
Safety Nets for Startups - garbowza
http://www.theatlantic.com/business/archive/2012/02/the-entrepreneur-state-safety-nets-for-startups-capitalism-for-corporations/253211/
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thejteam
The problem with a safety net is that somebody has to weave it. If a person
want to live the life of a start-up, that's fine. Go for it. Just don't expect
me to pay for your essentials just because you want to spend a couple of years
of your life building a social network or recipe exchange. Sorry, it's just
not that important to me or to most other people.

Life is not without risk. I can minimize it by being smart about things. I
could get hit by a car when crossing the street. So I look both ways and then
hustle across. I want to start my own business. So I read books and running a
company for awhile. I find a problem to solve. I come up with a plan. Then I
attempt to execute it. I may fail, but that's life. I learn. I get a job to
pay off any debts I ran up. Then I try again.

The one thing I can say I did agree with is the need to stop favoring large
established companies over smaller ones. These laws and regulations need to be
tackled at all levels of government: federal, state , and local. But to do
that requires a fundamental attitude change about risk. Small companies are
risky. Big companies are not as risky. Ultimately it needs to be about people
educating themselves and deciding accordingly.

~~~
mkramlich
good points. but i think the notion of having society help provide a safety
net for startups exists in the context of, and in comparison to, all the other
things society is currently forced to spend money on. personally i'd rather my
taxes go to help provide a safety net for an entrepreneur than a truly lazy
welfare parasite (important: i'm not saying all welfare recipients, i'm making
a generalization to illustrate a point). and i'd rather my tax money went to
help entrepreneurs than to fund overseas military adventures. i'd rather
subsidize a couple taking a chance on starting a family business than to
subsidize a gigantic multinational oil company. And it's not about choosing an
ideal world, just one that's perhaps a little better or pragmatic than the
alternative.

~~~
BadassFractal
If you think about it, if jobs are a huge concern, then enormous international
war campaigns are guaranteed to give a lot of people employment.

Obviously I'd much rather have that same money spent on making life at home
better, but at least you're creating jobs either way.

~~~
silentOpen
War campaigns do not create structural employment, only demand shock
employment. Id est, we don't need 10e6 jobs next year, we need 10e6 jobs for
the next two decades.

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dreamdu5t
Safety nets for startups? Please. We need safety nets for people who work for
wages 40 hours a week, not for people who went to Stanford and have their
parents' money fuelling their dreams.

~~~
WadeF
That's a pretty narrow minded view of entrepreneurs. There are far more
companies started by people who didn't go to Stanford and aren't working off
their parents dimes than companies that are.

~~~
rprasad
Yes, but those companies aren't called startups. They're called _businesses_.

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PaulHoule
I see the health care issue as being pivotal. Many people can't find insurance
on the private market at any price.

~~~
thejteam
The way I see it, the health insurance problem is the result of different
people having different ideas on the "right" amount of health care and
insurance to provide. Example... if somebody has a potentially fatal disease
and $25000 worth of treatment can solve the problem, then go ahead and do it.
But I don't want to pay to have some hypochondriac go to the doctor every time
they get a sniffle. Other people believe all medical care should be free. Some
people oppose measures to prolong life, some oppose pulling the plug. I
haven't even started to touch the controversial stuff in the news recently. In
order to fix health insurance availability, these decisions have to be made,
because ultimately any "solution" will require government subsidizing
somebody, whether its the person buying insurance or the insurance company or
by providing the insurance directly.

~~~
mgkimsal
Agreed, mostly. We don't use car insurance the same way as health insurance,
demanding $5 "co pays" for oil changes and tire rebalancing - you just pay for
the services you need. For 'catastrophic' car stuff - body work after
accidents, etc - yes, you have auto insurance to help cover those major
expenses. Since we've had so many layers between medical users and providers
over the decades, there's very little in the way of 'market forces' at work.

My own health (and that of my wife) isn't perfect, but it's reasonably good
enough that we can afford our own private health policy, but only reasonably
as a high-deductible variant of $5k or so. And... while it's not great to have
to deal with large bills now and then, it's still doable.

We had $3300 in premiums last year, and $4300 in out of pocket expenses
(roughly). That's $7600 - divided by 12 is $633/month. But we only had $3300
in premiums the year before - $280/month. That's the nature of insurance - we
take some risk. Not everyone can do it, of course, but I have friends who are
chained to jobs partially (mostly) because of employer-provided healthcare.
For a family of 5, high-deductible insurance may be something like $600/month,
with a potential extra $5k+ out of pocket, but that's a risk. Instead, they're
usually paying more than that in premiums (either they are or the employer is
sharing it), so that money's getting definitely being spent either way,
instead of only _potentially_ being spent.

What might be interesting is to get employers to start offering high-
deductible plans, but putting x% extra in to a pool, then sharing a portion of
that as a bonus each year to employees who don't use it, but it's there to
help if employees need to access it - perhaps something like 50% of your out
of pocket deductible could be paid by the company.

But... that's just really confusing over time, imo. Just make it easier for
people to buy insurance in the open market - get away from employer-sponsored
health insurance. We've moved away from employer-provided retirement packages
- make the same move on health insurance.

~~~
rdl
What I've seen (and really like) is doing a great High Deductible Health Plan
(i.e. HSA-eligible) -- something where you get top quality coverage for
extreme things, and get access to the best doctors, and negotiated prices for
everything from the first dollar each year, but are on the hook for the first
$5k or so of costs.

Then, your employer gives you $5k/yr tax-free into your HSA account; if you
don't use it, it's basically equivalent to a Roth IRA. It's actually better to
spend cash out of pocket and then leave the full amount in the HSA, since it
can be invested tax-free forever, and all gains are themselves tax-free. You
can easily end up with a few hundred thousand dollars extra.

This accomplishes the useful goal of getting people to be price conscious for
their medical services, but doesn't impoverish them. The one thing it might do
is promote time shifting expenses (if I know I'm over the $5k limit in one
year, I'll get all my other elective stuff done that year), but it's not a big
deal otherwise.

IMO, the HSA thing was one of the best reforms in health care in a long time,
and one of the (few) good things GWB did.

~~~
thejteam
My current employer does this. Deductible is 2400/year for a family. Then they
give us 200 per month into the HSA and we could contribute more. The insurance
companies like this because it gets people to be more cost conscious. It is
cheaper for my employer to offer the high deductible plan and give us the
deductible than it is to give us a no deductible plan.

------
phamilton
In Sweden there are, in some cases, so many government subsidies and
incentives to open a McDonald's or other business that the business can run
for years without ever turning a profit.

I don't think that is a good thing. We frequently discuss here on HN to fail
fast and try again. That seems to be the opposite.

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dmils4
Interesting article - but I don't think the writer gets it.

"We should focus on minimizing the downside of losing so that startup roulette
feels less risky. After all, startups shouldn't just be for rich kids who can
afford to take a chance on a big idea."

If more risk averse people began starting companies - would the ratio of
success to failure change? My guess is that it would. Who knows in which
direction.

There's always some BS stat in these articles about the percentage of
entrepreneurs that succeed. Without a definition for what a successful
entrepreneur is. How is that defined?

~~~
nbashaw
Starting a startup is not equally risky for everyone. Some people have their
own safety net (family, saved up money, etc) while others don't, making it too
big of a risk to start a company.

Most entrepreneurs I know didn't take any crazy risks. They knew they'd be ok
if their startup failed. Many people don't have that luxury.

~~~
BadassFractal
Part of being an entrepreneur is resourcefulness. The idea is that if you want
success bad enough, you'll find a way to save enough money to quit and give
your idea a chance. That's the theory at least, I'm sure in practice a huge
chunk of the population will never be in such a lucky situation.

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_pius
I love the idea of policy incentives that encourage entrepreneurship, but
referring to such a framework as a "safety net" is a misnomer that hurts the
author's argument.

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BadassFractal
If you're going to be working 40+ hour weeks for a boring soul-crushing job,
then you might as well get a few perks out of it, such as health insurance.

I don't see the govt supporting people who don't want to get a corporate job
and instead choose to chase their dreams.

It'd be great if things were different, but they're not going to change
anytime soon. Why would anybody put up with dead-end jobs if they could just
work on their passion their entire lives?

~~~
davekinkead
> If you're going to be working 40+ hour weeks for a boring soul-crushing job,
> then you might as well get a few perks out of it, such as health insurance.

Part of the problem is that health can even be thought of as a 'perk' in the
first place. Most of the safety net effect could be achieved simply by
removing the link between health cover and employment. Just do what most of
the rest of the world does (where employment status is irrelevant to health
cover) and a major disincentive to innovation is removed.

Unless of course, the objective is to entrench dependency to large
organizations. In that case, the present system works just fine.

~~~
BadassFractal
I completely agree that it would be great, but it's not going to happen in
this country. As you said, making people's lives dependent on working for
large organizations is simply too convenient for the folks in power.

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bjornsing
I like the general idea. :) A first step would be getting rid of government
policies that favor larger companies at the expense of startups. At least
europe is full of those policies.

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marshallp
There can be a safety net for startups - college. If colleges could be
refocused from teaching psychology to creating tech businesses, then student
loans could be the financing. Anyone, including middle aged or seniors could
go to college from 1-5 years, learn tech skills while creating a company from
day 1, and have the current student loan industry finance it all. Olin College
in MA and Waterloo University Independent Studies Program, Ontario, Canada,
are two such examples that are close to the description (although not
completely, because they focus on projects and not projects with business plan
attached).

~~~
mkramlich
i like your idea. arguably the recent rise in incubators and accelerators is
doing something close to what you've described. i do think as a society we
need to stop throwing huge piles of money at universities "teaching" fuzzy
make-believe or peripheral things and instead spend less, or more tactically,
on core subjects and more practical skills. universities have become
essentially just expensive resorts for middle/upper-class twenty-somethings,
in many cases. there ways to educate and filter and certify folks that are
much faster, cheaper and more egalitarian, and thankfully there's a growing
movement to make this more mainstream.

