
Divorce Destroys Capital - burningion
http://www.kpkaiser.com/entrepreneurship/divorce-destroys-capital/
======
jrockway
Actually, litigation and selling illiquid assets destroy capital. The divorce
angle of the article is just to add some outrage to an otherwise ordinary
situation. Sell your business when nobody wants it, and you don't make much
money. Sell your business when it's super-hot and awesome, you make a lot of
money. It's called a "market".

~~~
philk
To be fair, divorce is the most likely reason the average person will have for
winding up in expensive litigation and people are more likely to pursue it to
the point of ruin because of the emotions involved.

Also bear in mind the fact that husbands can frequently be held accountable
for their spouse's legal fees and you have a situation which creates a
perverse incentive for litigation to continue.

~~~
jrockway
My parents got divorced, and both had a bit of money and assets. They each
hired a lawyer, split the assets, and that was that.

I think people are basing their decisions with respect to marriage and divorce
on what they hear on TV (or social drama sites), rather than actual data. Oh
well, HN readers are people too...

Also, the story this article is about would have ended the same way if he
needed to sell the company to pay off some other arbitrary debt; margin call
on a bad investment, the mortgage on his underwater home, anything. Divorce
isn't relevant to the "life lesson". (Which is, "if you have to do something
right now, you're not going to get a good price". I think I'll call it the
"Best Buy" effect.)

~~~
gscott
I agree with you, it is when people want to hurt each other that they end up
with nothing, spending it all to keep the other side in court until they are
broke or give up.

------
jdietrich
Marriage is a lie. In America and much of Europe, just under half of marriages
end in divorce. Any honest person would answer their vows with not "I do" but
"probably". We like the idea of lifelong fidelity, but it simply isn't a
practical reality for most people. We need to be honest with ourselves.

We're all smart people here. None of us would be so stupid as to sign a really
bad VC agreement because we really liked the VC. Why do so many of us
willingly sign bad contracts in our personal life? If someone here was signing
an agreement with a startup cofounder that had no stock vesting clause and no
provisions to secure IP, we'd be in like a shot to warn them. If someone here
announced their engagement, I'm sure we'd all congratulate them. Marriage is
objectively a terrible financial deal, particularly for the likes of us, but
we ignore how bad a deal it is for purely sentimental reasons.

~~~
portman
I'm curious if anyone in the anti-marriage camp has children.

I've heard the "marriage is an anachronism" argument for many years,
_exclusively_ from childless couples.

If that's true - and it may be just due to small sample size of my personal
experience - then it implies confirmation bias on both sides of the debate.

Is anyone here in a committed, _non-married_ relationship with kids?

~~~
michael_dorfman
I'm not-- I'm happily married with four kids-- but here in Norway, committed,
non-married relationships with kids are _extremely_ common. In fact, a
majority of children in Norway are born outside of wedlock (a fact that nobody
views as a problem.)

Also worth noting is that co-habiting partners have almost all of the same
rights as married partners, so legally, there's not much difference if one
marries or not.

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carlzlhu
To be someone more precise in language, this article really make the point
that divorce transfers capital from the unlucky couple to a pair of fortunate
lawyers. Capital is not so much destroyed as transferred.

~~~
Dylan16807
Yeah, this isn't at all the article I was expecting because of that.

~~~
barrkel
Lawyers are a transaction cost of transfer of property in divorces. Even
without direct destruction of the value of the property, the transaction cost
hurts economic efficiency, see e.g. Coase theorem.

------
mmaunder
Interesting that both this article and Elon Musk's piece recently (also on HN)
suggest that lawyers encourage creating conflict to serve their own interests.

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grandalf
Serious long term relationships are great. "Marriage" is a silly, bigoted
custom that should just go away.

~~~
The_Fox
Serious long term relationships are great, but without some kind of well-
understood commitment like marriage there's nothing keeping two people
together for life.

When everything is going great in my marriage, I don't need a reminder that
I'm obligated to stay with my wife. It's when things suck that my ring, my
vows, and my marriage certificate are beneficial. They keep me there because I
know that if I break them, I'd be a liar. And I know my wife will stick with
me when things are tough because she's made the same commitment.

If marriage is silly, are contracts between employers and employees and
between founders and investors also silly? If not, why?

~~~
barmstrong
Some differences between marriage and those contracts you mentioned...

* they have performance requirements * they aren't life long commitments

If you don't perform well as a CEO the board can fire you. And you don't get
to keep half of their personal net worth either.

You make a valid point that when things are tough, marriage helps you stay
together. But it seems like for the wrong reason (fear of divorce, rather than
love of the person).

It also seems likely that if the other person know's it's difficult for you to
leave, they may not try as hard.

This same problem exists when professors get tenure, when you sign a 2 year
contract with AT&T, or any long term contract that locks you in.

~~~
The_Fox
You're certainly right about the effects of being in a long-term
relationship/contract. That's why things work much better when one has an
attitude of, "I'm in this for the long haul- I better make an effort to
straighten things out," rather than, "It's hard for my spouse to end this
thing so I can slack off and be selfish."

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oconnore
What is the possibility of simply socially informing your friends and family
that you are "married" to your significant other, changing your last names to
match, and signing a contract that you will support her/him for x number of
years after any split?

If you both love each other, there is no problem. If it does not work out,
there is a monetary split as you defined in the contract, so no one is taken
advantage of, and both people are secure for some amount of time until they
can move on to a new job/new relationship etc.

That way you don't have to waste 10 grand paying lawyers to setup a prenup so
that you don't have to waste 50 grand paying lawyers to handle a divorce
settlement.

~~~
smokey_the_bear
You'd miss out on a lot of marriage benefits with this strategy - jointly
filing taxes, tax free inheritance to your spouse, hospital visitation rights,
sharing your health insurance, and a lot more

~~~
grandalf
Joint filing of taxes often results in paying more taxes, and spreads
liability across both spouses, so both can be held accountable if the other
one commits fraud.

~~~
positr0n
> and spreads liability across both spouses, so both can be held accountable
> if the other one commits fraud.

I think you're doing it wrong.

~~~
grandalf
Married filing jointly shares liability. Married filing separately offers
worse rates.

------
dennisgorelik
The key mistake in that case was having strong negative emotions to each
other. Divorce should be handled as a business deal with emotions being held
under control.

------
seertaak
Ok, I get the argument that, on a personal level, divorce destroys your
_savings_. But as far as _capital_ goes, divorce destroys as much of it as
marriage creates, namely none.

And besides, when _I_ get married, it _will_ be forever ;)

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prosa
Maybe what entrepreneurs need is a "Series AA"-style prenup to protect startup
equity?

~~~
spamizbad
Prenups don't fully hold up in court, and it's not uncommon for concessions to
be made outside of the agreement.

~~~
csallen
Why don't prenups fully hold up in court, and what can be done to ensure
you're protected?

~~~
gscott
Protected from the one you love and want to spend the rest of your life with?
The best protection is not marrying any person not totally committed to you
and the 2nd best protection is not to be a jackass to the one you love. The
3rd best protection is a secret bank account in another country that she
doesn't know about.

~~~
tomjen3
That is sentimental bullshit and exactly why people don't sign prenups.

You wouldn't get an investor without an agreement, you wouldn't get a co-
founder without an agreement, you shouldn't get a wife without an agreement.

~~~
gscott
I have been married for 15 years, if I am ever to be successful I want to
share that with my wife who has had our two children and provides me company.
I am surprised others wouldn't share the same view. Being married is not like
hiring someone.

~~~
tomjen3
Thats a different thing - what I am primarily trying to avoid is the case
where you end up broken, hateful of your former lover and have to waste a ton
of money in court to be allowed to see your children.

I doubt a prenup would prevent you from sharing your wealth with your wife
though.

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known
I guess <http://en.wikipedia.org/wiki/Surrogacy> is better than marriage.

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Tichy
Could he possibly have agreed to sell at a low price to spite his ex-wife?

