Sorry but the evidence doesn't stand up to this AT ALL.
Americans are much, MUCH more entrepreneurial than anyone in Europe. I'm American, I live in Europe, I know this very, very well. (Yes, anecdotally speaking, of course!)
Americans simply embrace risk, and embrace potential failure, far better than anyone else in the world, taken as a whole. Europeans meanwhile are a more gloomy bunch, more risk-averse, and far less likely to strike out on their own. Notable slight exceptions being the Dutch to some degree.
America is so far from a "welfare state" - it is about as far away as you can get. America is a "if you're going to fall, you are going to fall all the way down, and no one is going to save you, no matter what". And somehow, a huge part of the world's entrepreneurs and innovation come from there. I don't know why.
And don't take me as some kind of patriotic jingoist champion of the US of A - I am just about as far as you can get from the "Yeah Murica" kind of ultra patriots - heck, I live in Europe because I prefer the slower pace, the old world, the semblance of an actual culture, the environment that has not eaten itself from capitalism taken to the extreme.
The question is if that entrepreneurial spirit is a result of the welfare state or something else. If it's something else (cultural), we may not be maximizing our entrepreneurial abilities. Risk taking should be encouraged.
No they aren't -- not nationwide. Americans in most of the country are no more entrepreneurial than Europeans.
Americans in a few cities and regions are very entrepreneurial. These are not necessarily the cities and regions with the lowest taxes, most "business friendly" policies, or anything else that right wingers would consider likely to produce entrepreneurship. California is incredibly entrepreneurial, but it never shows up on those top ten lists of most business friendly states.
I think that strongly argues for this being cultural.
The more entrepreneurial Americans are those from wealthy backgrounds, well networked backgrounds, or desperate circumstances.
Notice, all three of the above do not require a state sponsored safety net, and it is that need for a safety net against destitution that creates an entrepreneurial mindset.
Without that safety net you don't get many risk takers.
You can certainly botch entrepreneurship with business-unfriendly policies, but they are not the ones right wingers always harp on about.
High-ish taxes are okay as long as they are not punitively high. Regulations are okay as long as they are easy to follow and simple to understand, and as long as they aren't over the top ideologically-driven stop-everything sorts of things. Keep fear mongers, authoritarians, and ideologues away from the regulatory pen.
Complexity is death. Regulations that categorically stop you from acting are death. Things that encumber agility are death. Anything that saps your time is death, since time is often worth more than money. As a founder I'd rather pay more in taxes on profit as long as the government stays the F out of the way of my time and my executive decisions.
The ideal setup for maximum entrepreneurship would probably be some kind of libertarian socialism: moderate and moderately progressive taxation, health coverage, guaranteed minimum income or negative income tax, and a simple regulatory structure that makes it easy to form new ventures, hire and fire, etc. Other than that the governments gets out of the way and lets people try new things.
One caveat on progressive income taxes: they should not be too progressive and there probably should be lower taxes on capital gains. Investing in long-sighted things should be a form of tax shelter. That's a good thing.
The best would probably be a progressive tax curve but where the curve doesn't start to increase until you get really, really up there. Another rationale here is diminishing marginal utility of money-- eventually you get to the point where more money does not materially alter your circumstance in any perceptible way. That's the point at which taxation should become more progressive. At that point you are as rich -- as subjectively experienced -- as a human being can possibly be, and the rest is "savings beyond planned investment" as Keynes would say.
"maximum entrepreneurship would probably be some kind of libertarian socialism"
Yes, but your libertarian socialism is neither libertarian nor socialist.
Socialism is the central control and planning of the means of production while libertarianism is the limitation of central power to maintenance of peace and property. Your proposal involves essentially no central planning and plenty of state activity beyond the night watchman libertarian limits.
In fact, you propose the welfare state. The government provides or funds basic social insurance for everyone by taxing mildly progressively everyone with income and property. Health care, education, basic income in case of misfortune, and pensions are arranged for everyone, but the economy is not tightly regulated, monopolized, planned, or centrally administrated.
Welfare statism works very well in practice if socialism can be kept out of it. Note that socialism actually does not require any redistribution of income and the implicit redistribution from social insurance actually accomplishes more redistribution than mid-twentieth century socialism did in practice.
> I would say that's for historic reasons and the egregious amount of money you possess as a country rather than some in built ability to take risks?
Indeed. The US is very young, and throughout history, we had many temporary centers of innovation - from various parts of Europe to Middle East to deep Asia to Africa.
According to this list[1] with data from the World Bank, Netherlands is 35th has 45.05 small businesses per 1000 people. Do you have a stationary shop on your corner or in your neighborhood? I certainly had access to many small businesses in Rotterdam, that would have folded 25 years again the States, replaced by mega corps and big box retailers.
The United States on the other hand is 69th on the list with 19.98 small businesses per 1000 people
in all fairness, comparing numbers of micro businesses across countries is tricky. differences in tax laws can create incentives to register as a micro business vs some other way, but not much of a measure of large scale entrepreneurship. But, either way, little evidence that US is more entrepreneurial
It doesn't seem helpful to equate small businesses and startups. Usually meme about "entrepreneurs being good for the economy" is referring to the latter, who fundamentally change how it works, finding numerous non-obvious efficiency improvements, rather than giving slightly cheaper picture framing.
I guess small businesses include the so-called ZZP-er (freelancer), for many jobs paid pretty crappy. In the Netherlands, especially for low income jobs like packet delivery, many Dutch companies hire ZZP-ers these days, since it's easier to get rid off. It's really hard and expensive in The Netherlands to get rid of bad performing employees with a permanent contract, especially compared to the USA. Because of this reason many companies prefer to hire ZZP-ers currently.
From recent statistics I understand we have approximately 800.000 ZZP-ers in the Netherlands or 1 per every 21 citizens.
I think even in the best case scenario Welfare State is only going to be one small factor in the rate of entrepreneurship, so Americans can easily be more entrepreneurial than Europeans despite the lack of welfare state. Culture, education, role models etc are all also going to be important. I think this data shows increasing welfare in America could increase entrepreneurship even more.
We're discussing an article based on multiple research studies by somebody at the Harvard Business School. Rebuttals should be based on more than vague anecdotes.
For this reason I think such a study should be focused on Europe and compare the countries there with each other, to see if this theory is a good one or not.
I don't think it makes much sense to compare it to US, because there are other factors contributing greatly to the success of US entrepreneurs and it has nothing to do with "being more risk-averse or not".
It has to do with the fact that the US is actually a huge single market. EU really isn't right now. It's not easy to just launch a company in a country and easily have success in another. Certainly nowhere as easy as it is to launch an online business in one state in US and have success in other states.
There are other factors, such as concentrating many entrepreneurs in one place, which also leads to a concentration of investors in one place (talking about Silicon Valley here).
There's also a huge concentration of media in the US that is followed by other countries as well. How many European media sites or blogs do you know? I bet you can count them on one hand. It's much harder for a company in Europe to get promoted across all European countries, let alone to have Americans hear about it.
I'm sure there are many other factors as well that make the US a much easier startup environment than Europe.
Keep in mind that some cities/states have much more generous social safety nets than others. Utah, is perhaps a bad example due to the confound of Mormon culture, but it has a good safety net and tons of entrepreneurs.
I can attest to that. I am not American and I believe that one of the bright spots in America is the entrepreneurial spirit of its people in general.
People in America love taking risk and pushing the envelope experimenting with new stuff and technologies and that's one of the major strengths of this nation but I wouldn't go too far to express something like this far better than anyone else in the world. That's just absurd patriotism and there's no doubt about it.
The Internet exists because of massive and very long-term spending on scientific research. This was a massively successful public works program, which led to a colossal boom in entrepreneurship.
Likewise, I'm no fan of the Department of Defense in this country (the US), but the research they're currently funding in robotics has similar potential.
"Americans embrace risk," as you say, partly because our government creates incredible opportunities through public research which can easily be transformed into private profit. Also, the article repeatedly demonstrated that Americans embrace risk more when they have a social safety net.
You can't hand-wave away research with a generalization, especially not when the research you're hand-waving away has gone into great depth examining the detailed workings of the underlying truth which made your generalization possible in the first place.
One certainly cannot axiomatically assert the internet wouldn't be here without the U.S government. Although it has definitely helped, the community programmers and engineers were the `fathers of the internet`.
If the government hadn't invested, there would certainly be analogous technologies and initiatives built on top of scientific developments. It's just too hard to say how it'd be like
Without the government it would be a hodgepodge of walled gardens based on different protocols and standards with everyone trying to make a 'platform play' to lock it down... exactly like what you see today with OSes. You'd also have complicated fee structures with every little service charged differently since telcos would want to charge a la carte for access to individual protocols and endpoints.
There are at least two ways of looking at this: one is to compare countries, the other to compare what the same individual would do in different countries.
There are quite a few non-Americans working in the American technology sector. I've worked on teams with 30% American content, the rest coming from around the world. Talking to those people, it's clear that they are taking advantage of the best of both worlds: the large capital accumulations that are available for investment in the US, but with the backup plan of going back home to a sensible social welfare structure if things don't work out.
I've been in the same boat: a Canadian who has lived and worked in both the US and Canada. I've taken risks--particularly as a husband and father--that my American colleagues could only take because they were childless and had spouses who worked. Knowing that no matter what happened, my kids would have access to a health-care system that produces significantly better outcomes at significantly lower cost to the public purse than the American mess, was without question an enabler for me. I was very conscious of this in making business decisions, including the decision to go into business (while broke and unemployed in the wake of the dot-com crash, as it happens.)
Had I been in the US at the time I would have been scrambling to find a job so my kids would be covered by decent health insurance.
Maybe my case is atypical, but some kind of comparison between foreigners living/have lived in the US vs natives might shed some light on this question.
> America is a "if you're going to fall, you are going to fall all the way down, and no one is going to save you, no matter what". And somehow, a huge part of the world's entrepreneurs and innovation come from there. I don't know why.
It's not that bad. People do look out for each other. They try to save each other from themselves. America is risky in that if you don't take steps to protect yourself from the broader market, eventually that exposure will over time erode your social position.
There are ways to protect yourself, most of them involve mobility. You get out of crappy markets, crappy jobs, crappy situations. You move towards hot spots, hot markets, hot ideas. So long as you keep moving with capital and wealth, that wealth will protect you because America is a place where there's always a shortage of good people available to do things.
If you don't want to be mobile, then you have to make up for that with planning. There are retirement vehicles that take time and skill and planning to execute on. Insurance products that take the sting out of all kinds of horrible risk. Health plans that will give you a baseline of care that you can then start planning your own health on.
To gain access to this world you need a certain amount of means, but you can generally trade time for capital. For example, you can shop around for insurance, health plans, and such. You can usually find something that will work at a very basic level that's relatively affordable. There's always someone out there that's recognized the market segment you are searching in and has a service tailored for you.
America's social services are also typically pretty good. It's certainly a point of contention, but people aren't starving, your dignity will take a hit if you end up homeless but Americans are compassionate enough so that, for instance, homeless people in San Francisco can find someone to loan them their garage. We don't like to see people suffer, and there are numerous church groups, social services, even the cops will take pity on you if they see you're really struggling.
America really takes its economy seriously, and everybody's expected to contribute to it, so we will not respect someone if they choose not to participate, but we won't let them starve, either. People who stay on the streets long-term are generally people who simply cannot contribute for whatever reason. Plenty of people become homeless for economic reasons, but the economy is fluid enough that they'll find a berth eventually, if they want one.
> I live in Europe because I prefer the slower pace, the old world, the semblance of an actual culture, the environment that has not eaten itself from capitalism taken to the extreme.
Well, you can thank American capitalism and ingenuity for that even existing, given WWI and WWII and the Cold War.
You are spot on when it comes to the difference in cultures. But Europe has little bearing to the argument as the question was more about US welfare.
And don't pretend you don't know why entrepreneurs come to the US... we all know why, that's where the money is. Investors and consumers with spending money. It's as simple as that.
It seems to make a little sense: If you're not worried about the worst case scenarios you can take on more risk.
ie: if you know your kids wont starve (food stamps), you wont end up in permanent debt (bankruptcy laws), you wont be killed by your creditors (social order) etc etc. then you can do things (start a business) that would otherwise risk those consequences.
A welfare state is reducing some people's economic security to add to other people's economic security. There is no way that can produce a net increase in entrepreneurship. Plus, a welfare state adds more regulations that block private enterprise in various areas and make it more difficult. Moreover, a welfare state hurts economic growth overall, also dragging down the total amount of entrepreneurship.
I'm going to throw this out there: If I had a proper social safety net and I didn't have to worry about things like health insurance, I'd be much more likely to start a business and take some risks.
So, uh... sources? Because the parent article had sources. Simply from a logical standpoint, it makes sense to me that having a safety net would make person less risk averse.
Yes, there are two sides to the coin. Look at France, which once had a 75 percent tax rate [1] on the wealthy. When you are only getting 25 percent of what you make (or even 50 percent in many countries), you have that much less incentive to succeed and others have that much less incentive to invest. There are not very many French startups, relative to other countries.
I'm not saying you can't have the best of both worlds. You could have a good social program and low taxes, if you cut things like defense spending (I believe in a strong defense, but I also believe that in the US we let contractors bill excessively and do little to curb it). But I think you give the consumer more freedom when you just cut taxes - it gives them the choice of what they want to buy, without government imposed restrictions (i.e. certain things not being covered in healthcare, having to live in low income housing, etc). If you want to encourage startups, you can always provide government grants (most countries already do in many areas), or tax breaks for small businesses.
France is definitely a counter example in my opinion: one of the strongest welfare in the world is producing more unemployment than anything, and certainly not entrepreneurs.
Just because there aren't french startups doesn't mean that french entrepreneurs aren't successful. This is about culture, not "where are startups located".
I believe there is nothing that differentiates a French man from an American (a large part of America was colonized by the French, after all!). French entrepreneurs can be just as successful, but IMHO they would flourish better in a lighter government.
I think we're vastly different. When in school in France, nobody will ever ask you if you want to start a business, and entrepreneurs are depicted as vilains. Your family will consider you've chosen the dark side of the force and will insist a "regular job" would be so much less risky. You'll
have no idea how a business works, and nobody really knows around you.
You'll be told to get a job. You'll be told that working for the government, like 25% of the people, is the way to go. You'll be told that you must choose welfare (France) or business freedom (USA).
You'll be told that the only good business is a non-profit association.
etc...
We're all humans, but we're made different by the society. And it takes efforts to fight what "culture" has put in your mind.
In french, we use the same work for "company" and "society"...
The post-World War II US had even higher top marginal income tax rates than that, but many see the US 50s as glory days economically. Certainly there was a lot of progress and innovation going on.
94% for 1944 and 1945. Above 90% until 1964. Above 70% until 1982.
Yes, has largely to do with our shift from blue collar jobs I think (we are no longer producing housing/infrastructure/automobiles/etc at the rate we once were). We are seeing this growth in places like China and India where these jobs still dominate.
I don't follow. Companies like Apple and Microsoft, among others, were founded regardless of the US having a 70% top income tax rate; what's the connection between that and blue collar jobs?
Oh, I'm just saying that the 50s were "the glory days" because there was no shortage of jobs, relatively low inflation (IIRC?), high housing demand, etc. College degrees (up until maybe as late as the early 90s) used to guarantee you a good job, and student debt was far lower, and overall there are many factors that you can't necessarily correlate directly to economic policy (IMHO). A lot of our jobs are going overseas (but they are jobs we don't particularly want, I suppose). That goes as well for current economic policy I think - for example, we see a lot of growth in Silicon Valley even though California is no haven for businesses (albeit many of those get registered in Nevada).
this is true, but at the same time US had all kinds of allowable deductions that no longer exist, so the effective tax rate was nowhere near those levels. Very few people actually paid 94% tax rates, if any
France is actually one of the examples used in the article.
"When France lowered the barriers to receiving unemployment insurance, it actually increased the rate of entrepreneurship.. Until 2001, citizens on unemployment insurance had little incentive to start businesses, since doing so would terminate their benefits. Instead of gutting the program, the state simply decided to let anyone who founded a business keep drawing benefits for a limited period, and guaranteed that they would be eligible again if that business failed. The result: a 25 percent increase in the rate of new-firm creation."
Yes, its a good example, although difficult to pin causation/correlation as I'm sure there are many other variables in play. :) I'm not trying to dismiss it, only throw the theory into question.
This article is based on multiple studies done by people at Ivy League institutions. Trying to "throw the theory into question" with a few generalizations isn't contributing to intelligent discussion.
HN is fast becoming Slashdot, where people only read headlines before diving into commenting.
Your statement is completely dishonest. It is NOT a 75% tax. It is a 75% tax on income over 1MM Euros. HUGE difference.
And your bit about simply cutting taxes is just not true. It has not shown to be true in any of the areas of the country where taxes were aggressively cut. In fact, in some of those places, like Kansas, things are worse than before, because the gains you claim would come never did, and they didn't have the income to be able to continue aid for things like education or food stamps.
The first thing I expected the article to show: a correlation between welfare state strength and rate of entrepreneurship, with the counterintuitive result that there are numerous countries with higher rates than the US and weaker welfare states, but if there are, it didn't list them.
The closes it comes is showing that the already-abysmal rates of entrepreneurship for people around CHIP eligibility levels, it's 30% higher for people just below the bracket.
Then there's idle theorizing about how food stamps "must" embolden entrepreneurs because they know they can fall back on it if their venture fails. While it sounds superficially plausible, can anyone give a concrete example of the kind of hypercompetent person who launched a successful startup and who would also have needed food stamps if it didn't succeed? Bezos? Musk? Kalanick? Even Brin or Page?
Sure, but I think the causality is reversed: had they not been rich, they are still extremely capable people who could and would have build up a big buffer before starting their business, which didn't depend on food stamps.
"The first thing I expected the article to show: a correlation between welfare state strength and rate of entrepreneurship, with the counterintuitive result that there are numerous countries with higher rates than the US and weaker welfare states, but if there are, it didn't list them."
"Then there's idle theorizing about how food stamps "must" embolden entrepreneurs because they know they can fall back on it if their venture fails. While it sounds superficially plausible, can anyone give a concrete example of the kind of hypercompetent person who launched a successful startup and who would also have needed food stamps if it didn't succeed? Bezos? Musk? Kalanick? Even Brin or Page?"
How about J. K. Rowling? She was on welfare when she wrote the first Harry Potter book:
“Harry Potter” author J.K. Rowling argues that there’s magic in government benefits. She stopped by “The Daily Show” to chat with Jon Stewart about her new book “The Casual Vacancy,” and delved into how government assistance helped her survive in her early years. “I couldn’t have written this book if I hadn’t had a few years where I’ d been really as poor as it’s possible to go in the U.K. without being homeless,” Rowling told Stewart. She added that “We were on welfare, what you we call welfare, I would call benefits, for a couple years.”[0]
If you listen to Neil deGrasse Tyson's interview on Star Talk with Elon Musk you will hear Musk talk about how he ran an experiment to see if he could live on $1 a day, and once he realized that he could do that he decided to take risks and work towards his first startup. I'm going to paraphrase here, but he essentially said "Once I figured out that I wasnt going to starve, I knew I could take risks". Seems like a pretty good anecdote to me.
I totally get this. Most people I know who are on welfare also describe themselves as "entrepreneurs". Unfortunately, they are not very good at making or saving money.
>America is a "if you're going to fall, you are going to fall all the way down, and no one is going to save you, no matter what".
I don't see how this is even remotely true. There are 42million people on food stamps, costing $82bn a year. This is a mere fraction of the spending that goes towards catching falling people. There is no capitalism. Open your eyes.
Assuming a perfectly efficient system, that's slightly under $2,000 per person per year.
Divided by 52 weeks, that works out to $38.00 per week in food aid. (In a perfectly efficient system; so, let's say a bit less).
Federal, State and Local governments had combined revenue of around 6 TRILLION dollars last year, 3.2 trillion of which was for the Federal government.
Does it seem unreasonable to you that the richest country on earth would spend 1/39th of its Federal revenue to give impoverished citizens $30/week of food aid?
A welfare state is not incompatible with capitalism. Actually, it is a natural consequence of capitalism, a thing bolted on to try and work around some of its more severe issues.
I can see the argument making sense that with a strong safety net folks are more willing to take risk. I know for me and my family needing to shoulder the full burden of health care expenses, even with the ACA changes, was one of the major inhibitors to striking out on my own. Even with the ACA and the opening up of the individual direct insurance market, we end up with a catastrophic high deductible plan that makes me loathe to seek medical care for some issues that maybe I should take care of and that a citizen of a nanny state wouldn't think twice about going in to have checked out.
Unfortunately a strong welfare state often goes hand in hand with a stronger bureaucracy in general including many regulations, red tape, unfavorable tax codes, and other obstructions to entrepreneurship. This is where the US trumps the strong welfare states.
"Unfortunately a strong welfare state often goes hand in hand with a stronger bureaucracy in general including many regulations, red tape, unfavorable tax codes, and other obstructions to entrepreneurship."
Often... in general... - too many maybes. I know for a fact that the UK and Ireland make it very simple and painless to start up.
"This is where the US trumps the strong welfare states."
Does it? Most regulations are set at the state level as well, so you're saying that, say, Massachusetts is more bureaucratic than North Dakota?
Most people in this thread are conflating "entrepreneurs" and "startups". Anecdotally there are a lot more small businesses (bakers, butchers, independent bookstores, family owned clothing stores, etc.) in Europe than in the US. The people who own these establishments are every bit the "entrepreneur" the founders of Uber are.
Maybe the US has more startups on the ultra-successful end but that doesn't say much about the chances of the average person starting an average, unremarkable business.
I could see a lack of social safety nets, increased costs/risks of safely running a compliant business and corporate consolidation being behind this trend...
Interesting to see that entrepreneurship among the 20-34 cohort is sharply down. In marked contrast to the prevailing narrative which says we are an entrepreneurial generation.
The article mentions student debt. I'm part of that cohort, and did start a business. I'm Canadian. If I had had the average US student debt, I never would have got started.
Though the pizza shop owner isn't that unique or in large scale to help a lot of people, so the impact is far more limited. Who cares whether someone can semantically be called "entrepreneur", etc.
If they didn't do their pizza shop, no one would notice, but if we didn't have high growth startups, I think we'd feel that impact far far more.
This is not to imply that high growth = high impact, because there's of course a ton of rent-seeking bullshit out there to be condemned.
If we're looking at "entrepreneurs" as a source of growth, then yes, startups are what we're looking for.
If you don't start that pizza business, I'll buy my pizza somewhere else.
Startups create new markets through innovation. A Facebook-like is like the pizza business. Facebook (or its ancestors) was the market creator.
Uber has similarities with the pizza business, but it's all about transforming a business (taxi service) into something else. So it's between pizzas and Facebook.
So I guess there are various levels of disruption or creation of the market.
But the pizza business is probably at level 0 of disruption/creation.
> But the pizza business is probably at level 0 of disruption/creation.
There are no pizza restaurant in my town, but plenty of Indian and Chinese take-aways and one each of the big three fast-food chains.
So if a pizza business arrived it could be disruptive to the status quo, particularly if it offered something that the others didn't e.g. delivery beyond two miles or first-class vegetarian options.
Another example of simple disruption is a shop which opened offering walk-in printing. You just pop your memory stick into the machine and hit 'print'. This completely undermined the library which previously had a monopoly on printing and which took > 15 minutes by the time you waited for a librarian to authorize the printing.
Neither are particularly exciting, but both offer a disruptive service.
Well, sure, you can argue about how you want to model it. But what you're referring to is pretty clearly not what the article is about. Especially since it mentions the historic role of immigrants as entrepreneurs and so on, which in my mind I closely associate with the trope of the small-business-owning first generation American.
"More" doesn't necessarily mean "more successful". It's not unreasonable that government intervention creates more entrepreneurs - as a Canadian I know I can go and get tens of thousands to start my own company along with some nice tax breaks - but it doesn't mean they would produce much value or amount to anything more than a barely afloat small business.
I suspect there is a correlation between welfare provision and protectionism around small businesses/anti-big business behaviour. This would lead to many more small businesses than the free market would support, but there is a bit of a question mark over how entrepreneurial and economically valuable this is.
I live in Amsterdam (cited elsewhere in this thread as being entrepreneurial): I appreciate having small independent shops and see the Dutch entrepreneurial attitude relative to other European countries in which I've lived. But I also understand why Hacker News readers would not believe the article is reflective: the majority of these businesses are not going to risk everything, change the world, or be worth millions/billions. Perhaps the count alone is not a useful metric.
edit: I'm European. Lots of neutral comments treated to downvote-disagree in this thread.
I think entrepreneurship is more of a mindset where you liberate yourself from the wage constraint and take control of your life by directly producing value for others.
Changing the world and being worth billions is just the Silicon Valley mythology, but that is not the only 'real' form of entrepreneurship there is.
Dare I say, a small business owner is more of an entrepreneur in my opinion than some wealthy dude who made an app, raised 5 mil, and ran the company into the ground in 12 months.
Now startups are great, but I really don't get the contempt the startup-types hold for small businesses. Maybe that's just a form of class contempt.
I like your perspective and agree the 0.1% of glamorous tech startups do not define the whole word. I think though that more people lean towards a concept of risk-taking and innovation (me too).
I guess my hypotheses are: a) HN will mostly lean this way too; b) America will mostly lean this way (but I have not lived there); c) if you accept this definition, European business are on average less of this style than American ones (due to government mitigating their risk or them being in established segments) in some - but definitely not all - cases.
You are of course free not to accept the definition ;) and I could be wrong about what the majority of HN readers/Americans think. If I'm not, the Atlantic - an American magazine with mostly American readership - is being a bit unrepresentative. As others have said, even if I'm wrong the conclusions seem a little strong for the evidence.
I am European (Swedish), but I have a hard time wrapping my head around the notion that the welfare state would produce more innovation/entrepreneurs. We have a large public discussion here in Sweden that we need to create more new companies and we definitely have a welfare state.
I would argue that a welfare state COULD be helping entrepreneurs, but that depends where all the taxation for the welfare state comes from. In Sweden it is very expensive to hire people for example, and it is also very hard to fire people (besides the point, taxation-wise, but still), The companies that hire people pay a large part of the welfare state. This makes it very hard to grow a company since it is so very expensive to hire.
The two Olds papers both use clever triple difference designs (e.g. you're using change in entrepreneurship amongst those who've just become eligible for food stamps in one state relative to those who were already eligible as the treatment group, and the change in entrepreneurship amongst those same types of people in another state that didn't have a change in eligibility laws as the control group) which are hard to find fault in. It seems like a lot of people are arguing "other countries have strong welfare states, but less entrepreneurship", but that's a different question - most of the papers cited are arguing that in the United States, a strengthening of the welfare state leads to increased entrepreneurship. That does not mean that this would be true in other countries, nor that moving to a proper guaranteed minimum income would increase entrepreneurship, nor that entrepreneurship is the best measure of dynamism in the economy. But it is pretty convincing evidence that giving potential entrepreneurs the ability to fail at starting a business without too severe of consequences increases the rate at which they'll start businesses.
One question I had was whether the overall rate of entrepreneurship increased. As you note, the papers seem to focus on rates within the population that receives the benefits, but the typical conservative argument is that the cost of those benefits in taxes retards economic growth overall. I'm not suggesting that they are right (as far as I know no substantial link has yet been found between low tax rates and economic growth), but it's a question worth addressing in the article and it was not.
Honestly, social-structure probably has a lot more to do with amount of entrepreneurs in a nation. In America, we utter the word "entrepreneur" the same way a 1960s boy would utter the word "astronaut" (or, if Soviet, "cosmonaut" or "potato"). As an American, I take it for granted that I can do a startup without my wife fearing she'll be ostracized by her friends, that I can still find a job if things don't work out, and the general public thinks it's endearing to support local/small businesses. Plus my parents don't feel the need to wallow in shame if I were to stay in their garage for a year to build my prototype (unless they're Asian), which effectively removes all my internal barriers to quitting my job and going down the path less traveled. The fact that social-security is there for me when I retire at 65 (lol) or so, general medical insurance won't be denied to me (considering the demographic of your average entrepreneur, why would it in the first place?), etc., don't occur to me at all.
As much as your average 20-something cynical know-it-all likes to bag on our education system and its spew of "you're special", "believe in your dreams", "don't be afraid to do something if you truly believe in it", etc., I should think it's that very sort of indoctrination starting at a young age that is ultimately responsible for so many Americans casting caution to the wind and pursuing their "American Dream", and for so many other Americans to sympathize with and be willing to support such folk on their trek.
But I will admit that the one government innovation that definitely helps entrepreneurship is the creation of the corporation. The fact that I can create this entity that's owned by me and the family, friends, and fools who believe in me, and that if things go South, the corporation can die without dragging me down with it, is extremely helpful in encouraging folks to venture. If I was a builder and the law was that if a house collapses and kills its residents, the builder will be found and killed in an eye-for-an-eye manor, I'd seriously think twice about building a house for anyone other than myself.
So what encourages entrepreneurship? Telling people since the founding of your nation that entrepreneurship is good and providing a means of separating the entrepreneur from his corporation.
If the conclusion of this is true, why aren't we seeing grand scale innovation and entrepreneurship from European countries that are most certainly very strong welfare states?
Why instead are we seeing massive amounts of unemployment?
There seems to be a delicate balance to strike to get this right. The fact of the matter is that in many European countries someone who is not working can enjoy the same standard of life as someone who is, except they don't have to get up in the morning to earn it.
Those benefiting from these states likely have very little incentive to rock their own boat of comfort by stepping out and taking on debt/risk for more of a reward. Especially when you throw high taxation into the mix, where that risk/reward ratio is further skewed because even if you do very well you'll end up paying the state a huge amount of tax, to then support the same welfare system.
In the US, on the other hand, you've a significantly less generous safety net and I would imagine the vast majority of those who fall into it from a more grand place - such as being securely in the middle class - would fight more to get out of it.
That's intuitive anyway.
Where the argument starts to fall apart is when you look at all the young tech entrepreneurs, whether it's hardware or software, or those starting up new media companies, or whatever, very few seem to come from the type of background where if they failed they'd end up on food stamps.
Are they better risk takers because they have a better, non-government provided safety net, perhaps? Which then goes on to conflict with the enhanced safety net available in Europe and the comparatively low level of innovation and entrepreneurship.
My conclusion would be that the government provided welfare is likely not a factor in determining innovation and entrepreneurship and that there's other, less obvious, factors at play.
"If the conclusion of this is true, why aren't we seeing grand scale innovation and entrepreneurship from European countries that are most certainly very strong welfare states?"
Most studies show European countries having far higher rates of small business and family business ownership than in the US.
" The fact of the matter is that in many European countries someone who is not working can enjoy the same standard of life as someone who is, except they don't have to get up in the morning to earn it."
This is entirely false, and spoken from someone who has no idea what they're talking about.
> Why instead are we seeing massive amounts of unemployment?
In 2010 the unemployment rate in the Eurozone and the US was about the same. Since then in the US it reduced by 2.5% while it grew by 2.5% in the Eurozone.
The reason for this is the austerity policies forced upon the Eurozone by adherents of a particular economic ideology, whereas the USA had fiscal stimulus, as well as regular fiscal transfers from the richer states on the coasts to the poorer ones in the center and south via the federal budget.
> The fact of the matter is that in many European countries someone who is not working can enjoy the same standard of life as someone who is
The fact of the matter is that in Spain unemployed citizens are looking for food in garbage bins. How many working people do you know who do that?
A very important premise has been ignored: the consequential government intervention in the economy. That means hundreds of regulations that constitute a barrier for many aspiring entrepreneurs.
Living in a welfare state, it took me 7 months to incorporate and ~$50000 on licenses+fees to start a simple exporting business. Maybe America and certain EU countries just haven't gotten there yet.
Kafkaesque licensing processes and protectionism are totally orthogonal to the welfare state, as demonstrated by many a developing country which neither permits the average person to try and start a business larger than a food stall nor provides them with access to any form of welfare whatsoever.
Edit: Do people genuinely believe that the average sub-Saharan African state, or even growing economies like Vietnam or Indonesia are either easier to legally form a trading company in or more generous with welfare (relative to incomes) than say, the UK, Sweden or even the USA? If there's evidence rather than blindly partisan "he said welfare states weren't bad for business" knee-jerk reactions behind the downvotes, I'd really like to see it.
Worth noting that a "welfare state" approaches basic income as it benefits more and more people.
Without getting into the various hairballs on here about the truth of the research, -if- this were true it might imply that the core conjecture of a basic income promoting innovation holds up.
However I could be wrong, I haven't been around on HN for long time.
Also I personally value skepticism, but I come from a semi scientific-engineering background.
It was pretty hammered hard into us lab techs, we need to be skeptical of our bioinformatics results, you never knew what hidden confounding factor could be affecting the experiment. We even tried to use markov models to help find hidden confounding variables.
There is here too. Not from The Atlantic but in the form of right wing ideological sock-puppets. If you are skeptical of this claim then read the article and its evidence and the comments and their lack of evidence and consider which is which.
Just because there are some smart people here doesn’t mean there aren't kooks.
On the issue of sock-puppets, it seems like you can have sock puppets for any issue.
After reading https://news.ycombinator.com/item?id=9269760, I suspect there are not only "right" or "left" wing sockpuppets but corporate pr puppets too. I suspect some sockpuppets could drive up controversy to increase ad revenue or product awareness(viral marketing?) as well.
disclaimer:I have no opinion on this Atlantic article nor am I familiar with site. I just didn't think the original criticism of "conservatism" on HN was accurate.
Also I don't think I understand why an article(I don't feel the Atlantic piece is propaganda) can't be propaganda, and the comments section can't be propaganda in another direction.
I'm still looking at evidence,but a big and bold claim should have some fairly bullet proof evidence.
I'd also hold something like Crispr https://news.ycombinator.com/item?id=8171039
to the same standard.
Game changing gene therapy ? I would like some good fairly bullet proof evidence.
Otherwise I think its reasonable to fall to a skeptical position.
Of course one should hold all ones beliefs lightly.
But to dismiss quality evidence because of crackpot comments is irrational.
I know nothing about gene therapy. But if you find a venue where peer reviewed papers on global warming are greeted by a flood of comments who deny it yet don't explain why then saying they are equally valid or equally likely to be propaganda is not being rational, it is failing to see a dangerous anti scientific social movement.
>corporate pr puppets too
To whit, post an article about Facebook's appalling privacy policy and watch what happens.
There is a point where this makes sense, but I would venture to guess that there is also a point where increased welfare benefits yield less and less entrepreneurship. People have to be willing to take a risk because they believe they could be better off - if the benefits of welfare were too great, there would no longer be any desire to take risks.
I certainly felt the Canadian social safety net made it easier to start my business.
First, my health care was covered. So I didn't have to worry about that downside risk. In fact I even had a major health problem two years in when money was tight. My medical care was a non issue financially.
I had some extended health insurance through my parents in the early years. Covered wisdom tooth extraction, and rehab to fix an arm injury. (I needed this to type). Not government safety net, but similar effect. Some countries would cover this sort of thing.
Tuition is lower in Canada. Low student debt. And repayment is very lenient for entrepreneurs and low income people. Never had to make payments or interest while starting up.
There are tax credits for low income earners. I received about $1000 a year in cash payments for sales tax credits. Tuition credits prevented my paying income tax starting out.
I would have gone bankrupt several times over without the above. Or maybe not even started. Instead, this year I'll be sending the government a large amount of income and sales
tax payments, and I'm glad to have the opportunity to do it.
On the other hand, there was almost no red tape for starting up. This was crucial. I didn't have to ask permission, I didn't need to pass a capital threshold, I could easily open accounts for my business and I didn't even need to register my company. And I didn't have to bother with sales tax until I passed a revenue threshold.
Keeping that sort of bureaucratic regulation low is also crucial for encouraging business creation.
Argh, yet another simple economic principle conflated by politicization.
Entrepreneurship is directly correlated to easy access to capital and the legal environment surrounding both starting and maintaining a small business... this has been proven ad nauseam.
I can't directly critique the papers linked in the article (especially because one of them 404's) right now, but I'd be willing to be a lot of money they cherry pick policies that (either directly or indirectly) created greater access to capital or made it legally easier to start and run a small business. That, or they've found some correlation between the two and are trying to gloss over the actual economics of the deal and support their political opinions.
Strong "social good" (read: welfare), strong laissez faire, totalitarian, anarchic, doesn't matter your political leanings as long you increase capital and ease of legal machinations you will experience an increase in entrepreneurship (comparatively, of course).
Surely there can be more than one thing which has an influence on rates of entrepreneurship... Why couldn't it be the case that both increasing ease of access to capital increases entrepreneurship and, separately, increasing security against risk of destitution via a strong welfare state increases entrepreneurship?
Although the cost of healthcare is not insignificant, it pales in comparison to general living expenses (food, rent, utilities, etc.).
Everyone is discussing conceptually, here are concrete numbers... When I was striking out on my own a few years ago health insurance was "the big one" everyone brought up, so I went on Kaiser's website and got a quote from ~$250 - $450/month (varies with copay, benefits, out of pocket max). It's a bit of a cost though not nearly as scary as everyone makes it out to be and not enough to plunge you into the depths of debt if things don't work out (it's also tax deductible).
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[ 3.4 ms ] story [ 208 ms ] threadAmericans are much, MUCH more entrepreneurial than anyone in Europe. I'm American, I live in Europe, I know this very, very well. (Yes, anecdotally speaking, of course!)
Americans simply embrace risk, and embrace potential failure, far better than anyone else in the world, taken as a whole. Europeans meanwhile are a more gloomy bunch, more risk-averse, and far less likely to strike out on their own. Notable slight exceptions being the Dutch to some degree.
America is so far from a "welfare state" - it is about as far away as you can get. America is a "if you're going to fall, you are going to fall all the way down, and no one is going to save you, no matter what". And somehow, a huge part of the world's entrepreneurs and innovation come from there. I don't know why.
And don't take me as some kind of patriotic jingoist champion of the US of A - I am just about as far as you can get from the "Yeah Murica" kind of ultra patriots - heck, I live in Europe because I prefer the slower pace, the old world, the semblance of an actual culture, the environment that has not eaten itself from capitalism taken to the extreme.
Nice linkbait headline though. :)
All these are "Europe" - but in terms of culture, finance, social welfare, educational systems and much else beside they are very different.
Some more than others, but no one in europe comes close to the entrepreneurial energy of the USA.
So I can go anywhere in the USA and find the exact same amount of entrepreneurial energy as everywhere else? Good to know.
Where did you think "entrepreneur" came from?
Americans in a few cities and regions are very entrepreneurial. These are not necessarily the cities and regions with the lowest taxes, most "business friendly" policies, or anything else that right wingers would consider likely to produce entrepreneurship. California is incredibly entrepreneurial, but it never shows up on those top ten lists of most business friendly states.
I think that strongly argues for this being cultural.
Notice, all three of the above do not require a state sponsored safety net, and it is that need for a safety net against destitution that creates an entrepreneurial mindset.
Without that safety net you don't get many risk takers.
High-ish taxes are okay as long as they are not punitively high. Regulations are okay as long as they are easy to follow and simple to understand, and as long as they aren't over the top ideologically-driven stop-everything sorts of things. Keep fear mongers, authoritarians, and ideologues away from the regulatory pen.
Complexity is death. Regulations that categorically stop you from acting are death. Things that encumber agility are death. Anything that saps your time is death, since time is often worth more than money. As a founder I'd rather pay more in taxes on profit as long as the government stays the F out of the way of my time and my executive decisions.
The ideal setup for maximum entrepreneurship would probably be some kind of libertarian socialism: moderate and moderately progressive taxation, health coverage, guaranteed minimum income or negative income tax, and a simple regulatory structure that makes it easy to form new ventures, hire and fire, etc. Other than that the governments gets out of the way and lets people try new things.
One caveat on progressive income taxes: they should not be too progressive and there probably should be lower taxes on capital gains. Investing in long-sighted things should be a form of tax shelter. That's a good thing.
The best would probably be a progressive tax curve but where the curve doesn't start to increase until you get really, really up there. Another rationale here is diminishing marginal utility of money-- eventually you get to the point where more money does not materially alter your circumstance in any perceptible way. That's the point at which taxation should become more progressive. At that point you are as rich -- as subjectively experienced -- as a human being can possibly be, and the rest is "savings beyond planned investment" as Keynes would say.
Yes, but your libertarian socialism is neither libertarian nor socialist.
Socialism is the central control and planning of the means of production while libertarianism is the limitation of central power to maintenance of peace and property. Your proposal involves essentially no central planning and plenty of state activity beyond the night watchman libertarian limits.
In fact, you propose the welfare state. The government provides or funds basic social insurance for everyone by taxing mildly progressively everyone with income and property. Health care, education, basic income in case of misfortune, and pensions are arranged for everyone, but the economy is not tightly regulated, monopolized, planned, or centrally administrated.
Welfare statism works very well in practice if socialism can be kept out of it. Note that socialism actually does not require any redistribution of income and the implicit redistribution from social insurance actually accomplishes more redistribution than mid-twentieth century socialism did in practice.
> And somehow, a huge part of the world's entrepreneurs and innovation come from there
I would say that's for historic reasons and the egregious amount of money you possess as a country rather than some in built ability to take risks?
Indeed. The US is very young, and throughout history, we had many temporary centers of innovation - from various parts of Europe to Middle East to deep Asia to Africa.
According to this list[1] with data from the World Bank, Netherlands is 35th has 45.05 small businesses per 1000 people. Do you have a stationary shop on your corner or in your neighborhood? I certainly had access to many small businesses in Rotterdam, that would have folded 25 years again the States, replaced by mega corps and big box retailers.
The United States on the other hand is 69th on the list with 19.98 small businesses per 1000 people
[1] http://www.nationmaster.com/country-info/stats/Economy/Micro...
On that metric, is Europe still ahead of the US?
From recent statistics I understand we have approximately 800.000 ZZP-ers in the Netherlands or 1 per every 21 citizens.
http://www.econ.brown.edu/students/Gareth_Olds/assets/olds_f...
I don't think it makes much sense to compare it to US, because there are other factors contributing greatly to the success of US entrepreneurs and it has nothing to do with "being more risk-averse or not".
It has to do with the fact that the US is actually a huge single market. EU really isn't right now. It's not easy to just launch a company in a country and easily have success in another. Certainly nowhere as easy as it is to launch an online business in one state in US and have success in other states.
There are other factors, such as concentrating many entrepreneurs in one place, which also leads to a concentration of investors in one place (talking about Silicon Valley here).
There's also a huge concentration of media in the US that is followed by other countries as well. How many European media sites or blogs do you know? I bet you can count them on one hand. It's much harder for a company in Europe to get promoted across all European countries, let alone to have Americans hear about it.
I'm sure there are many other factors as well that make the US a much easier startup environment than Europe.
People in America love taking risk and pushing the envelope experimenting with new stuff and technologies and that's one of the major strengths of this nation but I wouldn't go too far to express something like this far better than anyone else in the world. That's just absurd patriotism and there's no doubt about it.
Likewise, I'm no fan of the Department of Defense in this country (the US), but the research they're currently funding in robotics has similar potential.
"Americans embrace risk," as you say, partly because our government creates incredible opportunities through public research which can easily be transformed into private profit. Also, the article repeatedly demonstrated that Americans embrace risk more when they have a social safety net.
You can't hand-wave away research with a generalization, especially not when the research you're hand-waving away has gone into great depth examining the detailed workings of the underlying truth which made your generalization possible in the first place.
If the government hadn't invested, there would certainly be analogous technologies and initiatives built on top of scientific developments. It's just too hard to say how it'd be like
https://en.wikipedia.org/wiki/Standard_gauge
There are quite a few non-Americans working in the American technology sector. I've worked on teams with 30% American content, the rest coming from around the world. Talking to those people, it's clear that they are taking advantage of the best of both worlds: the large capital accumulations that are available for investment in the US, but with the backup plan of going back home to a sensible social welfare structure if things don't work out.
I've been in the same boat: a Canadian who has lived and worked in both the US and Canada. I've taken risks--particularly as a husband and father--that my American colleagues could only take because they were childless and had spouses who worked. Knowing that no matter what happened, my kids would have access to a health-care system that produces significantly better outcomes at significantly lower cost to the public purse than the American mess, was without question an enabler for me. I was very conscious of this in making business decisions, including the decision to go into business (while broke and unemployed in the wake of the dot-com crash, as it happens.)
Had I been in the US at the time I would have been scrambling to find a job so my kids would be covered by decent health insurance.
Maybe my case is atypical, but some kind of comparison between foreigners living/have lived in the US vs natives might shed some light on this question.
It's not that bad. People do look out for each other. They try to save each other from themselves. America is risky in that if you don't take steps to protect yourself from the broader market, eventually that exposure will over time erode your social position.
There are ways to protect yourself, most of them involve mobility. You get out of crappy markets, crappy jobs, crappy situations. You move towards hot spots, hot markets, hot ideas. So long as you keep moving with capital and wealth, that wealth will protect you because America is a place where there's always a shortage of good people available to do things.
If you don't want to be mobile, then you have to make up for that with planning. There are retirement vehicles that take time and skill and planning to execute on. Insurance products that take the sting out of all kinds of horrible risk. Health plans that will give you a baseline of care that you can then start planning your own health on.
To gain access to this world you need a certain amount of means, but you can generally trade time for capital. For example, you can shop around for insurance, health plans, and such. You can usually find something that will work at a very basic level that's relatively affordable. There's always someone out there that's recognized the market segment you are searching in and has a service tailored for you.
America's social services are also typically pretty good. It's certainly a point of contention, but people aren't starving, your dignity will take a hit if you end up homeless but Americans are compassionate enough so that, for instance, homeless people in San Francisco can find someone to loan them their garage. We don't like to see people suffer, and there are numerous church groups, social services, even the cops will take pity on you if they see you're really struggling.
America really takes its economy seriously, and everybody's expected to contribute to it, so we will not respect someone if they choose not to participate, but we won't let them starve, either. People who stay on the streets long-term are generally people who simply cannot contribute for whatever reason. Plenty of people become homeless for economic reasons, but the economy is fluid enough that they'll find a berth eventually, if they want one.
Well, you can thank American capitalism and ingenuity for that even existing, given WWI and WWII and the Cold War.
And don't pretend you don't know why entrepreneurs come to the US... we all know why, that's where the money is. Investors and consumers with spending money. It's as simple as that.
>NO STATISTICS AT ALL
>Nice linkbait headline though. :)
Nice complete lack of statistical evidence, though.
ie: if you know your kids wont starve (food stamps), you wont end up in permanent debt (bankruptcy laws), you wont be killed by your creditors (social order) etc etc. then you can do things (start a business) that would otherwise risk those consequences.
I'm not saying you can't have the best of both worlds. You could have a good social program and low taxes, if you cut things like defense spending (I believe in a strong defense, but I also believe that in the US we let contractors bill excessively and do little to curb it). But I think you give the consumer more freedom when you just cut taxes - it gives them the choice of what they want to buy, without government imposed restrictions (i.e. certain things not being covered in healthcare, having to live in low income housing, etc). If you want to encourage startups, you can always provide government grants (most countries already do in many areas), or tax breaks for small businesses.
[1] http://www.theguardian.com/world/2014/dec/31/france-drops-75...
I mean, perhaps indirectly, but it's not like new orleans or quebec are either tech hubs or paragons of french culture.
You'll be told to get a job. You'll be told that working for the government, like 25% of the people, is the way to go. You'll be told that you must choose welfare (France) or business freedom (USA).
You'll be told that the only good business is a non-profit association. etc...
We're all humans, but we're made different by the society. And it takes efforts to fight what "culture" has put in your mind.
In french, we use the same work for "company" and "society"...
Frances problems in this area are more to do with the technocratic elite from ena running the show
94% for 1944 and 1945. Above 90% until 1964. Above 70% until 1982.
http://en.wikipedia.org/wiki/Income_tax_in_the_United_States...
"When France lowered the barriers to receiving unemployment insurance, it actually increased the rate of entrepreneurship.. Until 2001, citizens on unemployment insurance had little incentive to start businesses, since doing so would terminate their benefits. Instead of gutting the program, the state simply decided to let anyone who founded a business keep drawing benefits for a limited period, and guaranteed that they would be eligible again if that business failed. The result: a 25 percent increase in the rate of new-firm creation."
HN is fast becoming Slashdot, where people only read headlines before diving into commenting.
And your bit about simply cutting taxes is just not true. It has not shown to be true in any of the areas of the country where taxes were aggressively cut. In fact, in some of those places, like Kansas, things are worse than before, because the gains you claim would come never did, and they didn't have the income to be able to continue aid for things like education or food stamps.
The closes it comes is showing that the already-abysmal rates of entrepreneurship for people around CHIP eligibility levels, it's 30% higher for people just below the bracket.
Then there's idle theorizing about how food stamps "must" embolden entrepreneurs because they know they can fall back on it if their venture fails. While it sounds superficially plausible, can anyone give a concrete example of the kind of hypercompetent person who launched a successful startup and who would also have needed food stamps if it didn't succeed? Bezos? Musk? Kalanick? Even Brin or Page?
Here you go: http://www.nationmaster.com/country-info/stats/Economy/Micro...
The US is pretty low on that list.
"Then there's idle theorizing about how food stamps "must" embolden entrepreneurs because they know they can fall back on it if their venture fails. While it sounds superficially plausible, can anyone give a concrete example of the kind of hypercompetent person who launched a successful startup and who would also have needed food stamps if it didn't succeed? Bezos? Musk? Kalanick? Even Brin or Page?"
All of those people were already rich.
“Harry Potter” author J.K. Rowling argues that there’s magic in government benefits. She stopped by “The Daily Show” to chat with Jon Stewart about her new book “The Casual Vacancy,” and delved into how government assistance helped her survive in her early years. “I couldn’t have written this book if I hadn’t had a few years where I’ d been really as poor as it’s possible to go in the U.K. without being homeless,” Rowling told Stewart. She added that “We were on welfare, what you we call welfare, I would call benefits, for a couple years.”[0]
[0] http://blogs.wsj.com/speakeasy/2012/10/16/j-k-rowling-on-how... (search Google for "rowling welfare" and it's the fourth result; there are others)
I don't see how this is even remotely true. There are 42million people on food stamps, costing $82bn a year. This is a mere fraction of the spending that goes towards catching falling people. There is no capitalism. Open your eyes.
Assuming a perfectly efficient system, that's slightly under $2,000 per person per year.
Divided by 52 weeks, that works out to $38.00 per week in food aid. (In a perfectly efficient system; so, let's say a bit less).
Federal, State and Local governments had combined revenue of around 6 TRILLION dollars last year, 3.2 trillion of which was for the Federal government.
Does it seem unreasonable to you that the richest country on earth would spend 1/39th of its Federal revenue to give impoverished citizens $30/week of food aid?
Unfortunately a strong welfare state often goes hand in hand with a stronger bureaucracy in general including many regulations, red tape, unfavorable tax codes, and other obstructions to entrepreneurship. This is where the US trumps the strong welfare states.
Often... in general... - too many maybes. I know for a fact that the UK and Ireland make it very simple and painless to start up.
"This is where the US trumps the strong welfare states."
Does it? Most regulations are set at the state level as well, so you're saying that, say, Massachusetts is more bureaucratic than North Dakota?
Maybe the US has more startups on the ultra-successful end but that doesn't say much about the chances of the average person starting an average, unremarkable business.
http://www.washingtonpost.com/news/on-small-business/wp/2015...
I could see a lack of social safety nets, increased costs/risks of safely running a compliant business and corporate consolidation being behind this trend...
The article mentions student debt. I'm part of that cohort, and did start a business. I'm Canadian. If I had had the average US student debt, I never would have got started.
If they didn't do their pizza shop, no one would notice, but if we didn't have high growth startups, I think we'd feel that impact far far more.
This is not to imply that high growth = high impact, because there's of course a ton of rent-seeking bullshit out there to be condemned.
I completely fail to notice most "high-growth" startups. I do like my neighborhood pizza joints and ethnic food stores.
But hey, maybe that's because I share Peter Thiel's taste in startups.
If you don't start that pizza business, I'll buy my pizza somewhere else.
Startups create new markets through innovation. A Facebook-like is like the pizza business. Facebook (or its ancestors) was the market creator.
Uber has similarities with the pizza business, but it's all about transforming a business (taxi service) into something else. So it's between pizzas and Facebook.
So I guess there are various levels of disruption or creation of the market. But the pizza business is probably at level 0 of disruption/creation.
Think of Starbucks vs. your coffee shop...
There are no pizza restaurant in my town, but plenty of Indian and Chinese take-aways and one each of the big three fast-food chains.
So if a pizza business arrived it could be disruptive to the status quo, particularly if it offered something that the others didn't e.g. delivery beyond two miles or first-class vegetarian options.
Another example of simple disruption is a shop which opened offering walk-in printing. You just pop your memory stick into the machine and hit 'print'. This completely undermined the library which previously had a monopoly on printing and which took > 15 minutes by the time you waited for a librarian to authorize the printing.
Neither are particularly exciting, but both offer a disruptive service.
I live in Amsterdam (cited elsewhere in this thread as being entrepreneurial): I appreciate having small independent shops and see the Dutch entrepreneurial attitude relative to other European countries in which I've lived. But I also understand why Hacker News readers would not believe the article is reflective: the majority of these businesses are not going to risk everything, change the world, or be worth millions/billions. Perhaps the count alone is not a useful metric.
edit: I'm European. Lots of neutral comments treated to downvote-disagree in this thread.
Changing the world and being worth billions is just the Silicon Valley mythology, but that is not the only 'real' form of entrepreneurship there is.
Dare I say, a small business owner is more of an entrepreneur in my opinion than some wealthy dude who made an app, raised 5 mil, and ran the company into the ground in 12 months.
Now startups are great, but I really don't get the contempt the startup-types hold for small businesses. Maybe that's just a form of class contempt.
I guess my hypotheses are: a) HN will mostly lean this way too; b) America will mostly lean this way (but I have not lived there); c) if you accept this definition, European business are on average less of this style than American ones (due to government mitigating their risk or them being in established segments) in some - but definitely not all - cases.
You are of course free not to accept the definition ;) and I could be wrong about what the majority of HN readers/Americans think. If I'm not, the Atlantic - an American magazine with mostly American readership - is being a bit unrepresentative. As others have said, even if I'm wrong the conclusions seem a little strong for the evidence.
I would argue that a welfare state COULD be helping entrepreneurs, but that depends where all the taxation for the welfare state comes from. In Sweden it is very expensive to hire people for example, and it is also very hard to fire people (besides the point, taxation-wise, but still), The companies that hire people pay a large part of the welfare state. This makes it very hard to grow a company since it is so very expensive to hire.
As much as your average 20-something cynical know-it-all likes to bag on our education system and its spew of "you're special", "believe in your dreams", "don't be afraid to do something if you truly believe in it", etc., I should think it's that very sort of indoctrination starting at a young age that is ultimately responsible for so many Americans casting caution to the wind and pursuing their "American Dream", and for so many other Americans to sympathize with and be willing to support such folk on their trek.
But I will admit that the one government innovation that definitely helps entrepreneurship is the creation of the corporation. The fact that I can create this entity that's owned by me and the family, friends, and fools who believe in me, and that if things go South, the corporation can die without dragging me down with it, is extremely helpful in encouraging folks to venture. If I was a builder and the law was that if a house collapses and kills its residents, the builder will be found and killed in an eye-for-an-eye manor, I'd seriously think twice about building a house for anyone other than myself.
So what encourages entrepreneurship? Telling people since the founding of your nation that entrepreneurship is good and providing a means of separating the entrepreneur from his corporation.
Why instead are we seeing massive amounts of unemployment?
There seems to be a delicate balance to strike to get this right. The fact of the matter is that in many European countries someone who is not working can enjoy the same standard of life as someone who is, except they don't have to get up in the morning to earn it.
Those benefiting from these states likely have very little incentive to rock their own boat of comfort by stepping out and taking on debt/risk for more of a reward. Especially when you throw high taxation into the mix, where that risk/reward ratio is further skewed because even if you do very well you'll end up paying the state a huge amount of tax, to then support the same welfare system.
In the US, on the other hand, you've a significantly less generous safety net and I would imagine the vast majority of those who fall into it from a more grand place - such as being securely in the middle class - would fight more to get out of it.
That's intuitive anyway.
Where the argument starts to fall apart is when you look at all the young tech entrepreneurs, whether it's hardware or software, or those starting up new media companies, or whatever, very few seem to come from the type of background where if they failed they'd end up on food stamps.
Are they better risk takers because they have a better, non-government provided safety net, perhaps? Which then goes on to conflict with the enhanced safety net available in Europe and the comparatively low level of innovation and entrepreneurship.
My conclusion would be that the government provided welfare is likely not a factor in determining innovation and entrepreneurship and that there's other, less obvious, factors at play.
Because enterpreneurialism is not the sole factor affecting economic growth, and European countries are currently dealing with various other issues.
And the amount of culture and technology that comes out of Sweden alone is extraordinary for their population size.
Music: Tove Lo, Robyn, The Knife, Miike Snow, Those Dancing Days, Icona Pop, Lykke Li.
In fact, pop music around the world has been shaped and written by Swedish producers and writers, everything from Brittany Spears to Katy Perry.
And look at all the Swedish films that America loves to remake. Girl With The Dragon Tattoo, Let The Right One In, etc.
And remember, this is just Sweden, a small country of 9 million people in the middle of nowhere.
Most studies show European countries having far higher rates of small business and family business ownership than in the US.
" The fact of the matter is that in many European countries someone who is not working can enjoy the same standard of life as someone who is, except they don't have to get up in the morning to earn it."
This is entirely false, and spoken from someone who has no idea what they're talking about.
In 2010 the unemployment rate in the Eurozone and the US was about the same. Since then in the US it reduced by 2.5% while it grew by 2.5% in the Eurozone.
http://www.businessinsider.com/chart-us-and-eurozone-unemplo...
The reason for this is the austerity policies forced upon the Eurozone by adherents of a particular economic ideology, whereas the USA had fiscal stimulus, as well as regular fiscal transfers from the richer states on the coasts to the poorer ones in the center and south via the federal budget.
> The fact of the matter is that in many European countries someone who is not working can enjoy the same standard of life as someone who is
The fact of the matter is that in Spain unemployed citizens are looking for food in garbage bins. How many working people do you know who do that?
http://www.nytimes.com/2012/09/25/world/europe/hunger-on-the...
Living in a welfare state, it took me 7 months to incorporate and ~$50000 on licenses+fees to start a simple exporting business. Maybe America and certain EU countries just haven't gotten there yet.
Edit: Do people genuinely believe that the average sub-Saharan African state, or even growing economies like Vietnam or Indonesia are either easier to legally form a trading company in or more generous with welfare (relative to incomes) than say, the UK, Sweden or even the USA? If there's evidence rather than blindly partisan "he said welfare states weren't bad for business" knee-jerk reactions behind the downvotes, I'd really like to see it.
Without getting into the various hairballs on here about the truth of the research, -if- this were true it might imply that the core conjecture of a basic income promoting innovation holds up.
"Headline Claiming That Anything About Welfare is Positive, with Supporting Evidence"
Top comment: "Sorry, but the evidence doesn't support that." Evidence provided to substantiate claim: none.
However I could be wrong, I haven't been around on HN for long time.
Also I personally value skepticism, but I come from a semi scientific-engineering background.
It was pretty hammered hard into us lab techs, we need to be skeptical of our bioinformatics results, you never knew what hidden confounding factor could be affecting the experiment. We even tried to use markov models to help find hidden confounding variables.
Edit: On why skepticism is important, its because propaganda is everywhere https://news.ycombinator.com/item?id=9269760
It seems like blindly questioning is far better than blindly without questioning.
There is here too. Not from The Atlantic but in the form of right wing ideological sock-puppets. If you are skeptical of this claim then read the article and its evidence and the comments and their lack of evidence and consider which is which.
Just because there are some smart people here doesn’t mean there aren't kooks.
After reading https://news.ycombinator.com/item?id=9269760, I suspect there are not only "right" or "left" wing sockpuppets but corporate pr puppets too. I suspect some sockpuppets could drive up controversy to increase ad revenue or product awareness(viral marketing?) as well.
disclaimer:I have no opinion on this Atlantic article nor am I familiar with site. I just didn't think the original criticism of "conservatism" on HN was accurate.
Also I don't think I understand why an article(I don't feel the Atlantic piece is propaganda) can't be propaganda, and the comments section can't be propaganda in another direction.
I'm still looking at evidence,but a big and bold claim should have some fairly bullet proof evidence. I'd also hold something like Crispr https://news.ycombinator.com/item?id=8171039 to the same standard.
Game changing gene therapy ? I would like some good fairly bullet proof evidence.
Otherwise I think its reasonable to fall to a skeptical position.
But to dismiss quality evidence because of crackpot comments is irrational.
I know nothing about gene therapy. But if you find a venue where peer reviewed papers on global warming are greeted by a flood of comments who deny it yet don't explain why then saying they are equally valid or equally likely to be propaganda is not being rational, it is failing to see a dangerous anti scientific social movement.
>corporate pr puppets too
To whit, post an article about Facebook's appalling privacy policy and watch what happens.
First, my health care was covered. So I didn't have to worry about that downside risk. In fact I even had a major health problem two years in when money was tight. My medical care was a non issue financially.
I had some extended health insurance through my parents in the early years. Covered wisdom tooth extraction, and rehab to fix an arm injury. (I needed this to type). Not government safety net, but similar effect. Some countries would cover this sort of thing.
Tuition is lower in Canada. Low student debt. And repayment is very lenient for entrepreneurs and low income people. Never had to make payments or interest while starting up.
There are tax credits for low income earners. I received about $1000 a year in cash payments for sales tax credits. Tuition credits prevented my paying income tax starting out.
I would have gone bankrupt several times over without the above. Or maybe not even started. Instead, this year I'll be sending the government a large amount of income and sales tax payments, and I'm glad to have the opportunity to do it.
On the other hand, there was almost no red tape for starting up. This was crucial. I didn't have to ask permission, I didn't need to pass a capital threshold, I could easily open accounts for my business and I didn't even need to register my company. And I didn't have to bother with sales tax until I passed a revenue threshold.
Keeping that sort of bureaucratic regulation low is also crucial for encouraging business creation.
Entrepreneurship is directly correlated to easy access to capital and the legal environment surrounding both starting and maintaining a small business... this has been proven ad nauseam.
I can't directly critique the papers linked in the article (especially because one of them 404's) right now, but I'd be willing to be a lot of money they cherry pick policies that (either directly or indirectly) created greater access to capital or made it legally easier to start and run a small business. That, or they've found some correlation between the two and are trying to gloss over the actual economics of the deal and support their political opinions.
Strong "social good" (read: welfare), strong laissez faire, totalitarian, anarchic, doesn't matter your political leanings as long you increase capital and ease of legal machinations you will experience an increase in entrepreneurship (comparatively, of course).
I'm solving this and am announcing my findings Sunday at the Texas bitcoin conference.
The fix is really pretty simple.
Everyone is discussing conceptually, here are concrete numbers... When I was striking out on my own a few years ago health insurance was "the big one" everyone brought up, so I went on Kaiser's website and got a quote from ~$250 - $450/month (varies with copay, benefits, out of pocket max). It's a bit of a cost though not nearly as scary as everyone makes it out to be and not enough to plunge you into the depths of debt if things don't work out (it's also tax deductible).