

Some Notes to Congress on the Economy - sefner
http://blogmaverick.com/2010/06/09/some-notes-to-congress-on-the-economy/

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logicalmind
It's nice to see the nod to Y-Combinator and the realization that many
businesses can be started with much less money today. But there is also
another point to realize. Have you noticed how large the barriers to entry are
in some industries? Could anyone today really start a bank, an oil company, a
car company, etc.?

Some markets (especially in technology) are opening with very low barriers to
entry. But some markets are more closed than ever.

~~~
rmorrison
_Could anyone today really start a bank, an oil company, a car company, etc?_

Actually, a few businessmen in my home town got together and started a bank.
Tesla Motors is an example of a car company started, according to Wikipedia,
by a couple of guys with personal funds (while they created the business
plan). Regularly, although rarely, companies start out small, attack some
market, and then grow into the multinational corporations.

 _some markets are more closed than ever._

I definitely don't agree with this, at least not the examples that you
mentioned. Technology makes it easier in all industries. Biotechs in pharma.
Five Guys Burger and Fries in restaurants. Boutique hedge funds in finance.
While I don't know the oil industry, it sounds like there are a lot of areas
where a small startup could focus on and eventually become a bigger company,
like owning a drilling rig (and run it well and according to best practices),
or underwater surveying, or something.

~~~
westbywest
I'm uncertain about the ability of independent start-ups to gain much traction
in the petroleum industry. Much of that has to do with owning/having access to
fleets of ships that are capable of bring you and your equipment to/from the
right location on time.

That said, the BP oil spill in the Gulf of Mexico has indeed shown some light
on potential niche fields that could be accessible to start-ups, e.g. Kevin
Costner's Ocean Therapy device.

~~~
anamax
> Much of that has to do with owning/having access to fleets of ships that are
> capable of bring you and your equipment to/from the right location on time.

That's not the only way to build an oil company.

There are lots of folks who rent an on-shore drilling rig.

If you hit reasonable amounts of oil, transportation appears. Sometimes it's
in the form of a guy who builds a pipeline from said small field to a place
with better transportation.

Those are two of the many ways that folks have built oil companies without
fleets of ships and the like. (It's not just "dirty work" - there are many
tech opportunities in oil-relevant data analysis.)

For example, the only US billionare who died this year started his oil company
with $10k and a pickup.

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yummyfajitas
There is more to job creation than building the next Twitter. Twitter doesn't
work on a schedule. Sri Ganesh's Dosa House and Can't Flush We Rush Plumbers
do. The economy can survive without twitter, but without flushing toilets we
will quickly find ourselves living in the dark ages.

As for people who lose money to carried interest, yes, some will go back to
work at a the same bank they quit from (same pay, better security). Others
will just raise management fees, resulting in a net loss of investment. More
importantly, there will be a major loss of _diversity_ in investments; as
Cuban notes, the guy earning $30mm/year won't be dissuaded from investment,
only the guy earning $500k (who could make a similar salary at a bank). This
means a smaller amount of the investment strategy search space is explored,
and we have fewer Michael Burry's. Is that a good thing?

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johnrob
In the interest of increasing angel investing, why not remove the legal
barriers (accredited investing) and bring a whole new class of players in the
game?

~~~
joshu
the vast majority of wealth available for investment is represented primarily
by institutions and entities, and secondarily by people who meet the
requirements.

of the latter group, i suspect the vast majority do not invest anyway. it
takes a lot of stomach to systematically invest in enough opportunities that a
positive return is likely. it certainly makes me queasy from time to time.

anyway, i'm reasonably sure that there are ways to get around this for friends
and family investment.

~~~
johnrob
What would happen if a startup was seed funded by 30 people at 1K each? It
could be very interesting. The company would only have 30K of investment, but
on the flip side there would already be 30 people who want to see it succeed.
30 evangelists ready to pump whatever the company can produce. Nobody really
knows how well a model like this would work, because it's not yet legal.

~~~
Retric
This has been tried in the past the result was an is mostly pyramid schemes
and other forms of investment fraud.

See: multilevel marketing for a more common equivelent.

~~~
johnrob
I had a similar thought when describing the idea. However, I don't think we're
comparing apples with apples. The accredited investing law has been in place
since 1933, so if the pyramid schemes you're referring to really are
conceptually the same as what I described, they would have been illegal.

~~~
Retric
Accredited investment law's have significantly reduced the impact of most
pyramid schemes because they make it far harder to get the ball rolling still
you can find a few more recent examples at:
<http://en.wikipedia.org/wiki/Pyramid_scheme> but mostly they are outside the
US.

For a better look at the pyramid schemes closest relative:

<http://en.wikipedia.org/wiki/List_of_Ponzi_schemes> you can see several home
grown examples mostly involving more wealthy people. What separates them IMO
is Pyramid schemes give you plenty of foot soldiers to sell the idea, Ponzi
schemes are limited to the initial con artists which focus on people with
money by default.

PS: There is a friends and family exception to these things, so if you only
need 30k you can probably collect to from people you already know. However,
random strangers have a hard time distinguishing a reliable businesses from a
con artist so it's a hard call to make.

