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Are Today’s ‘Entrepreneurs’ Actually the Unemployed? (nytimes.com)
69 points by robg on June 2, 2010 | hide | past | favorite | 40 comments

Although my separation from my company was voluntary, they suggested they might be amenable to hiring me as a contractor, for lower pay and longer hours than before. As, you know, a favor to me.

That was a brief conversation.

My own (voluntary) separation from my employer was similar, except normal hours (for short 1 to 6 week periods) and negotiable pay. Of course, so far, they haven't actually contacted me about any work, so in the end, we're in the same boat :)

Heh, similar, except it wasn't voluntary. The man had balls.


Smart. Both you and them. They knew that they were ultimately saving time and money.

I know far too many 'entrepreneurs' in their 20's who are basically just unemployed (or unemployable because they won't take anything except a top level job) trust-fund kids. They never had a successful startup that they cashed out of, but rather just an inheritance or trust that their parents bestowed on them. They have big ideas, but little for execution.

There's a reason that wealth doesn't last multiple generations in the US.

Is the last part really true? If you look at wealthy U.S. industrialists of the late 19th century, many of them now have 4th or 5th-generation descendants who are still wealthy-- Rockefellers, Vanderbilts, Mellons, etc.

Those are the exceptions, not the norms. OP is correct, most 2nd or 3rd generation trust fund kids end up blowing the family fortunes. No, I don't have any citations :p

There's a book called "The Millionaire Next Door" that gives all the citations you could ask for on this topic. It basically corroborates what you're saying -- wealth usually doesn't last past the 2nd generation.

Link: http://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/d...

Yep. And this book is an excellent read and resource to have. It is saturated with great observations and solid data. Highly recommend it.

Hence the dictum: Rags to rags in 3 generations.

Yeah, it seems likely that most modest fortunes (say, single-digit millions) would be blown. The really big fortunes make active efforts to preserve wealth across generations, though--- things like generation-skipping trusts aim both to minimize inheritance taxes as well as the risk that a single generation could blow the whole family fortune.

I hope that is true. I agree with Buffett's sentiments when it comes to dynastic wealth in America (namely, I oppose it).

> I agree with Buffett's sentiments when it comes to dynastic wealth in America (namely, I oppose it).

That's nice, but let's look at how Buffet behaves.

(1) He's set up his estate so it won't be taxed.

(2) He sells insurance to pay estate tax bills. Yes, he profits from the estate tax.

Like cynicalkane alluded, Buffett donated tens of billions to the Bill and Melinda Gates Foundation -- he didn't even create his own eponymous foundation! He did, if I recall correctly, set up a foundation in his wife's name, and that may well be how he transfers some wealth to his children. But at the end of the day, he could have made them each multi-billionaires, and he chose not to. In a small way (with a few hundred million or a billion dollars), he didn't put his money where his mouth was. In a much larger way, to the tune of tens of billions, however, he did.

Buffet's estate won't be taxed because he donated almost all of it to charity.

And like all such charities, it will take care of his children and their children and probably beyond.

No. Warren Buffet's son was on NPR maybe 2 months ago, he'd written some music or something. He makes his living as a musician. And it was explained that his dad arranged things so that the kids all have to earn their own livings. Apparently, the son is fine with that. He sounded like a really nice guy.

> He makes his living as a musician.

That's now. If he fails, do you really think that the foundation won't take care of him?

FWIW, it's interesting to me that no one commented on how Buffet makes money from the estate tax via his insurance biz. He sells a line of products that only make sense if the estate tax exists.

In most cases, folks would say "look what we found when we followed the money". Why is Buffet and the estate tax different?

Money is incredibly caustic to motivation and ambition. I struggled with this for a while myself.

Even for the motivated, having some dollars decreases urgency significantly; you shift from short-term thinking to long-term thinking. Having the right balance is necessary (you need a little vision into the distance) but it's surprisingly destructive to have the wrong mix.

Insightful but I totally disagree with the government providing yet another tax-payer sponsored program to ensure that people who were earning an income at one bracket will earn that same amount while working another job, regardless of choice. All we need are more entitlement programs or maybe a government sponsored 2 extra months of pay. We're just not close enough to Greece.

For starters, they could use what might be called “earnings insurance” that would pay for up to two years part of the difference between what they earned on the old job and what they earn now on their own. Employed workers would contribute to the insurance fund through their payroll taxes, as they do with unemployment insurance, but the total bill for benefits would be unlikely to rise because earnings insurance would get them back to work quicker and thereby reduce the number of weeks they relied on unemployment benefits.

Wow, what a terrible, terrible idea.

I got the impression that Reich's article was more about the reporting of labor statistics than people working as temps going around claiming to be entrepreneurs. Economist semantics really without much actionable insight IMO

The article summarizes with one unemployment number an overall characteristic. The reporters conclusion is to simplistic and I don’t agree with the observation.

Sure the increased number of unemployed contributes to the increased level of startup, but that might not be all the reason. 
Why are there so many 35-44 starting their own business? Not because the majority got laid off, but rather they lost the trust to corporate and know major changes will come. Too many have seen with downturns what can and often will happen to people with advanced age level.

If you fall into that position you have some serious problem, because the severance package for 10,15, 20 or more years of service is not a real help. It helps out a couple of months, but than what. What do you have? I am one of early 40 pool and decided not to wait, but rather take action.

This strikes me as a very good thing. Yes, many of them will fail but they'll learn a huge amount in the process and make themselves more employable at the end of it all. Others will succeed of course. Meanwhile, the state isn't so many economically inactive people.

With respect to "more employable", consider http://news.ycombinator.com/item?id=1287110 and similar screeds against people not holding long-term steady jobs.

It's better than being unemployed, but may still "count against" people in the future. (Note that this does not mean I agree with such assessments, and also note that there is a difference between a startup and hand-to-mouth freelancing.)

EDIT: The second paragraph previously just said "It's better than being unemployed, but not all that much." Replaced with the above.

Actually the reason this "screed" is news is because it was so thouroughly rebutted. "Steady long-term jobs" is something for our fathers. We're all capitalists now.

Depends on industry I guess, if a company didn't want to hire me because I'd spent a couple of years founding (and programming) a startup then I wouldn't want to work there.

I think one of the great things about programming is that there is always a way to make a living. Can always start a startup or freelance.

I agree with what you are saying. Someone who spent years trying to build a real startup and working hard at it would likely make a fine employee if they failed (and have no need to work if they didn't want to if they succeeded in a big way).

But that is not what this article is about. Most the entrepreneurs they are talking about are not startup founders in the sense you mean. They are not trying to build the next big thing. They are instead working as individual contractors at poor pay (compared to what they had before at least) soley because they cannot get full time work.

While I do not necessarily think this should be held against them, especially not with the way the global economy has been lately, this is still a very different situation than being a startup founder trying to build something brand new.

Well, some in the 55-65 age range didn't expect to be in this position. "Are there no prisons? Are there no workhouses?"

This really throws some light on how misleading "unemployment" numbers really are. There are an increasing number of underemployed Americans who are sometimes worse of than the unemployed because they are not eligible for unemployment benefits

Is "George" a typical example? How many contractors work for less than what they were on when they were salaried? (even after the agency takes their cut).

Although the myth of the super-contrator is popular, in my experience most contractors are glorified temp labor with poor to average hourly rates.

Please stop believing this. Every time you accept a job for temp wages, it creates another unrealistic employer that the rest of us have to explain the concept of "contracting" to.

Temp agencies depend on people not having effective strategies for selling themselves.

I work for about double right now. But I don't get full-time work, so it works out about the same.

I have. Well, not exactly like George, I've never gone back to a company I used to be employed at. However if the work looks fun and the company is interesting and they throw in the odd intangible perk, then I'm more than happy to negotiate on price.

Clearly George is doing it wrong, no matter what industry he's in. I've met a few contracters like this. They really want a full time job, but are taking contract positions in the meantime. They just done get how contracting works.

According to the Book Illusions of Entrepreneurship, most people who work in their own businesses make significantly less than they would working for others. However, they're as happier as if they made 200k more than they do, so in general they're happier though they make less.

Non aff link to the book (I really enjoyed it for it's real world stats on running a company and what it means for me): http://www.amazon.com/Illusions-Entrepreneurship-Costly-Entr...

I'll work as a "self-employed" and earn whatever my work make me earn and not go for a full time job with annoying co-workers and under a boss. I may consider working for a big corporation if it's worth the shot (fun, money, experience).

This may be the reason why Americans are heading towards "self-employment". Freedom is priceless.

Employment is to survive in life. Entrepreneurship is to succeed in life.

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