ll find that the fraction of the human population that is intrinsically motivated to work is by no means large enough to support the entire population—and if this is the case, then the reforms you propose would eventually cause the collapse of civilization (assuming that someone did not eventually stop the madness).
posted by Dave
on June 10, 2008 #
Yes, Nixon must have been proposing the collapse of civilization. That must be why Denmark and Sweden are no longer on the map.
Give me a break.
posted by Aaron Swartz
on June 10, 2008 #
Aaron,
How many start-ups are coming out of Denmark and Sweden? Adjusted for population, are there more or less than are coming out of the US?
-Mark
posted by Mark
on June 10, 2008 #
Aaron,
Pardon my ignorance, but if one is young ind relatively healthy (and you better be if you are going to work in a startup), what does one need health insurance for?
posted by Nickolai Leschov
on June 11, 2008 #
Great minds move in…
The Basic Income Guarantee is championed eloquently by Martin Luther King, Jr.
http://www.cooperativeindividualism.org/king-martin-luther_on-poverty.html
It’s from his last book.
Love.
posted by William Loughborough
on June 11, 2008 #
Why do you think people who start companies need to be relatively healthy? My health problems never affected my startup work.
posted by Aaron Swartz
on June 11, 2008 #
I agree with some of your arguments, particularly the one about health insurance. I mean, survive you must, and fear of dying doesn’t help startup founders to be bold.
But I also know how incredibly hard it is in many european countries to get your own business started, and to a large degree it is hard because of the safety net that others enjoy.
That famous european safety net has one salient characteristic. It’s much better for those groups who are better organised and who have a long tradition of being close to the government and the political parties. Pensioners, workers in well unionised sectors, farmers, civil servants, railway workers, medical doctors, teachers, etc.
As a startup founder, almost by definition, you don’t belong to any of those groups. When I started my first business, I had to pay hugely more social security contributions and taxes than any 9 to 5 worker (relative to my meagre income). Effectively, I had to pay for their safety net, a safety net that partly excludes entrepreneurs. If I could’ve just kept my own money, pay nothing and get nothing, I would’ve been better off.
I agree that a basic safety net that catches you when you fall is a good thing. But that european safety net catches like 80% of the people, costs almost 50% of our income and fails many of those who actually need it. I wonder if that is an automatic consequence of democratically organised redistribution.
posted by fauigerzigerk
on June 11, 2008 #
“To DAR:
What makes you think the rest of us owe you a living? In life you get to make choices, and you value your family above the pursuit of a startup. That’s one possible choice. Why should the rest of us have to pay to give you infinite choices?
You might ponder TANSTAAFL.”
Dude, I think you are either totally messedup or just plain trying to garner some attention. Indendently speaking, I can understand and appreciate your statement. Having read DAR’s comment though, I fail to see the connection that you are trying to imply. The man’s just trying to vent his frustration that the current attitude of VCs and such like is such that it does not allow for any leeway of “risk” such as having a family. TANSTAAFL indeed. For you, I would have to respond - GTFOH*
*Get the Finnegan outta here.
posted by Timmy Jose
on June 12, 2008 #
“To DAR:
What makes you think the rest of us owe you a living? In life you get to make choices, and you value your family above the pursuit of a startup. That’s one possible choice. Why should the rest of us have to pay to give you infinite choices?
You might ponder TANSTAAFL.”
@ Robertson
Dude, I think you are either totally messedup or just plain trying to garner some attention. Indendently speaking, I can understand and appreciate your statement. Having read DAR’s comment though, I fail to see the connection that you are trying to imply. The man’s just trying to vent his frustration that the current attitude of VCs and such like is such that it does not allow for any leeway of “risk” such as having a family. TANSTAAFL indeed. For you, I would have to respond - GTFOH*
*Get the Finnegan outta here.
posted by Timmy Jose
on June 12, 2008 #
Great post, Aaron. By the way, not exactly start-up related, but similar reasons were a major economic factor driving me to abandon my civil-liberties activism. It was just too dangerous to risk lack of employment.
posted by Seth Finkelstein
on June 12, 2008 #
Your intro paragraph infers it all: “we need more economic inequality. Lower income and capital gains taxes provide more incentive to work, looser labor laws make it easier to fire non-performers, and large private wealth funds provide investment capital.” <br/>
This statement is not economic theory: not that you state it is, but rather that mainstream business and politics tell us it is. This construct is barely even economic hypothesis; not even well founded wishful thinking. Rather wolfish greed wrapped in lambskin. <br/>
I have been an IT entrepreneur for 20 years and never consider those economic principals when making my start-up decisions. I have only accomplished my most recent startup, ShellShadow because I am living in China now and have economic leverage to do so on a tight budget.<br/>
The “theory” that people create due to economic inequality is pure bunk. People can get very rich due to economic inequality but it has little to do with creativity or a desire to create.
posted by Jon Hancock
on June 12, 2008 #
Aaron:
Lack of adequate healthcare affects some 25 million Americans, a significant portion of them, like me, who are working citizens who contribute to the “system” in the form of taxes, and sometimes, cash payments for medical services needed. I think it’s shameful that we can’t even get a basic level of standard medical protection for our nation all because of greed, greed, greed. I feel for all those people who find themselves in the position of being forced to chose bankruptcy due to a pressing illness.
posted by Anthony Kuhn
on June 12, 2008 #
The safety net is a good point—you are right, it was previously friends and family, but today most are tapped out.
However, instead of the government stepping in, what if friends, family, spouses, and want-to-be entrepenuers stopped promising away their entire current and future income (via mortgages and loans) so that they could go back to being the social safety net that they once were?
My grandparents at several times lived with other family, and several times had other family live with them, while starting out. And so while they used mortgages and loans, it wasn’t so early and so leveraged that they could no longer be a safety net for others.
Granted, their lifestyle was not what most people likely expect these days—but that is a trade off everyone is free to make, lower your lifestyle today and have more choices, or raise your lifestyle today and have less choices.
(Basically, DAG is right—he should sell the house he can only afford on a 30-year corporate salary and rent in a cheaper location. That is economic tradeoffs and it works much better when individuals make these decisions for themselves instead of the government deciding for the whole citizenship that it knows best.)
I also wonder how much the lack of a safety net is real or just perceived due to our individualistic, self-reliant culture.
Granted, I admire your goals, but good goals doesn’t mean that, once in place, a program will automatically acheive those goals. Goals vs. incentives is discussed nicely in Basic Economics by Thomas Sowell.
posted by Stephen
on June 12, 2008 #
I’m surprised you didn’t mention behavioral economics to explain the statistics. Isn’t it obvious that the biggest barrier to start-ups is risk aversion? When I tell people I’m working for a startup, the vast majority of responses is “oooh, risky!”.
posted by Andrey Fedorov
on June 14, 2008 #
You can also send comments by email.
Comments
I definitely would have quit my job and started my own company long ago if I had access affordable health insurance outside work. But I’m not entirely sure that would have been a good decision. While I agree with everything you say here, it still feels like there are some subtle positive aspects of the current environment we may lose with a safety net, e.g. forcing better planning of startups by making them contingent on better life planning. I don’t imagine those are anywhere near worth the pitfalls of the current environment, but it would be good to consider them further to ease the transition.
posted by Scott Reynen on June 9, 2008 #
hi Aaron, this is a very interesting entry! you might be interested by the debates and analyses of the idea of an universal unconditional income, there are several authors discussing it but the books “Real Freedom for All” by Philippe Van Parijs, and “Redesigning Distribution” edited by Bruce Ackerman, Anne Alstott and Van Parijs (avail. for free online), are worth reading.
posted by pierre on June 9, 2008 #
Good post. As an entrepreneur in Israel, having high quality government funded healthcare has certainly helped me bootstrap my current startup. My calculations would have been very different if I had to take health insurance into account.
I’m not sure though that your conclusion regarding Europeans (where almost all who consider starting a business actually do it) is necessarily correct. Maybe in a culture where entrepreneurship isn’t as glamorous as it is in the US, those who profess that they consider starting a business are only the real die-hard born-to-be-entrepreneurs, essentially the same people who manage to overcome the hurdles in the US and do their own thing at all costs? In a place like California (or Israel for that matter), where entrepreneurship is admired, many more people consider it, or would tell you so in a survey, even though they’re not really serious. I have friends who keep talking about starting their own business, but would probably never do it - not because they lack the wherewithal, but because they haven’t really got it in them.
Moreover, starting a company in most countries of western Europe is much harder than it is in the US. It takes financial commitment up-front, as well as going through a lot of bureaucracy. The state, while it provides the social safety net, puts serious hurdles in the would-be business owner’s way, and you could argue that these are just as bad as the lack of a safety net.
posted by Elad Kehat on June 9, 2008 #
I think you miss the main problem: sheer time availability. See my full response here:
http://www.cincomsmalltalk.com/blog/blogView?showComments=true&printTitle=Why_so_few_do_startups&entry=3390474479
posted by James Robertson on June 9, 2008 #
Your voice is getting stronger, Aaron. You’re doing good work.
URLS for the books Pierre mentions above:
Redesigning Distribution
Real Freedom For All
posted by Bob Erb on June 9, 2008 #
If you love Iceland so much why don’t you go and live there!!111eleventy!1
As a longtime professional tracker-of-startups, I note without surprise how many of mine are in Australia, Ireland and Israel now.
Scott Reynan: if US entrepreneurs are indeed motivated by fear of bankruptcy, most of them are behaving in remarkably self-defeating ways.
posted by Yatima on June 9, 2008 #
+1, Aaron.
I’m a parent of 2, and it’s frustrating as all hell that I can’t work out a way to start a startup without putting my family at risk.
It’s fairly well established that no angel or VC investor will want to look at you until you’ve at the very least finished a prototype, more likely not until you’ve finished the product, and even more likely not until you’ve shown “traction” by attracting a decent number of users. In the meantime, that probably means a good year of going without income in order to get to that point. Who’s got the kind of money to keep a family afloat during that time?!?!?!? Some of us weren’t born with rich family or friends.
I haven’t figured a way out of this conundrum yet, but I’m damn well going to because I refuse to go my whole life working for someone else. (Most likely in order to fund this I’ll have to sell my home, and rent in a cheaper location for a while.)
But it sure is good to hear someone going against the conventional “wisdom” (aka bullshit) on this issue and telling it like it is, Aaron.
Meritocracy, my ass! The startup world is a plutocracy, pure and simple. If you don’t have someone with big bucks behind you, you’re shut out. The only people whose “merit” matters are the ones who are able to pony up the ante.
posted by DAR on June 9, 2008 #
(A pingback for some of the discussion on hacker news.)
I have to say I strongly agree with this. The personal risks I am taking to start a company, are a little crazy, and I’ve had no shortage of people telling me so. And I know so many people who are waiting for their life to be settled and stable before they begin. This is one of the main social influences repressing our potential founders.
http://news.ycombinator.com/item?id=213181
and
http://news.ycombinator.com/item?id=213210
posted by Danielle Fong on June 9, 2008 #
To DAR:
What makes you think the rest of us owe you a living? In life you get to make choices, and you value your family above the pursuit of a startup. That’s one possible choice. Why should the rest of us have to pay to give you infinite choices?
You might ponder TANSTAAFL.
posted by James Robertson on June 9, 2008 #
Yes, doing a startup is hard for a family, but what about the plan where one spouse gets a corporate job, and the other starts a business?
posted by Don Marti on June 9, 2008 #
I think one reason Europeans are less likely to consider starting their own companies is that employment conditions even in low-end jobs tend to be better here (longer holidays, higher minimum wages, etc).
posted by Sam Pablo Kuper on June 10, 2008 #
Aaron,
How many of these policies would you support even if they had zero impact on startups? I ask because all your suggestions that are particular to startups actually involve “the standard refrain of cut taxes and deregulate”
Things that are good for everyone are good for everyone but I can’t but help notice that your more socialist suggestions are about people not like you (help families and older people, stick it to big business, etc) and your more free market suggestions apply to areas where you have local experience.
posted by Jack Diederich on June 10, 2008 #
Is this satire? Because I really don’t see how it could be anything else, except perhaps insanity.
The problem with providing these sorts of benefits to everyone is that it removes nearly all extrinsic motivations for work. Unfortunately, I believe that you’ll find that the fraction of the human population that is intrinsically motivated to work is by no means large enough to support the entire population—and if this is the case, then the reforms you propose would eventually cause the collapse of civilization (assuming that someone did not eventually stop the madness).
posted by Dave on June 10, 2008 #
Yes, Nixon must have been proposing the collapse of civilization. That must be why Denmark and Sweden are no longer on the map.
Give me a break.
posted by Aaron Swartz on June 10, 2008 #
Aaron,
How many start-ups are coming out of Denmark and Sweden? Adjusted for population, are there more or less than are coming out of the US?
-Mark
posted by Mark on June 10, 2008 #
Aaron,
Pardon my ignorance, but if one is young ind relatively healthy (and you better be if you are going to work in a startup), what does one need health insurance for?
posted by Nickolai Leschov on June 11, 2008 #
Great minds move in…
The Basic Income Guarantee is championed eloquently by Martin Luther King, Jr.
http://www.cooperativeindividualism.org/king-martin-luther_on-poverty.html
It’s from his last book.
Love.
posted by William Loughborough on June 11, 2008 #
Why do you think people who start companies need to be relatively healthy? My health problems never affected my startup work.
posted by Aaron Swartz on June 11, 2008 #
I agree with some of your arguments, particularly the one about health insurance. I mean, survive you must, and fear of dying doesn’t help startup founders to be bold.
But I also know how incredibly hard it is in many european countries to get your own business started, and to a large degree it is hard because of the safety net that others enjoy.
That famous european safety net has one salient characteristic. It’s much better for those groups who are better organised and who have a long tradition of being close to the government and the political parties. Pensioners, workers in well unionised sectors, farmers, civil servants, railway workers, medical doctors, teachers, etc.
As a startup founder, almost by definition, you don’t belong to any of those groups. When I started my first business, I had to pay hugely more social security contributions and taxes than any 9 to 5 worker (relative to my meagre income). Effectively, I had to pay for their safety net, a safety net that partly excludes entrepreneurs. If I could’ve just kept my own money, pay nothing and get nothing, I would’ve been better off.
I agree that a basic safety net that catches you when you fall is a good thing. But that european safety net catches like 80% of the people, costs almost 50% of our income and fails many of those who actually need it. I wonder if that is an automatic consequence of democratically organised redistribution.
posted by fauigerzigerk on June 11, 2008 #
“To DAR:
What makes you think the rest of us owe you a living? In life you get to make choices, and you value your family above the pursuit of a startup. That’s one possible choice. Why should the rest of us have to pay to give you infinite choices?
You might ponder TANSTAAFL.”
Dude, I think you are either totally messedup or just plain trying to garner some attention. Indendently speaking, I can understand and appreciate your statement. Having read DAR’s comment though, I fail to see the connection that you are trying to imply. The man’s just trying to vent his frustration that the current attitude of VCs and such like is such that it does not allow for any leeway of “risk” such as having a family. TANSTAAFL indeed. For you, I would have to respond - GTFOH*
*Get the Finnegan outta here.
posted by Timmy Jose on June 12, 2008 #
“To DAR:
What makes you think the rest of us owe you a living? In life you get to make choices, and you value your family above the pursuit of a startup. That’s one possible choice. Why should the rest of us have to pay to give you infinite choices?
You might ponder TANSTAAFL.”
@ Robertson
Dude, I think you are either totally messedup or just plain trying to garner some attention. Indendently speaking, I can understand and appreciate your statement. Having read DAR’s comment though, I fail to see the connection that you are trying to imply. The man’s just trying to vent his frustration that the current attitude of VCs and such like is such that it does not allow for any leeway of “risk” such as having a family. TANSTAAFL indeed. For you, I would have to respond - GTFOH*
*Get the Finnegan outta here.
posted by Timmy Jose on June 12, 2008 #
Great post, Aaron. By the way, not exactly start-up related, but similar reasons were a major economic factor driving me to abandon my civil-liberties activism. It was just too dangerous to risk lack of employment.
posted by Seth Finkelstein on June 12, 2008 #
Your intro paragraph infers it all: “we need more economic inequality. Lower income and capital gains taxes provide more incentive to work, looser labor laws make it easier to fire non-performers, and large private wealth funds provide investment capital.” <br/> This statement is not economic theory: not that you state it is, but rather that mainstream business and politics tell us it is. This construct is barely even economic hypothesis; not even well founded wishful thinking. Rather wolfish greed wrapped in lambskin. <br/> I have been an IT entrepreneur for 20 years and never consider those economic principals when making my start-up decisions. I have only accomplished my most recent startup, ShellShadow because I am living in China now and have economic leverage to do so on a tight budget.<br/> The “theory” that people create due to economic inequality is pure bunk. People can get very rich due to economic inequality but it has little to do with creativity or a desire to create.
posted by Jon Hancock on June 12, 2008 #
Aaron:
Lack of adequate healthcare affects some 25 million Americans, a significant portion of them, like me, who are working citizens who contribute to the “system” in the form of taxes, and sometimes, cash payments for medical services needed. I think it’s shameful that we can’t even get a basic level of standard medical protection for our nation all because of greed, greed, greed. I feel for all those people who find themselves in the position of being forced to chose bankruptcy due to a pressing illness.
posted by Anthony Kuhn on June 12, 2008 #
The safety net is a good point—you are right, it was previously friends and family, but today most are tapped out.
However, instead of the government stepping in, what if friends, family, spouses, and want-to-be entrepenuers stopped promising away their entire current and future income (via mortgages and loans) so that they could go back to being the social safety net that they once were?
My grandparents at several times lived with other family, and several times had other family live with them, while starting out. And so while they used mortgages and loans, it wasn’t so early and so leveraged that they could no longer be a safety net for others.
Granted, their lifestyle was not what most people likely expect these days—but that is a trade off everyone is free to make, lower your lifestyle today and have more choices, or raise your lifestyle today and have less choices.
(Basically, DAG is right—he should sell the house he can only afford on a 30-year corporate salary and rent in a cheaper location. That is economic tradeoffs and it works much better when individuals make these decisions for themselves instead of the government deciding for the whole citizenship that it knows best.)
I also wonder how much the lack of a safety net is real or just perceived due to our individualistic, self-reliant culture.
Granted, I admire your goals, but good goals doesn’t mean that, once in place, a program will automatically acheive those goals. Goals vs. incentives is discussed nicely in Basic Economics by Thomas Sowell.
posted by Stephen on June 12, 2008 #
I’m surprised you didn’t mention behavioral economics to explain the statistics. Isn’t it obvious that the biggest barrier to start-ups is risk aversion? When I tell people I’m working for a startup, the vast majority of responses is “oooh, risky!”.
posted by Andrey Fedorov on June 14, 2008 #
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