

An Entrepreneurial Fix for the U.S. Economy - tokenadult
http://online.wsj.com/article/SB10001424053111903480904576512683292295492.html

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anigbrowl
This is superficially interesting, but the article is too short to explore the
ramifications of the proposed changes. I'm looking at the Kauffman foundation
report now (<http://www.kauffman.org/research-and-policy/startup-act.aspx>),
but my seat-of-the-pants reaction to the proposals goes like this:

 _Letting in immigrant entrepreneurs who hire American workers._

Sure...but why not just open up the labor market and have done with it, rather
than trying to predict in advance which immigrants will adjust the demand
side? I think this is a necessity given the US's demographic problem (ie
making sure there are enough workers to fund social security in the coming
years), but it won't lead to endless expansion since both demographics and
regional wage competition are projected to even out during the 2030s.

 _Reducing the cost of capital through capital gains tax relief for early
stage investments._

I'd like to see numbers on this. The startup world appears to be awash in
cheap capital already and that taxes are on capital gains rather than capital
investments - in other words, you're not paying that tax unless your
investment make a profit. Capital gains tax is already fairly low compared to
income taxes, and many would argue that the problem is not early stage access
to seed capital but mid-stage access to revolving capital during a period of
slack demand. ISTM that demand is going to remain slack until the housing
market is more predictable and the consumer debt overhang is gone.

 _Reducing barriers to IPOs by allowing shareholders to opt out of Sarbanes-
Oxley._

This seems sensible, since the cost of compliance for SarbOx is high. But if
large firms already have that priced in, how does one avoid a two-tier system
whereby opted-out companies are unable to get an 'investment grade' rating for
their commercial paper? Again, it would help to have some numbers quantifying
the cost of compliance, and some kind of strategy for dealing with the corner
cases where bad faith or incompetence result in serious losses.

 _Charging higher fees for patent applicants who want quick decisions to
remove the backlog of applications at the Patent Office._

Wouldn't it be better for Congress to just let the patent office keep its own
fees? Selling access just raises the barrier to entry and effectively cedes
control of the patent landscape to big players like IV or various large
corporations that already devote $$$ to patent litigation. If anything, this
change would reduce the negotiating power of entrepreneurs with patentable
ideas during pre-IPO funding rounds.

 _Giving licensing freedom to academic entrepreneurs at universities to
accelerate the commercialization of their ideas._

That one went over my head - I thought this was already allowed under the
Bayh-Dole act, and with relatively low transaction costs.

 _Having the government provide data to permit rankings of startup
friendliness of states and localities._

Surely this is better provided by someone like Gartner group or some other
entity. Assigning bureaucrats to the task of measuring bureaucracy seems
perverse. Information about incorporation fees, median wait times, and tax
regimes is already available on state websites, and evaluating it is exactly
the sort of thing one pays lawyers and accountants for. That falls under 'due
diligence' from an investment standpoint.

 _Regular sunsets for regulations and a consistent policy of putting new ones
in place only if their benefits exceed their costs._

I'm for sunsets, legislative performance targets, and empirical microeconomics
in general. But again, more specificity is needed here: what sort of
regulations do the authors consider wasteful? There are pointless regulations
like excess credentialism, but many regulations exist to address real
problems. I was sort of happy to see the FDA requiring the recall of turkey
meat a week or two back, since I'd rather not consume _e. coli_ -tainted food.

EDIT: the pdf on the startup bill (at the link above) addresses quite a few of
my objections, is well-argued in many respects, and is moderate rather than
partisan. Still, I stand by my basic contention that much of the problem stems
from economic uncertainty on the demand side, rather than a paralyzing excess
of red tape on producers.

To take the HN community as an example, when did you last see people
complaining about the inability to procure a business license or the
complexity of buying worker's comp insurance? Has anyone actually thrown up
their hands and moved their firm across state lines to reduce their fixed or
marginal cost of doing business, or shut a firm down and handed the money back
because the administrative costs didn't make economic sense?

------
timr
Ah, yes...the usual conservative shopping list: de-regulation (eliminate
Sarbanes-Oxley! Sunset regulations!), tax cuts for the rich (Who likes capital
gains taxes? Certainly not the hard-scrabble "entrepreneur" managers of
"small-company" hedge funds!), privatize shared knowledge (Make it easier for
rich people to get patents, and commercialize academic research!). But
somewhat unsurprisingly, the WSJ omitted an extremely important bullet:

* single-payer health care.

It's a huge problem. Gigantic. How many people in the US are putting off their
entrepreneurial dreams because they're afraid of being waylaid by the costs of
unexpected health problems? I'm not that old, and it worries me. It has to be
terrifying to people with families.

Dear WSJ: if you want me to take your opinions about "entrepreneurship"
seriously, you have to stop proposing things that benefit the old economic
guard (I've yet to meet an entrepreneur who would start a business _but for_
the capital gains tax), and start proposing things that benefit _actual
entrepreneurs_. (And by "entrepreneur", of course, I mean _"someone starting a
business"_ \-- not _"someone managing a hedge fund"._ )

But, of course...I'm being willfully naïve. The WSJ doesn't _really_ want to
benefit entrepreneurs. They want to help the rich people who read the WSJ, and
dress it up to _look_ like they're helping entrepreneurs. Big difference.

~~~
jacoblyles
I'll ignore your partisan bile and address your salient point (Yes,
regulations do have costs. Sorry.).

My friend's startup was offering health insurance within 6 months after it was
initially incorporated. Most of the founders had some sort of individual plan
or COBRA before then. Are you telling me that there are many people out there
resourceful enough to be successful entrepreneurs but not resourceful enough
to cover that gap? Count me among the skeptical of the idea that government
health care will unlock a torrent of entrepreneurial energy.

If government support is necessary for entrepreneurs, why isn't Silicon Valley
located in old Europe?

I have to admit that the idea that government provided health care is
necessary for entrepreneurship has been a successful meme. I see it repeated
everywhere even though I haven't heard a convincing case for it. You gotta
admire the persistence and message discipline if nothing else.

~~~
ap22213
partisan bile? Sounds more like the poster is an independent who's tired of
Big-C vs. Big-L politics and really wants pragmatic change, not partisan line-
toeing.

Look, I don't know what age you are, but health care at upper-30s is no easy
street, and from what I hear, it gets much, much worse. Just in the past year,
I dropped 10K on health care expenses, and that is _with_ fantastic insurance.

Edit: and, seriously - I'm no slouch. I'm an extremely healthy upper-30s guy
who runs, weight-trains, eats like godliness. I'm guessing the audience of HN
is probably lower-middle 20s. Well, trust me, health problems still creep up
(on some of us), even with uber lifestyle.

~~~
timr
_"partisan bile? Sounds more like the poster is an independent who's tired of
Big-C vs. Big-L politics and really wants pragmatic change, not partisan line-
toeing."_

I think I'm an independent, but it's probably objectively possible to look at
my position here, and claim that I'm siding with the Democrats. So be it: if
the Democrats want single-payer health care, then I'm on their side, and I
guess it makes me "partisan" in the eyes of people who disagree.

There's nothing inherently wrong with being partisan -- the problem comes when
people are partisan without reasons beyond party affiliation. Demonizing
"partisanship" is a rhetorical trick that dresses up _ad hominem_ attacks as
legitimate debate.

~~~
jacoblyles
"Partisan bile" refers to your snarky dismissal of the case for deregulation.
There are real problems with regulation, including Sarbox. The law has
encouraged cartelization of the economy by pushing firms towards acquisitions
instead of IPOs. Most regulation punishes startups and protects incumbents.
Sometimes the benefits are worth it but often they are not.

~~~
timr
I said that degregulation was part of the usual conservative shopping list
(which it is). That particular remark was no more or less snarky than the
rest. But if your primary objection is that I'm snarky...well, that's great.
My argument remains.

In any case, I'm the first person to admit that there are problems with
Sarbanes Oxley. I think that parts of the law were a total over-reaction to
the situation, solving nothing. But I'd rather see _ammendments_ to the law
than a wholesale _retraction_. And that's where I differ from most
conservatives.

------
bfe
Somehow I doubt startup founders have been desperately waiting for a new
government bureaucracy that will finally give them a way of finding out good
locations to start a new company.

~~~
sologoub
Yeah, this part of the article is a waste of space...

