Very interesting chart in this article that shows more educated people (masters, bachelor's, some college) are less entrepreneurial than they were 25 years ago. On the flip side, less educated folks (high school graduates and non-high school graduates) have seen an increase in entrepreneurship.
"In 1992, 4% of 25-54 year olds with a master’s degree or PhD owned a small company with at least 10 employees. In 2017, this was true of only 2.2%."
Could it be that the cost barrier is lower today than in the past, but there is much more money to be made as an educated employee today than 25 years ago?
A big difference is that modern kids are conditioned to do what they're told, work hard and choose a safe path in life.
To get into a good school now you have to spend your time studying hard to pass the standardized tests.
Previously kids playing around, got bored, chasing girls/boys, leaving home as soon as possible, maybe joined the army, married young. So a 25 year old already had a lot of life experience. Able to take the responsibility to follow dreams and start up a new firm.
Today's kids at 25 are just leaving school and still dont really know much about the real world. Great candidates to get a safe job in a company, not so great at starting a firm.
I can attest to this. I'm currently working my way through the college application pipeline, and my peers are laser focused on what it takes to get into a good college. Rather than pursuing what interests them, many choose challenging courses just to have a favorable transcript, and standardized test stress is an epidemic. Anxiety about "getting in" to a good school supersedes any dreams of starting a venture or pursuing an option that isn't a 4-year prestigious university.
The disappearance of new ventures can be attributed in some way to this new way of thinking. I've been told that college anxiety didn't exist 20 years ago -- maybe it's time to go back to those days. High school, in my mind, is a time to experiment and find what actually interests you: not to manifest into a homework bot that's dominated by stress.
This isn't always the case, though. The 25-year-old with life experience and a past of experimentation still exists, it's just not the norm anymore.
I've done some serious reflecting on exactly what you've said. I'm on that "safe" route. I went through the college anxiety, the GPA worries -- all of that was my mantra. To this day, I still admit to being a "resume" builder. I want things on a paper for a sense of achievement.
This scares me, though. I'm starting to realize that is not what it's about. It's about making a difference. Sure, you can indeed make a difference doing what you and I have described. A company needs people like that. But I always wonder, could I have made an even bigger difference doing something else? I'm not even talking about my education. I've even thought about this for sports.
For instance, I grew up playing baseball religiously because I had already invested a lot of my time with it. I didn't want to adhere to anything else for the fear of wasting my time. Here I am, years later, realizing I would've been an even better tennis player had I actually been open to trying something that would've given me more success, but potentially been less safe (starting a new sport in the middle of being so devoted to one already). Here I am, hitting with racquet on every volley, wishing that I had bought into the sport earlier because I know I could've been better at it than I was baseball.
What matters in addition to grades is personality and people you know. Things stay anonymous in university during undergrad for the most part, but if you are really good professors will start to notice you and then you get invited to join seminars, do internships etc. Especially in intellectually very competitive fields like math and physics everyone recognizes that tests do not really matter, they are nescessarily trivial or test only a small subset of skills you need to do research.
I've been told that college anxiety didn't exist 20 years ago
As the parent of a HS senior in the fall, I long for those old days (like it was when I was in HS). It's insane what we put kids through. Unintended side effects are a real thing, and they are very, very hard to know in advance.
It doesn't help that our major cities are currently set up in a way that people have to work crazy hours and have high-performing jobs to get ahead ( or just to survive in some cases ).
What if we built more housing? Brought down the cost of rent.
Not to mention the criminal price of healthcare and education.
I strongly disagree with this idea. And the romanticizing of of the "maybe joined the army, married young" path. For one, the world is a little different now than when this path was normal - things are mass produced and menial jobs are outsourced to third-world countries, work that doesn't require specialized training is being automated. You can't open a mom and pop retail store around the corner and expect to survive in the age of Amazon and Walmart. It's also more expensive than ever to start a business - healthcare costs are through the roof, and big businesses have managed to finagle tax breaks that you won't get. Also since OPs comment was referring to the businesses started by those with master's degrees and higher, factor in student loans which have skyrocketed (increasing the risk you're taking on). Also, factor in housing costs in cities, which is where you need to be if you want to start something niche and technical. The fact is economic incentives are set up so that it's just way way more beneficial for a 25 year old to join a big company than to start their own (and definitely more so than joining someone else's startup...which makes hiring for startups harder - and round and round it goes).
You can reply with polemics about the joys of working for yourself etc., but clearly there must be a point where the financial beating you take from doing so makes it not worth it. To me, this data indicates that we have reached that point.
I have no idea if the data support this, but it intuitively rings true for me.
My background - I failed out of college in 2003 due to clinical depression, and spent a few years getting my life together and learning how to function. I'd met my wife at 14 years old and we've been together since, which has been a huge factor in my life. Both she and I describe ourselves as "hustlers" - meaning that we pretty much always have at least one side hustle going on to generate income, and usually have several.
It as 2007 before I was really able to function as an adult and got a "real job" with an actual career path. By that time I'd been: an electrician, a photographer, a photo technician, an assistant on a dairy farm, a web designer, a PC technician, and a retail clerk. My wife had been a hair and makeup artist, a dance teacher, a graphic designer, a videographer... you get the idea.
A couple of years ago my wife was doing volunteer work as a member of our local Junior League, and the discussion turned toward career plans. Her peers in her age group (late 20s/early 30s) were in many cases either just graduating school after having achieved an advanced degree or were "paying their dues" working their first real jobs. Most of them were single and many had never had a serious relationship. That struck her as very odd - by 30, we had gone through a number of milestones for which her peers felt they still weren't prepared: careers, marriage, children, moving across the country, etc. By and large, they seemed to feel like they were finally wrapping up their education and "young adulthood", and were about to embark on their life.
I figure a lot of this was because of our backgrounds - my wife and I grew up in a poor area in Arkansas where it was extremely common to be married with children by twenty, and at the time we were living in central Virginia where the median family income was over 300% higher than where we grew up.
I do wonder though how much of it is simply generational. It seems like a lot of people I know in their twenties not only aren't yet fully responsible for themselves (financially and socially), but don't feel like they are expected to be yet. That's completely foreign to me, but it appears to be a common perspective.
Similar situation with my wife and I: I was working in IT directly out of high school (late 80s), and met my wife at the same company. Fast-forward a bit, and I'm married with my first kid at age 22, we started our first company when I was 26, and then started our current company when I was 28 (by then we had two kids and a new house). I see "kids" today that are 30-32 and just getting married, getting a house, and say "what took you so long ?". :-)
Edit: downvoters, it's a joke, okay ? I have many close friends that are in that situation (I'm not that old), and I understand the forces that are conspiring against people to prevent them from "starting" their lives earlier.
Hmm in my community it’s very odd to get married before your late twenties. Children and house come several years later (if at all). Looking at the parent and grandparent comments I think there are two main reasons for this:
(1) If you grow up around educated people, college is the obvious way to kick off a financially stable life. That means school until 22+ followed by working for as much money as possible to dig out of student debt. By the time you can breathe a bit, you’re 30.
(2) Marriage is moving from a foundation to a capstone. In my social circle, virtually nobody got married in their early 20s. They didn’t feel they could before figuring out their careers, choosing a city, having some independent adventures. Sure there was romance, but not the long term commitment and financial integration.
I think The common thread between these two issues is “hunger.” If you’re like GP and grew up in a poor area, you’re willing to take risks to get out. It makes sense to marry the best partner you can find locally and climb out together. You’re not “discovering myself before settling down” you’re pair-climbing a mountain, recognizing it’s safer with help. Hopefully when you reach the summit the shared experience will keep you together against the pressure of expansive options available there.
One key question: does marrying reduce or increase your geographic flexibility? For college-first people, you have to move around while single to build your career, then marry wherever you wind up. If you marry first, it’s harder to find a place that optimizes earning potential for both partners.
I think a lot about what this means for my own children. I want them to take more risks, but I don’t want them to fall short of what I have achieved. I want them to support themselves as early as possible, but I know education is generally a more profitable use of time. (Should they be working minimum wage jobs or studying or school nights?) There are many reasons why the youth unemployment rate is so high.
I think the general answer here is that some people don't treat relationships and marriage as something else to check off at the appropriate time. My wife and I shared the same values, loved each other very much, and just "went with our guts" and started a life together. We've now had two kids, have moved thousands of miles, lived in many places and worked many different jobs, and just celebrated our 25th anniversary this year.
Life can be very interesting and fulfilling, if you let it be that way. It doesn't always have to be 1), then 2), then 3)...
Yeah, this is the path that we saw a lot of people following in central Virginia. It's worth noting that the social circles we cultivated there were very different from the ones we had (and now have again) in Arkansas, so it's seems very likely that at least some of this is economic in nature.
> (2)
Marriage was absolutely a foundational thing for me. Without my wife, I'm not sure I would have ever had the motivation to dig myself out of the hole I found myself in after failing out of college. We married at 21, and at that point we'd been together for seven years. We knew each other about as well we knew ourselves.
> I think The common thread between these two issues is “hunger.” If you’re like GP and grew up in a poor area, you’re willing to take risks to get out.
Perhaps. One thing I didn't mention is that while we grew up in a poor area, I wasn't really ever "poor". My mom in particular was climbing the corporate ladder while I was in elementary and high school. By the time I graduated we were comfortable enough that we were beginning to be able to take yearly family vacations. My wife's family wasn't as well-off financially, but while she is an only child, she has a very large and established extended family. When we ran into issues early in our life together, I could call my parents and usually get enough money to keep us out of serious financial distress; my wife could get a dozen people to show up and contribute to whatever we needed to get done. I won't say those advantages are interchangeable, but they've both been very valuable.
> you’re pair-climbing a mountain, recognizing it’s safer with help.
Yep, 100%. My wife saved me from despair - and objectively speaking, probably suicide eventually. In return, I was able to build a career with an income in excess of anyone in our high school class that I know of - by several multiples, on average. I realize that statement can seem pompous, but I cannot stress enough that I never would have been able to realize even a fraction of my latent aptitude without her by my side.
> If you marry first, it’s harder to find a place that optimizes earning potential for both partners.
Ah, here's another cultural issue. While my wife carried both of us for a while after high school, once we had children at 25 she has primarily been a homemaker. Yeah, there's been the aforementioned "hustling" - we've owned a small retail shop and dance studio - but nothing that has taken her away from the home for the majority of the day, and nothing that we expected or needed to bring in enough income to keep the family afloat. The way we've built our life, I am solely responsible for ensuring we have enough income to meet our needs and desires. My wife is solely responsible for keeping the home together and educating our children (we homeschool).
As a result, we are extremely flexible geographically. We moved to Virginia in the first place because I'd reached the point in my career that I wouldn't be able to increase my income locally. After five years in Virginia I had enough experience and a large enough professional network that I was able to transition into a remote position. Between my remote work and my wife's homeschooling, we were able to move back to where we grew up and buy a decent home for a fraction of what it would have cost in Virginia, without worrying about how I'd be able to find a job here or about the quality of the local schools.
We're an extreme case w/r/t flexibility there, but the vast majority of families around me have a primary income earner whose career prospects take precedence.
> I think a lot about what this means for my own children. I want them to take more risks, but I don’t want them to fall short of what I have achieved. I want them to support themselves as early as possible, but I know education is generally a more profitable use of time. (Should they be working minimum wage jobs or studying or school nights?) There are many reasons why the youth unemployment rate is so high.
Yeah, kids are an all-consuming topic in and of themselves. Our general plan is to provide them with an entrepreneur's education: by the time they're in the late teens, we plan for them to have at least a minimally profitable online business and the skills necessary to grow it. If they want to go on college, then they're going to be responsible for figuring out a way to make that happen. That doesn't mean we won't help, but it does mean that they cannot assume that we'll pay for them to attend.
My nine-year-old made a comment a few months ago that she "had more money" than one of her peers. I corrected her: "No, you don't. Your mom and I have money. You have nothing yet."
We're not planning on buying our kids cars, paying for their college, or providing them living expenses once they're out of the house. We don't want to "give" them anything, we want them to work for it and value what they have. For a car, I drive a Jeep and already have my daughters outside working on it whenever I can. My oldest says she wants a Jeep when she's old enough; if that remains the case then I'll put a bunch of money into parts and have her upgrade pretty much all of it when she's 13-15. I'll then offer to sell it to her at a very subsidized price - it'll cost her just enough that she'll have to spend most of her income on saving for it for six months or so.
In short - we'll always be there to help them and will do everything we can to make sure they're secure and not facing abject poverty, but it must be absolutely clear that they are responsible for building a life for themselves. To some extent they've inherited economic stability, but we feel it's very important that they not feel like they've inherited success. For my wife and I the hard times that we went through together cemented our character and our relationship. More than anything else we want to make sure that we don't deprive our children of that experience.
This is an excellent point at the lower end of this age range. I do still think there is something in the fact that today's tech companies have very high profit-per-employee numbers. This allows them to pay higher skilled workers more money and those people become less likely to leave and start something on their own (a financially risky choice). It's possible that golden handcuffs (equity, etc.) are pushing this number down as well.
Yes, it is probably, "modern kids," who are conditioned to do what they're told. I think you've solved it. Also, they're immature and haven't even lived in the real world until at least 28.
No. I think it's more that the mythos of the startup has been busted. Most of us probably know someone (or had it happen to them) that joined a startup, and got completely fucked on equity while getting paid peanuts and being worked 80-90 hours a week. Why would they want to go work for a startup, or give most of their startup to VCs, when they can work in a much lower stress environment for far more money, and actually get to go home at the end of the day?
I thought we had been dogging millenials for ages for bring dynamism to the workplace through not wanting to do what they are told? These kids can not do right, no matter what.
I would love to mount the Mr. Holland’s Opus defense here. Maybe the problem is not that kids are rule-followers / lemmings, but maybe through removing free time, attacking the arts, etc., we have raised one of the smartest generations without giving them opportunities to become impassioned about what they could make in this world.
But the sample is US-based. 25 years ago you might get by with a small student loan to complete your education. Nowadays the debt load is pretty much off the charts [1].
IMHO a better study would be to check out what's happening in continental Europe, where higher education is either free or nearly so for all practical intents. As a local, I'd put forward that youngsters are as entrepreneurial as they were a generation ago, if not more.
At any rate, I would expect the real issue in the US has more to do with the skyrocketing education costs (and later, mortgage costs) than it does with lack of desire or drive to create a business.
I'll attest to that, at least anecdotally: we sell primarily to small software companies and have a lot of customers in the EU that tend to run the gamut in terms of makeup, whereas in the US almost all of the small companies are being tended to by older developers that started them in the 90s.
I've also noticed that in the EU (and other places outside of the US), developers are more likely to use non-mainstream languages and tools and aren't so hung up on the current trends.
But, again, this is all anecdotal and subject to my own biases.
> I've also noticed that in the EU (and other places outside of the US), developers are more likely to use non-mainstream languages and tools and aren't so hung up on the current trends.
I can confirm that at least for Germany outside of Berlin (Germany's SV). Nobody wants to sit in the office until 10pm because some new trendy language or one of its alpha-grade libraries decided to shit the bed in an edge-case. We rather go home to our families. Companies stick to C#, Java, and sometimes Python. C/C++ for embedded, obviously.
>Could it be that the cost barrier is lower today than in the past, but there is much more money to be made as an educated employee today than 25 years ago?
This is likely a component. Purely anecdotal, but in connecting with entrepreneurs in Portland, OR vs. Seattle, WA, the contrast is clear. In Seattle there are more high-paying employers (Microsoft, Google, Amazon, Facebook, for example), and thus the startup meet ups have relatively few attendees. Compare to Portland where outside of the significant apparel focus (Nike, Adidas, Columbia) the number of household name brands drops significantly. Yes there are Puppet and NewRelic, but they aren't the scale of Amazon, for example. So, you end up with more people willing to take a risk and strike out on their own as entrepreneurs.
that does sound like US companies that contract out their cleaning services to an independent company. here the motives are a bit different (reduce employee headcount and thereby eliminate unemployment insurance and benefit costs and reduce other liabilities. possible other advantages depending upon workforce eligibility to work legally in the US.)
It's same in Ukraine, I'd even say tax rate differences are less ridiculous in Poland. In Ukraine personal income is taxed at flat 20% and another 22% of income goes to social security, while sole proprietorship income is taxed at 5% plus 22% of minimal monthly wage (which is something around 150 USD. yes, monthly) to social security. Everybody from IT people to supermarket chains and restaurants abuse this.
Also, since you don't hire people, but contract some other company it's de-facto at-will employment in country with Soviet-era Labor Code still in place.
The criteria is "a small company with at least 10 employees." Uber drivers would not count, neither would other independent contractors who run their own design or development businesses.
"examines trends in entrepreneurship—defined here as self-employment with at least 10 employees"
"Start-up" is such an abused term. I used to think of it as an endeavor searching for a way to monetize and fund a new idea, but it seems that it is used now to refer to any new entrepreneurial (thank you spell check) endeavor.
Change in demographics. A 25-25yo in 1990 was living in a very different place. The boomers were still working. Now they are retired. Lots of upper middle-class family money that in 1990 might have been used by kids, to do stuff like found companies, is now locked up in retirement planning to maintain the boomers as they age. People today generally don't get access to the family money until their parents die, something that happens long after the kids turn 54.
Remember too that this is about people owning a company with 10+ employees before age 54. That is an unusual situation. A large number of those actually owning their company, rather than have outside investors, would have gotten started with family money. Seed money today rarely comes not as outright gifts from mom and dad, but from formal investors who then take a share of the company. Mom and dad today are also more likely to take a large interest in the business than gift money outright.
The youngest boomers are currently 54. Perhaps they are starting to think about retirement now, but what money did they have in 1990 (when they were 26 years old) to invest in a 25 year old?
I couldn't find exact numbers, but extrapolating from the one that I did find [1], it seems plausible that the # of PhD/Masters students starting businesses has stayed flat while the actual # of degrees awarded has doubled (US population in that time has only increased by ~30%).
To me this indicates that while there are increased barriers to starting a business, the trend is more reflective of a mix shift in the types of people who get higher degrees.
> Could it be that the cost barrier is lower today than in the past, but there is much more money to be made as an educated employee today than 25 years ago?
One big confounding factor could be the cost of student debt. You can't tell your student loan company to defer payments until your business gets off the ground.
Also, I think in general, enthusiasm for capitalism (and with it, entrepreneurship) is waning.
That's why loans can be a trap; you have to pay them back eventually regardless of outcome. I remember Mark Cuban saying it's foolish to take out a loan to start a business, and while I do think there's a time and a place to do that, there's a nugget of truth to what he said.
A lot of people such as myself have nothing to lose in starting a business, that is besides the debt which has become further and further normalized in our society.
Loans are great and I've used them for a variety of things, but it's fascinating when there are unintended and perhaps unintuitive consequences.
Wouldn't the loan be under the business, and not you personally? In that case, wouldn't it be better to take the business loan than give up part of your company to VCs who also demand that their money get paid back?
I feel like he is more pointing out the clear mismatch of priorities. As soon as you have the mortgage requirement that bill is there and asking for money every month forever and you getting paid RIGHT NOW when that bill's over your head starts to become a dominating factor in business decisions. A lot of the arguments in the comments here have to do with this kind of problem- we keep trapping ourselves in financial instruments that require more regularity than any early business or even early-mid business can provide. Student loans are one, but so are home mortgages and so on.
I know I am trapped by this right now- the clock that takes a good chunk of my monthly net makes you risk adverse.
Business loans generally require at least one personal signature, exactly for that reason - if the business tanks and can't make payments itself, then someone is on the line to repay the loan.
A business likely needs a reputation and such to get a loan on its own. In this case if it’s a new-ish startup, no one will be giving the company a loan without someone backing the loan. Which would likely be you.
> One big confounding factor could be the cost of student debt. You can't tell your student loan company to defer payments until your business gets off the ground.
But how many prospective tech start-up founders are saddled with student debt?
Granted I went to school (public university) 10 years ago, but in my experience the majority of the students in the CS program all come from the following cohorts:
* professional parents paying for school
* Students receiving massive amounts of grant money, with minimal loans needed
* Students able to get top internships/TA positions during the school year, which more than offset school cost.
I agree loan debt is a problem in general, but among the population that has produced VC-funded startups, it feels minimal.
(The actual "problem" I see is that opportunity cost of a start-up is now higher for these would-be founders because large companies pay so much.)
According to this site, 71% of graduates in 2012 had some kind of student loan debt [1].
I think it's probably more accurate to assume that the number of CS students is pretty close to that number, instead of assuming that your anecdotal remembrance from 10 years ago is universal.
I don't see why it is reasonable to treat CS students the same.
The average debt for graduates per your citation is about $30k. Two programming internships will more than offset that and very few other students can command even $10k in a summer, let alone $20k.
Well, if you don't want to use those aggregate numbers, then you are going to need numbers of your own. What percentage of CS students have paid internships? What's the average pay of those internships? That sort of thing.
There is a declining intersection of people with the capital with the the people who have the inclination to make a start on a venture. Both in the trait within s single individuals, and as social mixing.
The number of plain small business starts have also been on a long decline for much the same reasons.
E.g. Collegeboard has the average debt per graduate being $12,300 in 2000-01, whereas your source has it as being $22,500ish the same year. Maybe your numbers are including for-profit colleges? (Which isn't really appropriate, since they were very uncommon in 1990.)
Huge numbers of people don’t graduate, and the people who don’t graduate are more likely to struggle to pay down their debts, so they might have higher debt burdens.
Also, why in the world would one want to exclude for-profit colleges? Kids get told to go to college, and the least qualified kids go to for-profit colleges. Excluding this group of students seems like cherry picking, and it really doesn’t seem reflective of the national story.
As a self-educated software engineer, entrepreneur, and business owner I cringe whenever data statistics of ”educated” people are only represented by individuals who have a masters, Ph.D., or doctorate.
I have studied at universities, but unfortunately, the education system in the USA is not suitable for Autism. From an early age I had to teach myself because 99% of my teachers and professors didn’t have the resources or time to help me. Does anyone here have a similar experience?
I was briefly Director of Community Life for the TAG Project. I was homeschooling my 2xE sons and moderating a gifted homeschooling list, basically.
Since he was a preschooler, I have told my oldest son he will need to be an entrepreneur. He won't make it as an employee. I tried to enroll him in college classes when he was 13. The college accepted him, but the classes fell through. I think one was full and the other was cancelled.
After that, he told me he really did not want to attend college. He wanted me to keep homeschooling him, even though what he knew in some areas was beyond me, so I wasn't really qualified to teach him per se in some areas. So I became a resource person that fostered his own self education.
Bill Gates is a college drop out. So is Madonna. I used to be able to quote statistics. A fairly high percentage of entrepreneurs can't be arsed to finish a degree program. They are too busy making things happen.
Degrees are about credentialing. Entrepreneurs often take classes for a specific purpose, to learn specific knowledge or skills. Credentials tend to matter less to them than knowledge and skill.
The minute I post this, you can bet someone will rebut it. It isn't true of, say, 90% of entrepreneurs and there are plenty who do have substantial formal education. But the aggregate figures show (or did at one time) that these things are generally true.
It's certainly not just you. Plenty of entrepreneurs describe themselves as mavericks or misfits or similar.
i once heard that most small business owners are either the children of small business owners or small family farmers.
if this is true, perhaps we're in a downward spiral, given historically smaller startup cohorts and the agglomeration of family farms into corporate farms.
I'm not sure that I have a learning disability that could be diagnosed, and I did (barely) finish an undergrad degree, but I feel exactly the same way.
Higher education is (mostly) a market response to social stigma / conventions. Degrees are as much about asserting social class as they are about career prep or the passing on of knowledge.
Anecdotally, I have a number of friends with graduate degrees, some full PhDs. I make more money than any of them and am arguably more successful (by their standards).
Everything I learned in life was self guided. I too am a software engineer (doing some relatively hardcore stuff) and have started more than one successful company.
I can't fix the system, but I will tell my son that higher education is optional and help him get a start on his own (and not just wrt money) if he decides to skip it.
And to more directly address your post, I do consider myself educated and an expert in a couple things. I encountered exactly zero teacher along the way that made a meaningful contribution to that.
That's awesome to hear. I'm thankful for your insight and feel encouraged to know that I'm not the only one. I'm starting to realize that it would be good for me to grow my local network with individuals such as yourself. Having people to talk who can better understand and appreciate my uniqueness is important for general mental health.
I see your point and am in a similar situation, but I have to suspect that truly educated people who haven't achieved a higher degree are a relatively low number for the purposes of aggregate statistics.
That's generally exactly what they're trying to measure: statistics about people who follow the standard path society lays out for education. If something about getting an advanced degree is discouraging people from doing startups, that's important to know, whether or not some population of smart autodidacts also exists.
That's exactly what they are measuring though, people are considered "educated" in those statics for receiving those higher level degrees. Not a bad thing you don't fall in that bucket, but that's just the facts of what they are surveying for.
That graph is fascinating. The decreasing value of formal higher education to becoming a successful entrepreneur is being accelerated from so many angles. The cost of collegiate education itself has risen dramatically, while at the same time the cost of access to collegiate educational materials has plunged to zero due to the internet and open publishing. If this trend continues, I wonder if motivated, aspiring entrepreneurs will be better off skipping formal higher education altogether. Could that already be true today? If someone can decide that the college path is not for them at a young enough age with a high enough level of maturity, then they can unschool and skip the bull-shit college-admittance optimization altogether, and instead focus on actually becoming an educated, masterful individual in domains that will help them create new value that they, and society, care about.
Of course, there's so many confounding factors feeding into this one simple graph that I may have over-extrapolated to this particular thrust, but I think it's a perspective completely absent from the article that should be articulated.
An alternative conclusion is that educated would-be entrepreneurs are now receiving higher wages in industry, resulting in the group shifting to industry. Less educated would-be entrepreneurs see wages lowering/stagnant in corporations and thus shift to entrepreneurship.
Right, that's definitely a huge component, and one that is focused on in the original article. I bring up these other factors because they're not mentioned, including the fact that the rate of entrepreneurship has actually increased among the least formally educated.
I've tried doing this. It may be OK for some fields like software, where the cost to entry for materials is low. However, for someone like me who wants to do mechanical and bioengineering, there still is a huge cost for equipment (CNC machines, upkeep, IACUC protocols and a certified lab for some animal testing). While maker spaces have started to address some of these issues, it is still somewhat difficult to keep profitable. It's one thing to learn from a virtual electronics testing tutorial; it's another to physically use the equipment and get exposed to the nuanced details of learning.
Work ethic is still the determining factor. Some people are better suited to institutional learning like some people need "fat camp" because they can't discipline themselves to adopt a healthy lifestyle.
My advice to young folks - education has INCREDIBLE value, but err towards buying low. It's a racket industry and you must navigate the options to find best long-term value for the money you spend, including having a strategy for how the investment will pay for itself. Even kids who know they have the entrepreneur bug can benefit from the creds of a formal education. Just be smart about it.
Every nascent industry is dominated by startups and little guys becoming big guys. It happened with oil, the auto industry, electronics, and among many, many others.
Although I believe we're only in the midst of the information revolution it would make sense that over time as the industry matures it becomes more and more difficult to break into it. The big guys have leverage and lawyers and I think what we see today with many startups being built to get bought rather than as new enterprises that will stand on their own is evidence of this new phase shift.
I would love to see if there is a correlation between the quantity of startups VS new major innovation waves.
Yes, there are less new startups today but if you come to think of it, we don't have a major innovation at the moment that's easy to jump into.
Look at the late 90s, we had the INTERNET, anyone could make a website with frontpage or a little html tag understanding.
Then in the late 2000s we had the MOBILE PHONES... I have an idea for an app! (everyone did!)
At the moment, we have AI/ML but my opinion is that it's not ripe for an average person to start an ML company. Another major upcoming branch is blockchain but it's also not mature enough for this major innovation to trickle down a leaf tree of startups.
What do you think?
Oh, almost forgot to mention AR/VR! Not there yet!!
Blockchain as "major upcoming"? Like after all these startups have not managed to produce any substantial success stories and there are no real validations of a technological fit besides crypto-currency? Where IBM is desperate as hell in selling their blockchain crap to corporations and isnt really seeing success? Yeah, don't think the blockchain revolution you are waiting for is happening any time soon, if ever. ML and AI are sadly also more of a buzzword right now outside of a couple or large players, but at least its applicable in different areas.
To me, blockchain is equivalent to PageRank in terms of impact. An amazing algorithm with extremely limited use cases. Maybe one company can create significant value like Google did with PageRank, but that is probably it.
I'm not sure "the startup is disappearing" is the only explanation for this data. Isn't it possible that companies are just lasting longer than 2 years?
What if there was a larger percentage of age 0-2 companies '85 because back then, so few were making it past 2? Maybe easier access to capital has increased survival rate (or at least slowed down dissolution by a few years).
This explanation also fits better with the massive influx of cash into VC over the last ~10 years.
That would be true if this was actually a number, not a percentage. To take a hyperbolic example, there could be 100x more startups at 0-2 years right now than in '85 and 100,000x aged 2-4 years; you'd still see a percentage decline in the former and we'd be pretty far from "the startup disappearing."
I am curious about the methodology to count startups. One of things is sure that we are now in a consolidation phase. We are seeing a glut of M&A deals. In that vein many startups are disappearing because they are getting acquired by larger companies. No one wants to be the next Yahoo refusing to buy a company which might become their next chief competitor. And the cheap credit environment is making this easier.
I don’t have enough broad economic insight to know if this should be worrying generally or possibly even be seen as good.
But what I do know is that work conditions, pay, and equity risk characteristics in start-up jobs are miserable, not to mention that work life balance is often poor and the start-up management is often deluded about the scope and importance of the business.
I would be happy if entrepreneurs believed they needed a far greater amount of initial capital before starting a business, and viewed it as essentially mandatory to provide market rate salaries, comprehensive insurance, and seriously professional work life balance and workplace behavior, all before even hiring the first employee, and also even after accounting for early stage equity.
If it was something of a cultural norm that you are a shyster, suspicious “entrepreneur” if you attempt to convince people to work for you without already having the capital arranged to invest that significantly in giving them good jobs from day one, I think this would be a great thing for the labor market generally, and would greatly deter a bunch of hype-driven nonsense startups that essentially allow already wealthy people to treat it like lottery tickets at the expense of employees.
In my experience, only the founders of startups make any money. If the startup is successful, then the founders walk away with millions. Everyone else would be financially better off if they worked for a large company instead.
Also, the executives of the startups take free trips and expense everything on the company's dollar. While the employees receive low pay.
I don't think the large companies are winning. The startups are killing themselves.
> Everyone else would be financially better off if they worked for a large company instead.
To be fair a lot of the change is because large companies are paying people so much these days. Barring large amounts of funding, a Series A- startup (based on the company being 0-2 years old definition of the article) simply can't compete with salaries.
Perhaps startups should start offering far more equity to early employees (I'm surprised you don't see more seed stage firms offering ~5% to senior devs) to compensate for the cash loss.
Nobody will give a senior developer 5% equity when even VCs only take 7% for the first investment that also includes access to professional networking events.
I think this partially the law's fault and partially example bias. I worked for a company who was acquired and I did very well especially considering I was a relatively new employee when the company was acquired. In other words, I think you tend to only hear about the bad stories because employees are pissed. In addition, the 90-day rule for stock options means early employees are rarely able to participate in an exit. I think if the law was changed to remove this 90-day exercise limitation, then a lot more employees would benefit from their shares/options.
The author of the article uses "start up" to refer to a business less than 2 years old - fair enough. As someone who runs a business which falls into this category, it certainly is frustrating to know how heavily our government subsidizes well-funded, monied large corporations (whereas small business owners have very little government-supplied - or otherwise - financial incentive to fuel their endeavor).
I don't suppose I would want them to stop subsidizing certain deals in the private sector with corporate America. A lot of that seems to be smart business to me. But I certainly would like to see the government to place a higher value on small business innovation. Starting something from nothing is already hard enough.
Have you looked at the SBA? There's actually a fair amount of support there, including preferential treatment for bidding on set aside gov't contracts, including SBIR - Small Business Innovation Research contracts. Is it dollar and lobbying wise the same, no, but it is there.
They always want to equate disappearing startups with lack of labor supply. That just seems completely ridiculous. Lack of labor in startups is a result/effect, not a cause. Labor, as a general rule of thumb, always follows the money. If Startups were more successful, they'd get more investment and more labor. If you doubt this, just remember what happened when facebook opened up it's app store. Just like that, overnight, thousands of developers and start ups appeared out of no-where. As soon as people smell the money, they'll leave their cushy jobs at google or anywhere else in a heartbeat. It all comes down to opportunity.
I mean, just look at the ycombinator and other investor's acceptance rates. They're that low because there's only so many opportunities. When there's too many people chasing too few opportunities, this is the result.
The real reasons why start ups are far fewer, is much more complicated: an it has to do with fewer opportunities. Some opportunities are limited legally, some due to market barriers and some are just due to what's currently possible.
The solution is to look at all those barriers and see what govt can do to reduce or get rid of the barriers. Look at the industries in most dire need of innovation: transportation, housing, and health insurance (where need is measured by $ opportunity) ~ and all the downstream industries that support these - like manufacturing, raw materials, etc. How many start ups are addressing these needs, and why is it so low?
You were on the right track and then veered off course at the end. The problem is startups don’t pay enough for the risk you have to take, and there are few easy problems left to disrupt. There will always be small businesses and sole proprietors, but there are few winner take all startup opportunities that require little capital to start.
Also, after seeing what happens when startups flout regulation (Uber, Airbnb, Theranos), I prefer government regulation stay intact or more of it. The less startups abusing the commons, the better.
Are mom and pop stores included in the data? What about law firms, doctors offices, mutual funds? I don’t think we’d consider those new businesses to be start ups.
I'm surprised nobody's mentioned it, but the bureaucracy of licensing, taxes, and now national sales tax collection is unhelpful to the startup. Not that it's a startup, but I just jumped through all the hoops required to legally hire a nanny in the US state of Washington:
- obtain Federal EIN number
- obtain state business license & UBI number (still waiting on this, and I need childcare now)
- file with state employment security department
- pay state labor & industries insurance
- pay state employment security taxes
- pay my portion of income taxes for the nanny
- pay payroll company to deal with all the tax payouts and paychecks
Oh, and actually pay the nanny.
All of this to just have a nanny and be above board. And what I do for my startup is way more complicated than this.
I'm confused, to legally hire a nanny you need to start a legal entity and hire the nanny as a contractor/employee? It seems to me that this would be the nanny's responsibility to start a business and charge the customer (you) money for their service.
I'm sure you're much more familiar than me, can you help me correct my intuition?
Over the past 4 years I have advised startups at an incubator in a mid-size US city.
During that time I have only seen 2 startups run into issues around licensing and taxes that caused significant hurdles to their startup.
However, in both cases I think the entrepreneur was largely using bureaucracy as an excuse for lacking product/market fit and personal sales skills...
In my experience the issue of fewer startups being created is multi-faceted and has to do with lack of affordable healthcare options/healthcare tied to employment, changing attitudes toward risk across generations, student loan and housing debt, lack of awareness of entrepreneurship as a viable career path (and more).
Another factor could be that before, big companies kinda sucked for the employee. Today's big companies like Google and Facebook are wonderful place to work for. In the grand scale of things, the new management styles are considerably more comfortable for the employee, the decision making and the promotion methods are significantly more efficient, interesting and smart. Not saying they are perfect, there is definitely room for improvement but 30 years ago, it was all wage slavery.
I guess you may be right. Is there still big companies which would fire you because you're late 2 minutes 3 times this year? Where everybody have to be there at 8am? And stuff.
Small local businesses / startups get squeezed out by larger brands with name recognition. No one looks for stuff in the yellow pages anymore - they go to the most successful brand off the internet.
Additionally, the risks of starting a business / startup are much higher when the cost of housing and healthcare is so much higher. And on top of that you have student debt.
> This means that, contrary to popular belief, jobs in the US are far more secure than they were in previous decades.
This is a fallacy. Your job is not secure if you're not able to speak up about injustices because there's no competitors to hire you if you were to get fired about speaking up about something that's immoral but not illegal.
the paper seems to be talking about "startups" as firms less than 2 years old. i guess this includes startups in plumbing as well as startups in software.
maybe the reason a young plumber doesn't go out and start their own new firm is different from the reason a young software engineer doesn't go out and start their own new firm.
If startups fail (test bad ideas) 5x faster than in the 80's and 90's and if most founders quit entrepreneurship after their 1st failure, even if 2x more people are founding companies, then it's probably normal that, overall, less man-years would be spent in startups every year in the US.
What I always thought the economic system would naturally come to is actually happening now. It's interesting why it's only happening now, likely because of the new growth dynamics of data companies.
Oh please... People are just realizing that startups aren't all that glamorous and at times attract a special breed of shitty egotistical workaholics.
By the merits of this article we should wait to see Paris or some other benign socialist hell-hole become "the next startup hub". I can assure you that won't be happening anytime soon.
Silicon Valley is an incredibly un-sustainable incestuous bubble. The future of startups will be distributed, not in one place.
Startups are struggling in this era of rising market concentration. In most industries, since the 1980s, the share of all sales going to the top firms is increasing. Startups may have a hard time competing with these mega firms, which can out pay them for the best talent and sometimes attempt to drive them out of the industry. Previous Brookings research found there are fewer startups in states where a smaller number of companies dominate the market
From Lenin, "Imperialism, the highest stage of capitalism" (1916):
This transformation of competition into monopoly is one of the most important — if not the most important — phenomena of modern capitalist economy.
I paid out $100,000 to pay off my wife & my own student loan debt early. Student loan debt can not be discharged by bankruptcy; it's always waiting for you.
This implies several things immediately:
- You have to take a job which can make payments on the debt.
- You have to choose stable jobs which will not suddenly fold under you.
There's also a somewhat hard to define aspect to the problem where you have to ensure that your local system is fiscally stable.
Anyway, non-1% Americans graduated from college not taking risks in their first 10 years out? Totally predictable, just from the debt perspective.
Then, at 32, 34, a lot of people are married and/or have a kid on the way. Welp, there's your high levels of downside again.
Add in to all this the fact that housing prices are effectively tethered to the availability of cash provided to the "highly paid" market (inequality increases)....
... so if your startup fails, you'll lose your place to live, and remote jobs are very rare, so you're in trouble in the big city with now-unaffordable costs of living.
the solution, in part, has a simple policy component: declare jubilee on all federally-originated student debt; free college for all students who maintain adequate gpas, no more federal loans. impose cost controls on universities that take federal money.
that effectively derisks an entire generation and opens up new options.
housing costs are less directly tractable and more politically problematic: the effective solution is to federally strip single family zoning from all land, and mandating density minimums and other supply-increasing zoning. (I assure you, the housing market is an interstate commerce system. :) ). But that only staunches the wound, it doesn't bring down housing prices into line with the median American's income.
Wait, this is about startups? Ha! No. That's a third order consequence caused by increasing early-career & mid-career risk, which in turn is increased by the planning & zoning codes and governmental defunding of education.
Just make student loans dischargeable. The market will sort it out at that point. Loans for degrees that are valuable will be granted, and loans that are for selfish degrees that produce no skills anyone else wants or cares about won't be granted. And colleges would have to start cutting costs to make their degrees more affordable. And given the mind boggling increase in tuition over the last 40 years, there's an epic amount of fat to be trimmed.
I totally agree this is the root of the problem. You wouldn't be giving out 50k loans for degrees that are looking at making 30k a year.
I think the big problem with this approach is that it disproportionately effects poor people. If person A studies underwater basket weaving but their parents cosign and have great credit and income, that's much less of a risk than person B who is studying engineering but has no assistance. 18 year olds have very little credit history or net worth so you are mostly looking at their parents situation. If there is a way to overcome that aspect, I would totally support the ability to discharge loans.
To obtain some market-based grounding in reality, I'd rather the universities be required to collect their fee as a fixed percentage of the students' incomes for a fixed number of years after graduation. Poor students wouldn't be handicapped by not having the money to pay for college, because the college wouldn't be paid until the student got paid.
The "epic amount of fat to be trimmed" from the universities won't happen until the universities get off the guaranteed gov't money gravy train and have to adapt to a system where their success depends on their clients' success.
What would keep someone from getting an economically valuable degree, declaring bankruptcy on graduating, and then just waiting until that had expired from their credit record?
You can't just declare bankruptcy and then be all good, you have to go through a court and a judge is going to lambast you for attempting such a thing when it is obvious you didn't even try to pay your loan. Otherwise this same thing would be a problem for other forms of loans too. Someone gets a loan, stashes it in some form that can't be retrieved by debt collectors, declares bankruptcy. The judge is going to tell you go fuck yourself because you don't even have anything to liquidate and deny your bankruptcy declaration. If you do have something to liquidate, well now you aren't any better off because you just lost all your possessions.
Plus there are criminal charges for fraud since it would be pretty obvious you took out the loan with this plan in mind.
It is my understanding that doing this is next to impossible. The way bankruptcy laws are structured student loans are almost never discharged as part of bankruptcy proceedings, and require a special hearing to justify their discharge. These hearings are only rarely successful, mainly due to physical or mental incapacitation, not financial stress.
The market might not be fit to decide what education is worthwhile, but it will certainly figure out what degrees are lucrative.
It would be nice if we could all go to college to chase our childhood dreams, but the reality is that most of us need to prepare to support ourselves and, someday, a family. That's why I'm a software engineer and not a novelist, and that's why I got a CS degree and not a BFA in English.
Are the humanities "worthwhile?" Certainly. But should the average person drop $100,000 on a humanities degree? Absolutely not. And the fact that we're willing to bury children under that kind of debt so that they can get a Master's in French Opera or whatever is a crime.
"The market might not be fit to decide what education is worthwhile, but it will certainly figure out what degrees are lucrative."
And those are completely separate things, and should not be conflated. Basically, you're saying that only the rich should be able to study non-STEM stuff.
> Basically, you're saying that only the rich should be able to study non-STEM stuff.
I'm saying that only rich people are able to study non-STEM stuff. I mean sure, a disadvantaged person can study literature or interpretive dance or whatever, but that choice will make them a debt slave with no significantly increased earning potential.
You don't need to go to college to improve yourself as a human being. You can be well-read and appreciative of the arts without paying $100,000. And for the vast majority of people, that is the only sensible course of action.
Grants, partial and full-ride scholarships, community colleges, etc. will all still exist, but while it will definitely limit the number of people taking out expensive loans to get advanced degrees for low-paying jobs, it probably would not exclude those who either had existing money, or who could keep the loan amounts to within repayable limits, by getting a cheaper undergrad, or what have you.
The important thing here is that with regards to US student loans, the market is already deciding everything, but it's backed up by the government having made it impossible to escape student loans by declaring bankruptcy.
That system could potentially be a lot less unfair and a lot lower cost if the government didn't put its thumb on the scales in favour of lenders. This would be true even if the system was still unfair.
There's probably a deeper conversation to be had once the system is closer to neutral, but the point is that it isn't anything like neutral: it's blatantly biased against students.
And once (or while) the student loan debt clears up you then get a mortgage and start a family - both of which now make you crave a stable paycheck while you get a hang of this house ownership thing and to take care of your loved ones. It's hard to take that gamble when you feel like the world is riding on your shoulders.
If feeling like the world is riding on your shoulders changes your risk-adversity quotient maybe founding a startup isn't such a great idea. Instead of 1 mortgage (yours), you're now responsible for 20 (your employees').
Entering into a business relationship with an employee bears its own responsibilities; however, all parties know that it's a business relationship. Everyone understands the limits of the responsibilities associated with that relationship & employees always have another employer they can go to if need be.
Totally. If you already feel like you're in a space where everything is riding on you, it's not exactly appealing to expand that responsibility. If you felt freer, you may be willing to take on that burden initially.
I have had a hypothesis for awhile that the economy is going to see a lot more post-retirement startups. You've got a ton of Boomers who are going to be bored who are or are about to retire in the next 5 years. I was talking with my mom, she's wondering what she's going to do and I floated the idea of trying to start a business with one of her hobbies. I think she's going to do it when she retires in a few years.
You've got extended lifespans incrementing up with each census, meaning people need to make money to pay for the extension to maintain a quality of life; however, most retirees have their housing locked down and the necessities paid for.
I know several retirees that have done something similar, most go into a consulting role/function helping newer companies since their knowledge and experience is their #1 asset.
On a side note, I've had no small amount of schadenfreude watching them run head-long into the regulations they've spent the last 3 decades cramming into every nook and cranny of the economy. They thought it was funny irony when kids got visits from authorities for selling lemonade at the end of the driveway... now they've got a metaphorical truck-full of lemons, a squeezer, and a hefty reality check.
I would agree! I vaguely plan to shift to consulting out my experience and competence at age 60 or so, then do that on a part time basis until I topple over. No sense in vegging at home, and I expect have the time and network at that time to select roles I personally enjoy.
> I have had a hypothesis for awhile that the economy is going to see a lot more post-retirement startups.
I think you are overestimating the economic state of most retirees. Also, startups are risky. Old people do not like risk and venture capital isn't going to throw money at older people nearing the end of their life.
> I floated the idea of trying to start a business with one of her hobbies.
So self-employment rather than a traditional "startup".
> I know several retirees that have done something similar, most go into a consulting role/function helping newer companies since their knowledge and experience is their #1 asset.
So taking jobs from younger people? Don't see how good this is for society in general. You shouldn't be allowed to collect a pension/social security/etc and work. Just my opinion.
I don't believe this article is using the same definition of "startup" that PG promotes. The article is really talking about small businesses. In this context, the OP's hypothesis makes more sense.
But consulting using your work experience of 10, 20 or 30 years is something that can happen and everyone in the economic rung could rise up 1 spot.
Also, your work experience in 1960s/70s isn't so relevant to most anything today. Especially in a technologically driven environment.
Besides most of these "consulting" work are government, union or private company jobs where nepotism or corruption plays a big role.
I know HN userbase skews very old, but old people "consulting" is just in everyone's way. Like I said, if you want to consult, then don't retire and keeping working. So exploit the system by collecting social security/pensions/etc and screwing over a tons of younger people.
Also getting rid of tons of bureaucracy/administrators in universities will help drive the cost down. Maybe better spread school endowments/donations around or have some sort of donation system that doesn't focus on 1) Schools with huge endowments, 2) alloted only for business schools, and 3) go primarily to sports
>the solution, in part, has a simple policy component: declare jubilee on all federally-originated student debt
Unfortunately this is a pretty terrible idea. First of all it would cost about $1.4 trillion and second it benefits the already better off in society. [1] Not only do the children of wealthy parents have disproportionally more student debt, they're also far better equipped to actually pay it off. A trillion dollar welfare plan which gives money to Sandra A. who went to Wellesley but not to Sandra B. who only has her GED doesn't sound that great. It'd be better just to spread it out evenly.
The kids of the better off have more debt because they can afford to take it on in the first place. Those from worse families financially are likely more avoidant of debt.
I don't think thats the case, within the families. My experience is that parents who don't have college degrees are much less likely to financially support and/or push for college for their children. The idea that the only way to make it in life is to graduate from college is a societal view.
Now you'd think that someone who didn't graduate college would see its value, but they're probably less likely to be able to help their kids financially (especially in the middle-area where the parents make too much for the kid to qualify to student aid, but not enough to comfortably afford it). Also cultural differences - conservatives are pretty unlikely to want their kids to go to a "liberalizing" college institution.
"First generation" college students also go to 2-year colleges at a far higher rate, and are far less likely to go to a private college than students who's parents completed college, and were also far more likely to drop out because of economic reasons. 33% drop out within 3 years vs 14% of those with parents who went to college.
What happens to the student loan system going forward? You can't declare a jubilee and then keep on giving out loans -- everyone will expect another jubilee and there will be so little confidence in the system you might as well get rid of it.
Unless you have a replacement system to help people pay for college, and it is already operational, destroying the student loan system would guarantee that only rich kids get to go to college.
I said to make college free: tuition, room, and board, so long as you keep adequate grades. Stop the loan system entirely. Sorry, I must have been unclear.
I'm not sure of how universities are funded in other countries. If for example the government says they will provide a fixed amount per student (yearly adjusted for inflation, etc) that might be a good example of price control. Another thing is many university administrative staff are used to paying themselves outrageous salaries and pensions and they just feeds into the rising costs.
The universities are not really independent from the government: the state runs the university, its faculty and employees are civil servants, etc.
Edit: I was thinking about private universities in the US, it’s true that public universities are already controlled by the same govermnents who pays most of their costs.
The degree to which this has weighed on entrepreneurship has got to be huge. I've put off efforts because of insurance, or because money had to go into healthcare. I know other people who've done it. I know someone who ran a great autoshop out of his house in off-hours for years... but needed a state full-time job because one of his kids had a condition that only a socialized risk pool had the depth to handle. Wonder what he could have done if the shop was his full-time job.
It seems obvious -- set up a socialized insurance system where if you happen to be one of society's big winners, you'll have to share more of that upside, and if/when you lose big, you get covered. That's what insurance is, socializing it just takes it to its logical conclusion, and even a guy like Hayek thought that maybe this was a place where it might be better socialized rather than private markets. In doing so you help with one of the most common risk factors and costs freeing up attention and small capital across the population.
Wait, entrepreneurs have healthcare costs? News to this entrepreneur. Healthcare is completely unaffordable if you start a new business and find yourself on the individual market making even a modest profit (to disqualify you for subsidies).
There are a variety of factors that conspire against small businesses. The lack of health care is definitely one of the risks you need to be comfortable with if you're going to go out and start a business. The hope is that you can grow quickly enough (in employee count and profit) to set up a group plan before shit goes wrong health-wise.
Unless you're saying that the only people who should be involved in startups are the completely healthy and those without any family or the desire to start one soon, yes.
What I'm saying is that among entrepreneurs (of which I'm one) that I know, most forego health insurance in the early days because it's too expensive to buy on the individual market. And yes, damn right - if you're not healthy and risk-prone at the same time, you're probably better off not walking down that road and staying under the umbrella of an employer-sponsored health plan. It's sad that health costs can be prohibitive to starting businesses, but it's a reality.
Self-employed consultant here (in New York). Not entrepreneur but in a similar hellscape. A 'top' ish plan on the individual market costs around 1K, which is tax deductible, and yes, usually offers lousy service thanks to a slim network and high deductible. And yes, health care costs are a barrier to entrepreneurship in this country. Agree 1000%.
But how can you take such extensive personal risk for 12K a year? Accidents happen, and genes might hit the hereditary crap lottery. If you're throwing money around in hopes of making it big, there's not 12K available? A terrible thing can happen and the costs can be much much higher.
I'm surprised/shocked to hear that, especially since you imply it's common. Is this California?
Oh yes, that! This is much worse if you actually have to address health issues! I was considering the best case median-paid person and their calculations!
If you have real health issues in your family, your best bet IMO is to work your tail off and be a salaryperson at a longer-lived Fortune 500, as those tend to have good health insurance. The family gets to see a doctor without ya'll going bankrupt - also, it often pays well.
Interesting that in America, in order to get life saving healthcare you have to sell your life to corporate America. Work for big business or death and financial ruin await. That's not an exaggeration.
If this is true, why don't countries with universal healthcare have a proportionally larger/more active startup scene than the US? They don't, so that means, logically, healthcare isn't that important to a country's startup success.
Of course healthcare isn't the only factor, but it's a huge boon for anyone considering starting a business.
The reality is that health extortion - let's not call it health insurance - in the US has a massively depressive effect on small business opportunity.
Generally opportunity increases as cost of entry decreases. It's easy to start a spare-time online micro-business in the US, but it's incredibly hard, dangerous, and expensive to start a full-time company now - unless you're already independently wealthy, or can do the investor dance with sufficient credibility.
The combination of high costs and investor demand for the next unicorn means there are far fewer unspectacular but profitable small businesses in the US than there might be.
It's mistaken to conclude that universal healthcare isn't important. If you look at the nations with a better social safety net, many also often have more regulations that might hold up new business formation. But if you look at nations which have fixed both healthcare and have smarter regulations, there are a lot more small businesses.
Most of the startups I know were pushing people into the state exchanges for their healthcare needs to try and limit their overhead for providing health insurance.
Snort! The individual market in my state is comprised of three types of people - those so disabled they _can't_ work, who consume extraordinary sums of cash, the subsidized, and (less each year) the small business owners/independent contractors. The last category is expected to pay more than the price of their mortgage to support the first two categories, which is completely unsustainable. After two years of trying to be a good little mousekateer, I shut it off and feel like a rube for waiting that long. I spend less on healthcare each year than my cat's vet costs, but am expected to pay the cost of another mortgage, with high deductible to boot? GTFO. I self-insure, and am happy the tax penalty bit the dust.
So the rest of us get to pay your expensive emergency room rates if you get "unlucky". I note that most of us will be unlucky in that way at some point in our lives.
It may work out accounting wise in the short term, individual sense, but that we can't work out a much less expensive, socially carried method like other developed nations is a crying shame.
You can proselytize all you want about policy theory and ideals, but the reality of starting a business (not just a side-hustle) comes with more risk to the owner than you probably realize. Trust me, I'd love to have insurance, but it's unobtainium where I live if you don't qualify for subsidies. Considering the benefits from profitable new businesses, including the employment numbers we drive, the taxes we generate, the office leases we pay, the administrative services we buy, etc., etc., I think the "rest of you" will probably get the better end of the deal relative to the risk a business owner directly bears, crap emergency treatment for the uninsured aside (if even needed during the start up years, which I'm gambling won't be). I'm just telling you the reality of being a small business owner.
Why wouldn't they be on Medicare, unless you're in a state that declined to expand it.
"I self-insure, and am happy the tax penalty bit the dust."
Good for you, but realize you're not always going to be healthy. Once you're not, you're going to hope and pray that there is still a way to distribute costs like we have today.
The insurance companies report to our state board about what drives y/y premium increases in our market. This (the quote) is one of them (the 20% driving 80% of costs, if I may loosely invoke Pareto). Maybe I'm flying loose characterizing them as such, but if you're sucking up $1m-2m annually(!!) in subsidized health care services, I'm assuming you have some serious concerns preventing you from living up to your full employment potential (and God bless 'em, by the way).
On the individual market, you're in a very high-risk pool, and the only people substantially contributing (e.g. zero subsidies) are in the minority and, IME, increasingly disenfranchised, either leaving the system or going back to working for the man. BTW, my state did expand medicaid and that system has plenty of its own issues. How they intersect, I neither know nor care at this point.
>>"realize you're not always going to be healthy"
Do you honestly think people don't realize that? I mean really? Do you honestly think I wouldn't prefer to have an out-of-pocket maximum that comes with insurance? I mean, stop assuming people are idiots and look at the problem: the premiums on the individual market are often too expensive for new business owners if they're in this doldrum-zone of being too profitable for subsidies but not large enough to build a new lower-cost risk pool out of their own employees or wealthy enough to afford a premium that costs as much as a house with no asset to show for it (when, btw, their consumption of services is less than $1k/year). This is just the reality, and a major contributing factor to why many who think about trying to start a business simply don't. It's _literally_ prohibitively expensive.
Being a veteran of going two years unsubsidized on the individual market in one of the highest-cost states probably means I've done more to help distribute costs than most (i.e. "you"). That the system is unsustainable (and predictably so, btw) is not my guilt to bear. That some aren't familiar with the nature of the burden and simply think people make bad decisions doesn't bode well for a fix anytime soon. The day there's an affordable plan, I'll sign up again, rest assured. In the meantime, enjoy your employer-sponsored plan, my friend. You have less to worry about than I do while I fly solo.
ACA helps. It needs an overhaul, along with a medicaid expansion everywhere to manage the risk pools.
If we had done ACA 1.1 with appropriate adjustments, it might not be a concern.
but the actual inflight plans are to reverse the ACA and, depending on the plan and who's been adjusting it most recently, it might even make us worse off than before the ACA.
When the ACA was working well, it was helpful, but not amazingly so. With Trump and GOP policy changes, all of those costs are going to increase, and coverage guarantees (like for pre-existing conditions) are getting rolled back. So if one might be forced to shop the private small business health market which has always been more expensive in my area.
Notably, if tuition slowed down (forcibly, incentivized, or through other methods) this would also alleviate the problem.
Since the late 70's / early 80's, its been rising at 3-3.5% above inflation every year. Median income has basically just tracked inflation. So the relative cost has effectively more than tripled for normal folks.
Even if we allow people to discharge loans, we can't keep giving them the loans in the first place. Paying back school costs that in inflation adjusted terms almost quadruple what your parents paid is not feasible unless real, after inflation incomes are quadruple. Which is almost, by definition, impossible. IE, education costs really need to be flat with inflation for this system to remain stable. Right now we have behavior that looks more like speculation.
Admittedly, its kind of self correcting. You have more debt. Take longer to pay it back. Work longer before a family is an option. Can afford to have less kids. Can afford to help them with college less. Or ... someone comes along with a needle and it all deflates - likely rapidly.
Unfortunately, in the middle there we have an Idiocracy situation, with a whole generation of indentured servants trapped through debt bondage.
This is kind of nitpicking a small point in your argument, but I've been in a lot of free-college discussions lately so I'm curious. Why do you think that an adequate GPA is the correct baseline for maintaining free tuition? GPA is dependent on so many extraneous factors such as a student's major or a department's grading scale that I feel like you would need a more fair metric. Is the cutoff simply a passing GPA (2.0), or something higher?
My arbitrarily guesstimated number would be 2.0 on a 4.0 scale.
Students who scored under that at my alma mater (U of Idaho, go go State School!) really had issues of one kind or another, whether it be health, disinterest, family, etc. Over that, yes, issues occurred, but it didn't make me sideeye and wonder if they should withdraw and save themselves their time and effort.
I expect other people would adjust that number. I'd probably also cut the funding for a full-time undergrad after 6 years. That number is also debatable, and I acknowledge that one could come to different numbers with solid justifications.
I also would fully fund grad student tuition, room, and board, with somewhat adjusted numbers depending on the program.
Note that this isn't merit-based, but a eh, you're giving it the ole college try, we're not going to defund you, along with a low-pass filter to remove pure leech behavior.
IMO, one of the big issues with massive extraneous issues hitting a student is that if you withdraw without a degree, you still have the debt, but no degree to help you pay it off. The incentive is to stick around and squeeze out the degree somehow, anyhow. Which is a perverse incentive, since profs, employers, fellow students tend to prefer people who want to be there and do well. So when you drop out early, you end off in a worse financial state than if you'd not gone to college at all (modulo whatever learning you picked up).
n.b., my perspective is that education is a socially provided benefit to improve society. It should not be a market good like a house or car. We all benefit from a more educated populace (and one with less debt, too!). I recognize there are other perspectives, but I think they lead to worse systemic ends.
What other measure would you use to determine if education was being thoroughly and adequately transferred and learned? Space is limited in classes - a class with half of the students failing to grasp the material is of less benefit to society than a class where most of the students are grasping the material.
I believe student loans can be written off after 25 years. Not sure the exact details. I know med school loans can be paid off based on income and if your income is low enough (almost never happens) you don't have to pay anything.
I'd nitpick a few things, but I think overall your points are valid. However, I would say a bigger cause is the replacement of small firms with larger ones. As the US has shifted more to a service economy larger firms have better economies of scale so it's harder to compete as a small firm. Plus, the pace of technological innovation is slowing so there are fewer opportunities to hitch your cart to some emerging technology.
Also, I believe their definition of startup is not what most people on HN think of when it comes to startups. It just means newly formed businesses, the vast majority of which are small, non-VC funded businesses.
> I believe student loans can be written off after 25 years.
The forgiveness of student loans is considered taxable income. The WSJ ran an article a couple weeks ago, a dentist had over $1M in student loans and projected to have $2M when the forgiveness kicks in, at which point he would then owe $700K in taxes.
Short answer: dental school is expensive (average $91K/year), he's an orthodontist (which requires 3 years of specialized training on top of 4 years of dental school on top of 4 years of college), tuition went up significantly when he was at school, and compounding interest is brutal when you owe a lot over long periods of time. He's also on IBR, which means the sum will keep compounding and the principal will just be wiped clean once he's made payments for 25 years.
I can see that being realistic. A quick search shows a University near me estimates it will cost someone just over $70 000 per year of undergrad at that school. Then you have four years of dental school. Another school near me lists tuition alone at about $270 000 for the four years if you're out of state. Then add 3 years of a specialty like orthodontics. Another search shows UPenn estimates that'll cost over $115 000 per year.
70k * 4 = 280k for undergrad
270k for tuition alone for dental school
$115k * 3 = 345k for a specialty
This gets us to just under $900k. That doesn't include any costs except tuition for the 4 years of dental school so we can assume the total will probably be higher. You can reduce some costs like the undergrad and if you're accepted to an in state school that might make dental school a bit cheaper but it is still an expensive undertaking.
> I believe student loans can be written off after 25 years. Not sure the exact details. I know med school loans can be paid off based on income and if your income is low enough (almost never happens) you don't have to pay anything.
I would frankly rather not have had 25 years of a ticking debt hanging over my head. I'd be almost 50. Maybe some people can see that far into the future and are comfortable with it, but I judged it an unacceptable risk.
Re the economies of scale, I don't think you're wrong per se, but third order effects have a lot of contributing causes.
> Also, I believe their definition of startup is not what most people on HN think of when it comes to startups. It just means newly formed businesses, the vast majority of which are small, non-VC funded businesses.
Ah, the ones where you submit a business plan and get a bank loan that you have to pay back. ;-) IMO, that's riskier than VC work; you walk away with a fat pile of debt if the biz fails before a fully formed corporate veil is established. Recall that sole owners don't have veils, as they personally sign for the debt; after a certain point of size that doesn't happen.
The ability of the median person to survive if their venture explodes is, to me, the critical point in founding a venture.
There's probably a very useful economic history of small biz/startup failure for the past 200 years. I wonder if it's been written yet!
Small firms have always gone out of business or grown, or been bought up, its their creation rate that has dropped off causing the ration of small/large to change.
If I remember correctly, you could make public universities in the US free by simply auditing and reigning in wasteful expenditures by the US military.
I've heard that too. And reading stories by the enlisted about the waste and inefficiency in the military make me groan as a citizen and a taxpayer. They don't like the waste, the bipartisan consensus in congress doesn't like the waste, this should be fixable.
I doubt it. The military-industrial complex is so deeply engrained in the country that I think it's literally impossible to budge. There's so many pockets of defense industry around the country that Congressmen have secured with pork barrel spending over the past ~70 years that downsizing any one part is electoral suicide. And we all know government agencies aren't famous for wanting to ever downsize their budgets, lest they don't fight for their "fuck you, got mine" part of the annual budget.
It's fucked, it really is. I don't see it ever changing.
Even something like "let's just set next year's budget at, say, 98% of this year's budget" is met with pushback and scorn.
As a kid, I remember hearing some political debates and people were talking about 'cuts' to programs (military, whatever). Our govt teacher dove in, and showed us what they were actually talking about was cuts to proposed increases. Proposing an increase of 30%, and someone else saying "just make it 27% increase" could be accused of "cutting program X by 10%!" And (enough) people often believe it, and we get nothing done.
It would be fantastic if we could, for example, say next years military budget is 99.5% of this years, and the year after, the same thing. 2 years from now we'd still be at ~99% of current spending. I doubt even something this sane could happen.
What's all the more crappy about this is some of the same people voting for continued increases in military spending have also been the ones who've condescendingly talked down to people about "family budgeting"-style spending, and "we just can't afford that extra $37m for food programs for the needy!"
After they actively pushed people in to houses with little and even no income and the sharks that targeted minorities with little understanding of contractual law.
And only the taxpayers and the global market felt the consequence.
>free college for all students who maintain adequate gpas, no more federal loans. impose cost controls on universities that take federal money.
You could probably do all this, but then you would have to clamp down on all the freeloaders, "irregular immigrants" and other people draining the public coffers.
Cutting into defense spending WILL NEVER HAPPEN so don't even suggest it. Yes it is a perfectly viable place to get all the money you could ever want, but regime change isn't free, and the US pays Israel 38 Bln a year in outright cash or arms. The money the US gifts Israel alone would likely make all your student loan debt disappear (for Citizen students with good GPA's).
Regulations are the problem, imagine wanting to build something and finding out you'll need to spend $20K on lawyers to go through thousands of pages of GDRP.
That's even before hiring a developer to actually build an MVP.
... And people laughed when Trump said he wanted to eliminate two regulations for every one being added.
Imagined you bought a meal and had to go to the hospital because they cut corners on food safety?
Regulation is a balancing act between compet in forces not just a Boolean good/bad
There's a strange thing about that. I enjoy traveling and living in developing nations. Food safety organizations and inspections are basically nonexistent. And in a decade I've gotten food poisoning exactly once - no hospital visit even then. It's anecdotal, but it's also very typical among other expats. People that make their living selling food generally know how to cook and enjoy it! And they also know full well what happens when they serve bad food. Think about the places you eat at. There's going to be a handful of places you eat at, over and over again. And this is also typical. Serve bad food just once, and a business stands to lose immensely. They're going to not only permanently lose that customer but also deal with all the terrible word of mouth that they will spread.
And in the end the biggest risk of food poisoning is often not from the food itself, but from unclean handling of the food. And all the FDA rules and regulations in the world don't mean a thing when a disinterested minimum wage worker chooses to not wash her hands after a bathroom visit, or just keeps on prepping after sneezing on the produce. The one time I got food poisoning was not from one of the literally thousands of dishes I've ordered from street vendors, but from a western-targeted chain restaurant. Instead of having the business owner being the person prepping the food, it was our low wage disinterested worker -- same story as the times I've gotten food poisoning in the US.
This video [1] just makes our whole system of food safety regulation seem so backwards, at Berkeley no less. Not an appeal to pathos, but an appeal to logos. We're treating people like shit and deterring entrepreneurship for the sake of enforcing these rules and regulations which don't really have such a major benefit as we might believe. It's an undesirable cost:reward ratio.
Instead of theoretical ideas about what would happen to the food industry or your anecdote about being fine when eating food that was unregulated I am going to point you to "Jungle" by Upton Sinclair.
You can't just acknowledge that your evidence is anecdotal and then still use it for the basis of your argument. Your anecdotes are not data and they prove nothing.
I'd agree data is very important. So what data, exactly, is your implied view that the FDA is the primary reason US food is safe to eat, based on? Anecdotal evidence is of limited value, but that value does tend to far exceed blind speculation. Let's say I told you that in some developing nation that 'only' 1 in 6.7 people contract some form of foodborn illness each year. You'd probably laugh at my usage of 'only' there and try to frame that as evidence of the hugely positive role that the FDA has had in the US. The problem there is that that number is actually from the US [1].
The issue with data is that it really just doesn't exist on an international level. Most nations do not provide cleanly comparable numbers. The WHO has collected and presented some data here [2] but it's not even close to an apples to apples comparison. It focus on 'disability adjusted life years' (DALY) as opposed to raw occurrence rates. DALY is a measurement of years of life lost, which means it works as a proxy for healthcare and knowledge of a population. It's also heavily driven by effects on children < 5, who make up 40% of all effects in their data. I am most interested in incidence rates among those with normal and developed immune systems since it does seem to be incredibly comparable and that is where the vast majority of the FDA's effect would lay.
Also GDPR is more like 90 pages and it took me about 2 days to work it through an to come up with an assessment of how it will impact our business. You want to do business? Make your homework.
"In 1992, 4% of 25-54 year olds with a master’s degree or PhD owned a small company with at least 10 employees. In 2017, this was true of only 2.2%."
Could it be that the cost barrier is lower today than in the past, but there is much more money to be made as an educated employee today than 25 years ago?